PURE BIOSCIENCE, INC.

1. Organization and Business

All references to “PURE,” “we,” “our,” “us,” “its” and the “Company” refer to PURE Bioscience, Inc. and our wholly owned subsidiary, ETI H20 Inc.

PURE Bioscience, Inc. is dedicated to developing and commercializing proprietary antimicrobial products that address health and environmental challenges related to pathogen and hygienic control. The Company’s technology platform is based on patented stabilized ionic silver, and our initial products contain Silver Dihydrogen Citrate, or SDC. This broad-spectrum, non-toxic antimicrobial agent is available in liquid form and various concentrations, distinguished by its superior efficacy, reduced toxicity, non-causticity, and the inability of bacteria to develop resistance.

The Company’s SDC-based disinfecting and sanitizing products are registered with the United States Environmental Protection Agency, or EPA, the United States Food and Drug Administration, or FDA, and Health Canada. In addition to manufacturing and distributing these products, the Company also supplies SDC-based formulations as raw material ingredients for personal care products.

The Company sees significant market opportunities for its safe and effective SDC-based solutions, particularly in the food industry. The Company’s registered offerings include PURE® Hard Surface, a food contact surface sanitizer and disinfectant designed for restaurant chains, food processors, and transportation companies, as well as PURE Control®, a direct food contact processing aid. The Company’s products are sold directly to end-use customers, as well as third-party distributors who market and sell our products across various industries, maximizing our reach and impact.

The Company was incorporated in the state of California in August 1992 as Innovative Medical Services. In September 2003, the Company changed its name to PURE Bioscience, Inc. In March 2011, the Company reincorporated in the state of Delaware. The Company operates in one business segment.

Liquidity and Going Concern

The Company has a history of recurring losses, and as of July 31, 2025 it has a stockholders deficiency of $5,116,000. During the fiscal year ended July 31, 2025, it recorded a net loss of $2,399,000 on recorded net revenue of $2,202,000. In addition, during the year ended July 31, 2025 the Company used $2,015,000 in operating activities resulting in a cash balance of $334,000 as of July 31, 2025. The Company’s history of recurring operating losses, and negative cash flows from operating activities give rise to substantial doubt regarding its ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from our possible inability to continue as a going concern.

The Company’s future capital requirements depend on numerous forward-looking factors. These factors may include, but are not limited to, the following: the acceptance of, and demand for, its products; the Company’s success and the success of its partners in selling our products; the Company’s success and the success of its partners in obtaining regulatory approvals to sell its products; the costs of further developing the Company’s existing products and technologies; the extent to which the Company invests in new product and technology development; and the costs associated with the continued operation, and any future growth, of its business. The outcome of these and other forward-looking factors will substantially affect its liquidity and capital resources.

Until the Company can continually generate positive cash flow from operations, it will need to continue to fund its operations with the proceeds of offerings of our equity and debt securities. However, the Company cannot ensure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or to its stockholders. If the Company raises additional funds from the issuance of equity securities, substantial dilution to its existing stockholders would likely result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict its ability to operate its business.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the consolidated accounts of PURE Bioscience, Inc. and its wholly owned subsidiary, ETIH2O Inc., a Nevada corporation. ETIH2O Inc. has no business and no material assets or liabilities and there have been no significant transactions related to ETIH2O Inc. during the periods presented in the consolidated financial statements. All inter-company balances and transactions have been eliminated.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board or the FASB, Accounting Standards Codification or ASC, Topic 606, Revenue from Contracts with Customers or Topic 606. Under Topic 606, revenue is recognized at an amount that reflects the consideration to which it expects to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following 5-step process:

Under Topic 606, the Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

The Company’s technology platform is based on patented stabilized ionic silver, and its initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent, which offers residual protection and formulates well with other compounds. The Company sells various configurations and dilutions of SDC direct to customers and through distributors. The Company currently offer PURE® Hard Surface as a food contact surface sanitizer and disinfectant to restaurant chains, food processors and food transportation companies. The Company also offer PURE Control® as a direct food contact processing aid.

Contract terms for unit price, quantity, shipping and payment are governed by sales agreements and purchase orders which it considers to be a customer’s contract in all cases. The unit price is considered the observable stand-alone selling price for the arrangements. Any promotional or sales discounts are applied evenly to the units sold for purposes of calculating standalone selling price.

