The initial beneficial conversion feature of $40,000 was recorded separately based on the intrinsic value method. 

The value of the beneficial conversion feature was recorded as a discount to the note which was amortized over the term of the note using the effective interest method. Amortization of $12,055 of the discount arising from the beneficial conversion feature of was included in interest expense during the fiscal period ended December 31, 2011 and $27,945 in 2012.

During 2012 the Company signed a series of seven promissory notes with unrelated parties for an aggregate of $29,800. The notes bear interest at 15% per annum and are due approximately one year from the date of issuance. The notes have conversion rights that allow the holder of the note to convert the principal balance into the Company’s common stock at any time after June 30, 2013 at the lender's sole discretion at $0.01 per share.

In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The BCF has been recorded as a discount to the notes payable and to Additional Paid-in Capital. As of December 31, 2012, the aggregate balance of convertible notes payable is $10,470 net of unamortized discounts of $19,330.

For the period ended December 31, 2012 the Company has recognized $1,632 in interest expense related to these notes and has amortized $10,470 of the beneficial conversion features which has also been recorded as interest expense. The aggregate carrying value of these notes is as follows:

Note 6. Subsequent Event

On April 17, 2013, the Company entered into a Modification Agreement, pursuant to which the distribution agreement with GUMI was modified and amended as follows: (i) GUMI engaged the services of Mr. Ygal Chapo, a Tel Aviv university trained mechanical engineer, to lead GUMI's design and engineering team developing a working prototype of the Company's patented electromagnetic percussion device ("Patented Device") and commercial models of the Patented Device; (ii) the Company agreed to contribute $10,000 to the compensation GUMI is paying its newly designated mechanical engineer; and (iii) the revenue sharing arrangement between GUMI and the Company was changed to 60% to GUMI and 40% to the Company from 65% to GUMI and 35% to the Company.

On May 5, 2013, the Company received a written report from GUMI (the "May 5 Report"), a copy of which is attached as an exhibit to this Form 10-Q. The May 5 Report announced that GUMI had concluded phase 1 of the engineering process, completing the full set of drawings, thereby enabling GUMI to manufacture the Prototype, following which GUMI will manufacture commercial models.

On April 17, 2013, the Company entered into an agreement with Sensoil Ltd, an Israeli company, with an address at 27 Maskit St., Hertzliya 46733 Israel ("Sensoil") that is engaged in the design, development, manufacture, installation and service of their Vaduze Monitoring Systems (VMS), a system designed to detect and monitor soil contamination, floods, breaching of dams and Heap Leaching processes. Pursuant to the agreement (the "Representative Agreement"), the Company has been designated as Sensoil's sales representative, on a non-exclusive basis, for the United States. The Representative Agreement is for an initial term of one year with automatic renewal terms of one year each. The Company will receive a commission equal to 25% of the first $5 million in sales revenues and 20% of sales revenues in excess of 45 million generated by the Company for Sensoil's products and services in the United States. The Representative Agreement with Sensoil Ltd is part of our plan to seek to enhance our revenue stream by entering into joint ventures or other business arrangements with third parties engaged in technology development, based upon our belief that there are many opportunities for us to develop relationships with technology companies in Israel that can generate revenues in the united States and elsewhere.

The following discussion contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as "anticipate", "estimate", "expect", "project", "intend", "plan", "believe", and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.

Plan of Operation

We are a development stage company that acquired the technology and received a patent for an electromagnetic percussion system, our Patented Device in 2008. From 2008 until 2011, we devote minimal resources and efforts to development of our Patented Device. During the later part of 2011 and into 2012, we renewed our interest in pursuing development of our Patented Device. Subsequent to our year-ended December 31, 2012, we entered into an agreement with GUMI Tel Aviv Ltd, a major, privately-held Israeli technology company engaged in the manufacture and sale of industrial equipment, to develop the Prototype and thereafter manufacture and distribute models of our Patented Device. We will continue to be dependent upon the ability of GUMI to successfully complete a fully-operational Prototype of our Patented Device and to manufacture and market commercial models. Our auditors have issued an opinion on our financial statements which includes a statement describing concern about our ability to continue as a going concern. 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 bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until GUMI is successful in generating sufficient sales revenues to recoup its costs and thereafter generate additional revenues that profits we will share with GUMI on a 65%/35% basis. Accordingly, we must raise capital from sources other than the actual sale of the product until such time, if ever, that GUMI is successful with our Patented Device. In 2008, the Company completed a capital formation activity in accordance with a Registration Statement on Form S-1 submitted to the SEC to register and sell in a self-directed offering 2,000,000 shares of newly issued common stock at an offering price of $0.04 per share for proceeds of $80,000. The Company had incurred $20,000 of deferred offering costs related to this capital formation activity. In December 2008, the Company was successful in raising an additional $200,000 in equity capital. These funds were not sufficient, given the relatively high costs of executive compensation and consulting expenses, to permit the Company to devote sufficient resources to development of its Patented Device.

