8. STOCKHOLDERS EQUITY

6 Months Ended

Oct. 31, 2013

Equity [Abstract]

8. STOCKHOLDERS' EQUITY

Preferred Stock

The Company’s Certificate of Incorporation authorizes it to issue 10,000,000 shares of $0.0001 par value preferred stock of which 9,990,400 are undesignated.

On August 22, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 4,600 shares of our authorized but unissued shares of preferred stock as Series D 8% Convertible Preferred Stock

On July 22, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 5,369 shares of our authorized but unissued shares of preferred stock as Series C 8% Convertible Preferred Stock.

On February 25, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 1,600 shares and 500 shares of our authorized but unissued shares of preferred stock as Series B-1 Convertible Preferred Stock and Series B-2 Convertible Preferred Stock, respectively.

Series D 8% Convertible Preferred Stock

On August 22, 2013, the Company closed its private placement of an aggregate of $4.6 million of shares of the Company’s Series D 8% convertible preferred stock (the “Series D Stock”) to JP SPC 3 obo OXBT FUND, SP (“OXBT Fund”).  In connection with the purchase of shares of Series D Stock, OXBT Fund received a warrant to purchase 2,358,975 shares of common stock at an exercise price equal to $2.60 (the “Series D Warrant”).  As consideration for the sale of the Series D Stock and Series D Warrant, $4.6 million in outstanding principal amount of a Note issued by the Company on July 1, 2011 and held by OXBT Fund was cancelled.  The Note carried interest at a rate of 15% per annum and matured on July 1, 2014.  Mr. Gregory Pepin, one of the Company’s directors, is the investment manager of OXBT Fund.  Pursuant to the terms of a lock-up agreement (the “Lock-Up Agreement”) executed prior to the closing, OXBT Fund and its affiliates are prohibited from engaging in certain transactions with respect to shares of the Company’s common stock and common stock equivalents until such time as the lead investor in the Company’s offering of Series C 8% Convertible Preferred Stock ceases to own at least 25% of the shares of Series C 8% Convertible Preferred Stock originally issued to such investor.

The table below sets forth a summary of the designation, powers, preferences and rights of the Series D 8% Convertible Preferred Stock.

Conversion	Subject to certain ownership limitations, the Series D Stock is convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the Series C Stock (or $1,000) by a conversion price of $1.95 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Until such time that for at least 25 trading days during any 30 consecutive trading days, the volume weighted average price of the Company’s common stock exceeds 250% of the initial conversion price, if the Company sells or grants any option to purchase or sell any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price, or the Base Conversion Price, then the conversion price shall be reduced to equal the Base Conversion Price
Dividends and Make-Whole Payment	Until the third anniversary of the date of issuance of the Series D Stock, the holder of the Series D Stock is entitled to receive dividends at the rate of 8% per annum of the stated value for each share of Series D Stock held by such holder payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date, and on each dividend payment date.  The Company can elect to pay the dividends in cash or in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof.  If the Company pays the dividends in shares of common stock, the shares used to pay the dividends will be valued at 90% of the average volume weighted average price for the 20 consecutive trading days ending on the trading day immediately prior to the applicable dividend payment date.  From and after the third anniversary of the date of issuance of the Series D Stock, the holder of Series D Stock will be entitled to receive dividends equal, on an as-if-converted to common stock basis, to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock.  The Company has never paid dividends on its common stock and the Company does not intend to do so for the foreseeable future. In the event OXBT Fund converts its Series D Stock prior to the third anniversary of the date of issuance of the Series D Stock, the Company must also pay to OXBT Fund in cash, or at the Company’s option in common stock valued as described above, or a combination of cash and shares of common stock, with respect to the Series D Stock so converted, an amount equal to $240 per $1,000 of the stated value of the Series D Stock, less the amount of any dividends paid in cash or in common stock on such Series D Stock on or before the date of conversion.
Liquidation	Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company, but before any distribution or payment is made to the holders of any junior securities, the holder of Series D Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to $1,000 per share, after which any remaining assets of the Company shall be distributed among the holders of the other class or series of stock in accordance with the Company’s Certificate of Incorporation.
Voting rights	Shares of Series D Stock will generally have no voting rights, except as required by law and except that the consent of the holder of the outstanding Series D Stock will, among other things, be required to amend the terms of the Series D Stock.

During the three months ended October 31, 2013, the Company issued 30,898 shares of Common Stock in the form of Series D Stock dividends. As of October 31, 2013 there were 4,600 shares of Series D Stock outstanding.

