NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 1. Financial Statement Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements and they should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended April 30, 2016 (the “Annual Report”). The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the nine month period ended January 31, 2017, are not necessarily indicative of the results that may be expected for the year ending April 30, 2017.

Basis of Presentation

The Company’s significant accounting policies are summarized in Note 1 of the Annual Report. These accounting policies conform to U.S.GAAP and have been consistently applied in the preparation of the interim unaudited condensed consolidated financial statements. There were no significant changes to these accounting policies during the nine months ended January 31, 2017, and the Company does not expect the adoption, as applicable, of other recent accounting pronouncements will have a material impact on its financial statements.

On January 23, 2017, ProGreen US, Inc.’s subsidiary in Baja California, Mexico, Procon Baja JV (Procon), entered into a definitive purchase agreement for, and has taken possession of, a large tract of land situated near the town of El Rosario in Baja California. In connection with this purchase the Company has recorded land in the amount of $500,000, paid $12,000 and recorded a liability under land contract for the balance due in the amount of $488,000 as of January 31, 2017. The land, planned for residential real estate development, is bordering the Pacific Ocean and covers a total area of 2,056 ha (5,100 acres) with 7,5 km (4.7 miles) of ocean front. See Note 3.

On January 15, 2017 the Company entered into a loan agreement with its 51% owned subsidiary Procon Baja JV (“Procon”) whereby the Company has agreed it will grant a loan to Procon in as much amount as is needed to accomplish Procon’s objectives. Procon will repay all borrowings received under the loan once Procon has sufficient income. The loan amounts bear interest at a 6% per annum from the date of each borrowing until repaid. During the nine month period ended January 31, 2017 the Company loaned Procon $20,000 to commence operations. All significant intercompany accounts and transactions have been eliminated. FASB Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” requires a company’s consolidated financial statements to include subsidiaries in which the company has a controlling financial interest. Procon is owned by Progreen (51%) and Inmobiliaria Contel S.R.L.C.V. (Contel (49%) and is included in the Company’s consolidated financial statements for the period ended January 31, 2017. The accrued interest payable was immaterial for the nine months ended January 31, 2017 and was not accrued, thus there is no noncontrolling interest recorded as of the current period end. Procon is the holding company for non-agricultural land and real estate developments. See Note 3.

Fair Value of Financial Instruments

The Company records convertible debt and warrants at fair value on a recurring basis.  Estimated fair values of the Company's convertible debt and derivatives liability were calculated based upon quoted market prices. See Notes 9 and 10.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 1. Financial Statement Presentation – continued

Going Concern

The Company’s unaudited condensed consolidated financial statements for the period ended January 31, 2017, have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon the success of management’s plans and the Company’s ability to use its common stock to raise working capital. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities in the event management’s plans are not successful.

The Company will continue to incur costs that are necessary for it to remain an active public company. In the current fiscal year, the Company used approximately $401,000 of cash to support its operations and such cash needs are expected to continue in the upcoming year.  As of January 31, 2017, the Company has approximately $64,000 in cash.

Land under Development

Land under development is recorded at cost.

Notes Receivable - Land Contracts

The note receivables land contracts are carried at amortized cost. Interest income on the notes receivable is recognized on the accrual basis based on the principal balances outstanding. Management believes the notes are collectible and therefore, an allowance for doubtful accounts has not been recorded at January 31, 2017.

Liability under Land Contract

Liability under land contract is recorded at cost.

Reclassifications

Certain amounts in previous periods have been reclassified to conform to fiscal year ending 2017 classifications.

Recent Accounting Pronouncements

We do not expect that any recently issued accounting pronouncements will have a material impact on our consolidated financial statements.

Depreciation expense for the Company’s rental properties for the nine month periods ended January 31, 2017 and 2016 totaled $22,841and $0, respectively.

The Company owned ten and thirteen rental properties as of January 31, 2017, and April 30, 2016, respectively. The Company held one property under development as of January 31, 2017, and April 30, 2016.

