PURE 10-Q
Pure Bioscience, Inc. (PURE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR
THE QUARTERLY PERIOD ENDED
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of December 14, 2022, there were shares of the registrant’s common stock, $0.01 par value per share, outstanding.
PURE Bioscience, Inc.
Form 10-Q
for the Quarterly Period Ended October 31, 2022
Table of Contents
| Page | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 20 |
| Item 4. | Controls and Procedures | 21 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 24 |
| Signatures | 25 |
| 2 |
Part I - Financial Information
Item 1. Financial Statements
PURE Bioscience, Inc.
Condensed Consolidated Balance Sheets
| October 31, 2022 | July 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories, net | ||||||||
| Restricted cash | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value: shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value: shares authorized, shares issued and outstanding at October 31, 2022 and at July 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes.
| 3 |
PURE Bioscience, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended | ||||||||
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| Net product sales | $ | $ | ||||||
| Royalty revenue | ||||||||
| Total revenue | ||||||||
| Cost of goods sold | ||||||||
| Gross Profit | ||||||||
| Operating costs and expenses | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Total operating costs and expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
| Shares used in computing basic and diluted net loss per share | ||||||||
See accompanying notes.
| 4 |
PURE Bioscience, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance July 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation expense - stock options | — | |||||||||||||||||||
| Share-based compensation expense - restricted stock units | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance October 31, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance July 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Share-based compensation expense - stock options | — | |||||||||||||||||||
| Share-based compensation expense - restricted stock units | — | |||||||||||||||||||
| Issuance of common stock upon the vesting of restricted stock units | ( | ) | ||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance October 31, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes.
| 5 |
PURE Bioscience, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended | ||||||||
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents, and restricted cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents, and restricted cash at end of period | $ | $ | ||||||
| Reconciliation of cash and cash equivalents, and restricted cash to the condensed consolidated balance sheets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | $ | $ | ||||||
| Total cash and cash equivalents and restricted cash | $ | $ | ||||||
See accompanying notes.
| 6 |
PURE Bioscience, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended October 31, 2022 and 2021
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of PURE Bioscience, Inc. and its wholly owned subsidiary, ETI H2O Inc., a Nevada corporation. ETI H2O, Inc. currently has no business operations and no material assets or liabilities and there have been no significant transactions related to ETI H2O, Inc. 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 quarter ended October 31, 2022 are not necessarily indicative of the results that may be expected for other quarters or the year ending July 31, 2023. The July 31, 2022 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, 2022 included in our Annual Report on Form 10-K covering such period filed with the Securities and Exchange Commission, or SEC, on October 28, 2022.
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.
2. Liquidity and Going Concern
We
have a history of recurring losses, and as of October 31, 2022 we have incurred a cumulative net loss of $
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.
Until we can continually generate positive cash flow from operations, we will need to continue to fund our operations with the proceeds of offerings of our equity and debt securities. However, we cannot ensure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise 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 our ability to operate our business.
| 7 |
3. Significant Accounting Policies
Revenue Recognition
Effective August 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under Topic 606, revenue is recognized at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following 5-step process:
| 1. | Identify the contract with the customer | |
| 2. | Identify the performance obligations in the contract | |
| 3. | Determine the transaction price | |
| 4. | Allocate the transaction price to the performance obligations in the contract | |
| 5. | Recognize revenue when (or as) each performance obligation is satisfied |
Under Topic 606, we recognize revenue when we satisfy a performance obligation by transferring control of the promised goods or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our technology platform is based on patented stabilized ionic silver, and our initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent, which offers 24-hour residual protection and formulates well with other compounds. We sell various configurations and dilutions of SDC direct to customers and through distributors. We currently offer PURE® Hard Surface as a food contact surface sanitizer and disinfectant to restaurant chains, food processors and food transportation companies. We 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 we consider 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 we satisfy at a point in time. We recognize product revenue when the following events have occurred: (a) we have transferred physical possession of the products, (b) we have 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.