Series C 8% Convertible Preferred Stock

On July 21, 2013, the Company entered into a Securities Purchase Agreement with certain investors providing for the issuance and sale by the Company (the “Series C Offering”) of an aggregate of approximately $5.4 million of shares of the Company’s Series C 8% convertible preferred stock (the “Series C Stock”), which are convertible into a combined total of 2,753,348 shares of common stock (the “Conversion Shares”).  In connection with the purchase of shares of Series C Stock in the Series C Offering, each investor will receive a warrant to purchase a number of shares of common stock equal to 100% of the number of Conversion Shares at an exercise price equal to $2.60 (the “Warrants”).  On July 23, 2013, the Company sold 5,369 units for net proceeds of approximately $4.9 million.

The table below sets forth a summary of the designation, powers, preferences and rights of the Series C 8% Convertible Preferred Stock.

Conversion	Subject to certain ownership limitations, the Series C Stock is convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the Series C Stock (or $1,000) by a conversion price of $1.95 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Until such time that for at least 25 trading days during any 30 consecutive trading days, the volume weighted average price of the Company’s common stock exceeds 250% of the initial conversion price, if the Company sells or grants any option to purchase or sell any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price, or the Base Conversion Price, then the conversion price shall be reduced to equal the Base Conversion Price
Dividends and Make-Whole Payment	Until the third anniversary of the date of issuance of the Series C Stock, each holder of the Series C Stock is entitled to receive dividends at the rate of 8% per annum of the stated value for each share of Series C Stock held by such holder payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date, and on each dividend payment date.  The Company can elect to pay the dividends in cash or in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof.  If the Company pays the dividends in shares of common stock, the shares used to pay the dividends will be valued at 90% of the average volume weighted average price for the 20 consecutive trading days ending on the trading day immediately prior to the applicable dividend payment date.  From and after the third anniversary of the date of issuance of the Series C Stock, each holder of Series C Stock will be entitled to receive dividends equal, on an as-if-converted to common stock basis, to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock.  The Company has never paid dividends on its common stock and the Company does not intend to do so for the foreseeable future. In the event a holder converts his, her or its Series C Stock prior to the third anniversary of the date of issuance of the Series C Stock, the Company must also pay to the holder in cash, or at the Company’s option in common stock valued as described above, or a combination of cash and shares of common stock, with respect to the Series C Stock so converted, an amount equal to $240 per $1,000 of the stated value of the Series C Stock, less the amount of any dividends paid in cash or in common stock on such Series C Stock on or before the date of conversion.
Liquidation	Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company, but before any distribution or payment is made to the holders of any junior securities, the holders of Series C Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to $1,000 per share, after which any remaining assets of the Company shall be distributed among the holders of the other class or series of stock in accordance with the Company’s Certificate of Incorporation.
Voting rights	Shares of Series C Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstanding Series C Stock will, among other things, be required to amend the terms of the Series C Stock.

The Company will not affect any conversion of the Series C Stock, nor shall a holder convert its shares of Series C Stock, to the extent that such conversion would cause the holder to have acquired, through conversion of the Series C Stock or otherwise, beneficial ownership of a number shares of Common Stock in excess of 4.99% of the Common Stock outstanding immediately preceding the conversion.

During the six months ended October 31, 2013, 4,999 shares of Series C Stock were converted into 2,563,583 shares of Common Stock, and the Company issued 788,803 shares of its common stock for the payment of $1,199,760 as dividends on the Series C Convertible Preferred stock. As of October 31, 2013 there were 370 shares of Series C Stock outstanding.

Series B Convertible Preferred Stock

On February 22, 2013, the Company entered into a Securities Purchase Agreement with an institutional investor providing for the issuance and sale by the Company (of $1.6 million of shares of the Company’s Series B-1 convertible preferred stock (the “Series B-1 Stock”) and $0.5 million of shares of the Company's Series B-2 convertible preferred stock (the “Series B-2 Stock” and, together with the Series B-1 Stock, the “Series B Preferred Stock”) which are convertible into a combined total of 420,000 shares of common stock, subject to adjustment for subsequent equity sales.

On February 27, 2013, the Company sold 2,100 units for net proceeds of approximately $1.9 million. Each unit sold consisted of (i) one share of the Company’s Series B Preferred Stock and (ii) a Warrant representing the right to purchase 300 shares of Common Stock at a price of $1,000 per unit, less issuance costs. The shares of Series B Preferred Stock were immediately convertible upon issuance.