Note 3. Land under Development and Liability under Land Contract

The Company held land under development in the amount of $500,000 and $0 as of January 31, 2017, and April 30, 2016, respectively. During the period ended January 31, 2017 Procon, the Company’s joint venture subsidiary purchased the first tract of land for residential real estate development. Under the terms of the definitive purchase agreement the Company has recorded land at cost in the amount of $500,000, paid $12,000 of the purchase price and recorded a liability under land contract for the balance due in the amount of $488,000 as of January 31, 2017. See Note 1. The payments are due as follows:

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 4. Notes Receivable - Land Contracts and Gain on Sale of Properties

On May 20, 2016 the Company sold one of its rental properties located at 23270 Helen Street, with a selling price of $119,000. The Company received a deposit of $10,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $109,000 to be paid in monthly installments, including principal and interest, beginning June 1, 2016 through June 1, 2019. The Land Contract bears interest at 9% per annum. In the nine months ended January 31, 2017 the Company recognized a gain on the sale of this property in the amount of $41,507. The balance due under this Land Contract totaled $108,339 as of January 31, 2017.

On June 25, 2016 the Company sold a second one of its rental properties located at 21421 Greenview Avenue with a selling price of $109,000. The Company received a deposit of $12,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $97,000, to be paid in monthly installments, including principal and interest, beginning August 1, 2016 through June 30, 2019. The Land Contract bears interest at 9% per annum. In the nine months ended January 31, 2017 the Company recognized a gain on the sale of this property in the amount of $96. The balance due under this Land Contract totaled $96,326 as of January 31, 2017.

On November 4, 2016 the Company sold a third one of its rental properties located at 29108 Tessmer Court with a selling price of $77,000. The entire $77,000 was received in cash during the nine months ended January 31, 2017. In the nine months ended January 31, 2017 the Company recognized a gain on the sale of this property in the amount of $18,650.

Note 5. Note Receivable - Related Party

During the nine months ended January 31, 2017, the Company contributed an additional $215,500 to Baja Joint Venture which is accounted for as an investment. Note Receivable - Related Party totaled $325,500 and $110,000 as of January 31, 2017 and April 30, 2016, respectively. See Note 18.

Note 6. Notes Payable

The Company is indebted as follows:

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 6. Notes Payable – continued

During the nine months ended January 31, 2017 in connection with the purchase of ARG, the note payable due to AMREFA under the June 2015 Instalment Payment Agreement was paid in full and cancelled with the delivery of a $200,000 Mortgage Note payable to AMREFA together with issuance of 441,084 shares of Series B Preferred Stock to AMREFA, with a fair value of $65,000 in payment of note plus accrued interest. See Note 16. The amount due was comprised of $261,150 principal plus accrued interest of $14,653, for a total due to AMREFA of $275,803. In connection with this payment in full, during the nine months ended January 31, 2017, the Company recorded a gain on settlement of a liability in the amount of $10,803, which is included in other expenses and income in the accompanying unaudited Condensed Consolidated Statements of Operations.

The Mortgage Note is non-interest bearing and is secured by the property at 24442 Kinsel Street, Southfield, Michigan. The Mortgage Note will be paid upon the sale of the Kinsel Street property. Notes payable to AMREFA totaled $200,000 and $265,150 as of January 31, 2017 and April 30, 2016, respectively. Accrued interest due AMREFA totaled $0 and $14,653 as of January 31, 2017 and April 30, 2016, respectively.

Note 7. Notes Payable, Related Parties

During the nine months ended January 31, 2017, in payment of the note payable related party the Company issued EIG 608,031 shares of Series A Preferred Stock with a total stated value equal to that of the agreed upon principal in the amount of $476,000 plus accrued interest in the amount of $148,613, for a total agreed upon amount of $624,613 and a fair value of $1,013,385. See Note 15. In connection with this payment in full, during the nine months ended January 31, 2017 the Company recorded a loss on settlement of a liability in the amount of $388,772 which is included in other expenses and income in the accompanying unaudited Condensed Consolidated Statements of Operations.

