PURE Bioscience (PURE) 10-Q 9 Jun 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2016	Jun. 09, 2016
Document And Entity Information
Entity Registrant Name	PURE BIOSCIENCE, INC.
Entity Central Index Key	1,006,028
Document Type	10-Q
Document Period End Date	Apr. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--07-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		64,646,645
Trading Symbol	PURE
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,016

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Apr. 30, 2016	Jul. 31, 2015
Current assets
Cash and cash equivalents	$ 5,405,000	$ 1,321,000
Accounts receivable	68,000	189,000
Inventories, net	320,000	207,000
Restricted cash	75,000	75,000
Prepaid expenses	312,000	187,000
Total current assets	6,180,000	1,979,000
Property, plant and equipment, net	407,000	90,000
Patents, net	1,021,000	1,192,000
Total assets	7,608,000	3,261,000
Current liabilities
Accounts payable	522,000	560,000
Restructuring liability	44,000	59,000
Accrued liabilities	174,000	246,000
Derivative liability	9,802,000	4,000
Total current liabilities	10,542,000	869,000
Deferred rent	5,000	9,000
Total liabilities	$ 10,547,000	$ 878,000
Stockholders' equity (deficit)
Preferred stock, $0.01 par value: 5,000,000 shares authorized, no shares issued and outstanding
Common stock, $0.01 par value: 100,000,000 shares authorized, 62,161,956 shares issued and outstanding at April 30, 2016, and 41,859,297 shares issued and outstanding at July 31, 2015	$ 622,000	$ 420,000
Additional paid-in capital	98,979,000	90,811,000
Accumulated deficit	(102,540,000)	(88,848,000)
Total stockholders' equity (deficit)	(2,939,000)	2,383,000
Total liabilities and stockholders' equity (deficit)	$ 7,608,000	$ 3,261,000

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Apr. 30, 2016	Jul. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	62,161,956	41,859,297
Common stock, shares outstanding	62,161,956	41,859,297

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Income Statement [Abstract]
Net product sales	$ 403,000	$ 109,000	$ 765,000	$ 499,000
Operating costs and expenses
Cost of goods sold	116,000	65,000	218,000	221,000
Selling, general and administrative	1,385,000	1,207,000	3,857,000	3,731,000
Research and development	205,000	171,000	679,000	562,000
Share-based compensation	186,000	766,000	1,621,000	1,751,000
Total operating costs and expenses	1,892,000	2,209,000	6,375,000	6,265,000
Loss from operations	$ (1,489,000)	$ (2,100,000)	(5,610,000)	$ (5,766,000)
Other income (expense)
Fair value of derivative liabilities in excess of proceeds			(1,867,000)
Change in derivative liability	$ 1,506,000	$ 1,000	(6,241,000)	$ 5,000
Interest expense, net	(3,000)	(2,000)	(8,000)	(7,000)
Other income (expense), net	16,000	10,000	34,000	7,000
Total other income (expense)	1,519,000	9,000	(8,082,000)	5,000
Net income (loss)	$ 30,000	$ (2,091,000)	$ (13,692,000)	$ (5,761,000)
Net income (loss) per common share-basic	$ 0	$ (0.05)	$ (0.25)	$ (0.15)
Net income (loss) per common share-diluted	$ (0.02)	$ (0.05)	$ (0.25)	$ (0.15)
Weighted average shares-basic	61,445,913	40,836,625	54,329,594	39,221,585
Weighted average shares-diluted	71,308,771	40,836,625	54,329,594	39,221,585

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015
Operating activities
Net loss	$ (13,692,000)	$ (5,761,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation	1,621,000	1,751,000
Amortization of stock issued for services	163,000	$ 66,000
Fair value of derivative liabilities in excess of proceeds	1,867,000
Depreciation and amortization	154,000	$ 154,000
Impairment of patents	48,000
Change in fair value of derivative liability	6,241,000	$ (5,000)
Changes in operating assets and liabilities:
Accounts receivable	121,000	(39,000)
Inventories	$ (113,000)	42,000
Prepaid expenses		(4,000)
Accounts payable and accrued liabilities	$ (125,000)	(1,061,000)
Deferred rent	(4,000)	(3,000)
Net cash used in operating activities	(3,719,000)	(4,860,000)
Investing activities
Investment in patents	(11,000)	(16,000)
Purchases of property, plant and equipment	(337,000)	(81,000)
Net cash used in investing activities	(348,000)	(97,000)
Financing activities
Net proceeds from the sale of common stock	8,000,000	$ 7,401,000
Net proceeds from the exercise of warrants	151,000
Net cash provided by financing activities	8,151,000	$ 7,401,000
Net increase in cash and cash equivalents	4,084,000	2,444,000
Cash and cash equivalents at beginning of period	1,321,000	86,000
Cash and cash equivalents at end of period	5,405,000	2,530,000
Supplemental disclosure of cash flow information
Cash paid for taxes	2,000	$ 1,600
Warrant liability removed due to settlements	6,310,000
Common stock issued for prepaid services	$ 288,000

