Note 2: Related Party Transactions

During the three month periods ended October 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $165,000 and $299,000, respectively, from Sheerr Memory, LLC (“Sheerr Memory”). During the six month periods ending October 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $289,000 and $773,000, respectively, from Sheerr Memory, LLC. Sheerr Memory’s owner (“Mr. Sheerr”) is employed by the Company as an advisor. Approximately $12,000 and $15,000 of accounts payable in the Company’s condensed consolidated balance sheets as of October 31, 2015 and April 30, 2015, respectively, is payable to Sheerr Memory. Sheerr Memory offers the Company trade terms of net 30 days and all invoices are settled in the normal course of business. No interest is paid. The Company has made approximately $20,000 in purchases from Sheerr Memory subsequent to October 31, 2015 and management anticipates that the Company will continue to do so, although the Company has no obligation to do so.

During the three month periods ended October 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $25,000, and $270,000 respectively, from Keystone Memory Group (“Keystone Memory”). During the six month periods ending October 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $658,000 and $526,000, respectively, from Keystone Memory Group. Keystone Memory’s owner is a relative of Mr. Sheerr. Approximately $37,000 and $27,000 of accounts payable in the Company’s condensed consolidated balance sheets as of October 31, 2015 and April 30, 2015 is payable to Keystone Memory. Keystone Memory offers the Company trade terms of immediately due and all invoices are settled in the normal course of business. No interest is paid. The Company has made approximately $161,000 in purchases from Keystone Memory subsequent to October 31, 2015 and management anticipates that the Company will continue to do so, although the Company has no obligation to do so.

As of October 31, 2013, the Company entered into an agreement with Mr. Sheerr to leaseback the equipment and furniture that was sold to Mr. Sheerr on October 31, 2013 for $500,000. The lease is for a term of 60 months and the Company is obligated to pay approximately $7,500 per month for the term of the lease. The Company has an option to extend the lease for an additional two year period. The transactions described have been accounted for as a sale-leaseback transaction. Accordingly, the Company recognized a gain on the sale of assets of approximately $139,000, which is the amount of the gain on sale in excess of present value of the future lease payments and will recognize the remaining deferred gain of approximately $322,000 in proportion to the related gross rental charged to expense over the term of the lease, 60 months. The current portion of $72,000 deferred gain was reflected in accrued liabilities and the long-term portion of $179,000 is reflected in other liabilities – long-term in the condensed consolidated balance sheet as of April 30, 2015. As of October 31, 2015, the current portion of $72,000 deferred gain is reflected in accrued liabilities and the long-term portion of $143,000 is reflected in other liabilities – long-term in the condensed consolidated balance sheet as of October 31, 2015.