4. NON-COMPETE AGREEMENT

In June of 2011, the Company issued 300,000 shares and 500,000 warrants for consulting services. The shares were valued at market price of $1.49 for $447,000. The warrants had a term of five years and a strike price of $1.00 per share. The warrants were valued at $704,706 using the Black Scholes valuation method using the following factors; risk free interest rate of .85%, strike prices of $1.00, market price of $1.49, volatility of 163% , and no yield. The total value of the stock and warrants, $1,151,706, was capitalized as a prepaid expense and will be amortized over the five-year period of the consulting agreement. As of July 31, 2011, $28,793 has been expensed and $1,122,914 remained in prepaid expenses. During the quarter ended October 31, 2011, this consulting agreement was terminated and the remaining $1,122,914 was expensed. As of October 31, 2011, $0 remained in prepaid expenses related to this agreement.

Soon after termination of the consulting agreement, the consultant began to demand payment of promised salaries and unpaid commissions. As the consultant had significant relationships with multiple customers and vendors of the Company and as a major supplier of the Company on the biodiesel side began to demand that the consultant be paid what was owed, the Company agreed to a 1-year Severance, Confidentiality and Nondisclosure Agreement with the former consultant. In order to get the 1-year agreement in place, the major supplier agreed to loan the money required to finalize the Agreement to the Company (see next paragraph). On December 2, 2011, the Company finalized the Severance, Confidentiality and Nondisclosure agreement with the former consultant for $1,237,500 in cash and 300,000 shares of common stock. The shares of common stock were valued at $0.59, the market price on the day the agreement was made for total value of $177,000. The total amount associated with the agreement, $1,414,500, was set up as a Non-compete Agreement asset and is currently being amortized over the 12 month term of the agreement. As of January 31, 2012, $235,750 of the costs associated with the Agreement have been expensed and $1,178,750 remain as a current asset.

In December 2011, the Company entered into a $1,200,000 unsecured promissory note with JAK Financial LLC to fund the payment of a Severance, Confidentiality and Nondisclosure Agreement with a former consultant. The original amount of the note was $1,200,000 and the effective interest rate on the note was 96.5%. The note was to be paid with 60 daily payments of $23,000 beginning on December 20, 2011 and continuing for the next 60 business days. The Company made 16 such payments before it was no longer able to do so. The balance due as of January 31, 2012 was $933,167 with accrued interest of $85,202. The company is currently in default on this note.