Basis of Presentation

Basis of Presentation	9 Months Ended
	Apr. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of PURE Bioscience, Inc. and its wholly owned subsidiary, ETIH2O Corporation, a Nevada corporation. ETIH2O Corporation currently has no business operations and no material assets or liabilities and there have been no significant transactions related to ETIH2O Corporation during the periods presented in the condensed consolidated financial statements. All inter-company balances and transactions have been eliminated. All references to “PURE,” “we,” “our,” “us” and the “Company” refer to PURE Bioscience, Inc. and our wholly owned subsidiary. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information pursuant to the instructions to Form 10-Q and Article 10/Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 30, 2016 are not necessarily indicative of the results that may be expected for other quarters or the year ending July 31, 2016. The July 31, 2015 balance sheet was derived from audited financial statements but does not include all disclosures required by GAAP and included in our Annual Report on Form 10-K. For more complete information, these unaudited financial statements and the notes thereto should be read in conjunction with the audited financial statements for the year ended July 31, 2015 included in our Annual Report on Form 10-K covering such period filed with the Securities and Exchange Commission, or SEC, on October 28, 2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Liquidity

Liquidity	9 Months Ended
	Apr. 30, 2016
Liquidity
Liquidity	2. Liquidity Since our inception, we have financed our operations primarily through public and private offerings of securities, debt financing, and revenue from product sales and license agreements. We have a history of recurring losses, and as of April 30, 2016, we have incurred a cumulative net loss of $102,540,000. As of April 30, 2016, we had $5,405,000 in cash and cash equivalents, and $522,000 of accounts payable. As of April 30, 2016, we have no long-term debt. Our 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, our products; our success and the success of our partners in selling our products; our success and the success of our partners in obtaining regulatory approvals to sell our products; the costs of further developing our existing products and technologies; the extent to which we invest in new product and technology development; and the costs associated with the continued operation, and any future growth, of our business. The outcome of these and other forward-looking factors will substantially affect our liquidity and capital resources. We expect that we will need to increase our liquidity and capital resources by one or more measures. These measures may include, but are not limited to, the following: reducing operating expenses; obtaining financing through the issuance of equity, debt, or convertible securities; entering into partnerships, licenses, or other arrangements with third parties; and reducing the exercise price of outstanding warrants. Any one of these measures could substantially reduce the value to us of our technology and its commercial potential. If we issue equity, debt or convertible securities to raise additional funds, our existing stockholders may experience dilution, and the new equity, debt or convertible securities may have rights, preferences and privileges senior to those of our existing stockholders. There is no guarantee that we would be able to obtain capital on terms acceptable to us, or at all. If we are unable to obtain sufficient capital, it would have a material adverse effect on our business and operations. It could cause us to fail to execute our business plan, fail to take advantage of future opportunities, or fail to respond to competitive pressures or customer requirements. It also may require us to delay, scale back or eliminate some or all of our research and development programs, to license to third parties the right to commercialize products or technologies that we would otherwise commercialize ourselves, or to reduce or cease operations. If adequate funds are not available when needed, we may be required to significantly modify our business model and operations to reduce spending to a sustainable level. We believe our available cash on-hand, our current efforts to market and sell our products, and our ability to significantly reduce expenses, will provide sufficient cash resources to satisfy our needs over the next 12 months. However, we do not yet have, and we may never have, significant cash inflows from product sales or from other sources of revenue to offset our ongoing and planned investments in research and development projects, regulatory submissions, business development activities, and sales and marketing, among other investments. Some or all of our ongoing or planned investments may not be successful. In addition, irrespective of our cash resources, we may be contractually or legally obligated to make certain investments which cannot be postponed.

Income (Loss) Per Common Share

Income (Loss) Per Common Share	9 Months Ended
	Apr. 30, 2016
Earnings Per Share [Abstract]
Income (Loss) Per Common Share	3. Income (Loss) Per Common Share Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted-average number of common shares outstanding during the period and the weighted-average number of dilutive common share equivalents outstanding during the period, using the treasury stock method. Dilutive common share equivalents are comprised of in-the-money stock options, warrants and restricted stock units, based on the average stock price for each period using the treasury stock method. For the three months ended April 30, 2016 and 2015, the incremental dilutive common share equivalents were 9,862,858 and zero, respectively. Since we incurred a loss for the nine months ended April 30, 2016 and 2015, the number of shares issuable upon the exercise of stock options, the vesting of restricted stock units, and the exercise of warrants, none of which are included in the computation of basic net loss per common share, was 18,946,821 and 9,298,956, respectively.

Comprehensive Income (Loss)

Comprehensive Income (Loss)	9 Months Ended
	Apr. 30, 2016
Equity [Abstract]
Comprehensive Income (Loss)	4. Comprehensive Income (Loss) Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities and foreign currency translation adjustments. For the three and nine months ended April 30, 2016 and 2015, our comprehensive income (loss) consisted only of net income (loss).

