Note 11. Stockholders’ Equity

Common Stock

As of July 31, 2022 and January 31, 2022, the Company had 200,000,000 common shares authorized, with 9,699,966 and 8,604,038 common shares at a par value of $0.0001 issued and outstanding, respectively. 

On April 19, 2022, two warrants were exercised for a total of 500,000 shares of common stock resulting in the Company receiving $0.5 million.

On June 3, 2022, the Law Offices of Carl G. Hawkins exercised their warrant acquiring 35,000 shares at the strike price of $1.00 per share through the conversion of the accounts payable owed by the Company for services provided. The shares were issued in the name of Carl G. Hawkins.

During the three months ended July 31, 2022, stock based compensation expense related to stock grants was $89,000, which consisted of grants to employee of $75,000 and consultants of $14,000. During the six months ended July 31, 2022, stock based compensation expense related to stock grants was $206,000, which consisted of grants to employee of $150,000 and consultants of $56,000. During the three and six months ended July 31, 2021, there was no stock based compensation expense associated with stock grants.

Preferred Stock

Series A Preferred Stock

As of July 31, 2022 and January 31, 2022, the Company had 1 million Series A Preferred shares, par value $0.0001, authorized, with 200,000 Series A Preferred shares issued and outstanding. The Series A Preferred stock converts into common stock at the option of the holder of the Series A Preferred. The conversion rate for every 1 share of Series A Preferred stock is 50 shares of common stock. Each share of Series A Preferred stock entitles the holder to 1,000 votes. Holders of Series A Preferred are entitled to share ratably in dividends, if any are declared. There are no redemption rights. In the event of dissolution, the holders of Series A Preferred are entitled to share pro rata all assets remaining after payment in full of all liabilities.

During the quarter ended July 31, 2021, the Company issued 50,000 shares of Series A Preferred Stock to Epic. The issuance was done as a prepayment for services to generate sales for the Company. The shares are earned as sales generated by Epic achieve certain sales targets.

Effective April 17, 2022, 150,000 shares of Series A Preferred Stock are eligible to be converted into common stock at the option of the holder of the Series A Preferred Stock. Effective June 16, 2023, the remaining 50,000 shares of Series A Preferred Stock will be eligible to be converted into common stock at the option of the holder of the Series A Preferred Stock.

Series B Preferred Stock

As of July 31, 2022 and January 31, 2022, the Company had 1.5 million Series B Preferred shares, par value $0.0001, authorized, with 400,000 Series B Preferred shares issued and outstanding. The Series B Preferred stock converts into common stock at the option of the holder of the Series B Preferred, after twenty-four months of ownership. The conversion rate for every 1 share of Series B Preferred stock is 10 shares of common stock. Each share of Series B Preferred stock entitles the holder to 100 votes. Holders of Series B Preferred are entitled to share ratably in dividends, if any are declared. There are no redemption rights. In the event of dissolution, the holders of Series B Preferred are entitled to share pro rata all assets remaining after payment in full of all liabilities.

Effective April 29, 2022, all shares of Series B Preferred Stock are eligible to be converted into common stock at the option of the holder of the Series B Preferred Stock.

Series C Preferred Stock

As of July 31, 2022, the Company had 2 million Series C Preferred shares, par value $0.0001, authorized, with no Series C Preferred shares issued and outstanding.

On March 17, 2022, the Board approved the conversion of 2,000,000 shares of blank check preferred stock into 2,000,000 shares of Series C Preferred Stock, par value $0.0001. The Series C Preferred Stock shall rank senior to the Company’s common stock, Series A Preferred Stock, and Series B Preferred Stock. Each holder of Series C Preferred Stock is entitled to one (1) vote for each share of Series C Preferred Stock held on all matters submitted to a vote of stockholders. Each share of Series C Preferred Stock shall be convertible, at the discretion of the holders, after six months of ownership, into shares of common stock. The number of common shares issued shall be at the rate of 30% less than the volume-weighted average price or $5.00 per share whichever is less.

On April 19, 2022, the Company sold 250,000 shares of Series C Preferred Stock for $1.0 million. Effective October 19, 2022, all shares of Series C Preferred Stock will be eligible to be converted into common stock at the option of the holder of the Series C Preferred Stock.

On June 14, 2022, our board of directors approved the early conversion of 250,000 shares of Series C Preferred Stock into 560,928 shares of common stock.