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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2013
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from________to_______
 
Commission file number: 0-11050
 
ELITE DATA SERVICES, INC.
(Exact name of registrant as specified in its charter)
 
FLORIDA
 
59-2181303
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
4447 N. Central Expressway Ste 100-135
Dallas, TX
 
75205
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:
(972) 885-3981
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Name of each exchange on which registered
None
 
None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, par value $0.00003
 
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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). Yes o No x
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes o No x
 
As of the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was approximately $1,053,150.
 
As of May 6, 2014, 14,915,450 shares of the common stock of the registrant were outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.
 


 
 

 
Table of Contents
 
PART I
     
         
Item 1
Business
   
4
 
Item 1A
Risk Factors
   
5
 
Item 1B
Unresolved Staff Comments
   
5
 
Item 2
Properties
   
5
 
Item 3
Legal Proceedings
   
5
 
Item 4
Mine Safety Disclosures
   
5
 
           
PART II
       
           
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
   
6
 
Item 6
Selected Financial Data
   
8
 
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
8
 
Item 7A
Quantitative and Qualitative Disclosure about Market Risk
   
15
 
Item 8
Financial Statements and Supplementary Data
   
F-1
 
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
   
16
 
Item 9A
Controls and Procedures
   
16
 
Item 9B
Other Information
   
17
 
           
PART III
       
           
Item 10
Directors, Executive Officers and Corporate Governance
   
18
 
Item 11
Executive Compensation
    22  
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   
23
 
Item 13
Certain Relationships and Related Transactions, and Director Independence
   
24
 
Item 14
Principal Accountant Fees and Services
    24  
           
PART IV
       
           
Item 15
Exhibits, Financial Statement Schedules
   
25
 
           
Signatures
   
27
 
 
 
2

 
 
FORWARD-LOOKING STATEMENTS
 
This report includes forward-looking statements with-in the meaning of Section 27A of the Securities Act (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these statements on our beliefs and assumptions, based on information currently available to us. These forward-looking statements are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, our total market opportunity and our business plans and objectives set forth under the sections entitled "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
Forward-looking statements are not guarantees of performance. Our future results and requirements may differ materially from those described in the forward-looking statements. Many of the factors that will determine these results and requirements are beyond our control. In addition to the risks and uncertainties discussed in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," investors should consider those discussed under "Risk Factors, and elsewhere herein, and in other filings with the SEC."
 
These forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect changes in our business anticipated results of our operations, strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.
 
 
3

 
 
PART I

Item 1. Business
 
Background
 
Elite Data Services, Inc. (hereinafter the “Company”, “Our”, “We” or “Us”) changed its name from Dynamic Energy Alliance Corporation on November 4, 2013. Prior to that the Company was formerly Mammatech Corporation. We were originally incorporated in the State of Florida in 1981, under the name Mammathetics Corp.
 
From 1981 through the first quarter of 2011, the Company’s business was that of a marketer of tumor detection equipment. On March 9, 2011, the Company and Dynamic Energy Development Corporation (DEDC), a private corporation, transacted a reverse triangular merger in which DEDC became a subsidiary of the Company, shifting its focus to the recoverable energy sector. In connection with this the Company planned to develop, commercialize, and sell innovative technologies in the recoverable energy sector. Specifically, it was focused on identifying, combining and enhancing existing industry technologies with proprietary recoverable production and finishing processes to produce synthetic oil, carbon black, gas, and carbon steel from discarded or waste tires waste. This process will be accomplished with limited residual waste product and significant reductions in greenhouse gases, compared to traditional processing. To maximize this opportunity, the Company had developed a scalable, commercial development strategy to build "Energy Campuses" with low operational costs and long-term, recurring revenues.
 
In conjunction with the acquisition of DEDC, the Company acquired Transformation Consulting (‘TC”), a wholly-owned subsidiary of DEDC. TC provides business development, marketing, and administrative consulting services. Through a January 2010 management services and agency agreement (“Agency Agreement”), TC received revenues from a related party based on billings received from certain of TC’s direct to consumer membership club products that were transferred to the related party under the Agency Agreement. As the Company continues its operations, it has decided to focus more on the advertising and marketing plan that generated revenues in the Company’s past.
 
Company History
 
DEDC’s business plan focused on developing and implementing recoverable energy technologies. DEDC, the Company’s wholly owned subsidiary, sought joint venture partners or other financing partners (hereinafter collectively “joint venture partners”), on a project by project basis, for the purpose of development, construction and operation of free standing plants to provide full cycle processing to convert discarded tires into shelf ready, saleable synthetic oil and solvents and carbon products (hereinafter referred to as “plants”). Although, the Company identified various plant locations and potential joint venture opportunities, as of today, it has not executed any agreements for the development of a plant.
 
DEDC proposed to develop a full cycle process plant for converting discarded tires to saleable synthetic oil and solvents and carbon products. To accomplish this plan and other milestones, management attempted to secure one or more partnerships, on a site-by-site basis, with local joint venture partners and/or financing sources, including companies who produced shredded tire feedstock usable in the plants. The Company’s business plan anticipated the creation of a state-of-the-art production facility called the “Pyrol Black Energy Campus” in late 2013 and early 2014, as one of its initial milestones. Specifically, the Company planned to acquire, combine and optimize a variety of existing proven and potentially innovative “Renewable Energy” technologies currently available in the market. Creation of such an initial plant required obtaining a location that has a dependable supply of waste feed stock for the plant, obtaining the necessary capital to develop, construct and set in operation the plant (likely with local joint venture partners and/or other financing sources), and establishment of markets for the resale of resulting products. The Company hoped to partner with other companies who can provide tire feedstock, land for a plant, and/or capital, on a joint venture basis. The Company had identified a potential site in Ennis, Texas upon which it could develop its first Energy Campus, and announced its intention to purchase such site, pending the completion of favorable due diligence and the obtaining of the necessary capital required to proceed. However, to date, the Company was unable to obtain the necessary financing to secure the Energy Campus.
 
 
4

 
 
As a result of the Company not being able to obtain the necessary funding to develop its plan as set forth above during the third quarter of 2013 new management joined the Company and the Company decided to focus mainly on the marketing and advertising sector with dynamic and complex web platforms whose assets include web systems operated for profit. The Company’s focus was mainly, but not limited to, the marketing and advertising sector within the automotive domain ranging from services to include third party advertisers, affiliate networks, private sellers, and automotive dealerships.
 
Since September 30, 2013, the Company has been focused on the marketing and advertising sector based on TC’s business model of developing, marketing, administering, and selling various consumer products and services including its membership club products. As of the year ended 2013, we entered into negotiations to purchase assets related to the Company’s alternative business strategy that had demonstrated positive revenues in the Company’s past.
 
Item 1A. Risk Factors
 
Smaller reporting companies are not required to provide disclosure pursuant to this Item.
 
Item 1B. Unresolved Staff Comments
 
As the Company is neither an accelerated filer or a large accelerated filer, as defined in Rule 12b-2 of the Exchange Act (§240.12b-2 of this chapter), or is a well-known seasoned issuer the Company is not required to provide disclosure pursuant to this Item.
 
Item 2. Properties.
 
The Company’s office is located at 4447 N. Central Expressway Ste 110-135 Dallas, Texas 75205.

Item 3. Legal Proceedings.
 
On August 16, 2013 Birch First Capital Fund, LLC (“Birch First”) filed a complaint against the Company in the 15th judicial circuit of Florida (2013 CA 012838) alleging that the Company owes them $168,661. The Company filed a response and counterclaim against Birch First and its principal for unspecified damages relating to Birch First’s fraudulent inducement and violation of U.S. securities law. Both claims are currently pending.
 
On November 18, 2013 the Company became aware of litigation by Birch First and Birch First Capital Management, LLC against Mr. Charles Cronin and Dr. Earl Beaver, naming the Company as a nominal defendant. The litigation is correlated to conduct by the former board members named above in relation to energy sector technologies. A motion to dismiss has been filed by the Company concerning this derivative lawsuit, ascertaining, among other things, that Birch First’s representation of the shareholder class is inconsistent based on his position to directly recover a judgment from the company, which in turn negatively impacts the very class of shareholders Birch alleges to represent. At this point in time, the Company has no evidence that supports Birch’s litigation, but believes it is the proper party to take action in recovery if evidence to the contrary is provided in further proceedings that is in the Company’s and shareholder’s best interest.
 
Item 4. Mine Safety Disclosures
 
Not Applicable.
 
 
5

 
 
PART II
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information
 
The Company’s common stock trades on the Over-the-Counter Bulletin Board under the symbol DEAC.
 
The following information concerning the high and low bid prices of the Company's common stock on the Over-the-Counter Bulletin Board.
 
Quarterly period
 
High
   
Low
 
Fiscal year ended December 31, 2013:
           
First Quarter
 
$
0.06
   
$
0.02
 
Second Quarter
 
$
0.04
   
$
0.01
 
Third Quarter
 
$
0.04
   
$
0.01
 
Fourth Quarter
 
$
0.03
   
$
0.00
 
 
 
 
 
 
 
 
 
 
Fiscal year ended December 31, 2012:
               
First Quarter
 
$
0.30
 
 
$
0.05
 
Second Quarter
 
$
0.19
 
 
$
0.09
 
Third Quarter
 
$
 0.10
   
$
 0.05
 
Fourth Quarter
 
$
 0.09
   
$
 0.04
 
 
* Number not adjusted for reverse stock split of 1300-1 conducted by the Company on November 4, 2013.
 
Common Stock
 
All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.
 
As of April 25, 2014, there are approximately 386 shareholders of record, including beneficial holders of the Company’s stock, with 14,915,450 shares outstanding of common stock.
 
The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company's Certificate of Incorporation, as amended, and By-Laws.
 
Dividends
 
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.
 
 
6

 
 
Debt Securities
 
On July 9, 2011, the Board of Directors of the Company approved and executed a debt agreement with a related party, Charles R. Cronin, a former director of the Company (the “Lender”), whereby, the Lender established, for a period extended to December 31, 2011, a revolving line of credit (“LOC - Cronin”) for the Company in the principal amount of $100,000, bearing interest at 15% per annum and payable, with accumulated interest, December 31, 2011. The LOC – Cronin was increased to $200,000 in September 2011, and further increased to $300,000 in October 2011. As of December 31, 2013 and 2012, the Company owed the Lender a total of $-0- and $119,139, respectively.
 
Stock Purchase Warrants
 
On September 17, 2013 a warrant holder exercised 385 warrants at the cashless exercise price on as provided for in the warrant.
 
On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock and the Assignment and Assumption Agreement entered into by Charles Cronin (former director of the Company) and Habanero Properties, Ltd. (former majority shareholder), Mr. Cronin assigned his warrants and those of TMDS at their strike price and 16,923 shares of common stock to Habanero Properties, Ltd, for $298,300. The purchase price was offset by amounts due under Habanero’s line of credit agreement that amounted to $189,512 at the time of exercise with the remaining balance of of $108,788 being offset against the Contingent Consideration Payable Amount assigned to Habanero Properties in the Assignment and Assumption Agreement dated September 30, 2013.
 
Recent Sales of Unregistered Securities
 
December 31, 2012, the Company recorded a liability to issue 126,020 shares of preferred stock, at par value of $.0001 per share, for a dilutive issuance under the preferred share agreement, to the shareholders of preferred stock. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.
 
On September 30, 2013, the Company entered into a series of repurchase agreements with each of the shareholders of its Series A Convertible Preferred Stock. Pursuant to the terms of the repurchase, each of the Series A Preferred Stock holders were issued common stock in the Company based on weighted average conversation rate of 67% of the applicable conversion rate. As a result, the Company issued an aggregate of 70,032 shares of common stock in exchange for the repurchase each of the Series A Preferred stockholders. The shares of common stock issued in connection with the Repurchase were exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
 
Pursuant to the terms of the Repurchase, the following individuals were issued shares of common stock (adjusted for the 1 for 1,300 reverse split) in exchange for the repurchase of their Series A Preferred Stock. (The individuals listed in the table below shall be collectively referred to as the “Preferred Holders”)
 
Name
 
Shares of Common Stock
 
Charles R. Cronin Jr.
    42,272  
James Michael Whitfield
    11,611  
Harvey Dale Cheek
    13,635  
Dr. Earl Beaver
    2,514  
TOTAL
    70,032  
 
The issuance of the Preferred Shares to the parties referenced above was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof. The Company made this determination based on the representations of from the parties referenced above, that said parties were “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, that said parties was acquiring the Preferred Shares for investment purposes for its own accounts and not as nominee or agent, and not with a view to the resale or distribution thereof, and that said parties understood that the Preferred Shares may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
 
 
7

 
 
Item 6. Selected Financial Data.
 
As a "smaller reporting company" as defined in Rule 12b-2 of Regulation S-K, the Company is not required to provide information required by Item 301 of Regulation S-K with respect to Selected Financial Data.
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report. Our audited consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
 
Forward-Looking Statements
 
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
 
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.
 