Inventory

Inventory	9 Months Ended
	Apr. 30, 2016
Inventory Disclosure [Abstract]
Inventory	5. Inventory 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. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold. Inventories consist of the following: April 30, 2016 July 31, 2015 Raw materials $ 149,000 $ 96,000 Finished goods 171,000 111,000 $ 320,000 $ 207,000

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Apr. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	6. Commitments and Contingencies Severance Agreement On August 13, 2013, the Company entered into a Severance and Release Agreement with Dennis Brovarone, a former Board member. Mr. Brovarone will receive $91,000, payable in 60 monthly installments of approximately $1,600, commencing December 11, 2013 for amounts previously accrued as of July 31, 2013. Approximately $44,000 remains payable under the agreement and is included in the accrued restructuring liability section of the condensed consolidated balance sheet as of April 30, 2016.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets	9 Months Ended
	Apr. 30, 2016
Impairment or Disposal of Tangible Assets Disclosure [Abstract]
Impairment of Long-Lived Assets	7. Impairment of Long-Lived Assets In accordance with GAAP, if indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the asset to the fair value of the asset and we record the impairment as a reduction in the carrying value of the related asset and a charge to operating results. Estimating the undiscounted future cash flows associated with long-lived assets requires judgment, and assumptions could differ materially from actual results. During the three and nine months ended April 30, 2016 we incurred $48,000 of expense relating to the impairment of long-lived assets. No impairment expense was recorded during the three and nine months ended April 30, 2015.

Fair Value of Financial Instrum

Fair Value of Financial Instruments	9 Months Ended
	Apr. 30, 2016
Fair Value Disclosures [Abstract]
Fair Value of Financial Instruments	8. Fair Value of Financial Instruments Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities. ● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In connection with the October and November 2015 Private Placements and a prior Bridge Loan, we issued warrants with derivative features. These instruments are accounted for as derivative liabilities (See Note 9). We used Level 3 inputs for the valuation methodology of the derivative liabilities. The estimated fair values were computed using a Monte Carlo option pricing model based on various assumptions. Our derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value of the derivative liabilities. Various factors are considered in the pricing models we use to value the warrants, including the Company’s current stock price, the remaining life of the warrants, the volatility of the Company’s stock price, and the risk free interest rate. Future changes in these factors will have a significant impact on the computed fair value of the warrant liability. As such, we expect future changes in the fair value of the warrants to vary significantly from quarter to quarter. The following table provides a reconciliation of the beginning and ending balances of the derivative liabilities for the nine months ended April 30, 2016: Warrant Liability Balance at July 31, 2015 $ 4,000 Issuances 9,867,000 Settlement of warrant liability (6,310,000 ) Adjustments to estimated fair value 6,241,000 Balance at April 30, 2016 $ 9,802,000

Derivative Liability

Derivative Liability	9 Months Ended
	Apr. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative Liability	9. Derivative Liability On October 23, 2015 (the “October Closing Date”), we completed a first closing of a private placement financing (the “Private Placement Financing”), where we issued an aggregate of 13,333,333 shares of our common stock (the “Common Stock”), a warrant to purchase up to an aggregate of 6,666,666 shares of common stock with a term of five years and a warrant to purchase up to an aggregate of 8,666,666 shares of common stock with a term of six months (See Note 10). On November 23, 2015, we completed a second closing of the Private Placement Financing, where we issued 4,444,439 shares of Common Stock, warrants to purchase up to an aggregate of 2,222,217 shares of common stock with a term of five years and a warrant to purchase up to an aggregate of 2,820,670 shares of common stock with a term of six months (See Note 10). We accounted for the combined 20,376,219 warrants issued in connection with the Private Placement Financing in accordance with the accounting guidance for derivatives. The applicable accounting guidance sets forth a two-step model to be applied in determining whether a financial instrument is indexed to an entity’s own stock, which would qualify such financial instruments for a scope exception. This scope exception specifies that a contract that would otherwise meet the definition of a derivative financial instrument would not be considered as such if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the stockholders’ equity section of the entity’s balance sheet. We determined the warrants were ineligible for equity classification due to anti-dilution provisions set forth therein. The estimated fair value of the five year warrants issued on the October Closing Date, as of the October Closing Date, and at April 30, 2016, was $4,034,000 and $6,083,000, respectively. The following assumptions were used as inputs to the Monte Carlo option pricing model at April 30, 2016 for the five year warrants: stock price of $1.12 and a warrant exercise price of $0.45; our historical stock price volatility of 90%; risk free interest rate on U.S. treasury notes of 1.2%; and warrant expiration of 4.5 years. The six month warrants issued on the October Closing Date expired unexercised on April 23, 2016. The estimated fair value of the six month warrants issued on the October Closing Date, as of the October Closing Date, and at April 23, 2016, was $2,974,000 and $6,067,000, respectively. The fair value on expiration was returned to additional paid in capital and is reflected in the Settlement of warrant liability section on the table above. The estimated fair value of the derivative warrants issued on the November Closing Date, as of the November Closing Date, and at April 30, 2016, was $2,859,000 and $3,710,000, respectively. The following assumptions were used as inputs to the Monte Carlo option pricing model at April 30, 2016: for the five year warrant, stock price of $1.12 and a warrant exercise price of $0.45; our historical stock price volatility of 90%; risk free interest rate on U.S. treasury notes of 1.2%; warrant expiration of 4.6 years; for the six month warrant, stock price of $1.12 and a warrant exercise price of $0.45; our historical stock price volatility of 90%; risk free interest rate on U.S. treasury notes of 0.2%; warrant expiration of 0.1 years. During the three months ended April 30, 2016, 335,981 of the six month warrants issued on the November Closing Date were exercised. The fair value on exercise of $243,000 was returned to additional paid in capital and is reflected in the Settlement of warrant liability section on the table above. Given that the fair value of the derivative warrants issued on the October Closing Date exceeded the total proceeds of the private placement of $6,000,000, as of the October Closing Date, no net amounts were allocated to the common stock. The $1,008,000 amount by which the recorded liabilities exceeded the proceeds was charged to other expense at the October Closing Date. Given that the fair value of the derivative liabilities issued on the November Closing Date exceeded the total proceeds of the private placement of $2,000,000, as of the November Closing Date, no net amounts were allocated to the common stock. The $859,000 amount by which the recorded liabilities exceeded the proceeds was charged to other expense at the November Closing Date. We have revalued the derivative liability as of April 30, 2016, and will continue to do so on each subsequent balance sheet date until the securities to which the derivative liabilities relate are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. As of April 30, 2016, we had a warrant liability of $9,000 related to 132,420 warrants issued pursuant to a Bridge Loan financing that occurred during the fourth quarter of 2012. Currently there are 9,709 warrants outstanding that were issued in connection with the Bridge Loan. The following assumptions were used as inputs to the model at April 30, 2016: stock price of $1.12 and a warrant exercise price of $0.20 as of the valuation date; our historical stock price volatility of 76.65%; risk free interest rate on U.S. treasury notes of 0.2%; warrant expiration of 0.65 years. On April 30, 2016, the total value of the derivative liabilities was $9,802,000. The change in fair value of the warrant liability for the three and nine months ended April 30, 2016, was a decrease of $1,506,000 and an increase of $6,241,000, respectively, which was recorded as a change in derivative liability in the consolidated statement of operations.