As of January 31, 2017 and April 30, 2016 the outstanding balance of the note payable related party was $0 and $476,000, plus accrued interest of $0 and $148,613, respectively.

On August 2, 2016, the Company entered into a credit line promissory note (“Credit Line”) with its President and Chief Executive Officer (“President”) whereby the Company may borrow up to $250,000 with interest at a rate of five (5%) percent per annum due on July 31, 2017. The Credit Line is unsecured. During the nine months ended January 31, 2017 the Company borrowed $194,000 under the Credit Line. As a result of the derivatives calculation an additional discount of $28,950 was recorded. Notes payable related parties includes the amount due to the Company’s President with a balance outstanding of $194,000 less the unamortized discount of $23,887 as of January 31, 2017 and $0 as of April 30, 2016. Amortization of the related discount totaled $ 5,063 for the nine months ended January 31, 2017. The Company recorded interest expense in connection with this Credit Line in the amount of $2,087 and $0 for the nine months ended January 31, 2017 and 2016, respectively. Accrued interest due under this Credit Line totaled $2,087 and $0 as of January 31, 2017 and April 30, 2016, respectively.

Also, in connection with the Credit Line, the Company issued the President common stock purchase warrants. The warrants entitle the President to purchase ten shares of common stock for each one ($1.00) dollar of total disbursements by the President to the Company, of up to 2,500,000 shares of common stock at an exercise price of $0.05. During the nine months ended January 31, 2017, 194,000 of these warrants were issued in various denominations between August 2, 2016 through January 23, 2017, resulting in a total number of warrant shares of 1,940,000 as of January 31, 2017. The warrants have a five year term. See Notes 9, 10 and 18.

In addition, notes payable related parties includes an amount due to the Company’s controller with a balance outstanding of $40,000 as of January 31, 2017 and April 30, 2016. The Company recorded interest expense in connection with this note payable in the amount of $2,453 and $0 for the nine months ended January 31, 2017 and 2016, respectively. Accrued interest due under this note payable totaled $3,831 and $1,378 as of January 31, 2017 and April 30, 2016, respectively.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 8. Note Payable Bank of Birmingham

The note payable had a balance outstanding of $454,059 and $490,000 as of January 31, 2017 and April 30, 2016, respectively and the Company recorded interest expense in connection with this note payable in the amount of $25,056 and $0 for the nine months ended January 31, 2017 and 2016, respectively. Accrued interest due under the note payable totaled $2,047 and $2,858 as of January 31, 2017 and April 30, 2016, respectively.

Principal payment requirements on the notes payable to Bank of Birmingham are as follows:

See Note 4.

Note 9. Fair Value Measurement

The Company utilizes the accounting guidance for fair value measurements and discloses for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period.

The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability.  ASC 820, "Fair Value Measurements and Disclosures", establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as follows:  

As of January 31, 2017, the Company held certain financial instruments that are measured at fair value on a recurring basis. These consisted of convertible debt totaling $85,384 and $0 with a derivative liability totaling $316,595 (including stock warrants) and $0 at January 31, 2017 and April 30, 2016, respectively, which are categorized as Level 3. The related loss on derivatives totaled $24,298 for the nine month period ended January 31, 2017. Loss on derivatives totaled $40,958 for the three month period ended January 31, 2017.