Product sales generally consist of a single performance obligation that it satisfies at a point in time. The Company recognizes product revenue when the following events have occurred: (a) it has transferred physical possession of the products, (b) it has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.

The Company’s direct customer and distributor sales are invoiced based on received purchase orders. Its payment terms on invoiced direct customer and distributor sales range between 30 and 90 days after it satisfies its performance obligation. The majority of our customers are on 30 day payment terms. The Company currently offers no right of return on invoiced sales and maintain no allowance for sales returns.

Shipping and handling are treated as activities to fulfill promises to customers and any amounts billed to a customer, if applicable, represent revenues earned for the goods provided. Costs related to such shipping and handling billings are classified as cost of sales.

The Company does not have significant categories of revenue that may impact how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

A summary of the Company’s revenue by product type for the fiscal years ended July 31, 2025 and 2024 is as follows:

Variable Consideration

The Company records revenue from customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of those goods or services. From time to time, the Company offer sales promotions on its products such as discounts. Variable consideration is estimated at contract inception only to the extent that it is probable that a significant reversal of revenue will not occur.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements, and the disclosures made in the accompanying notes to the consolidated financial statements. Actual results could differ materially from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities from the purchase date of three months or less.

Restricted Cash

The Company is required to maintain $75,000 in a restricted certificate of deposit account in order to fully collateralize four revolving credit card accounts.

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company become aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding. Management determinedno allowance for doubtful accounts was necessary at July 31, 2025 and 2024.

Inventories

Inventories are stated at the lower of cost or net realizable value, and net of a valuation allowance for potential excess or obsolete material. Cost is determined using the average cost method. The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on its estimated forecast of product demand and its ability to sell the product(s) concerned. Demand for its products can fluctuate significantly. Factors that could affect demand for its products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, its management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of our property, plant, and equipment range from three to ten years. Capitalized costs associated with leasehold improvements are depreciated over the lesser of the useful life of the asset or the remaining life of the lease. Depreciation is generally included in selling, general and administrative expense. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold.

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Shipping and Handling Costs

Shipping and handling costs incurred by us for product shipments are included in cost of goods sold.

Research and Development Costs

Research and development costs are expensed as incurred.

Share-Based Compensation

The Company periodically issue stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. It accounts for such grants issued and vesting to employees based on ASC 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period.

The Company estimates the fair value of share-based payment awards at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. Share-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures.

Fair Value Measurements

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

The carrying amounts of financial instruments such as cash, accounts receivable, inventories, accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying value of the Company’s convertible notes payable approximate their fair value based on the interest rate of the notes.

Concentrations

Gross sales. For the year ended July 31, 2025, one individual customer accounted for 18% of the Company’s net product sales. No other individual customer accounted for 10% or more of its net product sales. The geographic breakdown of net product sales was as follows: 100% U.S. For the year ended July 31, 2024, one individual customer accounted for 20% of the Company’s net product sales. No other individual customer accounted for 10% or more of its net product sales. The geographic breakdown of net product sales was as follows: 100% U.S.

*Accounts receivable.*As of July 31, 2025, the Company had accounts receivable from two customers that comprised 40% and 12% of total accounts receivable, respectively. As of July 31, 2024, the Company had accounts receivable from two customers that comprised 13% and 12% of total accounts receivable, respectively.

*Purchases.*For the fiscal year ended July 31, 2025, two vendors accounted for 28% and 11% of the Company’s purchases. For the fiscal year ended July 31, 2024, one vendor accounted for 19% of the Company’s purchases.

Accounts payable. As of July 31, 2025, one vendor accounted for 13% of the total trade accounts payable. As of July 31, 2024, no vendors accounted for 10% or more of the total trade accounts payable.

Income Taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established to reduce deferred tax assets to the amount expected to be realized.

Income (Loss) Per Share

Basic net loss per common share is computed as net loss divided by the weighted average number of common shares outstanding for the period. The Company’s diluted net loss per common share is the same as our basic net loss per common share because it incurred a net loss during each period presented, and the potentially dilutive securities from the assumed exercise of all outstanding stock options, restricted stock units, and warrants would have an anti-dilutive effect. As of July 31, 2025 and 2024, stock options, shares issuable upon the conversion of debt, and shares issuable under restricted stock unit awards of 53,098,223 and 29,666,450, respectively, have been excluded from the computation of diluted shares outstanding.