Company Overview and History
 
Our business is focused mainly, but not limited to, the marketing and advertising sector with dynamic and complex web platforms whose assets include web systems operated for profit. Currently, the Company’s focus is mainly, but not limited to, the marketing and advertising sector within the automotive domain ranging from services to include third party advertisers, affiliate networks, private sellers, and automotive dealerships.
 
For the last two years, the Company has executed its business plan in the recoverable energy sector. As management awaits a joint venture opportunity if it is to continue in the recoverable energy sector, the Company has devoted its energy towards the marketing and advertising sector of the Company’s wholly owned subsidiary Transformation Consulting, Inc. (“TC”) that generated the most revenue in its past operations. TC is in the business of developing, marketing, administering and selling various consumer products and services including its membership club products. In March 9, 2011, DEDC acquired all of the outstanding shares, of Transformation Consulting (“TC”) pursuant to a Stock Purchase Agreement between a former director of the Company (“the Director”) and DEDC, dated February 25, 2011 and Amendments No. 1, 2 and 3 to Stock Purchase Agreement, dated December 30, 2011, March 31, 2012 and September 26, 2012, respectively. As of September 2013, the Company has devoted its energy towards the marketing and advertising sector that generated the most revenue for the Company in its past operations.
 
History
 
Elite Data Services, Inc., (“DEAC”), formerly Dynamic Energy Alliance Corporation (the “Company”), was incorporated in the State of Florida on November 23, 1981 as Mammathetics Corp. On November 4, 2013 the Board of Directors approved the proposal to change the name of the company from Dynamic Energy Alliance Corporation to Elite Data Services, Inc. The name change was effected by means of an amendment to the Articles of Incorporation of the Company in accordance with applicable Florida state laws. The action was approved by the written consent of a majority of all shareholders entitled to vote on the record date.
 
 
8

 
 
From 1981 through the first quarter of 2011, the Company’s business was that of a marketer of tumor detection equipment. On March 9, 2011, the Company and Dynamic Energy Development Corporation (DEDC), a private corporation, transacted a reverse triangular merger in which DEDC became a subsidiary of the Company and DEDC staff began to operate the Company, shifting its focus to the recoverable energy sector. The fiscal year end of the Company was changed to December 31 from August 31. The Company formally changed its name to Dynamic Energy Alliance Corporation, having amended its Articles of Incorporation effective September 15, 2011. The Company’s new trading symbol, DEAC, became effective in December 2011 and the Company is still currently trading under this symbol.
 
Through its wholly owned subsidiary, DEDC, the Company’s business plan was to develop, commercialize, and sell innovative technologies in the recoverable energy sector. Specifically, DEDC focused on identifying, combining and enhancing existing industry technologies with proprietary recoverable production and finishing processes to produce synthetic oil, carbon black, gas, and carbon steel from discarded or waste tires waste. This process was to be accomplished with limited residual waste product and significant reductions in greenhouse gases, compared to traditional processing. To maximize this opportunity, the Company developed a scalable, commercial development strategy to build "Energy Campuses" with low operational costs and long-term, recurring revenues.
 
In conjunction with the acquisition of DEDC, the Company acquired TC, a wholly-owned subsidiary of DEDC. TC provides business development, marketing, and administrative consulting services. Through a January 2010 management services and agency agreement (“Agency Agreement”), TC received revenues from a related party based on billings received from certain of TC’s direct to consumer membership club products that were transferred to the related party under the Agency Agreement. As the Company continues its operations, it has decided to focus more on the advertising and marketing model that generated revenues in the Company’s past.
 
DEDC’s business plan focused on developing and implementing recoverable energy technologies. DEDC, the Company’s wholly owned subsidiary, sought joint venture partners or other financing partners (hereinafter collectively “joint venture partners”), on a project by project basis, for the purpose of development, construction and operation of free standing plants to provide full cycle processing to convert discarded tires into shelf ready, saleable synthetic oil and solvents and carbon products (hereinafter referred to as “plants”). Although, the Company identified various plant locations and potential joint venture opportunities, as of today, it has not executed any agreements for the development of a plant.
 
DEDC proposed to develop a full cycle process plant for converting discarded tires to saleable synthetic oil and solvents and carbon products. To accomplish this plan and other milestones, management attempted to secure one or more partnerships, on a site-by-site basis, with local joint venture partners and/or financing sources, including companies who produced shredded tire feedstock usable in the plants. The Company’s business plan anticipated the creation of a state-of-the-art production facility called the “Pyrol Black Energy Campus” in late 2013 and early 2014, as one of its initial milestones. Specifically, the Company planned to acquire, combine and optimize a variety of existing proven and potentially innovative “Renewable Energy” technologies currently available in the market. Creation of such an initial plant required obtaining a location that has a dependable supply of waste feed stock for the plant, obtaining the necessary capital to develop, construct and set in operation the plant (likely with local joint venture partners and/or other financing sources), and establishment of markets for the resale of resulting products. The Company hoped to partner with other companies who can provide tire feedstock, land for a plant, and/or capital, on a joint venture basis. The Company had identified a potential site in Ennis, Texas upon which it could develop its first Energy Campus, and announced its intention to purchase such site, pending the completion of favorable due diligence and the obtaining of the necessary capital required to proceed. However, to date, the Company was unable to obtain the necessary financing to secure the Energy Campus.
 
As a result of the Company not being able to obtain the necessary funding to develop its plan as set forth above during the third quarter of 2013 new management joined DEAC and decided to focus mainly on the marketing and advertising sector with dynamic and complex web platforms whose assets include web systems operated for profit. This business model was not foreign to the Company as its wholly owned subsidiary, TC, had been engaged in developing, marketing, administering, selling various consumer products and services including membership club products two years prior. As of December 31, 2013, the Company worked on securing its operations under the marketing and advertising sector and review transactional history of liabilities and assets pertaining to the Company’s operating history while solely engaged in the energy sector.
 
Change of Control of Registrant
 
On September 30, 2013 Habanero Properties LTD entered into an Assignment and Assumption Agreement with Harvey Dale Cheek, and Charles R. Cronin, Jr. (the “Assignment”). Pursuant to the Assignment, Habanero Properties LTD acquired 78,995 shares of Common Stock equal to 52.38% of the outstanding shares of Common Stock of the Company. As a result of the acquisition of these shares pursuant to the Assignment, a change of control of the Company occurred.
 
 
9

 
 
On September 30, 2013 the Company entered into a series of repurchase agreements (the “Repurchase”) with each of the holders of its Series A Convertible Preferred Stock. Pursuant to the terms of the Repurchase, each of the Series A Preferred Stockholders were issued common stock in the Company based on a weighted average conversion rate of 67% of the conversion rate owed to each of the Series A Preferred Stock holders pursuant to the current terms of the Series A Preferred Stock.
 
Pursuant to the terms of the Repurchase, the following individuals were issued shares of common stock (adjusted for the 1 for 1,300 reverse split) in exchange for the repurchase of their Series A Preferred Stock. (The individuals listed in the table below shall be collectively referred to as the “Preferred Holders”)
 
Name
 
Shares of Common Stock
 
Charles R. Cronin Jr.
    42,272  
James Michael Whitfield
    11,611  
Harvey Dale Cheek
    16,635  
Dr. Earl Beaver
    2,514  
TOTAL
    70,032  
 
On September 30, 2013, in connection with the acquisition by Habanero Properties LTD. of approximately 52.38% of the issued and outstanding shares of common stock of the Registrant each of the then Officers and Directors of the Company tendered their resignation. Immediately prior to tendering their resignation, the Board of directors unanimously approved the appointment of three new Officers and three new Directors as set forth below.
 
Appointment of Directors
 
Jim Ricketts
Sarah Myers
Steven Frye
 
Appointment of Officers
 
Steven Frye – Chief Executive Officer (President)
Sarah Myers – Chief Operations Officer (Secretary)
Josh Stocks – Chief Information Officer (Treasurer)
 
Acceptance of Resignation
 
Charles R. Cronin, Jr.– Chairman of the Board of Directors
James Michael Whitfield – Chief Executive Officer, President, Chief Financial Officer, Treasurer and Director
Tracy Williams – Vice President, Secretary and Director
Harvey Dale Cheek – Director
Karl Johnson – Director
Fiona Sutton – Director
 
 
10

 
 
Plan of Operations
 
For the last two years, the Company’s business plan has focused on developing and implementing recoverable energy technologies. As the Company has been unable to secure financing or a plant location, management has shifted its operations to focus on the marketing and advertising sector of TC. In support of this business direction, the Company entered into two asset purchase agreements in January 14, 2014 for classifiedride.com and autoglance.com. Classfiedride.com is a website where end users can search or list their vehicle, boat, RV, (anything with a motor) for sale. To offer a different approach to the car purchasing and selling market, the ClassifiedRide team works on aiding the private seller buy and trade their vehicle using social media and mobile application enhancements. The Company has been in the development of creating mobile marketing and social mediate tools for integrated maximum exposure to connect with traders and sellers on a more personal level. The Company’s mission is to expand its offerings to revolutionize each sector of its industries. Our management team has over 45 years of experience in the advertising and marketing industry; however, the Company’s goal is to eventually penetrate different markets by utilizing the Company’s technology and network-maximizing software. Currently, the Company is intently focused on the automotive sector, yet the potential application of the Company’s software aligns to a multitude of other industries and products. Whether the industry expansion is done in-house or on a licensed/leased basis is to be determined, but the Company’s purpose with this business model is to be first to market in a complete offering of technology-oriented networks. In addition, the Company is creating our own advertising network that will be used to generate traffic and revenue to further the Company’s operations.
 
Requirements and Utilization of Funds
 
To implement our plan of operations in the marketing and advertising sector, including some or all of the above described milestones (objectives), we will need to continue to raise capital (“equity”) in an amount of $2,000,000 in equity from restricted stock sales or other acceptable financing options over the twelve month period beginning in the first quarter of 2014 on terms and conditions to be determined. Management may elect to seek subsequent interim or “bridge” financing in the form of debt (corporate loans) as may be necessary.
 
At this time, management is unable to determine the specific amounts and terms of such future financings, or whether or not we will be successful in raising such funds on a basis acceptable to us.
 
At such time as these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. To date management has not identified the source for such additional capital, and whether the Company will be able to raise sufficient capital, and do so on commercially reasonable terms, is uncertain. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.
 
Management has plans for the staged continued development of our business over the next twelve months. Other than engaging and/or retaining independent consultants to assist the Company in various administrative and marketing related needs, we do not anticipate a significant change in the number of our employees, if any, unless we are able to obtain adequate financing.
 
Going Concern
 
In their report for our2012 Form 10-K, our auditors have issued a “going concern” opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated enough revenues and no substantial revenues are anticipated in the near-term. Accordingly, we must seek to raise cash from sources other than from the sale of our products.
 
Critical Accounting Policies
 
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified in Note 5 Summary of Significant Accounting Policies to the Financial Statements contained in Item 8 of this document certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the financial statements.
 
 
11

 
 
Use of Estimates
 
Preparation of the our financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as well as the reported amounts of revenues and expenses. Accordingly, actual results could differ from those estimates.
 
Fair Value of Financial Instruments
 
We account for the fair value of financial instruments in accordance with the FASB ASC Topic 820, Fair Value Measurements and Disclosures ("Topic 820"). Topic 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures.
 
The three levels are defined as follows:
 
Level 1 
Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 
inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;
Level 3 
inputs to valuation methodology are unobservable and significant to the fair measurement.
 
The fair value of the Company's cash and cash equivalents, accounts payable, and accrued expenses approximate carrying value because of the short-term nature of these items.
 
Management believes it is not practical to estimate the fair value of loan to related parties because the transactions cannot be assumed at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
 
On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated.
 
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty.
 
Share Purchase Warrants
 
The Company accounts for common share purchase warrants at fair value in accordance with ASC 815, Derivatives and Hedging. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.
 
 
12

 
 
Income Taxes
 
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes ("Topic 740"), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.
 
Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
 
The Company performed a review of its material tax positions. At the adoption date of October 1, 2007, the Company had no unrecognized tax benefits as a result of tax positions taken in a prior period. During the years 2013 and 2012, there were no increases or decreases in unrecognized tax benefits as a result of tax positions taken during those fiscal periods, there were no decreases in unrecognized tax benefits relating to settlements with taxing authorities, and there were no reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations. As of December 31, 2013 and 2012, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate. As of December 31, 2013, the Company has no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. Generally, the Company's tax years ended December 31, 2011 and after remain subject to examination by major taxing jurisdictions.
 
The Company has elected to classify any interest or penalties recognized with respect to any unrecognized tax benefits as income taxes. During the years ended December 31, 2013 and 2012, the Company did not recognize any amounts for interest or penalties with respect to any unrecognized tax benefits. As of December 31, 2013 and 2012, no amounts for interest or penalties with respect to any unrecognized tax benefits have been accrued.
 
Recently Issued Accounting Pronouncements
 
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC during the current reporting year did not, or are not, believed by management to have a material impact on the Company’s present or future consolidated financial statements.
 