Our plan also contemplates that as we begin to generate revenues from our Patented Device, together with our belief in our ability to raise either debt or equity funding from both affiliated persons and from third parties, neither of which can there be any assurance, we will seek to enhance our revenue stream by entering into one or more joint ventures or other business arrangements with third parties engaged in technology development. While there can be no assurance that we will be successful in all such efforts, we believe that in Israel alone there are many opportunities that have and will continue to be presented to us as well as to our shareholders. To that end, we entered into an agreement with: (i) GUMI Tel Aviv Ltd to develop, manufacture and distribute our Patented Device; and (ii) Sensoil Ltd on April 17, 2013, to serve as their sales representative in the United States. Both agreements are discussed more fully under "Recent Developments" below.

Recent Developments

On October 26, 2012, the Company's reverse stock split on a 1:100 basis ("Reverse Split") was implemented and approved by FINRA. In connection with the Reverse Split, the Company also amended its Certificate of Incorporation to reduce its authorized shares of common stock from 20 billion shares, consisting of 19.8 billion shares of common stock and 20 million shares of preferred stock to 520 million shares consisting of 500 million shares of common stock and 20 million shares of preferred stock. While there can be no assurance, the Company believes that its capital structure, as amended, should make investment in our shares of common stock potentially more desirable to investors and the financial community in general.

On January 15, 2013, the Company entered into a consulting agreement with Gennady Nickelshur to serve as the Company's chief scientific advisor ("CSO"). The agreement with Mr. Nickelshpur provides for cash compensation based upon an hourly rate and the grant to the CSO of options pursuant to an ESOP to be adopted by the board of directors. To date, no options have been granted to Mr. Nickelshpur nor have the number of options or terms of the ESOP been determined.

On March 7, 2013, Dynamic Applications Corp., a Delaware corporation (the "Company"), reported in its Form 8-K that it had entered into a material definitive agreement (the "Development/Manufacturing/Marketing Agreement" or "Agreement"), with GUMI Tel Aviv Ltd. ("GUMI"), a large privately-held an Israeli corporation. Pursuant to the terms of the five (5) year Agreement, GUMI has agreed, at its own cost and expense, to: (i) complete the development of the prototype for the Company's patented, electromagnetic percussion device (the "Patented Device"); (ii) manufacture the commercial application of the Patented Device ("Commercial Device"); and (iii) market the Commercial Device.

On April 17, 2013, the Company entered into a Modification Agreement, pursuant to which the above referenced distribution agreement with GUMI was modified and amended as follows: (i) GUMI engaged the services of Mr. Ygal Chapo, a Tel Aviv university trained mechanical engineer, to lead GUMI's design and engineering team developing a working prototype of the Company's patented electromagnetic percussion device ("Patented Device") and commercial models of the Patented Device; (ii) the Company agreed to contribute $10,000 to the compensation GUMI is paying its newly designated mechanical engineer; and (iii) the revenue sharing arrangement between GUMI and the Company was changed to 60% to GUMI and 40% to the Company from 65% to GUMI and 35% to the Company.

On May 5, 2013, the Company received a written report from GUMI (the "May 5 Report"), a copy of which is attached as an exhibit to this Form 10-Q. The May 5 Report announced that GUMI had concluded phase 1 of the engineering process, completing the full set of drawings, thereby enabling GUMI to manufacture the Prototype, following which GUMI will manufacture commercial models. Also attached as an exhibit is the drawing.