The table below sets forth a summary of the designation, powers, preferences and rights of the Series B Preferred Stock.

Dividends	No dividends shall be paid on shares of Preferred Stock.
Conversion	Holders may elect to convert shares of Series B Preferred Stock into shares of Common Stock at the then-existing conversion price at any time.  The initial conversion price is $5.00 per share of Common Stock, and is subject to certain adjustments, including an anti-dilution provision that reduces the conversion price upon the issuance of any Common Stock or securities convertible into Common Stock at an effective price per share less than the conversion price and a one-time price reset following the effectiveness of a reverse split of the Company’s outstanding common stock.
Liquidation preference	In the event of the Company’s voluntary or involuntary dissolution, liquidation or winding up, each holder of Series B Preferred Stock will be entitled to be paid a liquidation preference equal to the initial stated value of such holder’s Series B Preferred Stock of $1,000 per share, plus accrued and unpaid dividends and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital stock ranking junior to the Series B Preferred Stock.
Voting rights	Shares of Series B Preferred Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstanding Series B Preferred Stock will among other things, be required to amend the terms of the Series B Preferred Stock.

The Company will not affect any conversion of the Series B Preferred Stock, nor shall a holder convert its shares of Series B Preferred Stock, to the extent that such conversion would cause the holder to have acquired, through conversion of the Series B Preferred Stock or otherwise, beneficial ownership of a number shares of Common Stock in excess of 4.99% of the Common Stock outstanding immediately preceding the conversion.

During the six months ended October 31, 2013, 987 shares of Series B Preferred Stock were converted into 644,915 shares of Common Stock.  As of October 31, 2013 there were no shares of Series B Preferred Stock outstanding.

Common Stock

The Company’s Certificate of Incorporation authorizes it to issue 400,000,000 shares of $0.0001 par value common stock. As of October 31, 2013, there were 6,814,293 shares of common stock issued and outstanding.

Warrants

Series D Warrants

On August 22, 2013, the Company closed its previously announced private placement of an aggregate of $4.6 million shares of the Company’s Series D Stock to OXBT Fund. In connection with the purchase of shares of Series D Stock, OXBT Fund received the Series D Warrant to purchase 2,358,975 shares of common stock at an exercise price equal to $2.60 and contractual term of 6 years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $1,531,167 was recognized as a deemed dividend on the Series D Stock during the six months ended October 31, 2013. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

The Series D Warrant is exercisable beginning on the date of issuance and expires on August 22, 2019.  The exercise price and the number of shares issuable upon exercise of Series D Warrant is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock, and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders.  In addition, if stockholder approval for the transaction is obtained, the Series D Warrant will be subject to anti-dilution provisions until such time that for 25 trading days during any 30 consecutive trading day period, the volume weighted average price of the Company’s common stock exceeds $6.50 and the daily dollar trading volume exceeds $350,000 per trading day.

The Series D Stock and the Series D Warrant were issued and sold without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.  Accordingly, OXBT Fund may exercise the Warrant and sell the Series D Stock and underlying shares only pursuant to an effective registration statement under the Securities Act covering the resale of those securities, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act.

Series C Warrants

On July 23, 2013, the Company issued common stock warrants in connection with the issuance of Series C Stock (the “Series C Warrants”). As part of the offering, the Company issued 2,753,348 warrants at an exercise price of $2.60 per share and contractual term of 6 years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $1,867,991 was recognized as a deemed dividend on the Series C Stock during the six months ended October 31, 2013. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

In connection with the Series C Offering described above, the Company entered into a Placement Agency Agreement (the “Placement Agency Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Placement Agent”) pursuant to which the Placement Agent agreed to act as the Company’s exclusive placement agent for the Series C Offering. In accordance with the Placement Agency Agreement, on July 23, 2013 the Company issued to the Placement Agent warrants to purchase 53,539 shares of common stock at an exercise price of $2.4375 per share and a contractual term of 3 years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $51,231 was recognized as additional paid in capital during the six months ended October 31, 2013. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

On August 23, 2013, the Company entered into agreements with certain institutional investors to amend the terms of certain outstanding warrants to purchase an aggregate of 2,681,283 shares of the Company’s common stock issued by the Company on February 27, 2013 and July 27, 2013 (collectively, the “Warrant Amendments”).  The Warrant Amendments replace the price protection anti-dilution provision of each warrant with a covenant that the Company will not issue common stock or common stock equivalents at an effective price per share below the exercise price of such warrant without prior written consent, subject to certain exceptions.