Our direct customer and distributor sales are invoiced based on received purchase orders. Our payment terms on invoiced direct customer and distributor sales range between 30 and 90 days after we satisfy our performance obligation. The majority of our customers are on 30 day payment terms. We currently offer 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.
We do 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 our revenue by product type for the three months ended October 31, 2022 and 2021 is as follows:
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| PURE Hard Surface | $ | $ | ||||||
| SILVÉRION | ||||||||
| $ | $ | |||||||
Variable Consideration
We record revenue from customers in an amount that reflects the transaction price we expect to be entitled to after transferring control of those goods or services. From time to time, we offer sales promotions on our 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.
| 8 |
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.
Basic net loss per common share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Our diluted net loss per common share is the same as our basic net loss per common share because we 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 October 31, 2022 and 2021, stock options, warrants and shares issuable under restricted stock unit awards of and , respectively, have been excluded from the computation of diluted shares outstanding.
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| Common stock option | ||||||||
| Restricted stock units | ||||||||
| Warrants | ||||||||
| Total | ||||||||
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:
| October 31, 2022 | July 31, 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| $ | $ | |||||||
| 9 |
Share-Based Compensation
We periodically issue stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. We account 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.
We estimate 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.
Concentrations
Gross
product sales. For the three months ended October 31, 2022, two individual customers accounted for
Accounts
receivable. As of October 31, 2022, we had accounts receivable from two customers that comprised
Purchases.
For the three months ended October 31, 2022, one vendor accounted for
Accounts
payable. As of October 31, 2022, two vendors accounted for
Segments
We
operate in
| 10 |
4. Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments or ASC 326. The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivable. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options or ASU 2021-04. ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of ASU 2021-04 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
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 consolidated financial statement presentation or disclosures.
Restricted Stock Units
We issue 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. We determine 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. As of July 31, 2022, there were RSU’s outstanding of which were issuable.
During the three months ended October 31, 2022 and 2021, we recognized $ of compensation cost relating to the vesting of RSU’s, respectively. As of October 31, 2022, there was $ of unrecognized non-cash compensation cost related to the remaining RSUs we expect to vest, which will be recognized over a weighted average period of years.
During
the three months ended October 31, 2022, RSUs were granted, issued, or forfeited. Of the RSUs outstanding as of October
31, 2022, RSUs are vested and issuable.
| Total RSU Shares | Vested and Issuable | |||||||
| Outstanding at July 31, 2022 | ||||||||
| Granted | ||||||||
| Issued | ||||||||
| Forfeited | ||||||||
| Outstanding at October 31, 2022 | ||||||||
Stock Option Plans
2007 Equity Incentive Plan
In February 2016, we amended and restated our 2007 Equity Incentive Plan, the (“2007 Plan”), to, among other changes, increase the number of shares of common stock issuable under the 2007 Plan by shares and extend the term of the 2007 Plan until . The 2007 Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to our employees, directors, consultants and advisors. These awards have up to a -year contractual life and are subject to various vesting periods, as determined by the Compensation Committee of the Board of Directors. As of October 31, 2022, there were approximately shares available for issuance under the 2007 Plan.
| 11 |
2017 Equity Incentive Plan
In January 2021, we amended and restated our 2017 Equity Incentive Plan, the (“2017 Plan”), to, among other changes, increase the number of shares of common stock issuable under the 2017 Plan by shares and extend the term of the 2007 Plan until January 2031. The 2017 Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to our employees, directors, consultants and advisors. These awards have up to a -year contractual life and are subject to various vesting periods, as determined by the Compensation Committee of the Board of Directors. As of October 31, 2022, there were approximately shares available for issuance under the 2017 Plan.
During the three months ended October 31, 2022, the Compensation Committee of the Board of Directors granted stock options to our employees, officers, directors and consultants with a fair value of $ as determined by the Black Scholes option pricing model.
| Shares | Weighted- Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding at July 31, 2022 | $ | $ | ||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Cancelled | $ | — | ||||||||||
| Outstanding at October 31, 2022 | $ | $ | ||||||||||
The weighted-average remaining contractual term of options outstanding at October 31, 2022 was years.