Results from Operations
 
Our operating results for the years ended December 31, 2013 and 2012 are summarized as follows:
 
     
Year Ended December 31,
 
     
2013
      2012  
Revenue
 
$
0
   
 $
 420,189
 
Operating and other expenses
   
472,154
     
1,470,137
 
Net operating (loss) income
 
$
(472,154
)
 
$
 (1,049,948
)
 
In 2012, revenue figure above represents TC commission revenues earned after merger on March 9, 2011 from a management service agreement that TC had in place prior to the merger. In 2013, the revenue figure above reflects membership subscriptions efforts inspired by TC’s former business model in which the Company currently is exercising. No revenues were generated from the Company’s efforts in the Recoverable Energy Sector.
 
 
13

 
 
Operating Expenses
 
Our expenses for the years ended December 31, 2013 and 2012 are outlined in the table below:
 
    Twelve Months Ended December 31,  
   
2013
   
2012
 
Project development costs
  $
21,999
    $
119,229
 
Consulting services
   
261,536
     
597,221
 
General and administrative expenses
   
 147,434
   
 
 721,017
 
Total Operating Expenses
  $
430,969
    $
1,437,467
 
 
The decrease in project development costs from 2012 to 2013 is primarily due to project activities related to investigation and design of proto-type equipment that started in third quarter of 2012 and was contingent upon external financing, which the Company did not receive. The decrease in consulting services from 2012 to 2013 are primarily due to the Company budgeting its expenses. The decrease in general and administrative expenses from 2012 to 2013 is primarily due to Company budget of expenses.
 
Liquidity and Capital Resources
 
As of December 31, 2013, we had cash of $2,884 and our working capital deficit was $1,485,316. As of December 31, 2013, we generated no revenues and have a net loss of $472,154. As of December 31, 2012, we had cash of $592 and a working capital deficit is $1,606,502. During the year ended December 31, 2012, we generated revenues of $420,189 and had a net loss of $1,049,948. As of December 31, 2012, we have a cumulative net loss of $5,995,557. We are illiquid and need cash infusions from investors and/or current shareholders to support our marketing and sales operations.
 
Cash Flows
 
   
Twelve Months Ended December 31,
 
   
2013
 
 
2012
 
 
 
 
 
 
 
 
 
 
Net cash used in operating activities
 
$
(233,507
)
 
$
(26,008
)
Net cash provided by financing activities
   
235,799
     
18,948
 
Net (decrease) increase in cash
 
$
2,292
   
$
(7,060
)
 
Cash Flows - Operating Activities
 
Cash used in operating activities of $233,507 in the year ended December 31, 2013 is primarily due to loans the Company partook to pay for expenses related to operations and Company general expenses. Cash used in operating activities of $26,008 in the year ended December 31, 2012 is primarily due to net loss of $1,049,948, offset by non-cash warrant expenses for consulting services of $570,000, other non-cash consulting expenses of $173,408 and an increase in accounts payable and accrued expenses of $264,727.
 
Cash Flows - Financing Activities
 
Cash provided by financing activities in the year ended December 31, 2013 is due to subscription agreements of $155,000 and proceeds from related parties of $80,799. Cash provided by financing activities in the year ended December 31, 2012 was due to $18,948 net cash received from contingent consideration.
 
 
15

 
 
Going Concern Uncertainties
 
Management believes that our current financial condition, liquidity and capital resources may not satisfy our cash requirements for the next twelve months and as such we will need to either raise additional proceeds and/or our officers and/or directors will need to make additional financial commitments to our Company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our objectives, including marketing and sales of our product, and legal and accounting fees, through financial commitments from future debt/equity financings, if and when possible.
 
Management believes that we may generate more sales revenue within the next 12 months, but that these sales revenues may not satisfy our cash requirements to implement our business plan, including, but not limited to, project acquisitions, engineering, and integration costs, and other operating expenses and corporate overhead (which is subject to change depending upon pending business opportunities and available financing).
 
We have no committed source for funds as of this date. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail to satisfy our future cash requirements as a result of these uncertainties.
 
If we are unsuccessful in raising the additional proceeds from officers and/or directors, we may then have to seek additional funds through debt financing, which would be extremely difficult for an early stage company to secure and may not be available to us. However, if such financing is available, we would likely have to pay additional costs associated with high-risk loans and be subject to above market interest rates.
 
The Company and has a cumulative net loss of $6,482,711 at December 31, 2013. We currently have only limited working capital with which continue its operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties, but the Company anticipates it will need to obtain approximately $2,000,000 in additional capital in the form of debt or equity in order to cover its current expenses over the next 12 months and continue to implement its business plan. Whether such capital will be obtainable, or obtainable on commercially reasonable terms is at this date uncertain. These circumstances raise substantial doubt about the Company's ability to continue as a going concern.
 
Capital Expenditures
 
We have not incurred any material capital expenditures.
 
Commitments and Contractual Obligations
 
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Off-Balance Sheet Arrangements
 
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
 
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
 
Not Applicable.
 
 
15

 
 
Item 8. Financial Statements
 
ELITE DATA SERVICES, INC.
 (Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)
 
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
 
INDEX
 
 
 
Page
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
F-2
 
Consolidated Balance Sheets
 
 
F-3
 
Consolidated Statements of Operations
 
 
F-4
 
Consolidated Statement of Stockholders’ Deficit
 
 
F-5
 
Consolidated Statements of Cash Flows
 
 
F-6
 
Notes to Consolidated Financial Statements
 
 
F-7 - F-27
 
 
 
F-1

 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Elite Data Services, Inc. and Subsidiaries (formerly Dynamic Energy Alliance Corporation)
 
We have audited the accompanying consolidated balance sheets of Elite Data Services, Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. the Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company internal control over financial reporting. Accordingly, we express no such opinion. Our audits also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and cash flows for the years ended December 31, 2013 and 2012, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit of $6,467,711 and continues to experience losses. These considerations raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2, which contemplates the raising of additional loan and/or equity financing. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ Anton & Chia, LLP
 
Newport Beach, California
May 12, 2014
 
 
F-2

 
 
ELITE DATA SERVICES, INC. AND SUBSIDIARIES
(Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)
 
CONSOLIDATED BALANCE SHEETS
 
     
December 31,
 
     
2013
     
2012
 
ASSETS
CURRENT ASSETS:
               
Cash
 
$
2,884
   
$
592
 
Total Assets
 
$
2,884
   
$
592
 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued liabilities
 
$
460,278
   
$
470,843
 
Income taxes payable
   
     
1,750
 
Loans to a related party
   
41,348
     
119,139
 
Contingent consideration payable
   
906,574
     
1,015,362
 
Total Current Liabilities
   
1,408,200
     
1,607,094
 
                 
STOCKHOLDERS’ DEFICIT:
               
Preferred stock, $0.0001 par value; 50,000,000 shares Series A authorized; issued and outstanding 0 and 8,811, respectively (1)
   
     
1
 
Common stock, $0.00003 par value; 300,000,000 shares authorized; issued and outstanding 150,488 and 63,468, respectively (1)
   
5
     
2
 
Stock subscriptions
   
155,000
     
 
Additional paid-in capital
   
4,907,390
     
4,389,052
 
Deficit accumulated
   
(6,467,711
)
   
(5,995,557
)
Total Stockholders’ Deficit
   
(1,405,316
)
   
(1,606,502
Total Liabilities and Stockholders’ Deficit
 
$
2,884
   
$
592
 
 
(1) On the effective date of the reverse split, all outstanding shares of the Company’s common stock were converted at the reverse split ratio of 1for 1300. This has been presented on a retroactive bass in the consolidated financial statements.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
 
ELITE DATA SERVICES, INC. AND SUBSIDIARIES
 (Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
      Years Ended December 31,  
      2013       2012  
                 
REVENUES
 
$
   
$
420,189
 
                 
OPERATING EXPENSES
               
Project development costs
   
21,999
     
119,229
 
Consulting services
   
261,536
     
597,221
 
General and administrative
   
147,434
     
721,017
 
Total Operating Expenses
   
430,969
     
1,437,467
 
                 
LOSS FROM OPERATIONS
   
(430,969
)
   
(1,017,278
)
                 
OTHER (EXPENSE):
               
Interest expense
   
41,185
     
34,098
 
Other
   
     
322
 
Total Other Expense
   
41,185
     
34,420
 
                 
LOSS BEFORE PROVISION FOR INCOME TAXES
   
(472,154
)
   
(1,051,698
)
                 
PROVISION FOR INCOME TAX(BENEFIT)
   
     
(1,750
)
                 
NET LOSS
 
$
(472,154
)
 
$
(1,049,948
)
                 
Basic and Diluted Per Share Data:
               
Net Loss Per Share - basic and diluted
 
$
(5.70)
   
$
(16.70
)
                 
Weighted Average Common Shares Outstanding:
               
Basic and diluted (1)
   
85,640
     
62,890
 
 
(1) On the effective date of the reverse split, all outstanding shares of the Company’s common stock were converted at the reverse split ratio of 1for 1300. This has been presented on a retroactive bass in the consolidated financial statements.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
ELITE DATA SERVICES, INC. AND SUBSIDARIES
(Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
 
                     
Additional
   
 
   
Total
 
   
Preferred Stock
   
Common Stock
    Subscription    
Paid-in
   
Accumulated
   
Stockholders’
 
   
Shares
   
Amount
   
Shares (1)
   
Amount
   
Receivable
   
Capital
   
Deficit
   
Deficit
 
                                                 
Balance, December 31, 2011
    5,949     $ 1       62,542     $ 2     $     $ 3,645,645     $ (4,945,609 )   $ (1,299,961 )
Issuance of warrants
                                  570,000             570,000  
Issuance of common stock
                926                   173,035             173,035  
Issuance of preferred stock
    1,923                               250             250  
Dilutive issuance
    939                               122             122  
Net loss for the year
                                        (1,049,948 )     (1,049,948 )
Balance, December 31, 2012
    8,811     $ 1       63,486     $ 2     $     $ 4,389,052     $ (5,995,557 )   $ (1,606,502 )
                                                                 
Issuance of warrants
                                  140,000             140,000  
Issuance of preferred stock
    302                               40             40  
Cashless conversion of warrants to common stock
                385                                
Conversion of warrants to common stock
                16,923       1             298,299             298,300  
Forgiveness of debt by former CEO                                   80,000             80,000  
Issuance of common stock in exchange for preferred stock
    (9,113 )     (1 )     70,032       2             (1 )            
Subscription agreements
                            155,000                   155,000  
Effect of reverse stock split
                (320 )                              
Net loss for the year
                                        (472,154 )     (472,154 )
Balance, December 31, 2013
        $       150,488     $ 5     $ 155,000     $ 4,907,390     $ (6,467,711 )   $ (1,405,316 )
 
(1) On the effective date of the reverse split, all outstanding shares of the Company’s Common stock were converted at the reverse split ratio of 1 for 1,300. This has been presented on a retroactive basis in the consolidated financial statements.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-5

 
 
ELITE DATA SERVICES, INC. AND SUBSIDIARIES
(Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
Years Ended December 31,
 
   
2013
   
2012
 
OPERATING ACTIVITIES:
           
Net loss
  $ (472,154 )   $ (1,049,948 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Non-cash consulting expenses
    40       173,408  
Warrants issued for services
    140,000       570,000  
Changes in operating assets and liabilities:
               
Accounts payable and accrued expenses
    69,435       264,727  
Income taxes payable
    (1,750 )     (13,750 )
Loans payable to related parties
    30,922       29,555  
Net cash used in operating activities
    (233,507 )     (26,008 )
                 
FINANCING ACTIVITIES:
               
Proceeds from subscription agreements
    155,000       -  
Cash received from contingent consideration
    -       18,948  
Proceeds from related parties
    80,799       -  
Net cash provided by financing activities
    235,799       18,948  
NET INCREASE (DECREASE) IN CASH
    2,292       (7,060 )
CASH BEGINNING OF THE YEAR
    592       7,652  
CASH END OF THE YEAR
  $ 2,884     $ 592  
SUPPLEMENTAL DISCLOSURES:
               
Income taxes paid
  $ -     $ 12,025  
Interest paid
  $ -     $ -  
                 
Non-Cash Transactions:                
Warrants converted to common stock as settlement for related loans   $ 298,300     $ -  
Forgiveness of related party loans   $ 80,000     $ -  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6

 
 
ELITE DATA SERVICES, INC. AND SUBSIDIARIES
(Formerly DYNAMIC ENERGY ALLIANCE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
 
Note 1. DESCRIPTION OF BUSINESS
 
Elite Data Services, Inc. (hereinafter the “Company”, “Our”, “We” or “Us”) changed its name from Dynamic Energy Alliance Corporation on November 4, 2013. Prior to that, we were formerly Mammatech Corporation, and were incorporated in the State of Florida on November 23, 1981 under the name Mammathetics Corp. From 1981 through the first quarter of 2011, the Company’s business was that of a marketer of tumor detection equipment. On March 9, 2011, the Company and Dynamic Energy Development Corporation (DEDC), a private corporation, transacted a reverse triangular merger in which DEDC became a subsidiary of the Company, shifting its focus to the recoverable energy sector. In connection with this the Company planned to develop, commercialize, and sell innovative technologies in the recoverable energy sector. Specifically, it was focused on identifying, combining and enhancing existing industry technologies with proprietary recoverable production and finishing processes to produce synthetic oil, carbon black, gas, and carbon steel from discarded or waste tires waste.
 
