NOTE D – NOTES PAYABLE AND DERIVATIVES

3 Months Ended

Jul. 31, 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	July 31, 2016			April 30, 2016
Notes convertible at holder's option	$	2,716,568		$	2,625,105
Notes convertible at Company's option		225,000			225,000
Non-convertible notes payable		1,265,500			1,197,500
Subtotal		4,207,068			4,047,605
Less debt discount		(448,511	)		(556,885	)
Total		3,758,557			3,490,720
Less: Current portion of notes payable		(3,648,474	)		(3,394,033	)
Long-term portion of notes payable	$	110,083		$	96,687

At July 31, 2016, notes payable due after one year mature as follows:

Year ending April 30,	Amount
2018		$	398,500

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 July 31, 2016 the Company has reserved 266,334,875 shares of its common stock for issuance upon the conversion of debentures.

Amortization of debt discount for the three month periods ended July 31, 2016 and 2015 was $200,374 and $712,477, 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 July 31, 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	0.325 % to 0.75		%
Expected stock price volatility	Ranging from	242% to 409		%
Expected dividend payout			0	%
Expected life in years	Ranging from	0.25 year to 1.92		years

The change in fair value of the derivative liabilities of convertible notes outstanding at July 31, 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	0.101% to 0.752		%
Expected stock price volatility			248	%
Expected dividend payout			0	%
Expected life in years	Ranging from	0.34 years to 2.24		years

During the three months ended July 31, 2016 and 2015, the Company recorded expense of $258,064 and $75,465, respectively, related to the change in value of the derivative liabilities.

Changes in derivative liability during the three months ended July 31, 2016 and 2015 were:

	July 31,
	2016			2015
Balance, beginning of year	$	2,170,976		$	1,605,535
Derivative liability extinguished		(100,593	)		(477,540	)
Derivative financial liability arising on the issuance of convertible notes		275,300			823,201
Fair value adjustments		258,064			75,465
Balance, end of period	$	2,603,747		$	2,026,661