STOCKHOLDERS DEFICIT

3 Months Ended

Jul. 31, 2016

Notes to Financial Statements

NOTE 10 - Stockholders' Deficit

Authorized Shares

As of April 6, 2016, the Company amended its articles of incorporation to increase its authorized shares to 1,000,000,000 common shares and 10,000,000 preferred shares, and subsequently increased its authorized common shares to 3,000,000,000 shares (Note 13). The increase in authorized shares has been given retroactive effect in the accompanying condensed consolidated financial statements for all periods presented.

Stock Issuances

On May 2, 2016, the Company issued 194,999,999 shares of its common stock to a related party pursuant to the conversion of notes payable in default (see Note 4), reducing stock subscriptions payable by $2,925,000.

As part of a private placement to qualified investors, the Company issued 1,096,397 shares of its common stock on July 12, 2016 to an investor for stock subscriptions payable of $10,000.

Common Stock Payable

On May 8, 2015, a related party converted convertible notes payable with a book value of $1,950,000 into 194,999,999 common shares of the Company at $0.01 per share. The common shares issued were valued at $0.015 per share, the market price on the date of the conversion, which resulted in a loss on extinguishment of debt of $975,000. The 194,999,999 common shares were issued on May 2, 2016, reducing common stock payable by $2,925,000.

During the three months ended July 31, 2016, the Company completed subscription agreements for common stock and warrants with qualified investors in a private placement for cash of $21,000. The shares of common stock were issued subsequent to July 31, 2016, and common stock payable included $21,000 at July 31, 2016 related to these transactions. The attached warrants were identified as derivatives, resulting in derivative liabilities of $309,924 at July 31, 2016 (see Note 9).

Stock Options

On March 7, 2012, the Company issued a total of 2,000,000 stock options exercisable at $0.35 per share for a period of ten years from the date of grant. The Company did not grant any stock options during the three months ended July 31, 2016.

A summary of stock option activity during the three months ended July 31, 2016 is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding, April 30, 2016		2,000,000	$	0.35		5.85
Granted		-		-
Canceled / Expired		-		-
Exercised		-		-
Outstanding, July 31, 2016		2,000,000	$	0.35		5.60

The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options, which value is amortized to stock-based compensation expense over the vesting period of the options. No stock-based compensation expense was recorded during the three months ended July 31, 2016 and 2015 related to stock option grants. There was no unrecognized stock option expense at July 31, 2016.

Warrants

The Company has issued warrants to qualified investors in a private placement, for debt discounts or other stock-based compensation. These warrants generally vest upon grant and are valued using the Black-Scholes option pricing model or multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes.

A summary of warrant activity during the three months ended July 31, 2016 is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding, April 30, 2016		14,811,362	$	0.01		5.84
Granted		1,096,397	$	0.01
Canceled / Expired		-		-
Exercised		-		-
Outstanding, July 31, 2016		15,907,759	$	0.01		5.58

Common Stock Reserved

At July 31, 2016, 15,907,759 shares of the Company’s common stock were reserved for issuance of outstanding warrants.