Note 6. Share-Based Payments

Stock-based compensation in the amount of $2.4 million and $3.3 million was recognized for the years ended April 30, 2013 and 2012, respectively. Stock-based compensation costs were recorded as follows (in thousands):

	Year Ended April 30,
	2013		2012

General and administrative	$	1,984	$	3,009
Sales and marketing		263		240
Research and development		37		39
TOS cost of sales		20		10
POS cost of sales		72		25

Total stock-based compensation expense	$	2,376	$	3,323

2010 Equity Incentive Plan

On February 18, 2011, shareholders owning a majority of the issued and outstanding shares of the Company executed a written consent approving the 2010 Equity Incentive Plan (“2010 Equity Plan”). The purpose of the 2010 Equity Plan is to grant (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights (collectively, stock-based compensation) to its employees, directors and non-employees. Total stock awards under the 2010 Equity Plan shall not exceed 30,000,000 shares of common stock. Options and Stock Appreciation Rights expire no later than ten years from the date of grant and the awards vest as determined by the Board of Directors. Options and Stock Appreciation Rights have a strike price not less than 100% of the fair market value of the common stock subject to the option or right at the date of grant.

2008 Equity Incentive Plan

The Company has previously granted (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights (collectively, stock-based compensation) to its employees, directors and non-employees under a 2008 Equity Incentive Plan (the “2008 Equity Plan”). Such awards may be granted by the Company’s Board of Directors. Options granted under the 2008 Equity Plan expire no later than ten years from the date of grant and the awards vest as determined by the Board of Directors.

For share-based payments to non-employee consultants under both the 2010 and 2008 Equity Incentive Plan, the fair value of the share-based consideration issued is used to measure the transaction, as management believes this to be a more reliable measure of fair value than the services received. The fair value of the award is expensed over the period service is provided to the Company; however, it is ultimately measured at the price of the Company’s common stock or the fair value of stock options using the Black-Scholes valuation model on the date that the commitment for performance by the non-employee consultant has been reached or performance is complete, which is generally the vesting date of the award.

Director Compensation Plan

On February 22, 2010, the Compensation Committee of the Board of Directors of the Company adopted the Director Compensation Plan of 2010 (the “Director Plan”) to replace the Company’s former compensation policy for directors, effective for the 2010 calendar year commencing January 1, 2010. Under the Director Plan, independent directors of the Company are entitled to an annual award of five-year stock options to purchase 50,000 shares of the Company’s unregistered common stock, and the Chairman of the Board of the Company is entitled to an annual award of options to purchase 100,000 shares of the Company’s unregistered common stock. Independent directors who serve on one or more Board committees will also receive an annual grant of five-year options to purchase 50,000 shares of the Company’s unregistered common stock or 50,000 shares of restricted unregistered common stock. The Company will also pay each independent director $15,000 to offset the tax liability in respect of any unregistered restricted stock awards. All unregistered common stock options and unregistered restricted stock issued under the Director Plan vest quarterly at a rate of 25%. For the initial Director Plan year, an independent director could have chosen to receive a cash fee equal to the value of the unregistered restricted common stock that would have otherwise been granted. The Chairman of the Board was also entitled to the same arrangement for his services on Board committees at a rate of twice that of an independent director.

Stock Option Grants

Black-Scholes assumptions used to calculate the fair value of options granted during the years ended April 30, 2013 and 2012 were as follows:

	Year Ended April 30,
	2013	2012

Expected term in years	3.0 - 6.0	3.0 - 6.0
Risk-free interest rates	0.7% to 1.3%	0.4% - 2.3%
Volatility	88% - 104%	90% - 108%
Dividend yield	0%	0%

The weighted average fair value of stock options granted during the years ending April 30, 2013 and 2012, was $0.41 and $0.58, respectively. The Company’s stock options activity and related information as of and for the years ended April 30, 2013 and 2012 is as follows (dollars in thousands):

									Weighted
							Weighted		Average
			Directors				Average		Remaining		Aggregate
	Non-		and				Exercise		Contractual		Intrinsic
	Employees		Employees		Total		Price		Life (Years)		Value

Outstanding, May 1, 2012		1,410,000		13,456,038		14,866,038	$	0.88		7.6	$	-
Granted		130,000		611,250		741,250		0.41
Exercised		-		-		-		-
Canceled		-		(25,000)		(25,000)		0.62
Forfeited		-		(551,250)		(551,250)		0.72
Expired		(775,000)		(365,833)		(1,140,833)		0.95

