6. NOTES PAYABLE

3 Months Ended

Jul. 31, 2014

Debt Disclosure [Abstract]

6. NOTES PAYABLE

The following table summarizes our outstanding notes payable as of July 31, 2014 and April 30, 2014:

	July 31, 2014		April 30, 2014
Current portion of notes payable, net	$	16,007	$	63,568
Current portion of convertible notes payable		-		300,000
Less: Unamortized discount		-		(16,678	)
Current portion of notes payable, net	$	16,007	$	346,890

Convertible Note

On June 29, 2011, the Company issued a note (the “June Note”) with a principal amount of approximately $300,000 and Warrants to purchase 6,652 shares of common stock. On July 1, 2011, the Company issued a separate note (together with the June Note, the “Notes”) with a principal amount of $4,600,000 and warrants to purchase 101,996 shares of common stock. The aggregate gross proceeds to the Company from the offering were approximately $4.9 million, excluding any proceeds from the exercise of any warrants. The aggregate placement agent fees were $297,000 and legal fees associated with the offering were $88,839. These costs have been capitalized as debt issue costs and will be amortized as interest expense over the life of the Notes. The Company recorded amortization of debt issue costs of $21,427 and $32,154 the three months ended July 31, 2014 and 2013, respectively.

Interest on the Notes accrues at a rate of 15% annually and will be paid in quarterly installments commencing on the third month anniversary of issuance. The Notes will mature 36 months from the date of issuance. The Notes may be converted into shares of common stock at a conversion price of $45.10 per share (subject to adjustment for stock splits, dividends and combinations, recapitalizations and the like) (the "Conversion Price") in whole or in part, at any time at the option of the holders of the Notes. The Notes also will automatically convert into shares of common stock at the Conversion Price at the election of a majority-in-interest of the holders of notes issued under the purchase agreement or upon the acquisition or sale of all or substantially all of the assets of the Company. The Company may make each applicable interest payment or payment of principal in cash, shares of common stock at the Conversion Price, or any combination thereof. The Company may elect to prepay all or any portion of the Notes without prepayment penalties only with the approval of a majority-in-interest of the note holders under the purchase agreement at the time of the election.   The Notes contain various events of default such as failing to timely make any payment under the Note when due, which may result in all outstanding obligations under the Note becoming immediately due and payable.

On August 22, 2013 holders of $4.6 million of the Notes received 4,600 shares of the Company’s Series D 8% Convertible Preferred Stock (the “Series D Stock”) as consideration for cancelling their outstanding Note. On that date, the Company recognized non-cash interest expense of $1,311,847 for the remaining unamortized debt discount associated with this Note.

On June 29, 2014, the Company paid the remaining principal balance of $300,000 to the note holders upon maturity.

The Company recorded interest expense of $45,606 and $628,321 for the three months ended July 31, 2014 and 2013, respectively.

The total value allocated to the warrants was $1,960,497 and was recorded as a debt discount against the proceeds of the notes.  In addition, the beneficial conversion features related to the Notes were determined to be $2,939,504.  As a result, the aggregate discount on the Notes totaled $4,900,001, and was being amortized over term of the notes.  The Company recorded interest expense for the amortization of debt discount of $16,678 and $408,333 for the three months ended July 31, 2014 and 2013, respectively.