On April 17, 2013, the Company entered into an agreement with Sensoil Ltd, an Israeli company, with an address at 27 Maskit St., Hertzliya 46733 Israel ("Sensoil") that is engaged in the design, development, manufacture, installation and service of their Vaduze Monitoring Systems (VMS), a system designed to detect and monitor soil contamination, floods, breaching of dams and Heap Leaching processes. Pursuant to the agreement (the "Representative Agreement"), the Company has been designated as Sensoil's sales representative, on a non-exclusive basis, for the United States. The Representative Agreement is for an initial term of one year with automatic renewal terms of one year each. The Company will receive a commission equal to 25% of the first $5 million in sales revenues and 20% of sales revenues in excess of $45 million generated by the Company for Sensoil's products and services in the United States.

The Representative Agreement with Sensoil Ltd is part of our plan to seek to enhance our revenue stream by entering into joint ventures or other business arrangements with third parties engaged in technology development, based upon our belief that there are many opportunities for us to develop relationships with technology companies in Israel that can generate revenues in the united States and elsewhere.

Reference is made to the Company's Form 8-K filed with the SEC on April 22, 2013, which discloses the GUMI Modification Agreement and the Sensoil Representative Agreement, both of which are attached as exhibits to the 8-K.

Results of Operations during the three months ended March 31, 2013 as compared to the three months ended March 31, 2012

We have not generated any revenues since inception. We have operating expenses related to general and administrative expenses being a public company and interest expenses. During the three-month period ended March 31, 2013, we incurred a net loss of $70,861 due to expenses consisting of general and administrative expenses of $59,190, interest expenses of $2,816 and amortization of debt discount of $8,855 compared to a net loss of $35,463 due to general and administrative expenses of $24,121, interest expenses of $1,479 and amortization of debt discount of $9,863 during the same priod in the prior year.

Liquidity and Capital Resources

On March 31, 2013, we had total assets of $3,602, all of which was in cash as compared to total assets of $8,101 as of December 31, 2012, all of which was in cash. On March 31, 2013. We had total current liabilities of $104,033 consisting of $4,000 in accrued expenses, $12,272 in accrued interest, $28,436 in advances payable to related parties and $59,325, which is the current portion of long term debt, compared to current liabilities of $88,364 comprised of $9,458 in accrued interest, $28,436 in advances payable to related parties and $50,470 in current portion of our long-term debt as of December 31, 2012. Our accumulated deficits as of March 31, 2013 and December 31, 2012 were $575,756 and $504,895, respectively.

We used $19,499 in our operating activities during the three months ended March 31, 2013, which was mainly due to a net loss of $70,861 offset by amortization of debt discount of $8,855, fair value of warrants expenses of $35,691 and accounts payable and increases in accrued liabilities of $6,816. We used $44,889 in our operating activities during the three months ended March 31, 2012, which was mainly due to a net loss of $35,463 offset by amortization of debt discount of $9,863 and accounts payable and increses in accrued liabilities of $20,289.

We financed our negative cash flow from operations during the three months ended March 31, 2013 through proceeds of debt borrowings of $15,000. We financed our negative cash flow from operations during the three months ended March 31, 2012 through the issuance of common stock for $12,005 and proceeds of issuance of debt borrowings of $29,800.

We do not have, at present, sufficient capital resources to fully implement our business plan. While we believe that we should be able to generate positive cash flow from operations during the 3rd or 4th quarters of 2013, there can be no assurance that this will prove to be correct or that revenues, if any, will be sufficient to fund our ongoing operating expenses. Accordingly, we plan to raise these funds through a private offering of our equity securities or through issuance of convertible debt instruments. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

Our auditors have issued an opinion on our financial statements which includes a statement describing our going concern status. 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 bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business. Even if we raise the maximum amount of money in this offering, we do not know how long the money will last, however, we do believe it will last at least twelve months.

There are no limitations in our articles of incorporation on our ability to borrow funds or raise funds through the issuance of restricted common stock. Our limited resources and lack of operating history may make it difficult to do borrow funds or raise capital. Our inability to borrow funds or raise funds through the issuance of restricted common stock required to facilitate our business plan may have a material adverse effect on our financial condition and future prospects. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest.

None.

Evaluation of disclosure controls and procedures. As of March 31, 2013, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the  Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1. Description of Business, subheading "Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

None.

None.

(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.