Segments

The Company operates inone segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, its chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Recent Accounting Pronouncements

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on its financial statement disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

3. Balance Sheet Details

Inventories consist of the following:

Inventories at July 31, 2025 and 2024, are net of a reserve for inventory obsolescence of $212,000 and $238,000, respectively.

Property, plant, and equipment consist of the following:

During the fiscal year ended July 31, 2024, management performed an impairment test and determined that its forecasted operations could no longer support $60,000 of computer software previously capitalized as fixed assets, and as such an impairment was recognized. During the fiscal year ended July 31, 2025, management performed an impairment test and determinedno impairment of fixed assets was necessary.

Depreciation expense for the years ended July 31, 2025 and 2024 was $2,000 and $148,000, respectively.

4. Commitments and Contingencies

Legal

From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. Lawsuits against the Company or its officers or directors by employees, former employees, stockholders, partners, customers, or others, or actions taken by regulatory authorities, could be very costly and substantially disrupt its business. Such lawsuits and actions are not uncommon, and the Company may not be able to resolve such disputes or actions on terms favorable to the Company, and there may not be sufficient capital resources available to defend such actions effectively, or at all. As of July 31, 2025, there were no material lawsuits against the Company.

Manufacturing

Effective June 9, 2019, the Company entered into a five-year manufacturing supply agreement with Intercon Chemical Company or ICC with a three-year renewal term option or the Manufacturing Supply Agreement. The Company expects to renew the Manufacturing Supply Agreement in Fiscal 2026. The agreement consists of manufacturing, packaging, and distribution of PURE’s SDC-based products and contains no mandatory purchase commitment levels. The Manufacturing Supply Agreement provides:

The Manufacturing Supply Agreement may be terminated by mutual written consent, or by either party upon the material breach of the terms of the agreement by the other party.

Silver is the primary active ingredient in SDC and is a readily available commodity. The other active and inactive ingredients in our products are readily available from multiple sources.

5. Convertible Notes Payable to Related Parties

Convertible notes consist of the following:

(a) In fiscal year 2023, the Company entered into Note Purchase Agreements, or the 2023 Notes Purchase Agreements, with certain accredited investors, with an aggregate principal balance of $1,015,000. Messrs. Tom Y. Lee and Ivan Chen, each a member of the Company’s Board invested $1,000,000 and $15,000, as of July 31, 2023, respectively in the 2023 Private Placement, through affiliates or directly. As of July 31, 2025, $1,015,000 of principal was outstanding under the fiscal 2023 Notes.

(b) In fiscal year 2024, the Company issued additional Notes to Mr. Lee pursuant to the Note Purchase Agreements with an aggregate principal of $1,785,000. The disinterested members of the Board approved the Private Placement.

Mr. Lee invested $1,785,000 in the 2024 Private Placement, through affiliates or directly. As of July 31, 2025, $1,785,000 of principal was outstanding under the fiscal 2024 Notes.

(c) During the fiscal year ended July 31, 2025, the Company entered into Note Purchase Agreements, or the 2025 Note Purchase Agreements, with certain accredited investors, with an aggregate principal balance of $2,000,000. Mr. Lee invested $2,000,000 in the 2025 Private Placement, through affiliates or directly. The disinterested members of the Board approved the 2025 Private Placement. As of July 31, 2025, $2,000,000 of principal was outstanding under the fiscal 2025 Notes.

The Notes provided that the interest to the Lenders shall accrue at rates between 6.79% and 7.88%, compounded annually. The Maturity Date (as defined in the Notes) of the Notes is the third-year anniversary of the date of issuance, or such earlier date as the Notes provide.

*Conversion.*All or any portion of the principal amount of the Notes, plus accrued and unpaid interest, is convertible at any time, in whole or in part, at a Lender’s or the Company’s option, into shares of the Company’s common stock at a conversion price equal to the 30-day volume-weighted average price of the Company’s common stock as reported on the market or exchange on which the Company’s common stock is listed or quoted for trading (the “VWAP”) on the date of conversion on the last trading day prior to the date of conversion, provided that such conversion price is:

Additionally, at any time following the first year anniversary of the Notes, the holders of a majority of the outstanding principal balance under the Notes may elect specified in writing to convert all of the Notes at a conversion price equal to the VWAP, provided that the conversion price is equal to at least $0.115, $0.13, $0.15 and $0.095 per share, as discussed above, subject to certain customary adjustments.

