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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>6.
Derivative Liability</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
October and November of 2015 we closed two private placement financings (the “2015 Private Placement Financing”) and
issued 20,376,219 warrants. We accounted for warrants issued in connection with the 2015 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
September 25, 2017, we completed the first closing of a tender offer to amend and exercise outstanding warrants to purchase shares
of our common stock. As a result, 1,599,135 warrants issued in connection with the 2015 Private Placement Financing were exercised.
In addition, there was a net exercise on 118,057 warrants which resulted in the issuance of 63,811 shares of our common stock.
The change in fair value of the warrant liabilities on September 25, 2017 was recorded as a change in derivative liabilities in
the consolidated statements of operations during the fiscal year ended July 31, 2018. In addition, the fair value on the exercise
date was returned to additional paid in capital.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 10, 2017, we completed a second and final closing of a tender offer to amend and exercise outstanding warrants to purchase
shares of our common stock. As a result, 268,909 warrants issued in connection with the 2015 Private Placement Financing were
exercised. The change in fair value of the warrant liabilities on October 10, 2017 was recorded as a change in derivative liabilities
in the consolidated statements of operations during the fiscal year ended July 31, 2018. In addition, the fair value on the exercise
date was returned to additional paid in capital.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2018, all outstanding warrants containing derivative features issued in connection with the 2015
Private Placement Financing were exercised.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
change in fair value of the warrant liabilities for the fiscal year ended July 31, 2018, was a decrease of $459,000, which was
recorded as a change in derivative liabilities in the consolidated statements of operations. As of July 31, 2019, there were no
warrants classified as derivatives outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>8.
Stockholders’ Equity</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Preferred
Stock</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of July 31, 2019, the Company’s Board of Directors is authorized to issue 5,000,000 shares of preferred stock with a par
value of $0.01 per share, in one or more series. As of July 31, 2019 and July 31, 2018, there were no shares of preferred stock
issued and outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Common
Stock</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of July 31, 2019, 100,000,000 shares of common stock with a par value of $0.01 per share are authorized for issuance.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Private
Placement Financing</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
August 16, 2018, we completed a closing (the “Closing”) of a private placement financing to accredited investors.
We raised approximately $1.5 million in the Closing and issued an aggregate of 3,333,964 shares of our common stock at a purchase
price of $0.45 per share, including the conversion of approximately $0.5 million held in the form of a promissory note as of July
31, 2018. The shares issued in the private placement financing were issued pursuant to a securities purchase agreement entered
into with the investors. Mr. Tom Y. Lee, a member of the Company’s Board of Directors invested approximately $1.0 million
through his affiliates, including approximately $0.5 million of cash and the conversion of existing indebtedness in the
amount of approximately $0.5 million that was held in the form of a promissory note payable as of July 31, 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
net proceeds to us from the Closing (including the cancellation of indebtedness), after deducting fees and other offering expenses,
were approximately $1.5 million.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
issuance and sale of the shares was not registered under the Securities Act of 1933, as amended (the “Securities Act”),
and these shares may not be offered or sold in the United States absent registration under or exemption from the Securities Act
and any applicable state securities laws. The shares were issued and sold in reliance upon an exemption from registration afforded
by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Investors represented
to the Company that each was an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities
Act, and that each was receiving the shares for investment for its own account and without a view to distribute them.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
February 19, 2019, we entered into warrants amendments (each a “Warrant Amendment”, and together, the “Warrant
Amendments”) with three holders of warrants to purchase the Company’s common stock issued in August 2014 (the “2014
Warrants”). The Warrant Amendments provided (i) for a reduction in the exercise price from $0.75 to $0.35 and (ii) that
2014 Warrants would expire unless otherwise exercised on the date of the Warrant Amendments. In connection with the execution
of the Warrant Amendments, on February 19, 2019, the holders exercised the 2014 Warrants to purchase 2,399,999 shares of common
stock for an aggregate exercise price of $840,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Tom
Lee, the Company’s Chairman of the Board, and beneficial holder of a 2014 Warrant to purchase 2,133,333 shares of Common
Stock, entered into a Warrant Amendment and exercised his 2014 Warrant for an aggregate exercise price of $746,666. Additionally,
Dale Okuno, a member of the Company’s Board of Directors, and beneficial holder of a 2014 Warrant to purchase 213,333 shares
of Common Stock, entered into a Warrant Amendment and exercised his 2014 Warrant for an aggregate exercise price of $74,666.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Due
to the reduction in exercise price for the 2014 Warrants issued in connection with the Warrant Amendment, we determined it was
appropriate to record $960,000 of expense in the 2019 consolidated statement of operations for the inducement to exercise the
2014 Warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During May, June and July of 2019, we completed
three closings (the “Closings”) of private placement financings to accredited investors. We raised net proceeds of
$716,000 in the Closings and issued an aggregate of 2,468,963 shares of our common stock at a purchase price of $0.29 per share.
The shares issued in the private placement financing were issued pursuant to a securities purchase agreement entered into with
the investors. Messrs. Dale Okuno and Ivan Chen, each of whom is an accredited investor and a member of the Company’s Board
of Directors invested $250,000 and $35,000, respectively, in the private placement financings.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
net proceeds to us from the Closings, after deducting fees and other offering expenses, were approximately $716,000. We expect
to use the net proceeds for general corporate purposes, including our research and development efforts, and for general administrative
expenses and working capital.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
issuance and sale of the shares was not registered under the Securities Act of 1933, as amended (the “Securities Act”),
and these shares may not be offered or sold in the United States absent registration under or exemption from the Securities Act
and any applicable state securities laws. The shares were issued and sold in reliance upon an exemption from registration afforded
by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Investors represented
to the Company that each was an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities
Act, and that each was receiving the shares for investment for its own account and without a view to distribute them.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Schedule
TO and Warrant Exercises</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">On
October 10, 2017, we closed the offer to amend and exercise outstanding warrants to purchase shares of our common stock (the “Tender
Offer”). Specifically, we filed a Schedule TO with the SEC on August 25, 2017 offering to (i) reduce the exercise price
of the warrants to purchase 4,104,980 shares of common stock issued to investors participating in our private placement financing
completed on August 29, 2014, as amended (the “2014 Warrants”) from $0.75 per share to $0.60 per share of common stock
in cash, (ii) reduce the exercise price of outstanding warrants to purchase 1,986,101 shares of common stock issued to investors
participating in our private placement financing completed on November 23, 2015 (the “2015 Warrants”) from $0.45 per
share to $0.40 per share of common stock in cash, (iii) reduce the exercise price of the outstanding warrants to purchase 1,572,941
shares of common stock issued to investors participating in our private placement financing completed on January 23, 2017 (the
“2017 Warrants”, together with the 2014 Warrants and 2015 Warrants, the “Original Warrants”) from $1.25
per share to $0.85 per share of common stock in cash, (iv) shorten the exercise period of the Original Warrants so that they expired
concurrently with the expiration of the Offer to Amend and Exercise at 5:00 p.m. (Pacific Time) on September 25, 2017 (“Expiration
Date”) unless extended until the Subsequent Expiration Date (as defined below), (v) delete the cashless exercise provisions
in the Original Warrants and (vi) delete the price-based anti-dilution provisions contained in the 2015 Warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Additionally,
we requested the holders of a majority of the shares issuable upon exercise of the 2014 Warrants (the “2014 Requisite Majority”),
2015 Warrants (the “2015 Requisite Majority”) and 2017 Warrants (the “2017 Requisite Majority”) to approve
an amendment of all of the outstanding 2014 Warrants, 2015 Warrants and 2017 Warrants, respectively, to amend such Original Warrants
in the same manner as set forth above (the “Aggregate Warrant Amendment”), except the Expiration Date would be extended