The following table summarizes the Company’s warrant activity for the six months ended October 31, 2013:

	Warrants			Weighted Average Exercise Price
Outstanding at April 30, 2013		759,410		$	11.00
Issued		5,165,862			2.60
Exercised		(630,000	)		0.90
Forfeited		(1,661	)		126.00
Outstanding at October 31, 2013		5,293,611		$	3.47

1999 Amended Stock Plan

In October 2000, the Company adopted the 1999 Stock Plan, as amended and restated on June 17, 2008 (the “Plan”). Under the Plan, with the approval of the Compensation Committee of the Board of Directors, the Company may grant stock options, restricted stock, stock appreciation rights and new shares of Common Stock upon exercise of stock options. On September 30, 2011, the Company’s stockholders approved an amendment to the Plan which increased the amount of shares authorized for issuance under the Plan to 300,000, up from 40,000 previously authorized. As of October 31, 2013 the Company had 194,797 shares of Common Stock available for grant under the Plan.

The following table summarizes the shares available for grant under the Plan for the six months ended October 31, 2013:

	Shares Available for Grant
Balances, at April 30, 2013		282,726
Options granted		(39,863	)
Options cancelled/forfeited		550
Restricted stock granted		(103,519	)
Restricted stock cancelled/forfeited		44,735
Balances, at October 31, 2013		184,629

 
Plan Stock Options

Stock options granted under the Plan may be either incentive stock options (“ISOs”), or nonqualified stock options (“NSOs”). ISOs may be granted only to employees. NSOs may be granted to employees, consultants and directors. Stock options under the Plan may be granted with a term of up to ten years and at prices no less than fair market value for ISOs and no less than 85% of the fair market value for NSOs. Stock options granted generally vest over one to three years.

The following table summarizes the outstanding stock options under the Plan for the six months ended October 31, 2013:

	Outstanding Options
	Number of Shares			Weighted Average Exercise Price
Balances, at April 30, 2013		11,336		$	57.00
Options granted		39,892		$	4.69
Options cancelled		(550	)	$	38.76
Balances, at October 31, 2013		50,678		$	16.02

The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.

The Company used the following assumptions to estimate the fair value of options granted under its stock option plans for the six months ended October 31, 2013 and 2012:

	For the six months ended October 31
	2013			2012
Risk-free interest rate (weighted average)		1.11	%		1.29	%
Expected volatility (weighted average)		86.21	%		79.17	%
Expected term (in years)		7			7
Expected dividend yield		0.00	%		0.00	%

Risk-Free Interest Rate	The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of the Company’s stock options.
Expected Volatility	The expected stock price volatility for the Company’s common stock was determined by examining the historical volatility and trading history for its common stock over a term consistent with the expected term of its options.
Expected Term	The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. It was calculated based on the Company’s historical experience with its stock option grants.
Expected Dividend Yield	The expected dividend yield of 0% is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not anticipate paying any dividends in the near future.
Forfeitures	Stock compensation expense recognized in the statements of operations for the six months ended October 31, 2013 and 2012 is based on awards ultimately expected to vest, and it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company’s historical experience.

As of October 31, 2013, there were unrecognized compensation costs of approximately $77,000 related to non-vested stock option awards granted after May 1, 2004 that will be recognized on a straight-line basis over the weighted average remaining vesting period of 1.94 years.

Restricted Stock Grants

The following table summarizes the restricted stock grants under the Plan for the six months ended October 31, 2013.

	Outstanding Restricted Stock Grants
	Number of Shares			Weighted Average Grant Date Fair Value
Balances, at April 30, 2013		1,917		$	48.40
Restricted stock granted		103,519		$	1.75
Restricted stock vested		(50,062	)	$	2.29
Restricted stock cancelled		(31,372	)	$	1.64
Restricted stock forfeited		(13,363	)	$	4.49
Balances, at October 31, 2013		10,639		$	4.52

The Company recorded compensation expense for these restricted stock grants of $107,871 and $122,153 for the three and six months ended October 31, 2013, respectively.

As of October 31, 2013, there were unrecognized compensation costs of approximately $15,074 related to the non-vested restricted stock grants that will be recognized on a straight-line basis over the remaining vesting period.