Quarterly report pursuant to Section 13 or 15(d)

7. PREFERRED STOCK

7. PREFERRED STOCK

9 Months Ended

Jan. 31, 2015

The Company has one series of preferred stock designated as "Series E Preferred Stock." The Series E Preferred Stock has the following features:

Series E Preferred Stock does not bear any dividends;

Each share of Series E Preferred Stock is entitled to receive its share of assets distributable upon the liquidation, dissolution or winding up of the affairs of the Company. The holders of the Series E Preferred Stock are entitled to receive cash out of the assets of the Company before any amount is paid to the holders of any capital stock of the Company of any class junior in rank to the shares of Series E Preferred Stock;

Each share of Series E Preferred Stock is convertible, at the holder’s option, into shares of common stock, at the average closing bid price of the common stock for five trading days prior to the conversion date; and

At every meeting of stockholders, every holder of shares of Series E Preferred Stock is entitled to 50,000 votes for each share of Series E Preferred Stock, with the same and identical voting rights as a holder of a share of common stock; therefore, the holder of shares of Series E Preferred Stock can effectively increase the Company’s issued common stock shares without a vote of the common stock shareholders, thus enabling any potential shortfall of authorized common stock outstanding from being converted should a holder of Series E Preferred Stock wish to convert.

During the year ended April 30, 2014, a shareholder converted 8,500 shares of the Company’s Series E Preferred Stock into 54,000,000 shares of common stock. These shares were valued using the closing share price of the common stock on the day of issuance for a total of $6,475,000 resulting in a loss on conversion of $5,895,000.

Holders of Series E Preferred Stock have specific rights to be paid in cash out of the assets of the Company prior to any junior class of common stock. As a result of the obligations for Series E Preferred Stock, the Company has determined these redemption features have the potential to be outside the control of the Company and, therefore, the Company has classified the Series E Preferred Stock outside of shareholder’s equity in accordance with ASC 480 regarding instruments with debt and equity features. Thus, the full value for the convertible Series E Preferred Stock was recorded outside of stockholders’ equity in the accompanying unaudited consolidated balance sheet.