until October 10, 2017 (the “Subsequent Expiration Date”) if such Aggregate Warrant Amendment was approved with respect
to such class of Original Warrants. The 2015 Requisite Majority approved an amendment of all of the outstanding 2015 Warrants
and holders of 2015 Warrants had until the Subsequent Expiration Date to exercise their 2015 Warrants (the “Subsequent Offer
Period”).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Offer to Amend and Exercise with respect to the 2014 Warrants and 2017 Warrants expired on the Expiration Date of September 25,
2017. As of September 25, 2017, 1,491,649 shares of common stock were issued upon exercise of 2014 Warrants, 1,599,135 shares
of common stock were issued upon exercise of 2015 Warrants and 1,396,470 shares of common stock were issued upon exercise of 2017
Warrants, for aggregate gross proceeds to us of approximately $2,720,000. During the Subsequent Offer Period, 2015 Warrants to
purchase 268,909 shares of common stock were exercised for aggregate gross proceeds to us of approximately $107,000. 2014 Warrants
to purchase 2,533,331 shares of common stock and 2017 Warrants to purchase 176,471 shares of common stock at exercise prices of
$0.75 per share and $1.25 per share, respectively, continue to remain outstanding and no 2015 Warrants remain outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Original
Warrants (including 2015 Warrants exercised during the Subsequent Offer Period) to purchase an aggregate of 4,756,163 shares of
common stock were tendered and exercised in the Offer to Amend and Exercise for aggregate net proceeds to us of approximately
$2,632,000. Garden State Securities Inc. assisted the Company as warrant solicitation agents with respect to the 2017 Warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Due
to the reduction in exercise price for the Original Warrants issued in connection with the Schedule TO, we determined it was appropriate
to record $876,000 of expense in the 2018 consolidated statement of operations for the inducement to exercise the Original Warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Other
Activity</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the three months ended October 31, 2017, we entered into a two-year service agreement for business development services. In accordance
with the agreement we issued 50,000 shares of common stock, with a value of $51,000. The value was capitalized to prepaid expense
and is being amortized over the term of the agreement. During the fiscal year ended July 31, 2019 and 2018, we recognized $25,000
and $21,000 of expense related to these services, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
April 13, 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 $290,000. The value was capitalized to prepaid expense and was being
amortized over the term of the agreement. During the fiscal year ended July 31, 2018, we recognized $101,000 of expense related
to these services.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Additional
Warrant Exercise</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2018, there was a net exercise on 573,057 warrants which resulted in the issuance of 158,342 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. 198,057 of the warrants exercised during the period were issued in connection with the Original Warrants discussed
above.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our warrant activity and related data is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 78%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">8,303,836</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Issued</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(5,329,220</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Expired/Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(113,520</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,861,096</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Issued</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,399,999</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Expired/Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,097</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following table summarizes information related to warrants outstanding at July 31, 2019:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Expiration</font></td><td style="font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Exercise</font></td><td style="font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Date</font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Price</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; text-align: center"><font style="font-family: Times New Roman, Times, Serif">08/29/19</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.75</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">133,332</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">12/01/21</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">58,824</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">12/01/21</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.28</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">117,647</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">01/23/22</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">117,647</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: center; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">01/23/22</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.28</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">33,647</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,097</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>9.
Share-Based Compensation</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Restricted
Stock Units</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2019, the Compensation Committee of the Board of Directors authorized the issuance of 725,000 Restricted
Stock Units (“RSUs”) to officers and consultants. The RSUs vest over a two 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 4, 2018, the Board of Directors appointed Tom Myers as the Company’s Chief Operating Officer. In connection with
Mr. Myer’s appointment, the Board agreed to grant him 500,000 RSUs upon the achievement by the Company of cash flow breakeven
for a fiscal quarter, after which such RSUs shall vest annually over the following three years. Based on the applicable guidance,
we determined that these RSUs are not deemed to be granted and therefore there are no accounting implications as of July 31, 2019.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2018, the Compensation Committee of the Board of Directors authorized the issuance of 450,000 RSUs
to newly appointed members of our Board of Directors. RSUs issued to directors vest in two 50% installments on or before our annual
meeting of stockholders, typically held in January. In addition, we issued 300,000 performance based RSUs to third-party consultants.
We currently do not expect the 300,000 RSUs to vest. Each RSU represents the right to receive one share of common stock, issuable
at the time the RSU is delivered and subsequently settles, as set forth in the Restricted Stock Unit Agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our restricted stock unit activity and related data is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 78%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,035,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">750,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Vested</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(375,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(885,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,525,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">725,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Vested</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(206,250</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(131,250</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,912,500</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Of
the 1,912,500 RSUs outstanding, we currently expect 456,250 to vest. As of July 31, 2019, there was $207,000 of unrecognized non-cash
compensation cost related to RSUs we expect to vest, which will be recognized over a weighted average period of 1.80 years. Of
the 1,912,500 RSUs outstanding as of July 31, 2019, 1,456,250 RSUs are vested and the underlying common stock has not been delivered
and remains outstanding, as set forth in the RSU agreements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the fiscal year ended July 31, 2019 share-based compensation expense for RSUs was $1,062,000, of which $489,000 was due to the
accelerated vesting of RSU’s held by Dave Pfanzelter, the former Chairman of our Board. Mr. Pfanzelter retired from our
Board in August 2018. For the fiscal year ended July 31, 2018 share-based compensation expense for RSUs was $834,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Stock
Option Plans</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>2007
Equity Incentive Plan</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 4,000,000 shares and extend the term of the 2007
Plan until February 4, 2026. 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 10-year contractual
life and are subject to various vesting periods, as determined by the Compensation Committee of the Board of Directors. As of
July 31, 2019, there were approximately 1,153,000 shares available for issuance under the 2007 Plan.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>2017
Equity Incentive Plan</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our
shareholders approved our 2017 Equity Incentive Plan (the “2017 Plan”) in January 2018, which has a share reserve
of 5,000,000 shares of common stock that were registered under a Form S-8 filed with the SEC in February 2018. 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 10-year contractual life and are subject to various vesting periods, as determined
by the Compensation Committee of the Board of Directors. As of July 31, 2019, there were approximately 2,071,000 shares available
for issuance under the 2017 Plan.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Stock
Option Activity</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2019, the Compensation Committee of the Board of Directors authorized the issuance of 200,000 stock
options to a newly appointed member of our board of directors. The options vest over a two year period and carry a ten year term.