Stockholders' Equity

Stockholders' Equity	9 Months Ended
	Apr. 30, 2016
Equity [Abstract]
Stockholders' Equity	10. Stockholders’ Equity Private Placements On October 23, 2015, we completed the initial closing of the Private Placement Financing pursuant to a securities purchase agreement (the “Securities Purchase Agreement”), providing for the issuance and sale by us to Franchise Brands, LLC (the “Investor”) of (i) an aggregate of 13,333,333 shares (collectively, the “Purchase Shares”) of our common stock (the “Common Stock”) at a purchase price of $0.45 per share, (ii) a warrant to purchase up to an aggregate of 6,666,666 shares of Common Stock with a term of five years (the “Five-Year Warrant”) and (iii) a warrant to purchase up to an aggregate of 8,666,666 shares of Common Stock with a term of six months and only exercisable for cash (the “Six-Month Warrant”), for aggregate gross proceeds to us of $6.0 million. The six month warrants issued on October 23, 2015 expired unexercised. On November 23, 2015, we completed the second and final closing of the Private Placement Financing. We raised $2.0 million in this closing providing for the issuance to various investors (i) an aggregate of 4,444,439 Purchase Shares at a purchase price of $0.45 per share, (ii) Five-Year Warrants to purchase up to an aggregate of 2,222,217 shares of Common Stock (iii) Six-Month Warrants to purchase up to an aggregate of 2,820,670 shares of Common Stock (the “Six-Month Warrants,” together with the Five-Year Warrants, the “Warrants” and the shares issuable upon exercise of the Warrants, collectively, the “Warrant Shares”). We did not engage a placement agent or investment banker to facilitate the Private Placement Financing. We intend to use the aggregate net proceeds of the Private Placement Financing primarily for working capital and general corporate purposes. During the three months ended April 30, 2016, 335,981 of the six month warrants issued on the November Closing Date were exercised and, subsequent to April 30, 2016, 2,484,689 of the six month warrants issued on the November Closing Date were exercised. We offered the securities in the Private Placement Financing to the Company’s existing investors who previously purchased securities in our private placement financings in August and September of 2014 (the “Prior Financings”). Tom Lee, a member of our board of directors and a participant in the Prior Financings, together with certain of his affiliates, invested approximately $472,000 in the final closing of the Private Placement Financing on the same terms offered to the other Investors. The Warrants issued in connection with the Private Placement Financing have an exercise price of $0.45 per share, are exercisable immediately after their issuance and have a term of exercise equal to the earlier of (i) five years or six months, for the Five-Year Warrants and Six-Month Warrants, respectively, after their issuance date or (ii) the consummation of an Acquisition Event (as defined in the Warrants). The Warrants are subject to a broad-based anti-dilution adjustment in the event the Company issues shares of Common Stock without consideration or for consideration per share less than the exercise price in effect immediately prior to such issuance; provided however, that such adjustment does not apply to an Excluded Issuance (as such term is defined in the Warrants). Additionally, the number of Warrant Shares issuable upon exercise of the Warrants and the applicable exercise price therefore are subject to adjustment in the event of a stock dividend, stock split or combination as set forth in the Warrants. We also entered into a registration rights agreement with the Investors who participated in the Private Placement Financing (the “Registration Rights Agreement”), pursuant to which we will be obligated, upon request of Investors holding 75% of the Issuable Shares (as defined therein) and subject to certain conditions, to file with the Securities and Exchange Commission (the “Commission”) as soon as practicable, but in any event within 60 days after receiving such applicable request, a registration statement on Form S-1 (the “Resale Registration Statement”) to register the Purchase Shares and the Warrant Shares for resale under the Securities Act and other securities issued or issuable with respect to or in exchange for the Purchase Shares or Warrant Shares. We are obligated to use our commercially reasonable efforts to cause the Resale Registration Statement to be declared effective by the SEC as promptly as reasonably practicable after the filing of the Resale Registration Statement, but no monetary penalty or liquidated damages will be imposed upon the Company if the Registration Statement is not declared effective by the SEC. During the nine months ended January 31, 2015, we issued a total of 10,086,025 shares of common stock and warrants to purchase 4,652,312 shares of common stock for gross proceeds of $7,493,000. After deducting fees of $92,000, the net proceeds to us were $7,401,000. The warrants issued during the six months ended January 31, 2015 have a five-year term, are exercisable immediately, and have exercise prices ranging from $0.01 to $0.75 per share. A fair value of $4,397,000 was estimated for the warrants using the Black-Sholes valuation method using a volatility of 133.74%, an interest rate of 1.50% and a dividend yield of zero. We determined that the warrants issued in connection with the private placements were equity instruments and did not represent derivative instruments. Warrants During the three months ended April 30, 2016, we received $151,000 from the exercise of warrants issued in November 2015 to purchase 335,981 shares of our common stock. During the nine months ended April 30, 2016, there was a net exercise on 28,000 warrants which resulted in the issuance of 13,906 shares of our common stock. As these warrants were net exercised, as permitted under the respective warrant agreement, we did not receive any cash proceeds. The warrants were issued in connection with a prior year private placement and were considered equity instruments. Other Activity During the three months ended April 30, 2016, we entered into a two-year service agreement for general financial advisory services. In accordance with the agreement we issued 250,000 shares of common stock, with a value of $288,000. The value was capitalized to prepaid expense and is being amortized over the term of the agreement. During the three months ended April 30, 2016, we recognized $7,000 of expense related to these services.