At October 31, 2022, options to purchase shares of common stock were exercisable. These options had a weighted-average exercise price of $ and a weighted average remaining contractual term of years. The total unrecognized compensation cost related to unvested stock option grants as of October 31, 2022 was approximately $ and the weighted average period over which these grants are expected to vest is years.
For the three months ended October 31, 2022, share-based compensation expense for stock options that vested during the period was $. For the three months ended October 31, 2021, share-based compensation expense for stock options that vested during the period was $.
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 three months ended October 31, | ||||||||
| 2022 | 2021 | |||||||
| Volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Expected life | ||||||||
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.
| 12 |
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 expected life of options was estimated using the average between the contractual term and the vesting term of the options.
6. Related Party Transactions
As
of October 31, 2022 and October 31, 2021, accounts payable include $
7. Commitments and Contingencies
COVID-19
The COVID-19 pandemic led to severe disruptions in general economic activities, as businesses and federal, state, and local governments took broad actions to mitigate this public health crisis. While we have experienced some delays related to final third-party validation of certain of our products and product rollouts by customers using PURE Control, we did not experience a material disruption to our business. In addition, we previously benefited from increased demand from our customers for our PURE Hard Surface product due to a focus on surface disinfecting in response to attempting to prevent COVID-19 transmission. We subsequently experienced an abatement in such demand. Such abatement has not stabilized and we cannot assure you that demand will stabilize in the future. Additionally, we experienced supply chain issues with our various plastic packaging configurations and citric acid. Further, on a go-forward basis, we cannot guarantee the overall economic conditions will not affect our business, as these conditions may significantly negatively impact all aspects of our business. Our business is dependent on the continued health and productivity of our employees, including our sales staff and corporate management team.
The extent to which the COVID-19 pandemic or other health-related pandemics impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. Even after the COVID-19 pandemic or other health-related pandemics has subsided, we may experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
| 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All references in this Item 2 and elsewhere in this Quarterly Report to “PURE,” “we”, “our,” “us” and the “Company” refer to PURE Bioscience, Inc., a Delaware corporation, and our wholly owned subsidiary, ETI H2O, Inc., a Nevada corporation. ETI H2O, Inc. currently has no business operations and no material assets or liabilities and there have been no significant transactions related to ETI H2O, Inc. during the periods presented in the condensed consolidated financial statements contained elsewhere in this Quarterly Report.
The discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “would” or “will” or the negative of these terms or other comparable terminology, but their absence does not mean that a statement is not forward-looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which could cause our actual results to differ from those projected in any forward-looking statements we make. Several risks and uncertainties we face are discussed in more detail under “Risk Factors” in Part II, Item 1A of this Quarterly Report or in the discussion and analysis below. You should, however, understand that it is not possible to predict or identify all risks and uncertainties and you should not consider the risks and uncertainties identified by us to be a complete set of all potential risks or uncertainties that could materially affect us. You should not place undue reliance on the forward-looking statements we make herein because some or all of them may turn out to be wrong. We undertake no obligation to update any of the forward-looking statements contained herein to reflect future events and developments, except as required by law. The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes to those financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are focused on developing and commercializing proprietary antimicrobial products that provide safe and cost-effective solutions to the health and environmental challenges of pathogen and hygienic control. Our technology platform is based on patented stabilized ionic silver, and our initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent, which offers 24-hour residual protection and formulates well with other compounds. As a platform technology, we believe SDC is distinguished from existing products in the marketplace because of its superior efficacy, reduced toxicity, non-causticity and the inability of bacteria to form a resistance to it.