In addition, during the fiscal year ended July 31, 2019, the Compensation Committee of the Board of Directors authorized the issuance
of 100,000 stock options to a consultant supporting our business development activities. The options vest monthly over a two year
period and carry a five year term.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2018, we issued 2,245,000 stock options at various exercise prices to employees, directors, and
consultants. The options vest between one and two years and carry a term between five and ten years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the fiscal year ended July 31, 2018, the Compensation Committee of the Board of Directors extended the expiration terms of 740,000
employee options by three years. We accounted for the option modification under ASC Topic 718 and recorded a one-time expense
of $203,000, which was expensed under the share-based compensation line item on the consolidated statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our stock option activity for the fiscal years ended July 31, 2019 and 2018 is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Weighted-<br />
Average<br /> Exercise Price</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Aggregate<br />
Intrinsic<br /> Value</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 46%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">5,759,843</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,120,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,245,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(378,750</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.96</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">7,626,093</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.09</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">300,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.52</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(562,968</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.47</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">7,363,125</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.04</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
weighted average expected term of options outstanding at July 31, 2019 was 4.60 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At
July 31, 2019, options to purchase 6,354,792 shares of common stock were exercisable. These options had a weighted-average exercise
price of $1.04, an aggregate intrinsic value of zero, and a weighted average expected term of 4.32 years. The weighted average
grant date fair value for options granted during the years ended July 31, 2019 and 2018, was $0.52 and $0.44, respectively. The
total unrecognized compensation cost related to unvested stock option grants as of July 31, 2019 was approximately $312,000 and
the weighted average period over which these grants are expected to vest is 1.88 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the fiscal year ended July 31, 2019 and 2018, share-based compensation expense for stock options was $1,387,000 and $1,525,000
respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
use the Black-Scholes valuation model to calculate the fair value of stock options. Share-based compensation expense is recognized
over the vesting period using the straight-line method. The fair value of stock options was estimated at the grant date using
the following weighted average assumptions:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>For
the years ended</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>July
31,</b></font></p></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%"><font style="font-family: Times New Roman, Times, Serif">Volatility</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">75.67</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">71.18</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Risk-free interest rate</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2.63</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2.32</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Dividend yield</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Expected life</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4.80
years</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3.69
years</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>13.
Subsequent Events</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Private
Placement Financing</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 2, 2019, we entered into and completed a closing
(the “Closing”) of a private placement financing (the “Private Placement Financing”) to accredited investors.
We raised net proceeds of $830,000 in the Closing of an aggregate of 2,862,068 shares (collectively, the “Shares”)
of the Company’s common stock (the “Common Stock”) at a purchase price of $0.29 per share, the closing sales
price of the Company’s common stock on the date prior to the Closing.  The Shares issued in the Private Placement Financing
were issued pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into with the
investors. Tom Y. Lee and Dale Okuno, each of whom is an accredited investor and a member of the Company’s Board of Directors
(the “Board”) invested $290,000 and $250,000, respectively, in the Private Placement Financing. Mr. Lee also serves
as the Company’s President and Chief Executive Officer.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
net proceeds to the Company from the Closing, after deducting the forgoing fees and other offering expenses, are expected to be
approximately $829,000. The Company expects to use the net proceeds for general corporate purposes, including the Company’s
research and development efforts, and for g<font style="background-color: white">eneral administrative expenses and working capital</font>.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
issuance and sale of the Shares was not registered under the Securities Act of 1933, as amended (the “Securities Act”),
and these Shares may not be offered or sold in the United States absent registration under or exemption from the Securities Act
and any applicable state securities laws. The Shares were issued and sold in reliance upon an exemption from registration afforded
by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Investors represented
to the Company that each was an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities
Act, and that each was receiving the Shares for investment for its own account and without a view to distribute them.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Inventories
consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Raw materials</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">30,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">39,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Finished goods</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">147,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">158,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">177,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">197,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our stock option activity for the fiscal years ended July 31, 2019 and 2018 is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Weighted-<br />
Average<br /> Exercise Price</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Aggregate<br />
Intrinsic<br /> Value</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 46%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">5,759,843</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 14%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,120,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,245,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(378,750</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.96</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">7,626,093</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.09</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">300,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.52</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(562,968</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.47</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">7,363,125</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.04</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The fair value of stock options was estimated at the grant date using
the following weighted average assumptions:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>For
the years ended</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>July
31,</b></font></p></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%"><font style="font-family: Times New Roman, Times, Serif">Volatility</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">75.67</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">71.18</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Risk-free interest rate</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2.63</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2.32</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Dividend yield</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Expected life</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4.80
years</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3.69
years</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
1000
3000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>2.
Summary of Significant Accounting Policies</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Basis
of Presentation</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying consolidated financial statements include the consolidated accounts of PURE Bioscience, Inc. and its wholly owned
subsidiary, ETIH2O Inc., a Nevada corporation. ETIH2O Inc. has no business and no material assets or liabilities and there have
been no significant transactions related to ETIH2O Inc. during the periods presented in the consolidated financial statements.