Other terms of the Note Agreements.

Further, on all the notes discussed above, in the event of certain corporate transactions, all outstanding principal and unpaid accrued interest due on such Notes shall be automatically converted into conversion shares on the trading day immediately prior to the closing date of such corporate transaction. The number of shares to be issued upon such conversion shall be based on the VWAP on the last trading day prior to the public announcement of the execution of the definitive documents with respect to such transaction.

Events of Default. The Notes Documents provide for certain events of default that are typical for a transaction of this type, including, among other things, default in the payment of principal or interest for more than 30 days, the Company’s making an assignment for the benefit of creditors, within 15 days after the commencement of bankruptcy proceedings against the Company, or breach of certain covenants described below.

Covenants. The Company will be subject to certain customary covenants regarding the current public information, reservation of adequate share reserve, and maintenance of intellectual property rights, among other customary matters.

During the fiscal year ended July 31, 2025 and 2024, the Company recognized $287,000 and $143,000 of interest expense related to the 2025, 2024 and 2023 Notes, respectively. As of July 31, 2025 and 2024, interest of $436,000 and $149,000 was added to the principal, resulting in a balance owed of $5,236,000 and $2,949,000, respectively. In addition, as of July 31, 2025, the Notes and accrued interest were convertible into 42,325,723 shares of common stock.

6. Stockholders’ Equity

Preferred Stock

As of July 31, 2025, the Company’s Board is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.01 per share, in one or more series. As of July 31, 2025, and July 31, 2024, there wereno shares of preferred stock issued and outstanding.

Common Stock

As of July 31, 2025,200,000,000 shares of common stock with a par value of $0.01 per share are authorized for issuance.

7. Share-Based Compensation

Restricted Stock Units

The Company issues restricted stock unit awards, or RSUs, to key management and as compensation for services to consultants and others. The RSUs typically vest over a one to three-year period and carry a ten-year term. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU subsequently settles, as set forth in the Restricted Stock Unit Agreement. The Company determines that fair value of those awards at the date of grant, and amortize those awards as an expense over the vesting period of the award. The shares earned under the grant are usually issued when the award settles at the end of the term.

During the fiscal year ended July 31, 2025, the Company granted 30,000 RSUs to a third-party consultant for manufacturing services. The RSU’s vested 100% on the date of grant. As a result, the Company recognized the entire fair value of $3,000 of compensation cost relating to the vesting of the RSUs.

During the fiscal year ended July 31, 2025,30,000 RSUs were delivered. All of the remaining 712,500 RSUs outstanding are vested and issuable as of July 31, 2025. These RSUs are issued upon settlement date which is defined as “for each Vested Unit, the earliest of (i) the ten-year anniversary of the grant date; (ii) sixty days after the date the grantee’s service ceases for any reason and such cessation constitutes a “separation from service” within the meaning of Section 409A of the Code; (iii) the date of Grantee’s death or (iv) the date of a change in control that constitutes a “change in control event” within the meaning of Section 409A of the Code”.

A summary of our restricted stock unit activity and related data is as follows:

Stock Option Plans

2024 Equity Incentive Plan

The Company’s shareholders approved its 2024 Equity Incentive Plan, or the 2024 Plan, in February 2024, which has a share reserve of 10,000,000 shares of common stock that were registered under a Form S-8 filed with the SEC in August 2024. The 2024 Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to its employees, directors, consultants and advisors. These awards have up to a 10-year contractual life and are subject to various vesting periods, as determined by the Compensation Committee of the Board. The 2024 Plan replaced the prior amended and restated 2007 and 2017 shareholder approved equity plans. As of July 31, 2025, there were 7,470,000 shares available for issuance under the 2024 Plan.

Stock Option Activity

During the fiscal year ended July 31, 2025, the Compensation Committee of the Board of Directors granted 2,665,000 stock options to the Company’s employees, officers, directors and consultants with a fair value of $158,000 as determined by the Black Scholes option pricing model. The vesting terms of the options vary between one and two years and carry a ten-year term.