In conjunction with the acquisition of DEDC, the Company acquired Transformation Consulting (‘TC”), a wholly-owned subsidiary of DEDC. TC provides business development, marketing, and administrative consulting services. Through a January 2010 management services and agency agreement (“Agency Agreement”), TC received revenues from a related party based on billings received from certain of TC’s direct to consumer membership club products that were transferred to the related party under the Agency Agreement. As the Company continues its operations, it has decided to focus more on the advertising and marketing plan that generated revenues in the Company’s past.
 
History
 
DEDC’s business plan focused on developing and implementing recoverable energy technologies. DEDC, the Company’s wholly owned subsidiary, sought joint venture partners or other financing partners (hereinafter collectively “joint venture partners”), on a project by project basis, for the purpose of development, construction and operation of free standing plants to provide full cycle processing to convert discarded tires into shelf ready, saleable synthetic oil and solvents and carbon products (hereinafter referred to as “plants”). Although, the Company identified various plant locations and potential joint venture opportunities, as of today, it has not executed any agreements for the development of a plant.
 
DEDC proposed to develop a full cycle process plant for converting discarded tires to saleable synthetic oil and solvents and carbon products. To accomplish this plan and other milestones, management attempted to secure one or more partnerships, on a site-by-site basis, with local joint venture partners and/or financing sources, including companies who produced shredded tire feedstock usable in the plants. The Company’s business plan anticipated the creation of a state-of-the-art production facility called the “Pyrol Black Energy Campus” in late 2013 and early 2014, as one of its initial milestones. Specifically, the Company planned to acquire, combine and optimize a variety of existing proven and potentially innovative “Renewable Energy” technologies currently available in the market. Creation of such an initial plant required obtaining a location that has a dependable supply of waste feed stock for the plant, obtaining the necessary capital to develop, construct and set in operation the plant (likely with local joint venture partners and/or other financing sources), and establishment of markets for the resale of resulting products. The Company hoped to partner with other companies who can provide tire feedstock, land for a plant, and/or capital, on a joint venture basis. The Company had identified a potential site in Ennis, Texas upon which it could develop its first Energy Campus, and announced its intention to purchase such site, pending the completion of favorable due diligence and the obtaining of the necessary capital required to proceed. However to date, the Company was unable to obtain the necessary financing to secure the Energy Campus.
 
As the market for high end financing suffered to the downtown in the economy, the Company’s management began to assess the future of the Company for acquisitions relating to TC’s marketing strategies. Beginning in August 2013, the Company introduced new management to assist with the Company’s priorities and determine the best course of action to implement its business plan. This included evaluating all business opportunities related to the Company’s subsidiaries.
 
 
F-7

 
 
During this period, the Company evaluated DEDC’s potential assets to assess the feasibility of going forward on DEDC’s business plan and determined conclusively it was not in the Company’s best interest based on past operations and significant reliance on external financing. As the Company plans to continue and concentrate on the marketing and advertising solutions in which Transformation Consulting, Inc. had generated the most revenue for the Company in the past, the Company will not be exclusively focusing on DEDC’s business plan absent a joint partnership if these operations of the Company are to continue. As of December 31, 2013, no reasonably acceptable joint partnership has surfaced, prompting the Company to focus on the marketing and advertising sector of its wholly owned subsidiary Transformation Consulting, Inc.
 
History of Transformation Consulting, Inc.
 
Since September 30, 2013, the Company has been focused on its wholly owned subsidiary, Transformation Consulting, Inc.’s (“TC”) business model involving advertising, consulting and marketing services. More specifically, TC is in the business of developing, marketing, administering and selling various consumer products and services including its membership club products. In March 9, 2011, DEDC acquired all of the outstanding shares, of TC pursuant to a Stock Purchase Agreement between a former director of the Company (“the Director”) and DEDC, dated February 25, 2011 and Amendments No. 1, 2 and 3 to Stock Purchase Agreement, dated December 30, 2011, March 31, 2012 and September 26, 2012, respectively. The purchase price for the Shares was $2,000,000, payable from the gross revenues (pre-tax) of TC, as received, subject to the following contingent reduction or increase of the purchase price. Under the original agreement (which is not currently in effect to date), 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”). At the time of the acquisition, TC had minimal tangible assets and the entire $2,000,000 purchase price was allocated to a customers’ list intangible asset.
 
Through December 31, 2012, TC’s gross revenues under the Stock Purchase Agreement totaled approximately $2,000,000. Through December 31, 2012, payments of the purchase price, net of refunds, totaled $984,638. At December 31, 2012 and 2013, the contingent consideration payable was $1,015,362 and $906,574, respectively. Under an amended payment schedule, the contingent consideration owing was due December 15, 2012. Under this original agreement, the Company needed funding to fulfill its financial obligations and was in default for non-payment. TC’s past revenues were primarily related to a January 2013, Management Services and Agency Agreement (“Agency Agreement”). On September 30, 2013, Charles R. Cronin assigned to Habanero Properties, Ltd, all of its rights under this note.
 
Merger Acquisition by way of Share Exchange
 
On March 9, 2011, the Company effectively completed a merger transaction whereby it entered into a Share Exchange Agreement (“SEA”) with DEDC, a privately held corporation, with DEDC becoming a wholly-owned subsidiary of the Company. The share transactions to complete the merger transaction are hereinafter collectively referred to as the “Merger.” All costs incurred in connection with the Merger have been expensed. Following the Merger, the Company abandoned its prior business and concurrently adopted DEDC’s business plan as its principal business. In addition, the director and officer of the Company were replaced by the directors and officers of DEDC. On October 2, 2013, an Assignment and Assumption Agreement was entered into by the Company and Habanero Properties in which Habanero Properties purchased controlling ownership of the Company’s outstanding common stock.
 
Note 2. GOING CONCERN
 
Since inception, the Company has a cumulative net loss of $6,467,711. The Company currently has only limited working capital with which to continue its operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties. The Company must secure additional working capital through loans, sale of equity securities, or a combination, in order to implement its business plans. There can be no assurance that such funding will be available in the future, or available on commercially reasonable terms favorable to the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
 
 
F-8

 
 
The accompanying financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
During 2012, the Company has generated revenue in the amount of $420,189. Management has continued to manage its costs for 2013 to ensure appropriate funding is on hand for its operation. The Company's 2013 projections were not met.
 
Note 3. MERGER WITH DYNAMIC ENERGY DEVELOPMENT CORPORATATION
 
(a)
Description of the Merger
 
This merger acquisition was transacted as follows (The Company’s shares of common stock disclosures in this note have been presented on a post forward stock split basis.):
 
The Company, DEDC and Verdad Telecom (“Controlling Shareholder”) entered into a Share Exchange Agreement, pursuant to which Controlling Shareholder, owning an aggregate of 44,786,188 shares of common stock of the Company (“Common Stock”), equivalent to 85.5% of the issued and outstanding Common Stock (the “Old Shares”) would return its shares to treasury and DEDC shareholders would exchange 17,622,692 DEDC shares on a one for one basis of newly issued shares of the Company. On return of such shares to treasury, the Controlling Shareholder received a cash payment of $322,000 (the “Purchase Price”). In addition, prior to the effective time of the Merger, 6,000,000 shares of the Company’s common stock were issued to a debenture holder pursuant to an investment bonus feature in the convertibility of debenture notes. Immediately prior to the effective time of the Merger, 22,871,100 shares of the Company’s common stock were issued and outstanding. Upon completion of the Merger, the DEDC shareholders owned approximately 69.8% of the Company’s issued and outstanding common stock.
 
All references to share and per share amounts in these financial statements have been restated to retroactively reflect the number of shares of common stock issued pursuant to the Merger.
 
(b)
Accounting Treatment of the Merger; Financial Statement Presentation
 
The Merger was accounted for as a reverse acquisition pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805-40-25.1, which provides that the merger of a private operating company into a non-operating public shell corporation without significant net assets typically results in the owners and management of the private company having actual or effective operating control of the combined company after the transaction, with the shareholders of the former public corporation continuing only as passive investors.
 
These transactions are considered by the Securities and Exchange Commission to be capital transactions in substance, rather than business combinations. That is, the transaction is equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation, accompanied by a recapitalization. Accordingly, the Merger has been accounted for as a recapitalization, and, for accounting purposes, DEDC is considered the accounting acquirer in a reverse acquisition.
 
The Company’s historical accumulated deficit for periods prior to March 9, 2011, in the amount of $3,075,165 was eliminated by offset against additional-paid-in-capital, and the accompanying financial statements present the previously issued shares of common stock as having been issued pursuant to the Merger on March 9, 2011. The shares of common stock of the Company issued to the DEDC stockholders in the Merger are presented as having been outstanding since December 13, 2010, the month when DEDC first sold its equity securities.
 
Because the Merger was accounted for as a reverse acquisition under Generally Accepted Accounting Principles (“GAAP”), the financial statements for periods prior to March 9, 2011 reflect only the operations of DEDC.
 
 
F-9

 
 
Note 4. ACQUISITION OF TRANSFORMATION CONSULTING, INC.
 
On March 9, 2011, DEDC acquired all of the outstanding shares, of Transformation Consulting (“TC”) pursuant to a Stock Purchase Agreement between a director of the Company (“the Director”) and DEDC, dated February 25, 2011 and Amendments No. 1, 2 and 3 to Stock Purchase Agreement, dated December 30, 2011, March 31, 2012 and September 26, 2012, respectively. The purchase price for the Shares was $2,000,000, payable from the gross revenues (pre-tax) of TC, as received, 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”). At the time of the acquisition, TC had minimal tangible assets and the entire $2,000,000 purchase price was allocated to a customers’ list intangible asset.
 
Through December 31, 2012, TC gross revenues under the Stock Purchase Agreement totaled approximately $2,000,000. Through December 31, 2012, payments of the purchase price, net of refunds, totaled $984,638. At December 31, 2012 and 2013, contingent consideration payable is $1,015,362 and $906,574, respectively. Under an amended payment schedule, the contingent consideration owing was due December 15, 2012. On September 30, 2013, Charles R. Cronin assigned this debt to Habanero Properties, Ltd.
 
Note 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the Company and its subsidiaries, Dynamic Energy Development Corporation and Transformation Consulting, Inc.. All intercompany balances and transactions have been eliminated.
 
Use of Estimates
 
Preparation of the Company's financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as well as the reported amounts of revenues and expenses. Accordingly, actual results could differ from those estimates.
 
Development Costs
 
Development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. For the years ended December 31, 2013 and 2012, total development costs amounted to $21,999 and $119,229, respectively. At December 31, 2013 and December 31, 2012, the Company had no deferred product development costs.
 
 
F-10

 
 
Cash and Cash Equivalents
 
Cash and cash equivalents, if any, include all highly liquid instruments with an original maturity of three months or less at the date of purchase. At December 31, 2013 and December 31, 2012, the Company had no cash equivalents.
 
Financial Instruments and Concentration of Risk
 
The fair values of financial instruments, which include cash, accounts payable and accrued liabilities and convertible notes, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments. Management does not believe that the Company is subject to significant interest, currency or credit risks arising from these financial instruments. 
 
Fair Value of Financial Instruments
 
The Company accounts for the fair value of financial instruments in accordance with the FASB ASC Topic 820, Fair Value Measurements and Disclosures ("Topic 820"). Topic 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures.
 
The three levels are defined as follows:
 
·
Level 1
inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·
Level 2
inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
Level 3
inpuinputs to the valuation methodology are unobservable and significant to the fair measurement.
 
The fair value of the Company's cash, accounts payable, and accrued expenses approximate carrying value because of the short-term nature of these items.
 
Management believes it is not practical to estimate the fair value of loan to related parties because the transactions cannot be assumed at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
 
Revenue Recognition
 
The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.
 
Specifically with respect to TC, commission revenue is earned on consulting services provided to a company controlled by a director of the Company. TC earns these commissions based on this company’s revenues from certain direct to consumer membership club products. Commissions earned are recorded when deposited into an escrow account, effectively allowing for uncertainty of collectability and bad debt issues. 
 
 
F-11

 
 
Loss Per Common Share
 
Basic loss per common share (“EPS”) is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of common shares that are exercisable or converted into common stock is not material to effect diluted EPS results. Further, since the Company shows losses for the periods presented basic and diluted loss per share are the same for all periods presented. As of December 31, 2013 and December 31, 2012, there were no outstanding dilutive securities.
 
Certain Reclassification
 
Certain 2012 items were reclassified to conform to current year presentation. Such reclassifications had no effect on 2012 net income.
 
Income Taxes
 
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted the accounting standards codified in ASC 740, Income Taxes as of its inception. Pursuant to those standards, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years.
 
ASC 740-10-25 prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. An entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.
 
The Company does not have any unrecognized tax benefits as of December 31, 2013 and December 31, 2012 that, if recognized, would affect the Company's effective income tax rate. The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company did not recognize or have any accrual for interest and penalties relating to income taxes as of December 31, 2013 and December 31, 2012. 
 