See Notes 7, 10 and 11.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 10 - Derivative Liabilities

During the nine months ended January 31, 2017, the Company identified conversion features embedded within its convertible debt. See Note 11. The Company has determined that the conversion feature of the Hoppel convertible note represents an embedded derivative since the Note is convertible into a variable number of shares upon conversion. Accordingly, the Note is not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Hoppel convertible note tainted all other convertible instruments (all warrants) and these convertible instruments were treated as derivatives as well. Therefore, the fair value of the derivative instruments has been recorded as liabilities on the balance sheet with the corresponding amount recorded as discounts to the Notes. Such discounts will be accreted from the issuance date to the maturity date of the Notes. The change in the fair value of the derivative liabilities will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. The fair value of the embedded derivative liabilities on the convertible notes were determined using a multinomial lattice models on the issuance dates with the assumptions in the table below. The fair value of the warrants was calculated using a Black-Scholes valuation model.

  The fair value of the Company’s derivative liabilities at January 31, 2017 is as follows:

The fair values at the commitment dates and remeasurement dates for the convertible debt and warrants treated as derivative liabilities are based upon the following estimates and assumptions made by management for the quarter ended January 31, 2017:

The stock prices ranged from $0.0134 to $0.0114 in this period would fluctuate with the Company projected volatility;

An event of default for the Convertible Note would occur 0% of the time, increasing 0.5% per month to a maximum of 5%;

Alternative financing for the Convertible Notes would be initially available to redeem the note 0% of the time and increase monthly by 1% to a maximum of 10%;

The Holder would automatically convert (limited by trading volume and ownership limits of 4.99% to 9.99%) the note starting after 180 days if the company was not in default.

The projected annual volatility for each valuation period was based on the historical volatility of the Company and the remaining term of the instrument and ranged from 152% to 170% and 302% to 308%.

Default at maturity would occur 100% of the time for the Hoppel Notes and they would convert at a percentage of market.

The risk-free rates were based on the remaining term of the instrument and ranged from 0.52% to 1.92%.

See Notes 7, 9 and 11.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 11. Financing Agreement and Convertible Debentures

Tangiers Convertible Note and Financing Agreement

On August 25, 2016, the Company entered into an Amended and Restated 5.83% Fixed Convertible Promissory Note with Tangiers Global, LLC (“Tangiers convertible note”). This note amended the previously entered into 5.83% Fixed Convertible Promissory Note dated June 23, 2016 in the principal amount of $22,000 including an original issue discount in the amount of $2,000. This convertible note is due and payable on June 23, 2017 with guaranteed interest of 5.83% of the principal amount. This note is convertible at the election of the Holder from time to time after the issuance date. The note converts at $0.03. Conversion is limited such that the holder cannot exceed 9.99% beneficial ownership. In the event of default, the amount of principal not paid is subject to a default interest rate of 15% and a default penalty of 35%.

The Company may prepay the amounts outstanding to the holder at any time up to the 180th day following the issue date of this note by making a payment to the note holder of an amount in cash equal to 115% (for the first 90 days) up to 135%, multiplied by the sum of: the then outstanding principal amount of this Note plus accrued and unpaid interest on the unpaid principal amount of this Note. On December 9, 2016, the Company amended the Tangiers convertible note as follows; The Company may prepay the amounts outstanding to the holder at any time up to the 204th day following the issue date of this note by making a payment to the note holder of an amount in cash equal to: 115% (for the first 90 days), 125% (for the next 91-135 days), 135% (for the next 136-180 days) multiplied by the then outstanding principal amount of this Note or $31,200 (135% of Principal plus $1,500, including interest). After January 16, 2017 the Note may not be prepaid without consent from the Holder. If the Note is in default (as defined by the Original Note) the Company may not prepay the note without consent of the Holder. 

In connection with the Tangiers convertible note, the Company issued Tangiers a Common Stock Purchase Warrant. The warrant entitled the holder to purchase up to 4,000,000 shares of common stock at an exercise price of $0.02. The warrant expires on June 23, 2021. The warrant contains standard adjustments for stock dividends and splits, allows cashless exercise, and provides for alternative consideration or cash payment upon a fundamental transaction.

The Tangiers convertible note was redeemed in full on January 9, 2017. Amortization of the related discount totaled $2,000 for the nine months ended January 31, 2017. Interest in the amount of $9,200 was paid in the final settlement of Tangiers convertible note.

