NOTE D – NOTES PAYABLE AND DERIVATIVES

12 Months Ended

Apr. 30, 2016

NOTE D – NOTES PAYABLE AND DERIVATIVES

The Company has outstanding numerous notes payable to various parties. The notes bear interest at rates of 5% - 20% per year and are summarized as follows:

Notes Payable	April 30, 2016			April 30, 2015
Notes convertible at holder’s option	$	2,625,105		$	2,707,080
Notes convertible at Company’s option		225,000			300,000
Non-convertible notes payable		1,197,500			393,500
Subtotal		4,047,605			3,400,580
Less debt discount		(556,885	)		(762,426	)
Total	$	3,490,720		$	2,638,154

At April 30, 2016, notes payable due after one year mature as follows:

Year ending April 30,	Amount
2018		$	306,500

Certain of the notes payable contain variable conversion rates and the conversion features are classified as derivative liabilities. The conversion prices are based on the market price of the Company’s common stock, at discounts of 30% - 48% to market value. At April 30, 2016 the Company has reserved 330,087,549 shares of its common stock for issuance upon the conversion of debentures.

Amortization of debt discount for the years ended April 30, 2016 and 2015 was $1,606,591 and $1,013,934, respectively.

The Company’s derivative financial instruments consist of embedded derivatives related to the outstanding short term Convertible Notes Payable. These embedded derivatives include certain conversion features indexed to the Company’s common stock. The accounting treatment of derivative financial instruments requires that the Company record the derivatives and related items at their fair values as of the inception date of the Convertible Notes Payable and at fair value as of each subsequent balance sheet date. In addition, under the provisions of Accounting Standards Codification subtopic 815-40, Derivatives and Hedging; Contracts in Entity’s Own Equity (“ASC 815-40”), as a result of entering into the Convertible Notes Payable, the Company is required to classify all other non-employee stock options and warrants as derivative liabilities and mark them to market at each reporting date. Any change in fair value inclusive of modifications of terms will be recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income.

The change in fair value of the derivative liabilities at April 30, 2016 was calculated with the following average assumptions, using a Black-Scholes option pricing model are as follows:

Significant Assumptions:
Risk free interest rate	Ranging from	0.25 % to 0.75		%
Expected stock price volatility		281% to 434		%
Expected dividend payout			0	%
Expected options life in years	Ranging from	0.25 year to 1.83		years

The change in fair value of the derivative liabilities of convertible notes outstanding at April 30, 2015 was calculated with the following average assumptions, using a Black-Scholes option-pricing model are as follows:

Significant Assumptions:
Risk free interest rate	Ranging from	0.001% to 0.24		%
Expected stock price volatility			230	%
Expected dividend payout			0
Expected options life in years	Ranging from	0. years to 1		year

During the years ended April 30, 2016 and 2015, the Company recorded expense of $85,684 and $318,372, respectively, related to the change in value of the derivative liabilities.

Changes in derivative liability during the years ended April 30, 2016 and 2015 were:

	April 30,
	2016			2015
Balance, beginning of year	$	1,605,535		$	601,000
Derivative liability reclassified to additional paid in capital		(1,383,617	)		(768,174	)
Derivative financial liability arising on the issue of convertible notes		1,863,374			1,454,337
Fair value adjustments		85,684			318,372
Balance, end of year	$	2,170,976		$	1,605,535