We believe there is a significant market opportunity for our safe, non-toxic, non-caustic and effective SDC-based solutions. We currently offer PURE® Hard Surface as a food contact surface sanitizer and disinfectant to restaurant chains, food processors and food transportation companies. We also offer PURE Control® as a direct food contact processing aid. In addition to our direct sales efforts with PURE Hard Surface and PURE Control, we market and sell our SDC-based products indirectly through third-party distributors supporting various industries.
| 14 |
Business Strategy
Our goal is to become a sustainable company by commercializing the SDC-based products we have developed with our proprietary technology platform. We are focused on delivering leading antimicrobial products that address food safety risks across the food industry supply chain. Key aspects of our business strategy include:
| ● | Expanding sales and distribution for our products into the food industry with a focus on a dual track of food safety market opportunities: |
| ● | Hard Surface Disinfectant - commercializing our current EPA registered PURE Hard Surface disinfectant and sanitizer for use in foodservice operations, food manufacturing and food transportation. | ||
| ● | Direct Food Contact - commercializing FDA approved PURE Control as a direct food contact processing aid for fresh produce; commercializing FDA approved PURE Control as a food processing and intervention aid for food processors treating raw poultry in pre and post on-line reprocessing. |
| ● | Continuing to grow and establish new strategic alliances to maximize the commercial potential of our technology platform; | |
| ● | Continuing to partner with third parties who are seeking, or intend to seek, approvals to market SDC-based products in markets outside the U.S. | |
| ● | Developing additional proprietary products and applications; and | |
| ● | Protecting and enhancing our intellectual property. |
In addition to our current products addressing food safety, we intend to leverage our technology platform through licensing and distribution collaborations in order to develop new products and enter into new markets that could potentially generate multiple sources of revenue.
| 15 |
Financial Overview
This financial overview provides a general description of our revenue and expenses.
Net Product Sales
We contract manufacture and sell SDC-based products for end use, and as a raw material for manufacturing use. We recognize revenue when we satisfy a performance obligation by transferring control of the promised goods or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Any amounts received prior to satisfying revenue recognition criteria are recorded as deferred revenue. See “Critical Accounting Policies and Estimates – Revenue Recognition”.
Cost of Goods Sold
Cost of goods sold for product sales includes direct and indirect costs to manufacture products, including materials consumed, manufacturing overhead, shipping costs, salaries, benefits, reserved inventory, and related expenses of operations. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold.
Selling, General and Administrative
Selling, general and administrative expense consists primarily of salaries and other related costs for personnel in business development, sales, finance, accounting, information technology, and executive functions. Other selling, general and administrative costs include product marketing, advertising, and trade show costs, as well as public relations and investor relations, facility costs, and legal, accounting and other professional fees.
Research and Development
Our research and development activities are focused on leveraging our technology platform to develop additional proprietary products and applications. Research and development expense consists primarily of personnel and related costs, product registration expenses, and third-party testing. We expense research and development costs as incurred.
Other Income (Expense)
We record interest income, interest expense, the change in derivative liabilities, as well as other non-operating transactions, as other income (expense) in our consolidated statements of operations.
COVID-19
The COVID-19 pandemic led to severe disruptions in general economic activities, as businesses and federal, state, and local governments took broad actions to mitigate this public health crisis. While we have experienced some delays related to final third-party validation of certain of our products and product rollouts by customers using PURE Control, we did not experience a material disruption to our business. In addition, we previously benefited from increased demand from our customers for our PURE Hard Surface product due to a focus on surface disinfecting in response to attempting to prevent COVID-19 transmission. We subsequently experienced an abatement in such demand. Such abatement has not stabilized and we cannot assure you that demand will stabilize in the future. Additionally, we experienced supply chain issues with our various plastic packaging configurations and citric acid. Further, on a go-forward basis, we cannot guarantee the overall economic conditions will not affect our business, as these conditions may significantly negatively impact all aspects of our business. Our business is dependent on the continued health and productivity of our employees, including our sales staff and corporate management team.
The extent to which the COVID-19 pandemic or other health-related pandemics impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. Even after the COVID-19 pandemic or other health-related pandemics has subsided, we may experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
| 16 |
Results of Operations
Fluctuations in Operating Results
Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our results of operations will be affected for the foreseeable future by several factors that may contribute to these periodic fluctuations, including fluctuations in the buying patterns of our current or potential customers for which we have no visibility, the mix of product sales including a change in the percentage of higher or lower margin formulations and packaging configurations of our products, the cost of product sales including component costs, our inability for any reason to be able to meet demand, the achievement and timing of research and development and regulatory milestones, unforeseen changes in expenses, including non-cash expenses such as the fair value of equity awards granted and the fair value change of derivative liabilities, the calculation of which includes several variable assumptions, and unforeseen manufacturing or supply issues, among other issues. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a reliable indication of our future performance. As of the date of this filing, we are not aware of any trends in these factors or events or conditions that we believe are reasonably likely to impact our results of operations in the future.