All inter-company balances and transactions have been eliminated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Use
of Estimates</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Cash
and Cash Equivalents</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Cash
and cash equivalents consist of cash and highly liquid investments with original maturities from the purchase date of three months
or less.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Restricted
Cash</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company is required to maintain $75,000 in a restricted certificate of deposit account in order to fully collateralize four revolving
credit card accounts.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Fair
Value of Financial Instruments</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Certain
of our financial instruments—including cash and cash equivalents, accounts receivable, inventories, prepaid expenses, accounts
payable, accrued liabilities, and deferred rent are carried at cost, which is considered to be representative of their respective
fair values because of the short-term nature of these instruments. Our derivative liabilities were carried at estimated
fair value (See Notes 5 and 6 to these consolidated financial statements).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Accounts
Receivable</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Trade
accounts receivable are recorded net of allowances for doubtful accounts. Estimates of allowances for doubtful accounts are determined
based on historical payment patterns and individual customer circumstances. The allowance for doubtful accounts was zero at July
31, 2019 and 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Inventories</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Property,
Plant and Equipment</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Property,
plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. The estimated useful lives of our property, plant, and equipment range from three to
ten years. Capitalized costs associated with leasehold improvements are depreciated over the lesser of the useful life of the
asset or the remaining life of the lease. Depreciation is generally included in selling, general and administrative expense. Depreciation
related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time
inventory is sold.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Patents</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
have filed a number of patent applications with the United States Patent and Trademark Office and in foreign countries. Certain
legal and related costs incurred in connection with pending patent applications have been capitalized. Costs related to successful
patent applications are amortized over the lesser of the remaining useful life of the related technology or the remaining patent
life, commencing on the date the patent is issued. Capitalized costs related to patent applications are expensed in the period
in which a determination is made not to pursue such applications.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Impairment
of Long-Lived Assets</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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. There were no patent impairments during the years ended July 31, 2019 or 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Revenue
Recognition</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">1.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Identify
the contract with the customer</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">2.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Identify
the performance obligations in the contract</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">3.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Determine
the transaction price</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">4.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Allocate
the transaction price to the performance obligations in the contract</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">5.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Recognize
revenue when (or as) each performance obligation is satisfied</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our
direct customer and distributer 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i>Variable
Consideration</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i>Practical
Expedient</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
elected a practical expedient to expense sales commissions when the commissions are incurred because the amortization period would
have been one year or less. These costs are recorded as Selling, general and administrative expense on our Consolidated Statements
of Operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Shipping
and Handling Costs</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Shipping
and handling costs incurred by us for product shipments are included in cost of goods sold and were minimal for the years ended
July 31, 2019 and 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Research
and Development Costs</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Research
and development costs are expensed as incurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Share-Based
Compensation</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
grant equity-based awards under share-based compensation plans. 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Comprehensive
Loss</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Comprehensive
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 years ended
July 31, 2019 and 2018, our comprehensive loss consisted only of net loss.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Income
Taxes</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
recognize deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the
amounts at which they are carried in the financial statements based upon the enacted tax rates in effect for the year in which
the differences are expected to reverse. A valuation allowance is established to reduce deferred tax assets to the amount expected
to be realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Net
Loss Per Share</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 antidilutive effect. For the years ended July 31, 2019 and 2018, 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 9,736,722 and 12,012,189, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Recent
Accounting Pronouncements</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2014, the FASB issued Topic 606, which supersedes most existing revenue recognition guidance in U.S. generally accepted accounting
principles (“GAAP”), including most industry-specific guidance. The standard requires an entity to recognize the amount
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard was
originally effective for public companies for annual reporting periods beginning after December 15, 2016, with no early application
permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred by one year
the effective date for all entities, with application permitted as of the original effective date. The standard allows for either
a full retrospective or modified retrospective method of adoption. We adopted the new standard for the fiscal year beginning August
1, 2018 using the modified retrospective application method. Under this method, entities recognize the cumulative impact of applying
the new standard at the date of adoption without restatement of prior periods presented. The cumulative effect of applying the
new standard to contracts that were not completed as of August 1, 2018 did not have a material impact on our consolidated financial
position, results of operations, or cash flows.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
new standard also requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising
from customer contracts. Topic 606 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“Topic
605”). While results for reporting periods beginning after August 1, 2018 are presented under Topic 606, all prior period
amounts are not adjusted and continue to be reported under the accounting standards in effect during these prior periods. The
accounting policies for revenue recognition for periods prior to August 1, 2018 are described in “Note 2. Summary of Significant
Accounting Policies” of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for
the year ended July 31, 2018. Adoption of this ASC did not have a material impact on our consolidated financial statements. Refer
to the revenue recognition disclosure above.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
July 2017, the Financial Accounting Standards Board (“FASB”) issued a two-part Accounting Standards Update (“ASU”)
No. 2017-11, I. Accounting for Certain Financial Instruments With Down Round Features and II. Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests With a Scope Exception (“ASU 2017-11”). ASU 2017-11 amends guidance in FASB ASC 260, Earnings Per Share,
FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging. The amendments in Part I of ASU
2017-11 change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round
features. The amendments in Part II of ASU 2017-11 re-characterize the indefinite deferral of certain provisions of Topic 480
that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting
effect. ASU 2017-11 is effective for public business entities for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018 with early adoption permitted. The adoption of this guidance had no impact on our financial
statements as all derivative liabilities were all exercised or expired as of July 31, 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The standard clarifies the
presentation of restricted cash and cash equivalents and requires companies to include restricted cash and cash equivalents in
the beginning and ending balances of cash and cash equivalents on the statement of cash flows. The standard also requires additional
disclosures to describe the amount and detail of the restriction by balance sheet line item. The new standard was effective for
us on August 1, 2018. We adopted this standard using the retrospective transition method by restating the consolidated statements
of cash flows to include restricted cash of $75,000 in the beginning and ending cash, cash equivalents, and restricted cash balance.
Net cash flows for the fiscal year ended July 31, 2018, did not change as a result of including restricted cash with cash and
cash equivalents when reconciling the beginning-of-period and end-of-period amounts presented on the statements of cash flows.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
December 2017, the United States (“U.S.”) enacted the Tax Cuts and Jobs Act (the “2017 Act”), which changes
existing U.S. tax law and includes various provisions that are expected to affect public companies. The 2017 Act (i) changes U.S.
corporate tax rates, (ii) generally reduces a company’s ability to utilize accumulated net operating losses, and (iii) requires
the calculation of a one-time transition tax on certain previously unrepatriated foreign earnings and profits (“E&P”).
The 2017 Act will also impact estimates of a company’s deferred tax assets and liabilities. On December 22, 2017, the Securities
and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP
in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail
to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (“U.S. Tax Cuts and Jobs Act of 2017”).
This new law did not have a significant impact on our consolidated financial statements for the years ended July 31, 2019 and
2018 because we maintain a valuation allowance on the entirety of our deferred tax assets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which
provides clarity and guidance around which changes to the terms or conditions of a stock-based payment award require an entity
to apply modification accounting. The new standard was effective for annual reporting periods beginning after April 1, 2018, and
interim periods within those annual reporting periods. The adoption of this guidance had no impact on our financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment
Accounting, which aligns the measurement and classification guidance for share-based payment to non-employees with the guidance
for share-based payments to employees. Under the new guidance, the measurement period for equity-classified non-employee awards
will be fixed at the grant date. This update is effective for annual periods beginning after December 15, 2018, and interim periods
within those periods and early adoption is permitted. We elected to early adopt ASU No. 2018-07 during the fiscal year ended July
31, 2019. The adoption of this guidance had no material impact on our financial statements.</font></p>
1500000
1396470
63811
3333964
1491649
1599135
2468963
158342
2862068
0.75
0.60
0.45
0.40
1.25
0.85
0.45
0.29
0.29
4104980
1572941
268909
2533331
176471
4756163
1599135
268909
1986101
2133333
213333
2399999
459000
1909000
1774000
5000
8000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>7.
Promissory Note Payable</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
June 28, 2018, we raised $500,000 to support our continued operations by issuing a one-year promissory note to Tom Y. Lee, a member
of the Company’s Board of Directors and our largest stockholder. The note accrued interest at 6.5% per annum, compounded
annually. On August 16, 2018, $500,000 of principal and approximately $4,000 of accrued interest was canceled and converted into
1,120,633 shares of common stock (See Note 8 to these consolidated financial statements).</font></p>
504000
5802927
2214000
58000
2156000
63093153
68248158
76732334
1387000
1525000
1387000
1525000
1062000
834000
1062000
834000
58000
26000
473000
926000
1715000
398000
851000
0.75
1.25
0.75
0.35
0.75
1.25
1.28
1.25
1.28
473000
926000
4914505
2399999
840000
49000
24000
2583000
816000
2632000
960000
876000
960000
876000
19000
20376219
20376219
500000
500000
500000
1500000
716000
373000
275000
18000
58000
1041000
1456000
362000
461000
529000
658000
1932000
2575000
553000
608000
503000
185000
170000
738000
1281000
4000
13000
742000
1294000
768000
683000
123900000
117522000
-123478000
-116924000
1932000
2575000
1394000
1394000
3000
-3000
281250
121000
5000
3000
6000
8000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>1.
