3. NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS

12 Months Ended

Apr. 30, 2013

Debt and Capital Lease Obligations [Abstract]

3. NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS

3. NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS

August 2012 Note Payable Obligation

On August 30, 2012, we entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC, MidCap Financial SBIC LP, and Silicon Valley Bank (collectively, the “Lenders”) for up to $30,000,000 in total funding available in two $15,000,000 tranches. The Loan Agreement was secured by a first-priority security interest in substantially all of our assets, excluding our intellectual property and our rights under license agreements granting us rights to intellectual property. On August 30, 2012, we received initial funding of $15,000,000 under the Loan Agreement, excluding debt issuance costs of $251,000.

On September 24, 2012, we received a written notice of default (“Notice of Default”) from the Lenders, with respect to the Loan Agreement. The Notice of Default was triggered by a material adverse change under the Loan Agreement due to our discovery of major discrepancies in treatment group coding by an independent third-party vendor responsible for distribution of blinded investigational product used in our bavituximab Phase II second-line NSCLC clinical trial. Pursuant to the terms of the Notice of Default, all amounts due under the Loan Agreement were declared immediately due and payable by the Lenders. On September 25, 2012, we paid the Lenders all obligations declared due and payable under the Loan Agreement, including outstanding principal of $15,000,000, accrued interest thereon at the Loan Agreement’s applicable fixed rate of 7.95% per annum, plus a final payment fee equal to 6.5% of the principal amount funded (or $975,000), upon which, the Loan Agreement was terminated.

In addition, under the Loan Agreement, we issued to the Lenders six-year warrants to purchase shares of our common stock upon the funding of each tranche in an amount equal to 4.50% of the amount of such tranche divided by the exercise price, which is the lower of the average closing price of our common stock for the 10 business days immediately prior to the funding date for such tranche or the closing price on the day prior to such funding date. Therefore, upon the initial funding under the Loan Agreement, we issued the Lenders warrants to purchase an aggregate of 273,280 shares of our common stock at a per share price of $2.47, which are exercisable on a cash or cashless basis, and will expire on August 30, 2018. The fair value of the warrants issued was $470,000 and was calculated using a Black-Scholes valuation model with the following assumptions: risk-free interest rate of 0.87%; expected volatility of 80.20%; expected term of six years; and a dividend yield of 0%. The fair value of the warrants issued was initially recorded as a debt discount with a corresponding increase to additional paid-in capital. As of April 30, 2013, the warrants issued under the Loan Agreement were outstanding and exercisable (Note 8).

Upon the termination of the Loan Agreement, we recorded a loss on the early extinguishment of debt of $1,696,000, which consisted of the final payment fee of $975,000, the unamortized debt discount associated with the fair value of the warrants issued to the Lenders of $470,000, and the unamortized aggregate debt issuance costs of $251,000. The loss on the early extinguishment of debt is included in the accompanying consolidated statements of operations and comprehensive loss for the fiscal year ended April 30, 2013.

December 2008 Note Payable Obligation

On December 9, 2008, we borrowed $5,000,000 from MidCap Financial LLC and BlueCrest Capital Finance, L.P (collectively, the “Lenders”) under a term loan (the “Term Loan”) payable over three years. On December 1, 2011, the loan balance was paid in full.

In connection with the term loan, we issued to the Lenders five-year warrants to purchase an aggregate of 338,410 shares of our common stock at an exercise price of $1.4775 per share. The fair value of the warrants issued was $414,000 and was calculated using a Black-Scholes valuation model with the following assumptions: risk-free interest rate of 2.00%; expected volatility of 70.72%; an expected term of five years; and a dividend yield of 0%. The fair value of the warrants issued was initially recorded as a debt discount with a corresponding increase to additional paid-in capital. The debt discount was amortized as a non-cash interest expense over the term of the outstanding loan using the effective interest method. The discount was fully amortized as of December 1, 2011. During fiscal years 2012 and 2011, we amortized $12,000 and $113,000, respectively, in non-cash interest expense, which amounts are included in interest and other expense in the accompanying consolidated financial statements. As of April 30, 2013, 101,523 warrants issued under this term loan were outstanding and exercisable (Note 8).

In connection with the term loan, we also incurred $469,000 in financing fees and legal costs related to the closing the term loan. These fees were classified as debt issuance costs and were amortized as a non-cash interest expense over the term of the outstanding loan using the effective interest method. The debt issuance costs were fully amortized as of December 1, 2011. During fiscal years 2012 and 2011, we amortized $21,000 and $122,000, respectively, in non-cash interest expense, which amounts are included in interest and other expense in the accompanying consolidated financial statements.

Capital Lease Obligations

We have financed certain equipment under capital lease agreements which bear interest at a rate ranging from 3.71% to 5.36% per annum.

The equipment purchased under these capital leases is included in property in the accompanying consolidated financial statements at April 30, 2013 and 2012, as follows:

	2013			2012
Furniture, fixtures, office equipment and software	$	258,000		$	258,000
Less accumulated depreciation and amortization		(148,000	)		(96,000	)
Net book value	$	110,000		$	162,000

Minimum future capital lease payments as of April 30, 2013 are as follows:

Year ending April 30,:
2014	$	34,000
2015		13,000
Total minimum lease payments		47,000
Amount representing interest		(2,000	)
Net present value minimum lease payments		45,000
Less current portion included in other current liabilities		(32,000	)
Long-term portion included in other long-term liabilities	$	13,000