On June 23, 2016, the Company entered into a $5,000,000 equity line financing agreement (“Investment Agreement”) with Tangiers Global, LLC, Dorado, Puerto Rico and filed a Registration Statement for the financing with the SEC on August 31, 2016. The financing is over a maximum of 36 months. A maximum of 100 million (100,000,000) shares of the Company’s common stock will be registered for this financing. As of January 31, 2017 there have been no draws under the Investment Agreement thus the outstanding balance totaled $0 at January 31, 2017 and April 30, 2016.

Hoppel Convertible Notes

On September 13, 2016, the Company issued a convertible promissory note in the amount of principal amount of $105,000 to Lucas Hoppel (“Hoppel Convertible Note 1”). This convertible note is due and payable on March 13, 2017 with interest of a one-time charge of 7%. This note is convertible upon the event of default (as defined in the Hoppel convertible note agreement), if not cured within five calendar days following the default event, at the election of the Holder. The note converts at 65% of the average of the three daily lowest trades occurring during the fifteen previous trading days. Conversion is limited such that the holder cannot exceed 4.99% beneficial ownership, or 9.99% if the market capitalization is less than $2,500,000. In the event of default, the amount of principal not paid is subject to a 25% penalty and a daily penalty of $1,000 and the note becomes immediately due and payable.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 11. Financing Agreement and Convertible Debentures – continued

On January 20, 2017, the Company issued a convertible promissory note in the amount of principal amount of $105,000 to Lucas Hoppel (“Hoppel Convertible Note 2”). This convertible note is due and payable on July 20, 2017 with interest of a one-time charge of 7%. This note is convertible upon the event of default (as defined in the Hoppel convertible note agreement), if not cured within five calendar days following the default event, at the election of the Holder. The note converts at 65% of the average of the three daily lowest trades occurring during the fifteen previous trading days. Conversion is limited such that the holder cannot exceed 4.99% beneficial ownership, or 9.99% if the market capitalization is less than $2,500,000. In the event of default, the amount of principal not paid is subject to a 25% penalty and a daily penalty of $1,000 and the note becomes immediately due and payable.

The Company may prepay the amounts outstanding to the holder, under either Hoppel convertible note, at any time up to the 180th day following the issue date of this note by making a payment to the note holder of an amount in cash equal to 100%(for the first 90 days) up to 120%, multiplied by the sum of: the then outstanding principal amount of the Note plus accrued and unpaid interest on the unpaid principal amount of the Note.

In connection with Hoppel Convertible Note 1, the Company issued Lucas Hoppel a Common Stock Purchase Warrant. The warrant entitled the holder to purchase up to 1,000,000 shares of common stock at an exercise price of $0.05. The warrant expires on September 13, 2023. The warrant contains standard adjustments for stock dividends and splits, and allows cashless exercise after six months. In addition, Lucas Hoppel was issued 500,000 common shares as an inducement to enter into the financing. See Note 14. If the note has not been repaid in full and the share price at any time falls below $0.0125 after the six month repayment period, then the Company will issue an additional 500,000 shares. A total of $105,000 debt discount was recorded on Hoppel Convertible Note 1including original issuance discount of $5,000, stock issuance discount of $7,547 and derivative discount of $92,453.

In connection with Hoppel Convertible Note 2, the Company issued Lucas Hoppel a Common Stock Purchase Warrant. The warrant entitled the holder to purchase up to 1,000,000 shares of common stock at an exercise price of $0.03. The warrant expires on January 20, 2022. The warrant contains standard adjustments for stock dividends and splits, and allows cashless exercise after six months. In addition, Lucas Hoppel was issued 926,000 common shares as an inducement to enter into the financing. See Note 14. If the note has not been repaid in full and the share price at any time falls below $0.0125 after the six month repayment period, then the Company will issue an additional 926,000 shares. A total of $105,000 debt discount was recorded on Hoppel Convertible Note 2 including original issuance discount of $5,000, stock issuance discount of $12,408 and derivative discount of $87,592.