Organization and Business</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">All
references to “PURE,” “we”, “our,” and “us” refer to PURE Bioscience, Inc. and
our wholly owned subsidiary.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">PURE
Bioscience, Inc. is focused on developing and commercializing our proprietary antimicrobial products that provide 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 that is manufactured as a liquid delivered in various concentrations. We currently distribute and contract the manufacture
and distribution of our SDC-based disinfecting and sanitizing products. We also contract manufacture and sell SDC-based formulations
to manufacturers for use as a raw material ingredient in the production of personal care products. We believe our technology platform
has potential application in a number of industries. We intend to focus our current resources on providing food safety solutions
to the food industry.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
were incorporated in the state of California in August 1992 as Innovative Medical Services. In September 2003, we changed our
name to PURE Bioscience. In March 2011, we reincorporated in the state of Delaware. We operate in one business segment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Liquidity
& Going Concern Uncertainty</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 July 31, 2019, we have incurred
a cumulative net loss of $123,478,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
do not have, and may never have, significant cash inflows from product sales or from other sources of revenue to fund our operations.
As of July 31, 2019, we had $398,000 in cash and cash equivalents, and $738,000 of current liabilities, including $553,000 in
accounts payable. On October 2, 2019, we entered into and completed a closing of a private placement financing to accredited investors.
We raised net proceeds of $830,000 in the closing of an aggregate of 2,862,068 shares of the Company’s common stock at a
purchase price of $0.29 per share. Tom Y. Lee and Dale Okuno, each of whom are accredited investors and members of the Company’s
Board of Directors invested $290,000 and $250,000, respectively, in the private placement financing. Mr. Lee also serves as the
Company’s President and Chief Executive Officer.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
do not have any unused credit facilities or other sources of capital available to us at this time. We intend to secure additional
working capital through sales of additional debt or equity securities. Our intended financing initiatives are subject to risk,
and we cannot provide any assurance about the availability or terms of these or any future financings.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These consolidated financial statements
have been prepared and presented on a basis assuming we will continue as a going concern. The factors above raise substantial
doubt about our ability to continue as a going concern. <font style="font: 10pt Times New Roman, Times, Serif">The
consolidated financial statements do not include any adjustment relating to recoverability or classification of recorded assets
and classification of recorded liabilities.</font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>3.
Balance Sheet Details</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Inventories
consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Raw materials</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">30,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">39,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Finished goods</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">147,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">158,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">177,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">197,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the year ended July 31, 2018, we wrote-off $58,000 of finished goods inventory damaged at our contract manufacturer’s facility.
In addition we wrote-off $26,000 of inventory destroyed in a third-party warehouse fire. We received $45,000 from an insurance
claim for the replacement cost of the inventory destroyed in the fire. As a result, we recorded a gain of $19,000 reflected in
the other income section of our consolidated statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Property,
plant, and equipment consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Computers and equipment</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,072,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,064,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Furniture
and fixtures</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,022,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,085,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Less accumulated
depreciation</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(731,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(624,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">362,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation
expense remained unchanged at $106,000 for the years ended July 31, 2019 and 2018, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Patents
consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Patents</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">3,504,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">3,500,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Less accumulated
amortization</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,975,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,842,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">529,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">658,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Patent
amortization expense for the years ended July 31, 2019 and 2018 was $135,000 and $179,000, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At
July 31, 2019, future patent amortization expense is expected to be as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 80%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2020</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">87,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2021</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">76,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2022</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">48,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2023</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">42,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2024</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">42,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Thereafter</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">234,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">529,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>4.
Commitments and Contingencies</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i><u>Legal</u></i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From time to time, we could become involved
in disputes and various litigation matters that arise in the normal course of business. Lawsuits against us or our officers or
directors by employees, former employees, stockholders, partners, customers, or others, or actions taken by regulatory authorities,
could be very costly and substantially disrupt our business. Such lawsuits and actions are not uncommon, and we may not be able
to resolve such disputes or actions on terms favorable to us, and there may not be sufficient capital resources available to defend
such actions effectively, or at all. As of July 31, 2019, there were no material lawsuits against the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Operating
Leases</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
August 2016, we amended the lease of our primary facility in El Cajon, California under a noncancelable operating lease that now
expires in December 2019. This facility includes our corporate offices, research and development laboratory, and warehouse. Rent
expense, including common area maintenance, was $111,000 and $121,000 for the years ended July 31, 2019 and 2018, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
July 29, 2019, we entered into a Sublease Agreement (the “Sublease”) with SwabPlus L.P. (“SwabPlus”),
effective July 25, 2019, pursuant to which we will sublease certain office and industrial space for our corporate headquarters.
The premises are located in Rancho Cucamonga, California. Pursuant to the terms of the Sublease, the Company will pay SwabPlus
rent of approximately $2,333 per month, plus additional payments for real property taxes, maintenance and repair and related expenses.
We terminated the El Cajon lease and transitioned to the new premises in September 2019. We expect the Sublease to drastically
reduce our operating expenses as compared to our operating expenses under our prior lease at the El Cajon facility.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Tom
Y. Lee, the Company’s Chief Executive Officer, Chairman of the Board and President, also serves as chairman of the board
of directors and chief executive officer of SwabPlus. Mr. Lee also serves as president of Hermosa Property, Inc., the landlord
of the premises subject to the Sublease. The Sublease was considered by the Company in accordance with the Company’s Related
Party Transaction and Procedures Policy, and approved by the disinterested members of the Board.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Future
minimum annual lease payments for our primary facility as of July 31, 2019 are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 80%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">37,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">2020</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">14,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">51,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>5</b>.
<b>Fair Value of Financial Instruments</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.5in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
1 – Quoted prices in active markets for identical assets or liabilities.</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
connection with the October and November 2015 Private Placements, we issued warrants with derivative features. These instruments
were accounted for as derivative liabilities (See Note 6 to these consolidated financial statements).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">The following table provides a reconciliation of the beginning and ending balances of the derivative liabilities for the year
ended July 31, 2018:
<b></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Fair Value of Significant Unobservable
Inputs (Level 3)</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: center"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Warrant</font></td>
<td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Liability</font></td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 79%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Balance at July 31,
2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,853,000</font></td>
<td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Issuances</font></td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Settlement of warrant liability</font></td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(1,394,000</font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Adjustments
to estimated fair value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(459,000</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Balance
at July 31, 2018</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>10.
