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4. NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS

12 Months Ended

Apr. 30, 2012

4.

NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS

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 payable over three years. On December 1, 2011, the loan balance was paid in full.

In connection with the term loan, we issued warrants to purchase an aggregate of 338,410 shares of our common stock at an exercise price of $1.48 per share. The fair value of the warrants was $414,000 and this amount was credited to additional paid-in capital and reduced the carrying value of the debt, reflected as a debt discount in the accompanying consolidated financial statements. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: estimated volatility of 70.72%; risk free interest rate of 2.00%; an expected life of five years; and no dividend yield. The debt discount was amortized as a non-cash interest expense over the term of the outstanding loan using the effective interest method. During fiscal years 2012, 2011, and 2010, we amortized $12,000, $113,000, and $202,000 in non-cash interest expense, which amounts are included in interest and other expense in the accompanying consolidated financial statements. The discount was fully amortized as of December 1, 2011.

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. During fiscal years 2012, 2011, and 2010, we amortized $21,000, $122,000, and $228,000 in non-cash interest expense, which amounts are included in interest and other expense in the accompanying consolidated financial statements. The debt issuance costs were fully amortized as of December 1, 2011.

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, 2012 and 2011, as follows:

	2012			2011
Furniture, fixtures, office equipment and software	$	258,000		$	258,000
Less accumulated depreciation and amortization		(96,000	)		(45,000	)
Net book value	$	162,000		$	213,000

Minimum future capital lease payments as of April 30, 2012 are as follows:

Year ending April 30,:
2013	$	82,000
2014		34,000
2015		13,000
Total minimum lease payments		129,000
Amount representing interest		(5,000	)
Net present value minimum lease payments		124,000
Less current portion included in other current liabilities		(78,000	)
Long-term portion included in other long-term liabilities	$	46,000

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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