Note 3. Share-Based Payments

The Company has in place a 2010 Equity Incentive Plan and a 2008 Equity Incentive Plan both of which are described in more detail in the Company’s 2013 Proxy Statement on Schedule 14A. In general, these plans provide for stock-based compensation in the form (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights to the Company’s employees, directors and non-employees. The plans also provide for limits on the aggregate number of shares that may be granted, the term of grants and the strike price of option awards.

Stock-based compensation in the amount of $552,000 and $739,000 was recognized for the three months ended July 31, 2013 and 2012, respectively. Stock-based compensation expense was recognized as follows (in thousands):

	Three Months Ended July 31,
	2013		2012

General and administrative		419		570
Sales and marketing		63		82
Research and development		13		24
TOS cost of sales		8		8
POS cost of sales		49		55

Total stock-based compensation expense		552		739

Stock Option Grants

Black-Scholes assumptions used to calculate the fair value of options granted during the three months ended July 31, 2013 and 2012 were as follows (in thousands):

	Three Months Ended July 31,
	2013		2012

Expected term in years		6.0		6.0
Risk-free interest rates		1.38% to 1.91%		0.8% to 0.9%
Volatility		96.4% to 100.6%		98.5% to 98.8%
Dividend yield		0%		0%

The weighted average fair value of stock options granted during the three months ended July 31, 2013 and 2012 was $0.40 and $0.54, respectively. The Company’s stock options activity for the three months ended July 31, 2013 is as follows:

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

Outstanding, May 1, 2013		765,000		13,125,205		13,890,205	$	0.85		7.0	$	89,000
Granted		-		310,000		310,000		0.53
Forfeited		-		(12,500)		(12,500)		0.50
Expired		-		(26,250)		(26,250)		0.75

Outstanding, July 31, 2013		765,000		13,396,455		14,161,455		0.85		6.8		3,062,000

Vested and expected to vest as of July 31, 2013		765,000		13,396,455		14,161,455		0.85		6.8		3,062,000

Exercisable as of July 31, 2013		488,334		12,077,370		12,565,704		0.85		6.7		2,703,000

Included in the balances outstanding in the table 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 had to 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.

Subsequent to July 31, 2013, but prior to the issuance of this Form 10Q, the company granted approximately 1.3 million options to certain employees for a weighted average exercise price of $1.33.

Restricted Stock Grants

A summary of the activity related to restricted stock grants is as follows (in thousands):

			Weighted
			Average
			Grant Date
	Total		Fair Value
	Shares		Per Share

Nonvested, May 1, 2013		50,000	$	0.30
Granted		-		-
Vested		(25,000)		0.30
Forfeited		-		-
Expired		-		-

Nonvested as of July 31, 2013		25,000		0.30

The aggregate fair value of shares vested during the three months ended July 31, 2013 and 2012 was $7,500 and $5,000, respectively.

Stock Purchase Warrants

As of July 31, 2013 and April 30, 2013, the Company had warrants outstanding for the purchase of 3,276,667 shares of its common stock, respectively, 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 4. 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, 2013		3,276,667	$	0.61		3.9	$	-
Granted		-		-		-		-
Exercised		-		-		-		-
Expired		-		-		-		-

Outstanding, July 31, 2013		3,276,667	$	0.61		3.7	$	1,462,000