Share-Based Compensation

Share-Based Compensation	9 Months Ended
	Apr. 30, 2016
Share-based Compensation [Abstract]
Share-Based Compensation	11. Share-Based Compensation Restricted Stock Units During the nine months ended April 30, 2016, the Compensation Committee of the Board of Directors issued 200,000 restricted stock units (“RSUs”) to Henry R. Lambert, our Chief Executive Officer. The RSUs vest based on performance conditions and expire July 31, 2018. If the performance conditions are not met, or expected to be met, no compensation cost will be recognized on the underlying RSUs. If the performance condition is expected to be met, the expense will be allocated over the performance period. The RSUs granted to Mr. Lambert were not granted pursuant to any compensatory, bonus, or similar plan maintained or otherwise sponsored by the Company. In addition, during the nine months ended April 30, 2016, we issued 612,500 RSUs to key employees. The RSUs vest based on performance and service conditions. If the performance conditions are not met, or expected to be met, no compensation cost will be recognized on the underlying RSUs. If the performance condition is expected to be met, the expense will be allocated over the performance period. During the three and nine months ended April 30, 2016, 1,400,000 and 1,925,000 RSUs vested based on service conditions that were satisfied during the period, resulting in the issuance of 1,400,000 and 1,925,000 shares of common stock, respectively. Of the 1,285,000 RSUs outstanding, we currently expect 400,000 to vest. As of April 30, 2016, there was $196,000 of unrecognized non-cash compensation cost related to RSUs we expect to vest, which will be recognized over a weighted average period of 1.12 years. During the nine months ended April 30, 2016, 812,500 RSUs were forfeited. For the three months ended April 30, 2016 and 2015, share-based compensation expense for outstanding RSUs was $136,000 and $750,000, respectively. For the nine months ended April 30, 2016 and 2015, share-based compensation expense was $1,495,000 and $1,703,000, respectively. Stock Option Plans In February 2016, we amended and restated our 2007 Equity Incentive Plan, or the Plan, to, among other changes, increase the number of shares of common stock issuable under the Plan by 4,000,000 shares and extend the term of the Plan until February 4, 2026. The Plan A summary of our stock option activity for the nine months ended April 30, 2016 is as follows: Shares Weighted- Average Exercise Price Aggregate Intrinsic Value Outstanding at July 31, 2015 434,218 $ 4.07 Granted 850,000 $ 1.07 Cancelled (3,125 ) $ 19.76 Outstanding at April 30, 2016 1,281,093 $ 2.04 $ 84,000 The weighted-average remaining contractual term of options outstanding at April 30, 2016 was 2.43 years. At April 30, 2016, 528,593 options were exercisable. These options had a weighted-average exercise price of $3.31, an aggregate intrinsic value of $72,000, and a weighted average remaining contractual term of 3.19 years. We use the Black-Scholes valuation model to calculate the fair value of stock options. Stock-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: For the nine months ended April 30, 2016 2015 Volatility 84.20 % - Risk-free interest rate 0.70 % - Dividend yield 0.0 % - Expected life 1.73 years - 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. We have never paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. Accordingly, we have assumed no dividend yield for purposes of estimating the fair value of our 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. Certain options granted to consultants are subject to variable accounting treatment and are required to be revalued until vested. Stock-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures. We have not had significant forfeitures of stock options granted to employees and directors as a significant number of our historical stock option grants were fully vested at issuance or were issued with short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero. The total unrecognized compensation cost related to unvested stock option grants as of April 30, 2016 was approximately $216,000 and the weighted average period over which these grants are expected to vest is 0.89 years. For the three months ended April 30, 2016 and 2015, share-based compensation expense for outstanding stock options was $50,000 and $16,000, respectively. For the nine months ended April 30, 2016 and 2015, share-based compensation expense was $126,000 and $48,000, respectively.