During the fiscal year ended July 31, 2024, the Compensation Committee of the Board granted 2,000,000 stock options to the Company’s employees, officers, directors and consultants with a fair value of $197,000 as determined by the Black Scholes option pricing model. The vesting terms of the options vary between one and two years and carry a ten-year term.

A summary of the Company’s stock option activity for the fiscal years ended July 31, 2025 and 2024 is as follows:

The weighted average expected term of options outstanding at July 31, 2025 was 6.69 years.

For the fiscal year ended July 31, 2025 share-based compensation expense for stock options vesting during the period was $144,000. For the fiscal year ended July 31, 2024 share-based compensation expense for stock options vesting during the period was $214,000.

At July 31, 2025, options to purchase 9,315,000 shares of common stock were exercisable. These options had a weighted-average exercise price of $0.35 and a weighted average remaining contractual term of 6.54 years. The weighted average grant date fair value for options granted during the fiscal year ended July 31, 2025 was $0.07. The total unrecognized compensation cost related to unvested stock option grants as of July 31, 2025 was approximately $21,000 and the weighted average period over which these grants are expected to vest is 0.22 years. The intrinsic value of options outstanding at July 31, 2025 was $50,000.

The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. Share-based compensation expense is recognized over the vesting period using the straight-line method. The fair value of stock options was estimated at the grant date using the following weighted average assumptions:

Volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. Volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.

The risk-free interest rates used in the Black-Scholes calculations are based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve.

The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, it has assumed no dividend yield for purposes of estimating the fair value of its share-based compensation.

The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options.

8. Related Party Transactions

As of July 31, 2025 and July 31, 2024, accounts payable include $250,000 and $178,000 in board fees due to officers and directors, respectively.

9. Income Taxes

The Company files federal and state consolidated tax returns with our subsidiaries. There wasno income tax provision for the years ended July 31, 2025 and 2024 due to the net losses.

At July 31, 2024, the Company had federal and state tax net operating loss carry-forwards of approximately $106.7 million and $66.8 million, respectively. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code as well as similar state provisions. These ownership changes may limit the amount of net operating loss carry-forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 of the Internal Revenue Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since its formation, the Company has raised capital through the issuance of capital stock on several occasions (both before and after its initial public offering in 1996) which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition. While the Company does not believe that it has experienced an ownership change, the pertinent tax rules related thereto are complex and subject to varying interpretations, and thus complete assurance cannot be provided that the taxing authorities would not take an alternative position.

The Company’s current federal tax loss carry-forwards began expiring in the year ended July 31, 2020 and, unless previously utilized, all but $13.5 million will completely expire in the year ending July 31, 2038. The $13.5 million can be carried forward indefinitely. The Company’s state tax loss carry-forwards began to expire in the year ending July 31, 2029, and will completely expire in the year ending July 31, 2040.

Significant components of the Company’s deferred tax assets are as follows:

A reconciliation of income taxes computed using the statutory income tax rate, compared to the effective tax rate, is as follows:

Following authoritative guidance, the Company recognizes the tax benefit from a tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense; however it has hadno accrued interest or penalties at either July 31, 2025 or July 31, 2024. The Company is subject to income taxes in the United States and in various states, and its historical tax years remain subject to future examination by the U.S. and state tax authorities. During the years ended July 31, 2025 and 2024, it didnot record any activity related to our unrecognized tax benefits.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for tax years prior to 2012. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

10. Segments

The Company operates inone segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting” Topic of the ASC, its Chief Operating Decision Maker (“CODM”) has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. The following table presents significant segment expenses and other segment items regularly reviewed by our CODM:

11. Subsequent Events

On October 24, 2025, the Company entered into a Note Purchase Agreement (the “2026 Note Purchase Agreement”) with certain accredited investors (“Lenders”) pursuant to which the Company issued the Lenders convertible promissory notes (the “Notes”, collectively with the 2026 Note Purchase Agreement, the “Note Documents”) with an aggregate principal balance of $350,000 (the “2026 Private Placement”).The Note Documents provide for subsequent closings for an aggregate offering size of $2.0 million in principal balance. Tom Y. Lee, a member of the Company’s Board of Directors, or the Board invested $350,000 in the 2026 Private Placement, through affiliates or directly. The disinterested members of the Board approved the 2026 Private Placement.