Stockholders' Equity (Deficit)

3 Months Ended

Apr. 30, 2016

Equity [Abstract]

Stockholders' Equity (Deficit)

Note 10 - Stockholders’ Equity (Deficit)

(A) Series A Convertible Preferred Stock Transactions

On May 28, 2015, the Company amended its articles of incorporation to establish the designation, powers, rights, privileges, preferences and restrictions of the Series A Convertible Preferred Stock (“Series A Preferred”). The Company authorized 120,000 shares of Series A Preferred with each share of our Series A Preferred having a par value of $0.00001 and stated value equal to $100, as adjusted for stock dividends, combinations, splits and certain other events. The Company analyzed the conversion feature for potential derivative classification. On May 28, 2015, the Company amended its articles of incorporation to establish the designation, powers, rights, privileges, preferences and restrictions of the Series A Convertible Preferred Stock (“Series A Preferred”). The Company authorized 120,000 shares of Series A Preferred with each share of our Series A Preferred having a par value of $0.00001 and stated value equal to $100 (“Stated Value”), as adjusted for stock dividends, combinations, splits and certain other events. The Company analyzed the conversion feature for potential derivative classification. Despite the ratchet features included in the conversion option, the Company concluded that equity treatment was warranted since the feature was clearly and closely related to the host contract. The holders of the Series Preferred A will be entitled to (a) dividends at a rate of 8% per annum, (b) a liquidation preference equal to $0.675 per Series A Preferred share, (c) the option to convert the Series A Preferred shares to a number of shares of common stock calculated by dividing the Stated Value by $0.675 and (d) warrants to purchase a number of common shares calculated by dividing the Stated Value by $0.675 exercisable for a period of five years at a price of $1.00 per share. There is also an automatic conversion based on the occurrence of certain events detailed in the Certificate of Designation. As of April 30, 2016, all accrued dividends had been paid in Company common stock. Additionally, in April 2016 the Company granted an aggregate of an additional 2,510,001 Warrants to investors in a prior offering. These Warrants are for a term of five (5) years at an exercise price of $1.50 per share.

During May 2015, six directors of the Company entered into convertible note agreements with a maturity date of July 22, 2016 for total proceeds to the Company of $650,000. In June 2015, the notes were converted into Series A Preferred. Additional proceeds of $560,000 were received pursuant to closings that occurred in June, August and September. In connection with the closings, the Company also granted warrants to purchase 1,481,481 and 179,259 shares of common stock at $0.675 per share to shareholders and the placement agent, respectively. The warrants granted to the placement agent have a grant date fair value of $84,547 which is treated as a direct cost of the Financing and has been recorded as a reduction in additional paid in capital.

During November 2015, the Company completed the final closing of a private placement with 11 accredited investors and issued an aggregate of 10,200 shares of Series A Preferred and warrants to purchase 1,511,112 shares of common stock for aggregate gross proceeds to the Company of $1,020,000. Stock issuance costs of $132,600 were paid to placement agents yielding net proceeds of $887,400. Of these issuance costs, approximately $86,000 were pursuant to the promissory note agreement as discussed in Note 6.

As discussed in Note 6, during January 2016, the Company settled an outstanding payable with one of its vendors by issuing a promissory note in the principal amount of $116,003 and 1,100 shares of the Company’s Series A Preferred and warrants to purchase 162,963 shares of common stock.

(B) Common Stock Transactions

Common Stock

During the three months ended April 30, 2016, the Company issued 268,395 shares of its common stock to the holders of the Series A Preferred stockholders for the dividends in arrears totaling $131,513.

During the three months ended April 30, 2016, the Company issued 179,592 shares of its common stock to employees for services rendered a value of $92,000.

Treasury Stock

As discussed in Note 8, upon amendment of the Manatuck Debenture on October 29, 2015, the Company repurchased the 230,000 shares for an aggregate purchase price of $149,500 which is presented as Treasury Stock on the condensed consolidated balance sheets.

(C) Options

The following is a summary of the Company’s option activity:

	Options		Weighted Average Exercise Price
Outstanding – January 31, 2016		496,404	$	1.04
Exercisable – January 31, 2016		496,404	$	1.04
Granted		262,000	$	0.40
Exercised		-	$	-
Forfeited/Cancelled		-	$	-
Outstanding – April 30, 2016		758,404	$	0.81
Exercisable – April 30, 2016		758,404	$	0.81

Options Outstanding					Options Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.39 – 2.97		758,404	2.69 years	$	0.81		758,404	$	0.81

At April 30, 2016 and 2015, the total intrinsic value of options outstanding and exercisable was $25,000 and $87,733, respectively.

(D) Warrants

The following is a summary of the Company’s warrant activity:

	Warrants		Weighted Average Exercise Price
Outstanding – January 31, 2016		4,964,734	$	0.80
Exercisable – January 31, 2016		4,964,734	$	0.80
Granted		-	$	-
Exercised		-	$	-
Forfeited/Cancelled		-	$	-
Outstanding – April 30, 2016		4,964,734	$	0.80
Exercisable – April 30, 2016		4,964,734	$	0.80

Warrants Outstanding								Warrants Exercisable
Range of Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.68-$2.50		4,964,734		3.86 years	$	0.80		4,964,734	$	0.80

At April 30, 2016 and 2015, the total intrinsic value of warrants outstanding and exercisable was $0 and $88,925, respectively.