Recent Accounting Pronouncement

Recent Accounting Pronouncements	9 Months Ended
	Apr. 30, 2016
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Recent Accounting Pronouncements	12. Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not intend to early adopt this standard. We are still evaluating what effect the adoption of this standard will have on the financial condition of the Company. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize “right of use” assets and liabilities for all leases with lease terms of more than 12 months. The ASU requires additional quantitative and qualitative financial statement footnote disclosures about the leases, significant judgments made in accounting for those leases and amounts recognized in the financial statements about those leases. The effective date will be the first quarter of fiscal year 2019. We are currently evaluating the impact of the adoption of this accounting standard update on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this Update do not change the core principle of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations. ASU No. 2016-08 was amended by ASU No. 2016-10 to identify performance obligations and licensing. These amendments should be adopted concurrent with adoption of ASU 2014-09. We have not yet determined the effect of the standard on our ongoing financial reporting. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which is designed to simplify several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. ASU No. 2016-09 is effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of ASU No. 2016-09 on our consolidated financial statements.

Subsequent Events

Subsequent Events	9 Months Ended
	Apr. 30, 2016
Subsequent Events [Abstract]
Subsequent Events	13. Subsequent Events Subsequent to April 30, 2016, we received $1,118,110 from the exercise of warrants to purchase 2,484,689 shares of our common stock. The warrants were issued in connection with the November 23, 2015 Private Placement Financing.

Inventory (Tables)

Inventory (Tables)	9 Months Ended
	Apr. 30, 2016
Inventory Disclosure [Abstract]
Schedule of Inventory, Current	Inventories consist of the following: April 30, 2016 July 31, 2015 Raw materials $ 149,000 $ 96,000 Finished goods 171,000 111,000 $ 320,000 $ 207,000

Fair Value of Financial Instr20

Fair Value of Financial Instruments (Tables)	9 Months Ended
	Apr. 30, 2016
Fair Value Disclosures [Abstract]
Schedule of Derivative Liabilities at Fair Value	The following table provides a reconciliation of the beginning and ending balances of the derivative liabilities for the nine months ended April 30, 2016: Warrant Liability Balance at July 31, 2015 $ 4,000 Issuances 9,867,000 Settlement of warrant liability (6,310,000 ) Adjustments to estimated fair value 6,241,000 Balance at April 30, 2016 $ 9,802,000

Share-Based Compensation (Table

Share-Based Compensation (Tables)	9 Months Ended
	Apr. 30, 2016
Share-based Compensation [Abstract]
Schedule of Stock Option Activity	A summary of our stock option activity for the nine months ended April 30, 2016 is as follows: Shares Weighted- Average Exercise Price Aggregate Intrinsic Value Outstanding at July 31, 2015 434,218 $ 4.07 Granted 850,000 $ 1.07 Cancelled (3,125 ) $ 19.76 Outstanding at April 30, 2016 1,281,093 $ 2.04 $ 84,000
Schedule of Fair Value Assumptions	The fair value of stock options was estimated at the grant date using the following weighted average assumptions: For the nine months ended April 30, 2016 2015 Volatility 84.20 % - Risk-free interest rate 0.70 % - Dividend yield 0.0 % - Expected life 1.73 years -

Liquidity (Details Narrative)

Liquidity (Details Narrative) - USD ($)	Apr. 30, 2016	Jul. 31, 2015	Apr. 30, 2015	Jul. 31, 2014
Liquidity
Accumulated deficit	$ (102,540,000)	$ (88,848,000)
Cash and cash equivalents	5,405,000	1,321,000	$ 2,530,000	$ 86,000
Accounts Payable	$ 522,000	$ 560,000
Long term debt

Income (Loss) Per Common Share

Income (Loss) Per Common Share (Details Narrative) - shares	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015
Earnings Per Share [Abstract]
Antidilutive shares	9,862,858	0
Computation of basic net loss per common share	18,946,821	9,298,956

Inventory - Schedule of Invento

Inventory - Schedule of Inventory, Current (Details) - USD ($)	Apr. 30, 2016	Jul. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 149,000	$ 96,000
Finished goods	171,000	111,000
Inventory, Net, Total	$ 320,000	$ 207,000

