(2) Related Party Transactions

During the three-month periods ended January 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $228,000 and $872,000, respectively, from Sheerr Memory, LLC (“Sheerr Memory”). During the nine-month periods ended January 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $1,001,000 and $2,336,000, respectively, from Sheerr Memory. Sheerr Memory’s owner (“Mr. Sheerr”) is employed by the Company as the general manager of its Micro Memory business unit and is an executive officer of the Company. Approximately $6,000 and $271,000 of accounts payable in the Company’s consolidated balance sheets as of January 31, 2015 and April 30, 2014, 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 further purchases from Sheerr Memory subsequent to January 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 January 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $276,000 and $432,000, respectively, from Keystone Memory Group (“Keystone Memory”). During the nine-month periods ended January 31, 2015 and 2014, the Company purchased inventories for resale totaling approximately $802,000 and $770,000, respectively, from Keystone Memory. Keystone Memory’s owner is a relative of Mr. Sheerr. Approximately $41,000 and $27,000 of accounts payable in the Company’s consolidated balance sheets as of January 31, 2015 and April 30, 2014 are 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 is paid. The Company has made further purchases from Keystone Memory subsequent to January 31, 2015 and management anticipates that the Company will continue to do so, although the Company has no obligation to do so.

On December 14, 2011, the Company entered into a Note and Security Agreement with Mr. Sheerr. The agreement provides for secured financing of up to $2,000,000. The Company is obligated to pay monthly, interest equal to 10% per annum calculated on a 360-day year of the outstanding loan balance. Principal is payable in 60 equal monthly installments, beginning on July 15, 2012. The Company may prepay any or all sums due under this agreement at any time without penalty. The Company has borrowed the full $2,000,000 available under this agreement. Principal amounts due under this obligation are $33,333 per month which began on July 15, 2012.

The Company amended and restated its Note and Security Agreement with Mr. Sheerr as of October 31, 2013; The Company sold certain equipment and furniture for a purchase price of $500,000 under a sale leaseback transaction to Mr. Sheerr. The Company used the proceeds of the purchase price received from Mr. Sheerr to reduce the remaining principal amount of the original loan by an amount equal to $500,000. The principal amount was reduced to approximately $966,667 at October 31, 2013. The Company was obligated to pay monthly, interest equal to 10% per annum calculated on a 360 day year of the outstanding loan balance. Principal was payable in 29 equal monthly installments of $33,333, beginning on November 15, 2013 and subsequently on the 15th day of each month thereafter, until paid in full. On April 30, 2014, the note was paid in full.

As of October 31, 2013, the Company also entered into an agreement with Mr. Sheerr to leaseback the aforementioned equipment and furniture that was sold to Mr. Sheerr on October 31, 2013. 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 approximately $322,000 gain on sale 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 $250,000 is reflected in other liabilities – long-term in the consolidated balance sheet as of April 30, 2014. The current portion of $72,000 deferred gain is reflected in accrued liabilities and the long-term portion of $197,000 is reflected in other liabilities – long-term in the consolidated balance sheet as of January 31, 2015.