Related Party Transactions</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
June 28, 2018, we raised $500,000 to support our continued operations by issuing a one-year promissory note to Tom Y. Lee, a member
of the Company’s Board of Directors and our largest stockholder. The note accrued interest at 6.5% per annum, compounded
annually. On August 16, 2018, $500,000 of principal and approximately $4,000 of accrued interest was converted into 1,120,633
shares of common stock (See Note 8 to these consolidated financial statements).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
June 9, 2019, we entered into a five-year manufacturing supply agreement with Intercon Chemical Company (ICC) with a three-year
renewal term option (the “Manufacturing Supply Agreement”). The agreement consists of manufacturing, packaging, and
distribution of PURE’s SDC-based products. The Manufacturing Supply Agreement provides:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">ICC
licenses PURE’s patents and technology know-how for the non-exclusive manufacture of PURE’s SDC-based products.</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">ICC
will invest in plant improvements to allow for expanded SDC production.</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">●</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">ICC’s
R&D team will collaborate on SDC product line development.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Manufacturing Supply Agreement may be terminated by mutual written consent, or by either party upon the material breach of the
terms of the agreement by the other party.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the years ended July 31, 2019 and 2018,
our net product sales to ICC was $5,000 and $8,000, respectively. As of July 31, 2019 and 2018, there was no accounts receivable
due to the Company for products purchased by ICC. During the years ended July 31, 2019 and 2018, we purchased $540,000 and $575,000,
of SDC based products produced by ICC, respectively. Additionally, as of July 31, 2019 and 2018, $65,000 and $85,000 was payable
to ICC for the production of SDC based products, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The president of ICC is a shareholder of the
Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 29, 2019, we entered into a Sublease
Agreement (the “Sublease”) with SwabPlus L.P. (“SwabPlus”), effective July 25, 2019, pursuant to which
we will sublease certain office and industrial space for our corporate headquarters. The premises are located in Rancho
Cucamonga, California. Pursuant to the terms of the Sublease, the Company will pay SwabPlus rent of approximately $2,333 per month,
plus additional payments for real property taxes, maintenance and repair and related expenses. We terminated the El Cajon lease
and transitioned to the new premises in September 2019. We expect the Sublease to drastically reduce our operating expenses as
compared to our operating expenses under our prior lease at the El Cajon facility (See Note 4 to these consolidated financial
statements).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Tom Y. Lee, the Company’s Chief Executive
Officer, Chairman of the Board and President, also serves as chairman of the board of directors and chief executive officer of
SwabPlus. Mr. Lee also serves as president of Hermosa Property, Inc., the landlord of the premises subject to the Sublease. The
Sublease was considered by the Company in accordance with the Company’s Related Party Transaction and Procedures Policy,
and approved by the disinterested members of the Board.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>11.
Sales Concentration</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Net
product sales were $1,909,000 and $1,774,000 for the years ended July 31, 2019 and 2018, respectively. For the year ended July
31, 2019, one individual customer accounted for 15%, and two individual customers accounted for 11% of our net product
sales. No other individual customer accounted for 10% or more of our net product sales. For the year ended July 31, 2018, three
individual customers accounted for 20%, 16% and 11%, of our net product sales, respectively. No other individual customer accounted
for 10% or more of our net product sales. For the years ended July 31, 2018 and 2017, all net product sales occurred in the United
States.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>12.
Income Taxes</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
file federal and state consolidated tax returns with our subsidiaries. Our income tax provision for the years ended July 31, 2019
and 2018 was $1,650; the minimum state franchise taxes we pay regardless of income or loss.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At
July 31, 2019, we had federal and state tax net operating loss carry-forwards of approximately $108.3 million and $62.1 million,
respectively. At July 31, 2018, we had federal and state tax net operating loss carry-forwards of approximately $105.2 million
and $60.5 million, respectively. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation
due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the
Internal Revenue Code as well as similar state provisions. These ownership changes may limit the amount of net operating loss
carry-forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change,
as defined by Section 382 of the Internal Revenue Code results from a transaction or series of transactions over a three-year
period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders
or public groups. Since our formation, we have raised capital through the issuance of capital stock on several occasions (both
before and after our initial public offering in 1996) which, combined with the purchasing stockholders’ subsequent disposition
of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent
disposition. While we do not believe that we have experienced an ownership change, the pertinent tax rules related thereto are
complex and subject to varying interpretations, and thus complete assurance cannot be provided that the taxing authorities would
not take an alternative position.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our
current federal tax loss carry-forwards begin expiring in the year ended July 31, 2020 and, unless previously utilized, all but
$3.1 million will completely expire in the year ending July 31, 2038. The $3.1 million can be carried forward indefinitely. Our
state tax loss carry-forwards began to expire in the year ending July 31, 2029, and will completely expire in the year ending
July 31, 2037.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Significant
components of our deferred tax assets are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">Net operating loss carry-forward</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26,940,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26,170,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Stock options and warrants</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,870,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,590,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Other temporary
differences</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(130,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(130,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Total deferred tax assets</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">28,680,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">28,630,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Valuation allowance
for deferred tax assets</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(28,680,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(28,630,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Net
deferred tax assets</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
reconciliation of income taxes computed using the statutory income tax rate, compared to the effective tax rate, is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">Federal tax benefit at the
expected statutory rate</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21.0</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26.4</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">State income tax, net of federal tax
benefit</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.4</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">32.5</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Expired net operating loss carryforwards</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(20.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-family: Times New Roman, Times, Serif">Other</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(20.5</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2.9</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Rate change adjustment</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(175.4</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Change in state tax rates</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Permanent items</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Valuation allowance</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(0.9</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">139.4</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Income tax benefit
- effective rate</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Following
authoritative guidance, we recognize the tax benefit from a tax position if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our
practice is to recognize interest and/or penalties related to income tax matters in income tax expense; however we have had no
accrued interest or penalties at either July 31, 2019 or July 31, 2018. We are subject to income taxes in the United States and
in various states, and our historical tax years remain subject to future examination by the U.S. and state tax authorities. During
the years ended July 31, 2019 and 2018, we did not record any activity related to our unrecognized tax benefits.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few
exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for tax years
prior to 2012. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where
net operating losses were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company
is not currently under examination by the IRS or state taxing authorities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Property,
plant, and equipment consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Computers and equipment</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,072,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,064,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Furniture
and fixtures</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,022,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,085,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Less accumulated
depreciation</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(731,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(624,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">362,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Patents
consist of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Patents</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">3,504,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">3,500,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Less accumulated
amortization</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,975,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,842,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">529,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">658,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At
July 31, 2019, future patent amortization expense is expected to be as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 80%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2020</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">87,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2021</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">76,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2022</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">48,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2023</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">42,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2024</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">42,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Thereafter</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">234,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">529,000</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Future