Common Share Non-Monetary Consideration
 
In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:
 
i) the counterparty’s performance is complete;
 
ii) a commitment for performance by the counterparty to earn the common shares is reached; or
 
iii) the common shares are issued if they are fully vested and non-forfeitable at that date.
 
 
F-12

 
 
Stock-Based Compensation
 
On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated.
 
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty.
 
Share Purchase Warrants
 
The Company accounts for common share purchase warrants at fair value in accordance with ASC 815, Derivatives and Hedging. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.
 
Recently and Issued Accounting Pronouncements
 
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC during the current reporting period did not, or are not, believed by management to have a material impact on the Company’s present or future consolidated financial statements.
 
Note 6. RELATED PARTY TRANSACTIONS AND AMOUNTS OWING
 
a)
Loans payable to related party - Cronin – LOC
 
The amounts due to a related party at December 31, 2013 and 2012 of $-0- and $119,139 , respectively, represent an unsecured promissory note (“Cronin - LOC”) due to a former shareholder and former director of the Company. These amounts are unsecured, bear interest at 15% per annum and payable, with accumulated interest. This financial instrument has no outstanding balance at December 31, 2013, as the outstanding balance owed at the time of exercise of his warrants was offset towards partial payment of the warrants exercised at their strike price and aggregated $189,512.
 
In conjunction with the execution of the Cronin - LOC, the Company issued a Warrant to the shareholder and director for the purchase of 6,923 shares of common stock in July 2011, which were exercised in September 2013.
 
b)
Loans payable to related party – Myers - LOC
 
The amounts due to a related party at December 31, 2013 of $41,348, represents an unsecured promissory note (“Myers – LOC”) due to a shareholder and director of the Company. These amounts are unsecured and bear interest at the rate of 12%. The note is due and payable in August 2014.
 
 
F-13

 
 
c)
Contingent consideration payable to related party
 
Pursuant to Stock Purchase Agreement between a former 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, Inc. (“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 $115,944 of gross revenues paid at the later of 90 days of receipt or June 30, 2012;
 
For the years ended December 31, 2013 and 2012, TC gross revenues totaled $-0- and $1,580,302, respectively. Through December 31, 2012, TC gross revenues under the TC Stock Purchase Agreement totaled approximately $2,000,000.
 
Through December 31, 2013, payments, net of refunds, made to Director under the TC Stock Purchase Agreement totaled $984,638. Part of the outstanding balance owed at the time of exercise of the warrants was offset towards the payment of the warrants exercised at their strike price and aggregated $108,788. As part of the Assignment and Assumption Agreement entered into by the Company and Habanero Properties, TC assigned this debt to Habanero Properties, Ltd. At December 31, 2013 and 2012, the contingent consideration payable is $906,574 and $1,015,362, respectively, as follows:
 
 
 
As of
December 31,
2013
 
 
As of
December 31,
2012
 
 
 
 
 
 
 
 
 
 
Contingent consideration due
 
$
2,000,000
 
 
$
2,000,000
 
Less payments, net of refunds, to Director
 
 
(984,638
)
 
 
984,638
 
Payment of exercise of warrants
   
 (108,788
)
   
 -
 
 
 
$
906,574
 
 
$
1,015,362
 
 
 
F-14

 
 
d)
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 former 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 any decrease in accounts payable, and a monthly fee of $10,000 per month, accrued monthly, for each month of use of the facility by DEAC and/or its affiliates.
 
As of December 31, 2013, the assignment and assumption agreement and right of first refusal and option agreement “IWSI PS Plan” have terminated.
 
e)
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 two of the Company’s former 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”).
 
 
F-15

 
 
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 obtaining consent from TK to defer payment of the amount required, TK has the right to terminate its agreement with the Company.
 
As of December 31, 2013, TK had terminated this agreement.
 
f)
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”) for the years ended December 31, 2013 and 2012, in the amount of $-0- and $140,000 respectively. At December 31, 2013 and 2012 the Company has an accounts payable balance of $-0- and $0, respectively, to this related party. In July 2012, the consulting services agreement was amended and the accounts payable was settled in full. 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 years ended December 31, 2013 and 2012, in the amount of $-0- and $42,000, respectively. At December 31, 2013 and 2012, the Company has an accounts payable balance of $-0- and $10,500, respectively, to this related party. See Note 8, Commitments and Contractual Obligations, for discussion.
   
(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 former 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. This agreement was terminated effective September 30, 2013.
 
During the years ended December 31, 2013 and 2012, the Company recorded, the issuance of Warrants valued at $80,000 and 400,000 respectively to TMDS 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 2013 and there are no obligations due PS as of December 31, 2013.
 
 
F-16

 
 
Note 7. CAPITAL STOCK
 
Authorized
 
The Company is authorized to issue 200,000,000 shares of preferred stock, having a par value of $0.0001 per share, and 300,000,000 shares of common stock, having a par value of $0.00003 per share.
 
Forward Stock Split and Authorized Capital Stock
 
Effective September 15, 2011, by Articles of Amendment, the Company effected the following changes:
 
(1)
forward split all outstanding shares of the Corporation’s common stock on a 3 for 1 basis. Accordingly, common share disclosure has been presented on a post split basis, except where noted.
 
(2)
increased authorized capital stock to 500,000,000 shares, of which 300,000,000 shares shall be common stock, par value $0.00003, and 200,000,000 shares shall be preferred stock, par value $0.0001, and to give the Board of Directors the power to fix by resolution the rights, preferences and privileges of preferred stock.
 
On October 5, 2011, by approval of shareholders of the Company and the Florida Secretary of State, the authorized number of Series A Convertible Preferred Stock was changed to 50,000,000 shares from the previously authorized 200,000,000 shares of preferred stock. The Certificate of Designation for these shares provides among other rights and privileges the requirement that 75% of the outstanding Series A Convertible Preferred must give their prior consent, before the Company can elect members to the Board of Directors, issue any securities of the Company or affect any fundamental transaction (defined as acquisitions, mergers, sale or purchase of substantially all assets, etc.). The Company effectuated these amendments during the fourth fiscal quarter of 2011.
 
The shareholders of convertible preferred stock are voted equally with the shares of the Company’s common stock. Each share of the convertible preferred stock is convertible into two fully paid and non-assessable shares of common stock, subject to certain adjustments, as follows:
 
(i)
During the period commencing on October 10, 2013 and terminating on October 10, 2015 (“the quarterly conversion period”), each holder of convertible preferred stock may elect to convert, on each March 31, June 30, September 30 and December 31 occurring during the quarterly conversion period, that number of shares of convertible preferred stock equal to 25% of the total number of shares of convertible preferred stock initially issued to such Holder into full paid and non-assessable shares of common stock; and
 
 
(ii)
After the quarterly conversion period, each Holder may elect to convert all or any portion of its shares of convertible preferred stock then outstanding into full paid and non-assessable shares of common stock.
 
(iii)
At any time after the issue date and while the convertible preferred stock are outstanding, the Company sells or grants any option to purchase or otherwise disposes or issues any common stock and/or common stock equivalents entitling any person to acquire shares of common stock at a price per share that is lower than $2.50 (such issuances, collectively, then the Company is required to issue additional shares of preferred shares “Dilutive Issuance”), based on the ratio of the number of shares of common stock and equivalents divided by the number of shares of common stock prior to the dilutive issuance, times the number of shares of preferred stock prior to the dilutive issuance. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.
 
 
F-17

 
 
Issued and Outstanding
 
Preferred Stock
 
At December 31, 2013 and 2012, shares of preferred stock issued and outstanding totaled -0- and 8,811, respectively.
 
On September 13, 2012, the Company issued a total of 386 shares of series A convertible preferred stock, at par value of $0.0001 per share, to two directors of the Company, with each receiving 193 shares, in conjunction with the execution and completion of certain contract provisions related to the R.F.B., LLC agreement.
 
On October 2, 2012, the Company issued a total of 1,537 shares of series A convertible preferred stock, at par value of $0.0001 per share, to one director of the Company, in conjunction with the execution of the C.C Crawford Option Agreement.
 
During 2012, the Company issued 939 shares of preferred stock, at par value of $.0001 per share, for a dilutive issuance under the preferred share agreement, to the shareholders of preferred stock. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.
 
During the year ended September 30, 2013, the Company issued 302 shares of preferred stock, at par value of $.0001 per share, for a dilutive issuance under the preferred share agreement to the shareholders of preferred stock. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.
 
On September 30, 2013, the Company entered into a series of repurchasing agreements with each of the shareholders of its Series A Convertible Preferred Stock. The Company entered into the agreement to eliminate future dilutive issuance as a result the Company was able to reduce its convertible share exposure by 33% and eliminate 75% control held by the Series A Preferred Stock. In exchange for the agreement, each of the Series A Preferred Stock holders were issued common stock in the Company based on weighted average conversation rate of 67% of the conversion rate. As a result the Company issued 70,032 shares of common stocks at par value of $.00003 in exchange for the repurchase each of the Series A Preferred Stock.
 
Common Stock
 
At December 31, 2013 and 2012, shares of common stock issued and outstanding totaled 150,488 and 63,468, respectively.
 
During the year ended December 31, 2013, the Company issued 87,340 shares of common stock as follows:
 
 
On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock, Mr. Cronin exercised his warrants and those of TMDS at their strike price and 17,308 shares of common stock were issued for $298,300. The purchase price offset amounts due him under his line of credit and amount due under the contingent liability amount from the Company.
 
 
On September 30, 2013, the Company issued 70,032 shares of common stock under the repurchase agreements in exchange all of the outstanding Series A Convertible Preferred Stock.
 
Effective November 4, 2013, the Company received an affirmative vote by the shareholders for a reverse split of all the outstanding shares of the Company at a reverse split ratio of 1:1,300. No fractional shares were issued and cash was paid in lieu of the fractional shares. As a result of the fractional shares, outstanding shares were reduced by 320 post split shares.
 
During the year ended December 31, 2012, the Company issued 926 shares of common stock as follows:
 
 
On July 18, 2012, issued 469 shares to Key Services, Inc. (‘Key Services”), valued at $121,862, for settlement of accounts payable balance per amendment to Key Services’ consulting agreement;
 
 
On August 8, 2012, issued 192 shares to Heartland Capital Markets, LLC (“Heartland”), valued at $15,000, for corporate advisory services per amendment to Heartland’s corporate advisory services agreement;
 
 
On August 15, 2012, issued 96 shares to Undiscovered Equities, Inc. (“UEI”) valued at $17,500, for consulting services per amendment to UEI’s consulting agreement;
 
 
On September 13, 2012, issued 77 shares to R.F.B., LLC, (“RFB”), valued at $6,000, for acquisition of exclusive license by Company per RFB’s license and assignment agreement.
 
 
On December 31, issued 92 shares to outside contractor, valued at $12,673, under the outside contractor’s consulting agreement.
 
 
F-18

 
 
Stock Purchase Warrants
 
During the year ended December 31, 2012, the Company issued a total of six warrants for the purchase of 4,231shares of common stock with a total value of $570,000.
 
(1)
On January 17, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS, LLC ("TMDS"'), a company controlled by a director of the Company, as consideration for services rendered per a Contractor Agreement, dated July 9, 2011, and as further amended December 30, 2011. TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The warrant is exercisable at $0.13 per share, and has term expiring on the fifth anniversary date from the date of each issuance. The fair value of the issued warrant is $70,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.79%, expected life of 5 years and expected volatility of 473.82%.
 
(2)
On March 17, 2012, the Company issued a warrant for the purchase of 385 shares of common stock, at an exercise price of $1.30 per share, exercisable after twelve months from issue date, with a term expiring on the fifth anniversary date from the date of issuance, to a departing Chief Financial Officer, who resigned effective March 14, 2012. The fair value of the issued warrant is $70,000, based on Black-Scholes option-pricing model using risk free interest rate of 1.13%, expected life of 5 years and expected volatility of 460.03%. The warrant was exercised in September 2013 under the cashless provision contained in the warrant.
 
(3)
On April 16, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 Shares every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $160,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.85%, expected life of 5 years and expected volatility of 481.39%.
 
(4)
On July 1, 2012, the Company issued a warrant share issuance for the purchase of 769 Shares of common stock (‘Warrant Shares’) by to Joseph M. Danko, an independent contractor (“Contractor”), per a January 1, 2012 four year Stock Purchase Warrant Agreement that gives Contractor right to purchase 2,307 shares (“Warrant Shares”) of common stock, as consideration for services rendered per an Independent Contractor Agreement with the Company, effective January 1, 2012. The contractor is entitled to purchase 2,307 Warrant Shares as follows: 
   
 
769 Warrant Shares after the first year anniversary, at exercise price of $260.00 per share, with a term expiring on on January 1, 2016;
   
 
769 Warrant Shares after the second the second anniversary and expiring on January 1, 2016;
   
 
The fair value of the issued warrant is $100,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.67%, expected life of 4 years and expected volatility of 486.46%.
   