Comparison of the Three Months Ended October 31, 2022 and 2021
Net Product Sales
Net product sales were $467,000 and $497,000 for the three months ended October 31, 2022 and 2021, respectively. The decrease of $30,000 was attributable to decreased sales across our distribution network. Our top two customers accounted for $130,000 of net product sales for the three months ended October 31, 2022.
For the three months ended October 31, 2022, two individual customers accounted for 19% and 10% of our net product sales, respectively. No other individual customer accounted for 10% or more of our net product sales. All of our net product sales were U.S. based sales.
For the three months ended October 31, 2021, three individual customer accounted for 24%, 13% and 11% of our net product sales, respectively. No other individual customer accounted for 10% or more of our net product sales. All of our net product sales were U.S. based sales.
During the three months ended October 31, 2022 and 2021, we recognized $4,000 and $4,000 in royalties from a nonexclusive third-party distributor, respectively.
Cost of Goods Sold
Cost of goods sold was $214,000 and $172,000 for the three months ended October 31, 2022 and 2021, respectively. The increase of $42,000 was primarily attributable to increased contract manufacturing costs.
Gross margin as a percentage of net product sales, or gross margin percentage, was 54% and 65% for the three months ended October 31, 2022 and 2021, respectively. The decrease in gross margin percentage was primarily attributable to increased contract manufacturing costs, as well as, the sale of higher margin formulations and packaging configurations of our products during the quarter ended October 31, 2021, as compared with the prior period.
Selling, General and Administrative Expense
Selling, general and administrative expense was $1,165,000 and $1,057,000 for the three months ended October 31, 2022 and 2021, respectively. The increase of $108,000 was primarily attributable to increased personnel costs, facilities expenses, and travel. These increases were partially offset by decreased professional service costs and share-based compensation expense.
Share-based compensation expense, included in selling, general and administrative expense, was $84,000 and $190,000 for the three months ended October 31, 2022 and 2021, respectively. The decrease of $106,000 is primarily due to the prior year vesting of stock options and restricted stock units granted to employees, directors and consultants supporting our selling, general and administrative functions.
Research and Development Expense
Research and development expense, primarily consisting of third-party fees and personnel costs, was $78,000 and $67,000 for the three months ended October 31, 2022 and 2021, respectively. The increase of $11,000 was due to a increase in third-party fees.
| 17 |
Liquidity and Capital Resources
As of October 31, 2022, we had $2,527,000 in cash and cash equivalents compared with $3,466,000 in cash and cash equivalents as of July 31, 2022. The net decrease in cash and cash equivalents was primarily attributable to the use of cash to fund our operations and investments in property, plant and equipment. Additionally, as of October 31, 2022, we had $699,000 of current liabilities, including $561,000 in accounts payable, compared with $575,000 of current liabilities, including $488,000 in accounts payable as of July 31, 2022. The net increase in current liabilities was primarily due to trade payables due to our contract manufacture.
We have a history of recurring losses, and as of October 31, 2022 we have incurred a cumulative net loss of $130,000,000. During the three months ended October 31, 2022, we recorded a net loss of $993,000 on recorded net revenue of $471,000. In addition, during the three months ended October 31, 2022 we used $939,000 in operating and investing activities resulting in a cash balance of $2,452,000 as of October 31, 2022. Our history of recurring operating losses, and negative cash flows from operating activities give rise to substantial doubt regarding our 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.
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.