minimum annual lease payments for our primary facility as of July 31, 2019 are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 80%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">37,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">2020</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">14,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">51,000</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our warrant activity and related data is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 78%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">8,303,836</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Issued</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(5,329,220</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Expired/Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(113,520</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,861,096</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Issued</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Exercised</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2,399,999</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Expired/Cancelled</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,097</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following table summarizes information related to warrants outstanding at July 31, 2019:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Expiration</font></td><td style="font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Exercise</font></td><td style="font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Date</font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Price</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; text-align: center"><font style="font-family: Times New Roman, Times, Serif">08/29/19</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.75</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 16%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">133,332</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">12/01/21</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">58,824</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">12/01/21</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.28</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">117,647</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif">01/23/22</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.25</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">117,647</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: center; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">01/23/22</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="padding-bottom: 1.5pt; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1.28</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">33,647</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: center; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt; text-align: right"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">461,097</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of our restricted stock unit activity and related data is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Shares</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 78%"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2017</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,035,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">750,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Vested</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(375,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(885,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2018</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,525,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Granted</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">725,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Vested</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(206,250</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(131,250</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Outstanding at July 31, 2019</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,912,500</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Significant
components of our deferred tax assets are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">July
31,</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">Net operating loss carry-forward</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26,940,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26,170,000</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Stock options and warrants</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,870,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">2,590,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Other temporary
differences</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(130,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(130,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Total deferred tax assets</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">28,680,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">28,630,000</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Valuation allowance
for deferred tax assets</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(28,680,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(28,630,000</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt"><font style="font-family: Times New Roman, Times, Serif">Net
deferred tax assets</font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A
reconciliation of income taxes computed using the statutory income tax rate, compared to the effective tax rate, is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2019</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="font-weight: bold; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">2018</font></td><td style="padding-bottom: 1.5pt; font-weight: bold"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">Federal tax benefit at the
expected statutory rate</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">21.0</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="width: 2%"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">26.4</font></td><td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">State income tax, net of federal tax
benefit</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.4</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">32.5</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Expired net operating loss carryforwards</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(20.0</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-family: Times New Roman, Times, Serif">Other</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(20.5</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(2.9</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Rate change adjustment</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(175.4</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">Change in state tax rates</font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Permanent items</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Valuation allowance</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(0.9</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">139.4</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Income tax benefit
- effective rate</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td><td style="padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"><font style="font-family: Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">0.0</font></td><td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">%</font></td></tr></table>
106000
106000
135000
179000
3504000
3500000
87000
76000
48000
42000
42000
234000
30000
39000
147000
158000
177000
197000
1022000
1085000
1072000
1064000
21000
21000
111000
121000
2333
37000
14000
51000
731000
624000
500000
1000000
250000
35000
290000
250000
500000
500000
840000
746666
74666
2017-09-25
2019-08-29
2021-12-01
2021-12-01
2022-01-23
2022-01-23
P1Y
P1Y
0.065
0.065
500000
500000
4000
4000
1120633
1120633
461097
2861096
8303836
133332
58824
117647
117647
33647
2399999
5329220
113520
725000
500000
450000
300000
P2Y
P3Y
P10Y
0.50
We issued 300,000 performance based RSUs to third-party consultants. We currently do not expect the 300,000 RSUs to vest.
300000
1912500
456250
207000
P1Y9M18D
1456250
1387000
1062000
834000
1525000
203000
489000
4000000
2026-02-04
P10Y
P10Y
1153000
2071000
5000000
6354792
200000
100000
2245000
The options vest over a two year period and carry a ten year term
The options vest monthly over a two year period and carry a five year term.
The options vest between one and two years and carry a term between five and ten years.
740000
P4Y7M6D
P3Y
1.04
P4Y3M26D
0.52
0.44
312000
P1Y10M17D
1912500
1525000
2035000
725000
750000
206250
375000
131250
885000
7363125
7626093
5759843
300000
2245000
562968
378750
1.04
1.09
1.25
0.52
1.47
1.96
1120000
0.7567
0.718
0.0263
0.0232
0.000
0.000
P4Y9M18D
P3Y8M9D
We entered into an initial five-year manufacturing supply agreement with Intercon Chemical Company (ICC) with a three-year renewal term option (the "Manufacturing Supply Agreement"). The agreement consists of manufacturing, packaging, and distribution of PURE's SDC-based products
65000
86000
2333
1650
1650
108300000
105200000
3100000
62100000
60500000
0.50
0.210
0.264
26940000
26170000
1870000
2590000
-130000
-130000
28680000
28630000
28680000
28630000
0.004
0.325
-0.200
-0.205
-0.029
1.754
-0.009
1.394
0.000
0.000
2975000
2842000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Basis
of Presentation</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying consolidated financial statements include the consolidated accounts of PURE Bioscience, Inc. and its wholly owned
subsidiary, ETIH2O Inc., a Nevada corporation. ETIH2O Inc. has no business and no material assets or liabilities and there have
been no significant transactions related to ETIH2O Inc. during the periods presented in the consolidated financial statements.
All inter-company balances and transactions have been eliminated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Use
of Estimates</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Cash
and Cash Equivalents</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Cash
and cash equivalents consist of cash and highly liquid investments with original maturities from the purchase date of three months
or less.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Restricted
Cash</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company is required to maintain $75,000 in a restricted certificate of deposit account in order to fully collateralize four revolving
credit card accounts.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Fair
Value of Financial Instruments</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Certain
of our financial instruments—including cash and cash equivalents, accounts receivable, inventories, prepaid expenses, accounts
payable, accrued liabilities, and deferred rent are carried at cost, which is considered to be representative of their respective
fair values because of the short-term nature of these instruments. Our derivative liabilities were carried at estimated
fair value (See Notes 5 and 6 to these consolidated financial statements).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Accounts
Receivable</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Trade
accounts receivable are recorded net of allowances for doubtful accounts. Estimates of allowances for doubtful accounts are determined
based on historical payment patterns and individual customer circumstances. The allowance for doubtful accounts was zero at July
31, 2019 and 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Inventories</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Property,
Plant and Equipment</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Property,
plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. The estimated useful lives of our property, plant, and equipment range from three to
ten years. Capitalized costs associated with leasehold improvements are depreciated over the lesser of the useful life of the
asset or the remaining life of the lease. Depreciation is generally included in selling, general and administrative expense. Depreciation
related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time
inventory is sold.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Patents</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
have filed a number of patent applications with the United States Patent and Trademark Office and in foreign countries. Certain
legal and related costs incurred in connection with pending patent applications have been capitalized. Costs related to successful
patent applications are amortized over the lesser of the remaining useful life of the related technology or the remaining patent
life, commencing on the date the patent is issued. Capitalized costs related to patent applications are expensed in the period