Commitments and Contingencies (

Commitments and Contingencies (Details Narrative) - USD ($)	Aug. 13, 2013	Apr. 30, 2016	Jul. 31, 2015
Restructuring liability		$ 44,000	$ 59,000
Dennis Brovarone [Member]
Release agreement payment	$ 91,000
Cash severance payment period	60 months
Monthly installment amount	$ 1,600

Impairment of Long-Lived Asse26

Impairment of Long-Lived Assets (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Impairment or Disposal of Tangible Assets Disclosure [Abstract]
Impairment of long-lived assets	$ 48,000		$ 48,000

Fair Value of Financial Instr27

Fair Value of Financial Instruments - Schedule of Derivative Liabilities at Fair Value (Details)	9 Months Ended
	Apr. 30, 2016USD ($)
Beginning balance	$ 4,000
Ending balance	9,802,000
Warrant Liability [Member]
Beginning balance	4,000
Issuances	9,867,000
Settlement of warrant liability	(6,310,000)
Adjustments to estimated fair value	6,241,000
Ending balance	$ 9,802,000

Derivative Liability (Details N

Derivative Liability (Details Narrative) - USD ($)	Apr. 23, 2016	Nov. 23, 2015	Oct. 23, 2015	Apr. 30, 2016	Jul. 31, 2012	Apr. 30, 2016	Jul. 31, 2015
Number of common stock shares issued during the period						13,906
Derivative liabilities				$ 9,802,000		$ 9,802,000	$ 4,000
Change in fair value of warrant liability				$ 1,506,000		$ 6,241,000
Bridge Loan [Member]
Stock price				$ 1.12		$ 1.12
warrant expiration warrant exercise price				$ 0.20		$ 0.20
Fair value assumption of historical stock price volatility				76.65%
Fair value assumption of risk free interest rate				0.20%
Fair value assumption of warrant expiration term				7 months 24 days
Warrants liabilities				$ 9,000		$ 9,000
Number of warrants issued for bridge loan financing					132,420
Warrants outstanding				9,709		9,709
Private Placement Financing [Member]
Number of warrants issued				20,376,219		20,376,219
Private Placement Financing [Member] | October Closing Date [Member]
Number of common stock shares issued during the period			13,333,333
Proceeds from private placement				$ 6,000,000
Other expenses				1,008,000
Private Placement Financing [Member] | October Closing Date [Member] | Five Years [Member]
Warrants to purchase of common stock shares			6,666,666
Warrant term			5 years
Fair value of warrants			$ 4,034,000	$ 6,083,000
Stock price				$ 1.12		$ 1.12
warrant expiration warrant exercise price				$ 0.45		0.45
Fair value assumption of historical stock price volatility				90.00%
Fair value assumption of risk free interest rate				1.20%
Fair value assumption of warrant expiration term				4 years 6 months
Private Placement Financing [Member] | October Closing Date [Member] | Six Months [Member]
Warrants to purchase of common stock shares			8,666,666
Warrant term			6 months
Fair value of warrants	$ 6,067,000		$ 2,974,000	$ 335,981
Stock price				$ 1.12		1.12
warrant expiration warrant exercise price				$ 0.45		0.45
Fair value assumption of historical stock price volatility				90.00%
Fair value assumption of risk free interest rate				0.20%
Fair value assumption of warrant expiration term				1 month 6 days
Warrants unexercise expiration date			Apr. 23, 2016
Private Placement Financing [Member] | November Closing Date [Member]
Number of common stock shares issued during the period		4,444,439
Fair value of warrants		$ 2,859,000		$ 3,710,000
Fair value of warrants exercise return to additional paid in capital				243,000
Proceeds from private placement				2,000,000
Other expenses				$ 859,000
Private Placement Financing [Member] | November Closing Date [Member] | Five Years [Member]
Warrants to purchase of common stock shares		2,222,217
Warrant term		5 years
Stock price				$ 1.12		1.12
warrant expiration warrant exercise price				$ 0.45		$ 0.45
Fair value assumption of historical stock price volatility				90.00%
Fair value assumption of risk free interest rate				1.20%
Fair value assumption of warrant expiration term				4 years 6 months
Private Placement Financing [Member] | November Closing Date [Member] | Six Months [Member]
Warrants to purchase of common stock shares		2,820,670
Warrant term		6 months

