Note 2: Related Party Transactions

The Company purchased inventories for resale from Sheerr Memory, LLC (“Sheerr Memory”). Sheerr Memory’s owner (“Mr. Sheerr”) was employed by the Company as an advisor until August 31, 2016. In the nine months ended January 31, 2017 the Company purchased approximately $40,000 of inventories. In the three and nine months ended January 31, 2016, the Company purchased approximately $42,000 of inventories and $331,000 of inventories, respectively, from Sheerr Memory. Accounts payable of nil and approximately $11,000 in the Company’s condensed consolidated balance sheets as of January 31, 2017 and April 30, 2016 respectively, was payable to Sheerr Memory. Sheerr Memory offers the Company trade terms of net 30 days and all invoices were settled in the normal course of business. No interest was paid.

The Company purchased inventories for resale from Keystone Memory Group (“Keystone Memory”). Keystone Memory’s owner is a relative of Mr. Sheerr. In the nine month period ended January 31, 2017 the Company purchased approximately $501,000 of inventories. For the three and nine months ended January 31, 2016, the Company purchased approximately $309,000 of inventories and $967,000 of inventories, respectively, from Keystone Memory. Accounts payable of nil and approximately $190,000 in the Company’s condensed consolidated balance sheets as of January 31, 2017 and April 30, 2016 respectively was payable to Keystone Memory. Keystone Memory offers the Company trade terms of net due and all invoices are settled in the normal course of business. No interest was paid.

On 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 $103,000, 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 $358,000 in proportion to the related gross rental charged to expense over the term of the lease, 60 months. The current portion of approximately $72,000 deferred gain was reflected in accrued liabilities and the long-term portion of approximately $54,000 is reflected in other liabilities – long-term in the condensed consolidated balance sheet as of January 31, 2017. As of April 30, 2016, the current portion of $72,000 deferred gain is reflected in accrued liabilities and the long-term portion of approximately $107,000 is reflected in other liabilities – long-term in the condensed consolidated balance sheet as of April 30, 2016.