Until we can continually generate positive cash flow from operations, we will need to continue to fund our operations with the proceeds of offerings of our equity and debt securities. However, we cannot assure you that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise 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 our ability to operate our business.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
In addition, the condensed consolidated financial statements included in this Quarterly Report have been prepared and presented on a basis assuming we will continue as a going concern. Until we can generate significant cash from operations, we expect to continue to fund our operations with the proceeds of offerings of our equity and debt securities. However, we cannot assure you that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise 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 our ability to operate our business. Further, any contracts or license arrangements we enter into to raise funds may require us to relinquish our rights to our products or technology, and we cannot assure you that we will be able to enter into any such contracts or license arrangements on acceptable terms, or at all. Having insufficient funds may require us to delay or scale back our marketing, distribution and other commercialization activities or cease our operations altogether. Our financial statements do not include any adjustment relating to recoverability or classification of recorded assets and classification of recorded liabilities.
| 18 |
We believe the following accounting policies and estimates are critical to aid you in understanding and evaluating our reported financial results.
Revenue Recognition
We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under Topic 606, revenue is recognized at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following 5-step process:
| 1. | Identify the contract with the customer | |
| 2. | Identify the performance obligations in the contract | |
| 3. | Determine the transaction price | |
| 4. | Allocate the transaction price to the performance obligations in the contract | |
| 5. | Recognize revenue when (or as) each performance obligation is satisfied |
Under Topic 606, we recognize revenue when we satisfy a performance obligation by transferring control of the promised goods or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our technology platform is based on patented stabilized ionic silver, and our initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent, which offers 24-hour residual protection and formulates well with other compounds. We sell various configurations and dilutions of SDC direct to customers and through distributors. We currently offer PURE® Hard Surface as a food contact surface sanitizer and disinfectant to restaurant chains, food processors and food transportation companies. We 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 we consider 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 we satisfy at a point in time. We recognize product revenue when the following events have occurred: (a) we have transferred physical possession of the products, (b) we have 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.
Our direct customer and distributor sales are invoiced based on received purchase orders. Our payment terms on invoiced direct customer and distributor sales range between 30 and 90 days after we satisfy our performance obligation. The majority of our customers are on 30 day payment terms. We currently offer 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.
We do 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.
We do not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
The Company’s licensing contracts typically provide for royalties based on the licensee’s sales of various configurations of PURE Hard Surface. The Company records its royalty revenue in the month in which the licensee sold our products to end users. Payments are generally received in the subsequent month.
Variable Consideration
We record revenue from customers in an amount that reflects the transaction price we expect to be entitled to after transferring control of those goods or services. From time to time, we offer sales promotions on our 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.
| 19 |
Share-Based Compensation
We grant equity-based awards under share-based compensation plans or stand-alone contracts. We estimate the fair value of share-based payment awards using the Black-Scholes option valuation model. This fair value is then amortized over the requisite service periods of the awards. 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. Changes in assumptions used under the Black-Scholes option valuation model could materially affect our net loss and net loss per share.
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 months ended October 31, 2022 and 2021, no impairment of long-lived assets was indicated or recorded.
Recent Accounting Pronouncements
See Note 4 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, or the Exchange Act, and as provided in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
| 20 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission, or SEC, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by Rule 13a-15(b) under the Exchange Act, our management conducted an evaluation, under the supervision and with the participation of our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on the foregoing evaluation, our Principal Executive Officer and Principal Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, under the supervision and with the participation of our Principal Executive Officer and our Principal Financial Officer, concluded that there were no changes in our internal controls over financial reporting during the three months ended October 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
| 21 |
PART II – Other Information
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and any adverse result in these or other matters may arise from time to time that could harm our business. We are not currently aware of any such legal proceedings or claims to which we or our wholly owned subsidiary is a party or of which any of our property is subject that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, including the risk factor included below, as well as the risk factors disclosed in Item 1A. to Part I of our Annual Report on Form 10-K for the fiscal year ended July 31, 2022, which we filed with the SEC on October 28, 2022 (the “Form 10-K”). Other than the risk factor included below, the risks and uncertainties described in “Item 1A — Risk Factors” of our Form 10-K have not materially changed. Any of the risks discussed in this Quarterly Report on Form 10-Q, including the risk factor included below, or any of the risks disclosed in “Item 1A — Risk Factors” of our Form 10-K, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations, financial condition or prospects.
Risks Related to Our Business and Industry
As a result of our historical lack of financial liquidity, we do not currently have sufficient working capital to fund our planned operations and may not be able to continue as a going concern.