Outstanding, April 30, 2013		765,000		13,125,205		13,890,205		0.85		7.0	$	89,000

Vested and expected to vest as of April 30, 2013		765,000		13,125,205		13,890,205				7.0	$	89,000

Exercisable as of 30-Apr-13		458,334		10,886,120		11,344,454		0.86		6.9	$	54,000

									Weighted
							Weighted		Average
			Directors				Average		Remaining		Aggregate
	Non-		and				Exercise		Contractual		Intrinsic
	Employees		Employees		Total		Price		Life (Years)		Value

Outstanding, May 1, 2011		1,610,000		12,710,948		14,320,948	$	0.88		8.4	$	1,780
Granted		115,000		1,380,000		1,495,000		0.77
Exercised		(50,000)		-		(50,000)		0.17
Forfeited		-		(348,581)		(348,581)		0.94
Expired		(265,000)		(286,329)		(551,329)		0.60

Outstanding, April 30, 2012		1,410,000		13,456,038		14,866,038		0.88		7.6	$	-

Vested and expected to vest as of April 30, 2012		1,410,000		13,456,038		14,866,038		0.88		7.6	$	-

Exercisable as of 30-Apr-12		1,241,667		6,502,163		7,743,830		0.89		6.8	$	-

Included in the balances outstanding in the tables above are 10,000,000 options granted to the Company’s Chief Executive Officer and its President at the time of commencement of their employment in fiscal 2011, of which 5,000,000 contain only service-based vesting provisions and 5,000,000 contain both service and performance-based vesting provisions. The service-based provisions of these options provide for vesting to occur monthly over a period of three years. The performance-based conditions, which must be met prior to vesting to occur include: (i) closing of one or more financings of the Company in the aggregate amount of at least $5,000,000; (ii) bringing in new Company management; (iii) launching of personalized medicine (oncology) business; and (iv) commencing implementation of the Company’s business plan. The service-based options, like all of the Company’s service-based options, are expensed on a straight-line basis. Since the straight-line method is not available for performance or market-based share-based payments, the 5,000,000 performance-based options are being expensed on an accelerated basis. The Company’s Board of Directors determined that in April 2011 each of the performance conditions under the awards were met.

Restricted Stock Grants

A summary of the activity related to restricted stock grants for the years ended April 30, 2013 and 2012 is as follows (dollars in thousands):

	2013				2012
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
	Total		Fair Value		Total		Fair Value
	Shares		Per Share		Shares		Per Share

Nonvested, beginning of period		25,000	$	0.75		100,000	$	0.90
Granted		100,000		0.30		50,000		0.75
Vested		(75,000)		0.45		(125,000)		0.87
Forfeited		-		-		-
Expired		-		-		-

Nonvested, end of period		50,000		0.30		25,000		0.75

The total fair value of shares vested during the years ended April 30, 2013 and 2012 was $34,000 and $84,000, respectively. As of April 30, 2013, there was $15,000 of unrecognized stock compensation expense related to nonvested restricted stock awards. This cost is expected to be recognized over a weighted average period of 0.5 years.

Stock Purchase Warrants

As of April 30, 2013, the Company had warrants outstanding for the purchase of 3,276,667 shares of its common stock, all of which were exercisable. Of these warrants, 1,266,667 were issued in connection with the April 2011 Private Placement and 1,860,000 were issued in connection with the January 2013 Private Placement and are accounted for as liabilities as further discussed in Note 7. The remaining 150,000 warrants are accounted for as equity instruments and expire July 31, 2014. Activity related to these warrants, which expire at various dates through April 2016, is summarized as follows (dollars in thousands):

					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	of		Exercise		Contractual		Intrinsic
	Shares		Price		Life (Years)		Value

Outstanding, May 1, 2012		1,416,667	$	0.50		3.8	$	-
Granted		1,860,000		0.66		4.8
Exercised		-		-
Forfeited		-		-
Expired		-		-

Outstanding, April 30, 2013		3,276,667	$	0.61		3.9	$	-

					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	of		Exercise		Contractual		Intrinsic
	Shares		Price		Life (Years)		Value

Outstanding, May 1, 2011		1,912,019	$	0.73		3.7	$	524
Granted		-		-
Exercised		(495,352)		0.20				234
Forfeited		-		-
Expired		-		-

Outstanding, April 30, 2012		1,416,667	$	0.91		3.8	$	-