Stockholders' Equity (Details N

Stockholders' Equity (Details Narrative) - USD ($)	Nov. 23, 2015	Oct. 23, 2015	Sep. 30, 2014	Apr. 30, 2016	Jan. 31, 2016	Apr. 30, 2016	Apr. 30, 2015	Jan. 31, 2015	Nov. 30, 2015
Proceeds from exercise of warrants				$ 151,000		$ 151,000
Number of common stock shares issued during the period						13,906
Fair value assumption of volatility rate						84.20%
Fair value assumption of interest rate						0.70%
Fair value assumption of dividend yield						0.00%
Number of warrants exercise during the period						28,000
Private Placement Financing [Member]
Warrants exercise price per share				$ 0.45		$ 0.45
Five-Year Warrant [Member]
Fair value of warrants					$ 4,397,000
Fair value assumption of volatility rate					133.74%
Fair value assumption of interest rate					1.50%
Fair value assumption of dividend yield					0.00%
Five-Year Warrant [Member] | Minimum [Member]
Fair value of exercise price per share								$ 0.01
Five-Year Warrant [Member] | Maximum [Member]
Fair value of exercise price per share								$ 0.75
Warrant [Member]
Warrants to purchase of common stock shares									335,981
Franchise Brands, LLC [Member] | Securities Purchase Agreement [Member]
Warrants to purchase of common stock shares	4,444,439	13,333,333						4,652,312
Warrants exercise price per share	$ 0.45	$ 0.45
Proceeds from exercise of warrants		$ 6,000,000						$ 7,493,000
Proceeds from private placement	$ 2,000,000
Number of common stock shares issued during the period								10,086,025
Fees								$ 92,000
Proceeds from common stock								$ 7,401,000
Franchise Brands, LLC [Member] | Securities Purchase Agreement [Member] | November Closing Date [Member]
Number of warrants issued				335,981		335,981
Franchise Brands, LLC [Member] | Securities Purchase Agreement [Member] | November Closing Date One [Member]
Number of warrants issued				2,484,689		2,484,689
Franchise Brands, LLC [Member] | Securities Purchase Agreement [Member] | Five-Year Warrant [Member]
Warrants to purchase of common stock shares	2,222,217	6,666,666
Warrant term	5 years	5 years
Franchise Brands, LLC [Member] | Securities Purchase Agreement [Member] | Six-Month Warrant [Member]
Warrants to purchase of common stock shares	2,820,670	8,666,666
Warrant term	6 months	6 months
Warrants unexercise expiration date		Oct. 23, 2015
Tom Lee [Member] | Private Placement Financing [Member]
Proceeds from private placement			$ 472,000
General Financial Advisory Services [Member] | Service Agreement [Member]
Number of common stock shares issued during the period				250,000
Number of common stock issued during the period				$ 288,000
Services expense				$ 7,000

Share-Based Compensation (Detai

Share-Based Compensation (Details Narrative) - USD ($)	Feb. 29, 2016	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation		$ 186,000	$ 766,000	$ 1,621,000	$ 1,751,000
2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares increase under the plan	4,000,000
Contractual life vesting periods	10 years
Number of shares available for issuance under the plan		3,000,000		3,000,000
Key Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued				612,500
Restricted Stock Units R S U [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vested		1,400,000		1,925,000
Shares outstanding		1,285,000		1,285,000
Shares expected to vest				400,000
Unrecognized non-cash compensation costs		$ 196,000		$ 196,000
Unrecognized non-cash compensation costs, weighted average period				1 year 1 month 13 days
Shares forfeited				812,500
Share-based compensation		136,000	750,000	$ 1,495,000	1,703,000
Restricted Stock Units R S U [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued				200,000
Stock Option Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation		$ 50,000	$ 16,000	$ 126,000	$ 48,000
Weighted-average contractual term of options outstanding				2 years 5 months 5 days
Stock options were exercisable		528,593		528,593
Excercise price		$ 3.31		$ 3.31
Aggregate intrinsic value		$ 72,000		$ 72,000
Weighted average remaining contractual term				3 years 2 months 9 days
Unrecognized compensation cost of unvested stock option grants		$ 216,000		$ 216,000
Weighted average period over grants are expected to vest				10 months 21 days

Share-Based Compensation - Sche

Share-Based Compensation - Schedule of Stock Option Activity (Details)	9 Months Ended
	Apr. 30, 2016USD ($)$ / sharesshares
Share-based Compensation [Abstract]
Options Outstanding Shares, Beginning Balance | shares	434,218
Options Granted, Shares | shares	850,000
Options Cancelled, Shares | shares	(3,125)
Options Outstanding Shares, Ending Balance | shares	1,281,093
Weighted Average Exercise Price Outstanding, Beginning Balance | $ / shares	$ 4.07
Weighted Average Exercise Price Granted | $ / shares	1.07
Weighted Average Exercise Price Cancelled | $ / shares	19.76
Weighted Average Exercise Price Outstanding, Ending Balance | $ / shares	$ 2.04
Aggregate Intrinsic Value Outstanding, Beginning Balance | $
Aggregate Intrinsic Value Outstanding, Ending Balance | $	$ 84,000

Share-Based Compensation - Sc32

Share-Based Compensation - Schedule of Fair Value Assumptions (Details)	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015
Share-based Compensation [Abstract]
Volatility	84.20%
Risk-free interest rate	0.70%
Dividend yield	0.00%
Expected life	1 year 8 months 23 days	0 years

Subsequent Events (Details Narr

Subsequent Events (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2016	Apr. 30, 2015
Proceeds from exercise of warrants	$ 151,000	$ 151,000
Subsequent Event [Member] | Private Placement Financing [Member]
Proceeds from exercise of warrants		$ 1,118,110
Warrants to purchase of common stock shares	2,484,689	2,484,689