(5)
On July 15, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 Shares every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $80,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.62%, expected life of 5 years and expected volatility of 488.56%.
   
(6)
On October 13, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $90,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.67%, expected life of 5 years and expected volatility of 547.10%.
 
 
F-19

 
 
During the year ended December 31, 2013, the Company issued a total of four warrants for the purchase of 3,077 shares of common stock with a total value of $140,000. The following discusses the issuance of warrants during 2013:
 
 
On January 1, 2013, the Company incurred a warrant share issuance for the purchase of 769 Shares of common stock (‘Warrant Shares’) by an independent contractor (“Contractor”), per a January 1, 2012 Stock Purchase Warrant Agreement that gives Contractor right to purchase 769 shares (“Warrant Shares”) of common stock, after the first anniversary at exercise price of $260.00 per share, as discussed above. The fair value of the issued warrant is $60,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.72%, expected life of 4 years and expected volatility of 534.55%.
 
 
On January 11, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $50,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.80%, expected life of 4 years and expected volatility of 529.81%.
 
 
On April 11, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $20,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.74%, expected life of 4 years and expected volatility of 429.77%.
 
 
On July 15, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $10,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.34%, expected life of 2 years and expected volatility of 420.04%.
 
 
On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock, Mr. Cronin exercised his warrants and those of TMDS at their strike price and 17,308 shares of common stock were issued for $298,800. The purchase price offset amounts due him under his line of credit and amount due under the contingent liability amount from the Company.
 
As of December 31, 2013 and 2012 were 1,538 and 15,769 warrants outstanding, respectively.
 
The following table summarizes the warrant activity for the years ended December 31, 2013 and 2012:
 
 
 
Warrants Outstanding
 
         
Weighted
 
 
       
Average
 
   
Number of
   
Exercise
 
   
Shares
   
Price
 
Balance, December 31, 2011
    11,538     $ 25.79  
Granted
    4,231     $ 23.85  
Exercised
           
Expired/Cancelled
        $  
Balance, December 31, 2012
    15,769     $ 25.27  
Granted
    3,077     $ 65.10  
Exercised
    (17,308 )     (17.26 )
Expired/Cancelled
           
Balance, December 31, 2013
    1,538     $ 195.00  
Exercisable at December 31, 2013
    1,538     $ 195.00  
 
The range of exercise prices and the weighted average exercise price and remaining weighted average life of the warrants outstanding at December 31, 2013 were $130.00 to 260.00, $195.00 and two years, respectively. The aggregate intrinsic value of the outstanding warrants at December 31, 2013 was $-0-. 
 
 
F-20

 
 
Note 8. COMMITMENTS AND CONTRACTUAL OBLIGATIONS
 
a)
Strategic Business and Legal Services Agreement - NBN Enterprises, Inc.
 
On April 25, 2011, the Company entered into an agreement with NBN Enterprises, Inc. (“NBN”), through to May 1, 2013, whereby NBN provides strategic business services to the Company and pays the cost of outside legal counsel who will advise the Company on securities, corporate and contract matters. The agreement provides for compensation to NBN in the form of issuance of restricted Company common stock equal to 5% of outstanding shares, with anti-dilution protection through the issuance of additional shares through the term and for the succeeding 12 months, and a non-accountable expense allowance of $3,500 per month.
 
On September 11, 2012, the Company executed an amendment to the NBN agreement which substantially changed the terms for compensation under the original agreement, and made certain other changes, as follows:
 
(a)
The due and owing, but unissued Company 1,065,226 shares of common stock shall be issued to NBN with a private placement restriction.
 
(b)
NBN agreed to execute a separate Lock-up Agreement restricting the sale of the above referenced shares of common stock until September 21, 2013.
 
(c)
The Company and NBN agreed to modify the original agreement whereby the Company is no longer obligated to issue additional or catch-up shares to NBN in order to maintain total aggregate share issuances under original agreement to 5% of outstanding shares of common stock after September 21, 2012, provided that that the Company continues to pay the $3,500 per month payments through May 30, 2013.
 
As the Company failed to make payments under this agreement, this agreement has terminated.
 
During the years ended December 31, 2013 and 2012, the Company incurred legal expenses of $10,500 and $10,500, respectively, under this agreement. At December 31, 2013 and 2012, the Company has amounts due of $-0- and $10,500, respectively, under the agreement
 
b)
Line of Credit - Cronin
 
On July 9, 2011, the Company established a revolving line of credit (LOC – Cronin), bearing interest at 15% per annum, and payable with accumulated interest, and due December 31, 2011 with Charles R. Cronin, Jr., a shareholder and former director of the Company, (the “Lender”). On September 11, 2011 and October 5, 2011, the Board of Directors of the Company approved and the Company executed approvals of credit limit amendments to increase the Company’s outstanding line of credit to $300,000.
 
On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock, Mr. Cronin exercised his warrants and those of TMDS at their strike price and 17,308 shares of common stock were issued for $298,800. A portion of the purchase price was offset by an amounts due him under his line of credit that amounted to $189,512 at the time of exercise.
 
On December 31, 2013 and December 21, 2012 the Company owed the Lender $-0-and $183,045, respectively. During year ended December 31, 2013 and 2012, the Company recorded interest expense of $17,845 and $29,555, respectively, related to the line of credit.
 
 
F-21

 
 
c)
Loans payable to related party – Myers - LOC
 
The amounts due to a related party at December 31, 2013 of $41,348, represents an unsecured promissory note (“Myers – LOC”) due to a shareholder and director of the Company. These amounts are unsecured and bear interest at 12% per annum.
 
d)
Consulting Agreement – Key Services, Inc.
 
On July 9, 2011, the Company executed a consulting agreement with Key Services, Inc. (“Key”), whereby Key will locate and assist in the Company’s development and construction of an energy campus project 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 Key in the form of cash in an amount equal to $20,000 per month or at the Company’s option (if funds are not available), restricted shares of the Company’s common stock, valued at the average closing price of Company’s common stock over the preceding 20 trading days. In addition, Key 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.
 
On July 18, 2012, the Company executed an amendment to the Key Services, Inc. consulting agreement which settled the accounts payable balance and substantially changed the terms for compensation under the original consulting agreement, and made certain other changes, as follows:
 
(a)
The Company agreed to settle in full the past due and outstanding obligation for prior consulting fees to the Consultant which aggregated $121,862, at July 18, 2012, by the immediate private issuance of 609,315 shares of the Company’s restricted Common Stock to Consultant. The shares of common stock were issued September 28, 2012.
 
(b)
The Consultant agreed to execute a separate Lock-up Agreement restricting the related sale of the above referenced Shares for a period of twelve (12) months after the date of expiration of the customary SEC Rule 144 restriction period (normally 6 months).
 
(c)
The Company and Consultant agreed to terminate payment of a $20,000 monthly consulting fee during the remaining term of the Consulting Agreement, beginning July 1, 2012.
 
(d)
Reaffirmed the Parties agreement that the Company would pay Consultant additional fees to be separately negotiated, including site development, joint venture, partnership, consulting, developer, contractor and/or project management fees, on a project by project basis.
 
(e)
Provided that the Company has the right to assign its obligations under the Consulting Agreement to one or more wholly owned subsidiaries or related party entities. The Amendment contains customary warranties and representations and indemnification and confidentiality provisions and provides that the Consultant is subject to noncompetition and noninterference covenants.
 
For the year ended December 30, 2013 and 2012, the Company recorded consulting services expense of $0 and $140,000, respectively, to Key Services.
 
As of December 31, 2013, the Company had no amounts owing to Key Services and the contract was effectively terminated.
 
 
F-22

 
 
e)
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, whereby 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 729 shares of restricted common stock of the Company (“Shares”) every 90 days, exercisable at $0.13 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 years ended December 31, 2013 and 2012, the Company recorded the issuance of three Warrants totaling 2,308 shares of common stock, valued at $80,000, and four Warrants totaling 3,077 shares of common stock, valued at $400,000, respectively, to TMDS under this agreement. See Note 7, Capital Stock – Common Stock Warrants, for discussion.
 
This Agreement was terminated September 26, 2013.
 
f)
Consulting Agreement – Investor and Broker Dealer Relations and Financing Alternatives
 
On March 14, 2012, the Company executed a consulting agreement with Undiscovered Equities, Inc. (“UEI”), pursuant to which UEI has agreed to provide various consulting services, including retention and supervision of various public relations services and investor relations services, strategic business planning, broker dealer relations, financing alternatives and sources, and due diligence meetings for the investor community. The agreement has a six month term, but may be terminated early after 60 days, and provides for the Company to pay consulting fees as follows: (i) the sum of $25,000 per month over the term of the agreement upon the Company procuring financing of $500,000 or more, and (ii) a signing bonus in the form of immediate issuance of 96 shares of the Company’s restricted Common stock (the “Stock Payments”).
 
On May 3, 2012, the Company and UEI executed a letter of execution (the “Letter of Extension”) of the consulting agreement to extend the payment terms of Cash Payments and Stock Payments from the May 7, 2012 to June 15, 2012.
 
On August 15, 2012, the Company and UEI executed Amendment No. 1 to the consulting agreement, whereby the commencement date for the services to be provided by UEI, including the obligation of the Company to pay the monthly compensation to UEI upon the Company procuring financing of $500,000 or more, was amended to reflect a commencement date of September 1, 2012 instead of June 15, 2012. The shares of common stock, valued at $17,500, were issued in November 2012.
 
On November 8, 2012, the Company and UEI executed Amendment No. 2 to the consulting agreement, whereby the commencement date for the services to be provided by UEI, including the obligation of the Company to pay the monthly compensation to UEI upon the Company procuring financing of $500,000 or more, was amended to reflect a commencement date of December 1, 2012 instead of September 1, 2012.
 
As of December 31, 2013, this consulting agreement had officially lapsed.
 
g)
Stock Purchase Agreement – C.C. Crawford Retreading Company, Inc. (“CTR”) and Assignment and Assumption Agreement and Right of First Refusal and Option Agreement – IWSI PS Plan
 
On March 20, 2012, the Company, through its wholly owned subsidiary, DEDC, entered into a stock purchase agreement (the “Stock Purchase Agreement”) with C.C. Crawford Tire Company, Inc. (“CTR”), pursuant to which DEDC agreed to acquire 100% of the issued and outstanding common shares of CTR, for an aggregate purchase price of $600,000 in cash, due and payable upon the date of closing, on or before April 20, 2012, subject to the completion of certain closing conditions precedent, to be performed by both the Seller and DEDC.
 
 
F-23

 
 
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 (“IWSI PS”), an entity controlled by Charles R. Cronin, a shareholder and director of the Company, and the Seller pursuant to which DEDC assigned its rights to acquire CTR to IWSI PS Plan. 
 
On October 2, 2012, the Company, through its wholly owned subsidiary, DEDC executed a right of first refusal and option agreement with IWSI PS for both an option to purchase and right of first refusal to purchase CTR. 
 
The option to purchase granted to the Company 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 (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;
 
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’s shareholder equity, less any amounts CTR received from the prior sale of any assets;
 
5.
Amount equal to any decrease in accounts payable, and a monthly fee of $10,000 per month, 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.
 
As of December 31, 2013, all options and agreements relating to the purchase of CTR are officially terminated.
 
h)
License and Assignment Agreement – R.F.B., LLC
 
On May 23, 2012, Dynamic Energy IP, LLC, a Delaware corporation, a wholly owned subsidiary of Dynamic Energy Alliance Corporation, a Florida corporation (“DEAC”), entered into a definitive agreement (the “Contract”) with R.F.B., LLC (“RFB”), pursuant to which RFB licensed and assigned to Dynamic Energy LP, a Non-Provisional Patent Application (the “Application”), and the World Wide exclusive right, license and privilege of utilizing certain RFB technology and expertise. In consideration, the Company has an obligation to issue RFB 77 shares of the Company’s restricted common when RFB completes certain provisions of the Contract. On September 13, 2012, RFB completed its contract provisions and the shares of common stock, valued at $6,000, were issued in November 2012.
 
Further, the Contract provides for payment by the Company to RFB of specified license fees based on both gallons of high value organics produced utilizing the RFB technology, and a formula percentage of net profits realized from the recovery of all energy products from oil sands or tar sands over the term of the Contract by the Company (regardless of technology used) The Contract has a term of 25 years, or 20 years from the date of issuance of patents, whichever is shorter. 
 
As of December 31, 2013 and 2012, there are no obligations due under the Contract.
 
 
F-24

 
 
i)
Industry Consulting and Nondisclosure Agreement and Amendments – Practical Sustainability LLC
 
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 December 31, 2012.
 
j)
Consulting Agreement – Financing and Acquisitions Advisor
 
On June 1, 2012, the Company executed a corporate advisory agreement (“Agreement”) with Heartland Capital Markets, LLC (“Heartland”), pursuant to which Heartland agreed to provide various advisory services, including equity and/or debt financings, strategic planning, merger and acquisition possibilities and business development activities that include various investor relations services, strategic business planning, broker dealer relations, financing alternatives and sources, and due diligence meetings for the investor community. The agreement has a three month term which is renewable for additional three month periods, and provides for the Company to pay an advisory fee of one hundred ninety-two (192) restricted shares of the Company’s restricted common stock (“Stock”). The advisory fee is considered fully earned pro rata over the course of the term of the agreement and due to Heartland at the execution of the agreement.
 