The outstanding Hoppel Convertible Note 1 and Note 2 balances totaled $85,384 at January 31, 2017, net of the unamortized discount of $124,616. Amortization of the related discounts totaled $85,384 for the nine months ended January 31, 2017. Accrued interest totaled $14,700 and $0 at January 31, 2017 and April 30, 2016, respectively. See Notes 9 and 10.

Note 12. Note Payable AMREFA

During the nine months ended January 31, 2017, in connection with the Company’s purchase of ARG LLC, 8,093,541 shares of Series B Preferred Stock were issued to AMREFA and the note payable to AMREFA in the amount $1,170,811 was paid in full. Amortization of the related discount totaled $20,609 for the nine months ended January 31, 2017. See Notes 6 and 16.

Note 13. Related Party Advances

During the nine months ended January 31, 2017 in payment of the non-interest bearing advances due EIG in the amount of $59,000 the Company issued 59,000 shares of Series A Preferred Stock to EIG. In connection with this payment in full, during the nine months ended January 31, 2017 the Company recorded a loss on settlement of a liability in the amount of $39,333, which is included in other expenses and income in the accompanying unaudited Condensed Consolidated Statements of Operations. Related party advance from EIG totaled $0 and $59,000 at January 31, 2017 and April 30, 2016, respectively. See Note 15.

ProGreen US, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2017

Unaudited

Note 13. Related Party Advances – continued

During the nine months ended January 31, 2017 in connection with the amount due stockholders in the amount of $200,000, the Company issued 200,000 shares of Series A Preferred Stock. Amount due stockholders totaled $0 and $200,000 at January 31, 2017 and April 30, 2016, respectively. See Note 15.

Note 14. Common Stock

On December 6, 2016 the Company amended its Certificate of Incorporation to reduce the number of shares of common stock the Company is authorized to issue from 1,500,000,000 to 950,000,000.

On August 10, 2016, in payment of accrued interest due RF in the amount of $50,700, the Company issued 1,690,000 shares Common Stock, to RF.

On August 10, 2016, the Company issued the remaining 9,775,171 shares of Common Stock due EIG under the Stock Subscription for which the proceeds were received in a prior year.

In connection with Hoppel Financing on October 17, 2016 and January 26, 2017, the Company issued 500,000 and 926,000 shares of Common Stock, respectively. See Note 11.

During the nine months ended January 31, 2017 the Company issued 300,000 shares of Series A Preferred Stock settled in cash of which $200,000 was received in the last quarter of fiscal 2016 and was recorded as amount due stockholders in the amount of $200,000 at April 30, 2016. The remaining $100,000 was received in the nine months ended January 31, 2017.

See Note 7 and Note 13.

The Company analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.

The Company further analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted beneficial conversion features do not exist.

See Notes 5 and 11.

From the date of issuance of the Series B Preferred Shares through January 31, 2017 the Company accreted $44,548 of the purchase discount. As of January 31, 2017, the Series B Preferred Shares had a fair value of $1,300,968.

Each holder of record on September 8, 2016 and March 8, 2017 of the Series B Preferred Stock shall be entitled to receive a cash dividend at the annual rate of 7% of the Stated Value of the shares of Series B Preferred Stock held by such holder. During the nine month period ended January 31, 2017 the Company paid Series B cash dividends in the amount of $47,425and accrued an additional $39,505 for a total dividend of $86,930 as of January 31, 2017.

Series B is presented as temporary equity in the accompanying Condensed Consolidated Balance Sheet pursuant to ASC 480 as it is not redeemable until February 1, 2017. As of January 31, 2017 and April 30, 2016, 8,534,625 and no shares of Series B Preferred Stock were issued and outstanding, respectively.

The Company further analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted beneficial conversion features do not exist.