We have a history of recurring losses, and as of October 31, 2022 we have incurred a cumulative net loss of $130,000,000. During the three months ended October 31, 2022, we recorded a net loss of $993,000 on recorded net revenue of $471,000. In addition, during the three months ended October 31, 2022 we used $939,000 in operating and investing activities resulting in a cash balance of $2,452,000 as of October 31, 2022. As a result, our existing cash resources are not sufficient to meet our anticipated needs over the next twelve months from the date hereof, and we will need to raise additional capital to continue our operations and to implement our business plan, which capital may not be available on acceptable terms or at all.
Our capital requirements will depend on many factors, including, among others:
| ● | the market acceptance of, and demand for, our products; | |
| ● | the timing and costs of executing our sales and marketing strategies; | |
| ● | our ability to successfully complete the in-plant validation trials requested by potential customers and our ability to convert these trials into customer orders for our products; | |
| ● | the costs and time required to obtain the necessary regulatory approvals for our products, including the required USDA approvals: | |
| ● | the extent to which we invest in new testing and product development, including in-plant optimization trials; | |
| ● | the extent to which our customers continue to place product orders as expected and expand their existing use of our products; | |
| ● | the cost and time to satisfy unique customer requirements regarding validation trials or to support the value proposition and benefits of our products; | |
| ● | the timing of vendor payments and the collection of receivables, among other factors affecting our working capital; | |
| ● | our ability to control the timing and amount of our operating expenses, including the costs to attract and retain personnel with the skills required to implement our business plan; and | |
| ● | the costs to file, prosecute and defend our intellectual property rights. |
| 22 |
The above factors, along with our history and near term forecast of incurring net losses and negative operating cash flows, raise substantial doubt about our ability to continue as a going concern. If we do not obtain additional capital from external sources, we will not have sufficient working capital to fund our planned operations or be able to continue as a going concern. We cannot assure you that additional financing will be available when needed or that, if available, we can obtain financing on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise 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 our ability to operate our business. Further, any contracts or license arrangements we enter into to raise funds may require us to relinquish our rights to our products or technology, and we cannot assure you that we will be able to enter into any such contracts or license arrangements on acceptable terms, or at all. Having insufficient funds may require us to delay or scale back our marketing, distribution and other commercialization activities or cease our operations altogether.
The COVID-19 pandemic or other health-related pandemics could adversely affect our business, financial condition and results of operations.
The COVID-19 pandemic led to severe disruptions in general economic activities, as businesses and federal, state, and local governments took broad actions to mitigate this public health crisis. While we have experienced some delays related to final third-party validation of certain of our products and product rollouts by customers using PURE Control and supply chain issues, we did not experience a material disruption to our business. In addition, we previously benefited from increased demand from our customers for our PURE Hard Surface product due to a focus on surface disinfecting in response to attempting to prevent COVID-19 transmission. We subsequently experienced an abatement in such demand. Such abatement has not stabilized and we cannot assure you that demand will stabilize in the future. Additionally, we experienced supply chain issues with our various plastic packaging configurations and citric acid. Further, on a go-forward basis, we cannot guarantee the overall economic conditions will not affect our business, as these conditions may significantly negatively impact all aspects of our business. Our business is dependent on the continued health and productivity of our employees, including our sales staff and corporate management team.
The extent to which the COVID-19 pandemic or other health-related pandemic impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. Even after the COVID-19 pandemic or other health-related pandemics has subsided, we may experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 23 |
Item 6. Exhibits
The following Exhibits are filed as part of this report pursuant to Item 601 of Regulation S-K:
| * | Filed herewith. |
| 24 |
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PURE BIOSCIENCE, INC. | ||
| Date: December 14, 2022 | By: | /s/ TOM Y. LEE |
Tom Y. Lee, Chief Executive Officer (Principal Executive Officer) | ||
| Date: December 14, 2022 | By: | /s/ MARK S. ELLIOTT |
| Mark S. Elliott, Vice President, Finance | ||
| (Principal Financial and Accounting Officer) | ||
| 25 |