On August 17, 2012, the Company and Heartland amended the Agreement, whereby the commencement date for the services to be provided by Heartland was changed to September 1, 2012. Further, the amendment changed the date that the advisory fee consisting of 192 restricted shares of the Company’s restricted common stock (“Stock”) was considered fully earned to the date that Heartland was issued the Stock. The Company issued the common stock, valued at $15,000, on August 8, 2012.
 
 As of December 31, 2013, this agreement was no longer in effect.
 
k)
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 two 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”).
 
 
F-25

 
 
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 letter of intent contains customary warranties and representations and confidentiality provisions, including specific terms which are considered trade secrets, and are therefore not being released.
 
As of December 31, 2013, this agreement had not been exercised by the Company and was terminated.
 
l)
Birch First Capital Fund, LLC
 
On August 16, 2013 Birch First Capital Fund, LLC (“Birch First”) filed a complaint against the Company in the 15th judicial circuit of Florida (2013 CA 012838) alleging that the Company owes them $168,661. The Company filed a response and counterclaim against Birch First and its principal for unspecified damages relating to Birch First’s fraudulent inducement and violation of U.S. securities law. Both claims are currently pending.
 
On November 18, 2013 the Company became aware of litigation by Birch First and Birch First Capital Management, LLC against Mr. Charles Cronin and Dr. Earl Beaver, naming the Company as a nominal defendant. The litigation is correlated to conduct by the former board members named above in relation to energy sector technologies. A motion to dismiss has been filed by the Company concerning this derivative lawsuit, ascertaining, among other things, that Birch First’s representation of the shareholder class is inconsistent based on his position to directly recover a judgment from the company, which in turn negatively impacts the very class of shareholders Birch alleges to represent. At this point in time, the Company has no evidence that supports Birch’s litigation, but believes it is the proper party to take action in recovery if evidence to the contrary is provided in further proceedings that is in the Company’s and shareholder’s best interest.
 
The disputed liability amount, including accrued interest, of $178,818 is currently classified in accounts payable.
 
Note 9. INCOME TAXES
 
Potential benefits of income tax losses and other tax assets are not recognized in the accounts until realization is more likely than not. As of December 31, 2013 and 2012, the Company has net operating losses carryforwards of approximately $1,609,051 and $1,261,897, respectively, for tax purposes in various jurisdictions subject to expiration as described below. Pursuant to ASC 740, Income Taxes, the Company is required to compute tax asset benefits for net operating losses carried forward and other items giving rise to deferred tax assets. Future tax benefits which may arise as a result of these losses and other items have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these items. 
 
 
F-26

 
 
The actual income tax provisions differ from the expected amounts calculated by applying the combined income tax statutory rates applicable in each jurisdiction to the Company’s loss before income taxes and non-controlling interest. The components of these differences are as follows:
 
   
For the Year Ended December 31,
 
   
2013
   
2012
 
                 
Corporate income tax rate
   
34
%
   
34
%
Expected income tax (recovery)
  $
(165,632
)
  $
(357,578
)
Non-deductible finance costs and other
   
47,600
     
193,800
 
Change in valuation allowance
   
118,032
     
163,183
 
State income tax net of federal benefit
   
 -
     
 (1,155
)
Income tax (benefit) provision
  $
-
    $
(1,750
)
 
The Company’s tax-effected deferred income tax asset is estimated as follows:
 
   
As of December 31,
 
   
2013
   
2012
 
             
Net operating loss carryforward
  $
547,077
    $
429,045
 
Total deferred tax asset
   
547,077
     
429,045
 
Less: Valuation allowance
   
 (547,077
)
   
 (429,045
)
Net deferred tax asset after valuation allowance
  $
-
    $
-
 
 
The Company has approximately $1,609,051 in net operating losses carried forward for United States income tax purposes which will expire, if not utilized in various amounts through 2033.
 
Note 10. SUBSEQUENT EVENTS
 
On January 13, 2014, the Company entered into an asset purchase agreement with Baker Myers and Associates, LLC (“Baker Myers LLC”) to acquire www.classifiedride.com, whose platform was designed to revolutionize the selling and buying platform for online automotive markets. As consideration for the sale, the Company entered into a promissory note for $3,000,000 and 14,000,000 shares of the Company’s common stock with an interest rate calculated at $17,500 per month. Ms. Myers is the sole managing member of Baker Myers LLC and currently serves the Company as Chief Operating Officer and director. The classifiedride.com website was officially launched to the public in February 2012. Currently, ClassifiedRide provides a classified listing platform where users can list their vehicle truck, boat (i.e. anything that has a motor) to the Company’s website ether by free or paid listing options. The main premise of the website is to aid the private seller in selling or trading their vehicle. The Company, in turn, then works as the community leader to establish relationships between buyers and sellers using social media platforms and consumer customer support incentives. These relationships are used to generate revenue from private sellers, dealerships, affiliate lead providers, and third party advertisers. Part of the initial strategy will be to implement TC’s subscription agreements to produce reoccurring revenues.
 
On January 15, 2014, the Company entered into an Asset Purchase Agreement with Baker Myers LLC for 51% of the membership interest of Autoglance, LLC, a Tennessee Limited Liability Company, and with it majority control over all owned assets of Autoglance, LLC, including the website www.autoglance.com (collectively “Autoglance”). The Company tendered 765,000 shares of common stock as consideration to this agreement. Ms. Myers is the sole managing member of Baker Myers LLC and currently serves the Company as Chief Operating Officer and director. Autoglance is a search engine of used cars that prioritizes and compares inventory in individualized markets by displaying the best deals first while hiding listings that are older, more expensive, and have more mileage. Autoglance currently has a provisional patent for this method of organizing and displaying vehicles. More specifically, Autoglance’s invention groups vehicles of the same make and model in a market location to determine the best price based on the market value of the vehicle. Vehicles that are deemed worse deals are hidden from the user. The user can easily see hidden cars if he/she wishes by the click of a button.
 
 
F-27

 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
 
There have been no occurrences requiring response to this item.

ITEM 9A. CONTROLS AND PROCEDURES.
 
Evaluation of Disclosure Controls and Procedures
 
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to 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, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
 
Management’s Annual Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses: 
 
 
1.
As of December 31, 2013, we did not maintain effective controls over the control environment. Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
 
2.
As of December 31, 2013, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
 
 
16

 
 
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.
 
Changes in Internal Control over Financial Reporting
 
For the year ended December 31, 2013, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Independent Registered Accountant’s Internal Control Attestation
 
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts smaller reporting companies from providing attestation of their internal controls pursuant to Section 404 of the Sarbanes-Oxley Act. As a result, this report does not provide such an attestation, and the Company will be exempted from providing such an attestation until such time as it reaches $75 million in market capitalization.
 
Item 9B. Other Information.
 
There is no information to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year covered by this Form 10-K that has not been previously filed with the Securities and Exchange Commission.
 
 
17

 
 
PART III
 
Item 10. Directors, Executive Officers and Corporate Governance
 
Our Directors and Executive Officers
 
Set forth below is certain information with respect to our executive officers and directors. Our directors are generally elected at the annual shareholders’ meeting and hold office until the next annual shareholders’ meeting and until their successors are elected and qualify. Executive officers are elected by our board of directors and serve at its discretion. Our bylaws provide that the board of directors shall consist of that number of members as the board of directors may from time to time determine by resolution or election, but not less than five and not more than seven. Our board of directors currently consists of three members. The names and ages of the directors and executive officers of the Company, and their positions with the Company, are as follows:
 
Name
 
Age
 
Position
Dr. James Ricketts
 
75
 
Chairman of the Board of Directors
Stephen Frye
 
45
 
Chief Executive Officer, President, Chief Financial Officer, and Director
Sarah Myers
 
29
 
Chief Operations Officer, Secretary, Director
Joshua Stocks
 
32
 
Chief Information Officer, Treasurer
 
The term of office of each director expires at our annual meeting of stockholders or until their successors are duly elected and qualified. Except as set forth in Item 11 of this Annual Report, the Directors are not compensated for serving as such. Officers serve at the discretion of the Board of Directors.
 
Biographies of Chairman and Directors
 
Dr. James Ricketts
Chairman
 
James G. Ricketts Ph.D., Dr. Ricketts has had a diverse career path spanning multiple areas, including education, government and the private sector. After college he entered the education field while still furthering his studies at the graduate level. While completing his doctorate he held executive level positions in education. In the government capacity he has held numerous administrative and management level posts which resulted in his being appointed to cabinet level positions in two states. In the private sector he conceptualized and designed a RF tracking system which he then applied for and received a patent for this technology. Ultimately he founded the resulting company which developed under his supervision from a patent level startup to the actual sales and marketing of the product. Dr. Ricketts has held positions as President and CEO and served on the Board of Directors of several public companies, first as a Director and then two times as Chairman of the Board.
 
Steven Frye
Chief Executive Officer, President, and Director
 
Mr. Frye graduated from the University of Southern California, Los Angeles in 1992 with a B.S. in Business Administration. He began his career at Lehman Brothers in the Los Angeles, CA office where he worked while attending classes. He was licensed as a securities broker in 1992 while working for Lehman Brothers. In 1998 Mr. Frye began working as a business consultant, specializing in small and microcap equities which he continues to focus on today.
 
 
18

 
 
Sarah Myers
Chief Operations Officer, Secretary and Director
 
Ms. Myers graduated from the University of Tennessee at Chattanooga in 2007 manga cum laude and received her Juris Doctor from Nashville School of Law in 2012. While completing her degree, Ms. Myers began her career with SMA Alliance, Inc, focusing primarily on Project and Technology Management, Graphic Design, Customer Support, US Marketing and Legal Compliance. Since 2012, Ms. Myers began working with Baker Myers & Associates, where she focuses on Project Management for ClassifiedRide and Autoglance and also continues to provide Graphic Design, Customer Support, Sales Support and Legal Compliance services related to her industry.
 
Joshua Stocks
Treasurer
 
Mr. Stocks brings a wealth of IT experience to the Company including Perl script development, application development, database administration, project management in a wide variety of business applications. Mr. Stocks Perl scripts and applications are developed to work with online and local databases for the purpose of website interaction and include the set-up and maintenance with several database platforms such as MySQL, MS-SQL, MonogDB, and PostgreSQ and XEN, VM and HyperV servers.
 
Significant Employees 
 
None.
 
Family Relationships
 
None.
 
Involvement in Certain Legal Proceedings
 
There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of our officers and directors, during the past five years.
 
Board Meetings
 
The Board of Directors took a number of actions by written consent of all of the directors during the fiscal year ended December 31, 2013. Such actions by the written consent of all directors are, according to Florida corporate law and the Company's by-laws, as valid and effective as if they had been passed at a meeting of the directors duly called and held. The Company's directors and officers do not receive remuneration from the Company unless approved by the Board of Directors or pursuant to an employment contract. No compensation has been paid to the Company's directors for attendance at any meetings for the period served.
 
Board Committees
 
Nominating and Compensation Committees
 
The Company does not have standing nominating or compensation committees, or committees performing similar functions. The Company's Board of Directors believes that it is not necessary to have a compensation committee at this time because the functions of such committee are adequately performed by the Board of Directors. The Board of Directors also is of the view that it is appropriate for the Company not to have a standing nominating committee because the Board of Directors has performed and will perform adequately the functions of a nominating committee.
 
 
19

 
 
The Company does not have any restrictions on shareholder nominations under its certificate of incorporation or by-laws. The only restrictions are those applicable generally under Florida corporate law and the federal proxy rules, The Board of Directors will consider suggestions from individual shareholders, subject to evaluation of the person's merits. Stockholders may communicate nominee suggestions directly to the Board of Directors, accompanied by biographical details and a statement of support for the nominees. The suggested nominee must also provide a statement of consent to being considered for nomination. There are no formal criteria for nominees at the present time.
 
Audit Committee and Audit Committee Financial Expert
 
The Company does not currently have an audit committee, however, for certain purposes of the rules and regulations of the SEC and in accordance with the Sarbanes-Oxley Act of 2002, the Company's board of directors is deemed to be its audit committee and as such functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of the Company's independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors.
 
The Company's Board of Directors has determined that its members do not include a person who is an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee to be formed will have members capable of collectively analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.
 
Code of Ethics
 
The Company’s Board of Directors is developing a code of ethics (the “Code”) that will apply to members of the Board of Directors, all officers, employees and contemplated directors, officers and employees. The Code will set forth written standards that are designed to deter wrongdoing and to promote:
 
honest and ethical conduct,
 
full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
 
compliance with applicable governmental laws, rules and regulations;
 
prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
 
accountability for adherence to the Code.
 
An official Code of Ethics has not yet been finalized by the Board of Directors, who as a new governing body, recognize the value of such a Code from a regulatory and moral standpoint. The Code will be made available on our website at www.dynamicenergyalliance.com. We will describe the nature of amendments to the Code on our website, except that we may not describe amendments that are purely a technical, administrative, or otherwise non- substantive. We will also disclose on our website any waivers from any provision of the Code that we may grant. Information about amendments and waivers to the Code will be available on our website for at least 12 months, and thereafter, the information will be available upon request for five years. Once available, a copy of the Code may be obtained by written request addressed to Tracy Williams, Vice President, Dynamic Energy Alliance Corporation, 10000 N. Central Expressway, Suite 400, Dallas, Texas 75231.
 
 
20

 
 
Conflicts of Interest
 
Certain conflicts of interest exist and may continue to exist between the Company and its officers and directors due to the fact that each has other business interests to which they devote their primary attention. Each officer and director may continue to do so notwithstanding the fact that management time should be devoted to the business of the Company.
 
Certain conflicts of interest may exist between the Company and its management, and conflicts may develop in the future. The Company has not established policies or procedures for the resolution of current or potential conflicts of interest between the Company, its officers and directors or affiliated entities. There can be no assurance that management will resolve all conflicts of interest in favor of the Company, and conflicts of interest may arise that can be resolved only through the exercise by management their best judgment as may be consistent with their fiduciary duties. Management will try to resolve conflicts to the best advantage of all concerned.
 
Shareholder Communications
 
The Company provides access for its shareholders to the Company via telephone and its web site, www.edscompanies.com. Shareholders are able to, and encouraged to, view all of the Company’s SEC filings as well as gain knowledge about the Company’s activities and developments that affect the shareholder’s relationship with the Company. The Company has retained the services of a dedicated professional that provides functions related to the development and distribution of shareholder communications.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and the holders of more than 10% of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our equity securities. Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2013, all of our executive officers, directors and the holders of 10% or more of our Common Stock failed to comply with all Section 16(a) filing requirements.
 
Indemnification
 
Under Florida corporate law and pursuant to our certificate of incorporation and bylaws, the Company may indemnify its officers and directors for various expenses and damages resulting from their acting in these capacities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Company's officers or directors pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
 
Audit Committee and Financial Expert
 
We are not required to have and we do not have an Audit Committee. The Company's sole director performs some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the financial statements; reviewing the auditors' independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.
 
We have no audit committee financial expert. Our directors have financial statement preparation and interpretation ability obtained over the years from past business experience and education. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of the nature of our current limited operations, we believe the services of a financial expert are not warranted. 
 
 
21

 
 
Item 11. Executive Compensation
 
Compensation Discussion and Analysis
 
The Company is not a "listed company" under SEC rules and is therefore not required to have a compensation committee. Accordingly, the Company has no compensation committee.
 
Except as set forth in the summary compensation table below, during the fiscal years ended December 31, 2013 and 2012, the Company has not provided any salary, bonus, annual or long-term equity or non-equity based incentive programs, health benefits, life insurance, tax-qualified savings plans, special employee benefits or perquisites, supplemental life insurance benefits, pension or other retirement benefits or any type of nonqualified deferred compensation programs for its executive officers or employees.
 
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs are currently in place for the benefit of the Company's employees.
 
There are no understandings or agreements regarding compensation our management will receive after a business combination that is required to be included in this table, or otherwise.

The following table shows the compensation paid during the years ended December 31, 2013 and 2012 to the Company's executive officers.
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
 
Year
 
Salary
   
Bonus
   
Warrant
Awards(1)
   
All Other
Compensation
   
Total
 
James Whitfield
 
2013
 
$
-    
$
-
   
$
-
   
$
-
   
$
 -
 
Former CEO, CFO, President and Treasurer
 
2012
 
$
 39,500
   
$
-
   
$
-
   
$
-
   
$
39,500
 
                                             
Tracy Williams (1)
 
2013
 
$
 -
   
$
-
   
$
-
   
$
-
   
$
   
Former Vice President and Secretary
 
2012
 
$
10,500
   
$
-
   
$
-
   
$
-
   
$
10,500
 
 
Steven Frye (2)
 
2013
 
$
 -
   
$
-
   
$
-
   
$
-
   
$
 -
 
CEO, and President
                                           
                                             
Sarah Myers (2)
 
2013
 
$
 -
   
$
-
   
$
-
   
$
-
   
$
-
 
COO, and Secretary
                                           
 
Joshua Stocks (2)
 
2013
 
$
 -
   
$
-
   
$
-
   
$
-
   
$
-
 
CIO, and Treasurer
                                           
______________
(2) Became officer of the Company on September 30, 2013.
 
 
22

 
 
Employment Agreements
 
Currently, we have no employment agreements or other agreements with any of our executive officers.
 
Compensation of Directors
 
During the fiscal years ended December 31, 2013 and 2012, respectively, except as set forth above, Steven Frye, Sarah Myers nor Dr. James Ricketts, James Michael Whitfield, Tracy Williams, Dr. Earl Beaver, Harvey Dale Cheek, Karl Johnson and Fiona Sutton did not receive separate compensation for their services as directors.
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The following table sets forth certain information regarding the Company's common stock beneficially owned on May 6, 2014, for (i) each shareholder the Company knows to be the beneficial owner of 5% or more of its outstanding common stock, (ii) each of the Company's executive officers and directors, and (iii) all executive officers and directors as a group. In general, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days. To the best of the Company's knowledge, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. At May 6, 2014, 14,915,450 shares of the Company's common stock were outstanding.
 
Name of Person or Group
 
Number of Shares
of Common
Stock Owned
   
Percentage of Ownership (1)
 
Steven Frye (2)
           
Sarah Myers (3)
    14,765,000       98.89 %
Josh Stocks (4)
               
Dr. James Ricketts (5)
               
                 
All executive officers and directors as a group (four persons)
    14,765,000       98.89 %
 
 
(1)
Shares not outstanding but deemed beneficially owned by virtue of the right of a person or members of a group to acquire them within 60 days are treated as outstanding for determining the amount and percentage of common stock owned by such person. To our knowledge, each named person has sole voting and sole investment power with respect to the shares shown except as noted, subject to community property laws, where applicable. Rounded to the nearest one-tenth of one percent, based upon 14,915,450 shares of common stock, outstanding at May 7, 2014.
(2)
Mr. Frye is our Chief Executive Officer, and one of our Directors.
(3)
Ms. Myers is our Chief Operations Officer, Secretary, and one of our Directors.
(4) Mr. Stocks is our Chief Information Officer and Treasurer.
(5) Dr. Rickets is one of our Directors.
 
 
23

 
 
Securities authorized for issuance under equity compensation plans.
 
The Company has no securities authorized for issuance under equity compensation plans.
 
Item 13. Certain Relationships and Related Transactions, and Director Independence.
 
Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404.
 
Item 14. Principal Accountant Fees and Services
 
Anton & Chia LLP, 4400 MacArthur Blvd, Suite 970, Newport Beach, California 92660 is the Company's independent registered public accounting firm.
 
Audit Fees
 
The aggregate fees billed by Anton & Chia LLP for professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports or services that are normally provided in connection with statutory and regulatory filings were $21,260 for the year ended December 31, 2013 and $65,502 for the fiscal year ended December 31, 2012.
 
Tax Fees
 
The Company incurred $-0 - expenses for professional services for tax compliance, tax advice, and tax planning for the fiscal year ended December 31, 2013 and $6,750 expenses for year ended December 31, 2012.
 
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors
 
The Board of Directors acts as the audit committee of the Company, and accordingly, all services are approved by all the members of the Board of Directors.
 
 
24

 
 
PART IV
 
Item 15. Exhibits and Financial Statement Schedules.
 
Financial Statements
 
The Company's financial statements are included in Item 8 of this Annual Report.
 
Financial Statement Schedules
 
All schedules are omitted because they are not applicable or have been provided in Item 8 of this Annual Report.
 
Exhibits:
 
Those exhibits marked with an asterisk (*) refer to exhibits filed herewith. The other exhibits are incorporated herein by reference, as indicated in the following list.

Exhibit Number
 
Description of Exhibit
3.1
 
Articles of Incorporation, filed with the Secretary of State of the State of Florida on November 23, 1981
3.2
 
Articles of Amendment to Articles of Incorporation, as amended and restated with the Secretary of State of the State of Florida,
3.3
 
By-Laws of the Registrant (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (filed on October 2, 2013) dated September 30, 2013)
3.4
 
Amendments to By-Laws
3.5
 
Amendment to Articles of Incorporation to reflect Name Change (incorporated as Exhibit 5.03 in the Company’s Form 8-k, dated January 19, 2014)
10.1
 
Share Exchange Agreement, dated March 9, 2011, by and among Dynamic Energy Development Corporation, Mammatech Corporation and Verdad Telecom (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated March 16, 2010).
10.2
 
Share Purchase Agreement Dated July 9, 2010 by and between the Company and Verdad Telecom, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated July 14, 2010)
10.3
 
Amendment to Share Purchase Agreement, dated July 23, 2010 by and between the Company and Verdad Telecom, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated July 27, 2010)
10.4
 
Strategic Consulting Services Agreement with NBN Enterprises, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated July 22, 2011)
10.5
 
Consulting Agreement with TMDS, LLC (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q dated, July 22, 2011)
10.6
 
Consulting Agreement with Key Services, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated July 22, 2011)
10.7
 
Line of Credit with Charles R. Cronin, Jr. (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated July 22, 2011)
10.8
 
Stock Warrant Agreement with Charles R. Cronin, Jr. (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q , dated July 22, 2011)
10.9
 
Consulting Agreement with Enertech R.D., LLC (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated November 21, 2011)
10.10
 
Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated November 21, 2011)
10.11
 
Line of Credit – Amendment #1 and Amendment #2 (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q, dated November 21, 2011)
10.12
 
Securities Exchange Agreements with thirteen debenture holders (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated January 6, 2012)
10.13
 
Consulting Agreement with Undiscovered Equities, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated March 19, 2012)
10.14
 
Stock Purchase Warrant to Pamela Griffin, the Company’s former CFO (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated March 19, 2012)
10.15
 
Stock Purchase Agreement with C.C. Crawford Tire Company, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, dated March 21, 2012)
 
 
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10.16
 
Term Sheet with R.F.B., LLC (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated, March 31, 2012)
10.17
 
Definitive Agreement – R.F.B., LLC (incorporated by reference to Exhibit 99.1 of the Company's Form 8-K dated, May 24, 2012)
10.18
 
Amendment No.1 to the Project Location and Consulting Agreement and Mutual Indemnification and Release Agreement (incorporated by reference to Exhibit 9.01of the Company's Form 8-K, dated July 18, 2012)
10.19
 
Amendment No.1 to the Consulting Agreement – Undiscovered Equities Inc., dated August 15, 2012 (incorporated by reference by reference to Exhibit 10.19 of the Company’s Form 10-Q, dated August 20, 2012)
10.20
 
Amendment No.1 to Corporate Advisory Agreement - Heartland Capital Markets, LLC, dated August 17, 2012 (incorporated by reference to Exhibit 10.20 of the Company’s Form 10-Q, dated August 20, 2012)
10.21
 
Right of first refusal and option agreement to purchase C.C. Crawford Retreading Company, Inc. with IWSI PS Plan, dated October 2, 2012 (incorporated by reference to Exhibit 9.01 of the Company’s Form 8-K, dated October 2, 2012)
10.22
 
Non-binding letter of intent with Terpen Kraftig, LLC contemplating a definitive agreement, dated October 10, 2012 (incorporated by reference to Exhibit 9.01 of the Company’s Form 8-K, dated October 10, 2012)
10.23
 
Change of Address for relocation of the Company’s headquarters to 10000 North Central Expressway, Suite 400, Dallas, Texas 75231 (incorporated by reference to the Company’s Form 8-K, dated November 6, 2012)
10.24
 
Form of Repurchase Agreement, dated September 29, 2013, by and between Dynamic Energy Alliance Corporation and Earl Beaver (incorporated as Exhibit 10.1 of the Company's Form 8-K, dated October 2, 2013).
10.25
 
Assignment and Assumption Agreement, dated September 30, 2013 by and between Harvey Dale Cheek and Charles R. Cronin, Jr and Habanero Properties, LTD (incorporated as Exhibit 10.2 of the Company's Form 8-K, dated October 2, 2013).
21.1
 
List of Subsidiaries
101**
 
Interactive Data File (Form 10-K for the annual quarterly period ended December 31, 2013 furnished in XBRL).
31.1*
 
Certification of the registrant's Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1*
 
Certification of the Company's Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
_________________
* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
 
 
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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ELITE DATA SERVICES, INC.
(formerly Dynamic Energy Alliance Corporation)
 
 
 
 
 
Date: May 12, 2014
By:
/s/ Steven Frye
 
 
 
Steven Frye
 
 
 
President, Chief Executive Officer, Director and Chief Financial Officer
 
 
In accordance with the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the following capacities.
 
Date: May 12, 2014
By:
/s/ Steven Frye
 
 
 
Steven Frye,
 
 
 
Chief Financial Officer
 
 
 
(Duly Authorized and Principal Financial Officer) 
 
 
 
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