in which a determination is made not to pursue such applications.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Impairment
of Long-Lived Assets</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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. There were no patent impairments during the years ended July 31, 2019 or 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Revenue
Recognition</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">1.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Identify
the contract with the customer</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">2.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Identify
the performance obligations in the contract</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">3.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Determine
the transaction price</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">4.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Allocate
the transaction price to the performance obligations in the contract</font></td></tr>
<tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">5.</font></td>
<td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Recognize
revenue when (or as) each performance obligation is satisfied</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our
direct customer and distributer 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i>Variable
Consideration</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i>Practical
Expedient</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
elected a practical expedient to expense sales commissions when the commissions are incurred because the amortization period would
have been one year or less. These costs are recorded as Selling, general and administrative expense on our Consolidated Statements
of Operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Research
and Development Costs</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Research
and development costs are expensed as incurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Share-Based
Compensation</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
grant equity-based awards under share-based compensation plans. 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Comprehensive
Loss</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Comprehensive
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 years ended
July 31, 2019 and 2018, our comprehensive loss consisted only of net loss.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Income
Taxes</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
recognize deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the
amounts at which they are carried in the financial statements based upon the enacted tax rates in effect for the year in which
the differences are expected to reverse. A valuation allowance is established to reduce deferred tax assets to the amount expected
to be realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Net
Loss Per Share</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 antidilutive effect. For the years ended July 31, 2019 and 2018, 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 9,736,722 and 12,012,189, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Recent
Accounting Pronouncements</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2014, the FASB issued Topic 606, which supersedes most existing revenue recognition guidance in U.S. generally accepted accounting
principles (“GAAP”), including most industry-specific guidance. The standard requires an entity to recognize the amount
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard was
originally effective for public companies for annual reporting periods beginning after December 15, 2016, with no early application
permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred by one year
the effective date for all entities, with application permitted as of the original effective date. The standard allows for either
a full retrospective or modified retrospective method of adoption. We adopted the new standard for the fiscal year beginning August
1, 2018 using the modified retrospective application method. Under this method, entities recognize the cumulative impact of applying
the new standard at the date of adoption without restatement of prior periods presented. The cumulative effect of applying the
new standard to contracts that were not completed as of August 1, 2018 did not have a material impact on our consolidated financial
position, results of operations, or cash flows.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
new standard also requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising
from customer contracts. Topic 606 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“Topic
605”). While results for reporting periods beginning after August 1, 2018 are presented under Topic 606, all prior period
amounts are not adjusted and continue to be reported under the accounting standards in effect during these prior periods. The
accounting policies for revenue recognition for periods prior to August 1, 2018 are described in “Note 2. Summary of Significant
Accounting Policies” of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for
the year ended July 31, 2018. Adoption of this ASC did not have a material impact on our consolidated financial statements. Refer
to the revenue recognition disclosure above.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
July 2017, the Financial Accounting Standards Board (“FASB”) issued a two-part Accounting Standards Update (“ASU”)
No. 2017-11, I. Accounting for Certain Financial Instruments With Down Round Features and II. Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests With a Scope Exception (“ASU 2017-11”). ASU 2017-11 amends guidance in FASB ASC 260, Earnings Per Share,
FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging. The amendments in Part I of ASU
2017-11 change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round
features. The amendments in Part II of ASU 2017-11 re-characterize the indefinite deferral of certain provisions of Topic 480
that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting
effect. ASU 2017-11 is effective for public business entities for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018 with early adoption permitted. The adoption of this guidance had no impact on our financial
statements as all derivative liabilities were all exercised or expired as of July 31, 2018.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The standard clarifies the
presentation of restricted cash and cash equivalents and requires companies to include restricted cash and cash equivalents in
the beginning and ending balances of cash and cash equivalents on the statement of cash flows. The standard also requires additional
disclosures to describe the amount and detail of the restriction by balance sheet line item. The new standard was effective for
us on August 1, 2018. We adopted this standard using the retrospective transition method by restating the consolidated statements
of cash flows to include restricted cash of $75,000 in the beginning and ending cash, cash equivalents, and restricted cash balance.
Net cash flows for the fiscal year ended July 31, 2018, did not change as a result of including restricted cash with cash and
cash equivalents when reconciling the beginning-of-period and end-of-period amounts presented on the statements of cash flows.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
December 2017, the United States (“U.S.”) enacted the Tax Cuts and Jobs Act (the “2017 Act”), which changes
existing U.S. tax law and includes various provisions that are expected to affect public companies. The 2017 Act (i) changes U.S.
corporate tax rates, (ii) generally reduces a company’s ability to utilize accumulated net operating losses, and (iii) requires
the calculation of a one-time transition tax on certain previously unrepatriated foreign earnings and profits (“E&P”).
The 2017 Act will also impact estimates of a company’s deferred tax assets and liabilities. On December 22, 2017, the Securities
and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP
in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail
to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (“U.S. Tax Cuts and Jobs Act of 2017”).
This new law did not have a significant impact on our consolidated financial statements for the years ended July 31, 2019 and
2018 because we maintain a valuation allowance on the entirety of our deferred tax assets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which
provides clarity and guidance around which changes to the terms or conditions of a stock-based payment award require an entity
to apply modification accounting. The new standard was effective for annual reporting periods beginning after April 1, 2018, and
interim periods within those annual reporting periods. The adoption of this guidance had no impact on our financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In
June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment
Accounting, which aligns the measurement and classification guidance for share-based payment to non-employees with the guidance
for share-based payments to employees. Under the new guidance, the measurement period for equity-classified non-employee awards
will be fixed at the grant date. This update is effective for annual periods beginning after December 15, 2018, and interim periods
within those periods and early adoption is permitted. We elected to early adopt ASU No. 2018-07 during the fiscal year ended July
31, 2019. The adoption of this guidance had no material impact on our financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><i><u>Shipping
and Handling Costs</u></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Shipping
and handling costs incurred by us for product shipments are included in cost of goods sold and were minimal for the years ended
July 31, 2019 and 2018.</font></p>
0
0
P3Y
P10Y
9736722
12012189
45000
19000
We amended the lease of our primary facility in El Cajon, California under a noncancelable operating lease that now expires in December 2019.
118057
573057
198057
75000
75000
75000
2038-07-31
2037-07-31
829000
0.15
0.20
0.11
0.16
0.11
0.10
0.10
-1394000
-459000
1853000
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">The following table provides a reconciliation of the beginning and ending balances of the derivative liabilities for the year
ended July 31, 2018:
<b></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Fair Value of Significant Unobservable
Inputs (Level 3)</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: center"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font-family: Times New Roman, Times, Serif">Warrant</font></td>
<td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td>
<td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><font style="font-family: Times New Roman, Times, Serif">Liability</font></td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 79%; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Balance at July 31,
2017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td>
<td style="width: 18%; text-align: right"><font style="font-family: Times New Roman, Times, Serif">1,853,000</font></td>
<td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Issuances</font></td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Settlement of warrant liability</font></td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-family: Times New Roman, Times, Serif">(1,394,000</font></td>
<td style="text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1.5pt"><font style="font-family: Times New Roman, Times, Serif">Adjustments
to estimated fair value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: right"><font style="font-family: Times New Roman, Times, Serif">(459,000</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"><font style="font-family: Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-family: Times New Roman, Times, Serif">Balance
at July 31, 2018</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-family: Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-family: Times New Roman, Times, Serif">—</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
This Post-Effective Amendment is being filed to update the registration statement (the "Original Registration Statement") filed by PURE Bioscience, Inc. (the "Company", "we", "our" or "us") on February 6, 2017 and declared effective by the Securities and Exchange Commission on February 15, 2017, which registered for resale (i) up to 1,572,941 shares of common stock issued to the selling security holders in the registrant's private placement offering (the "Private Placement Offering"), which closed on December 1, 2016 and January 23, 2017 (the "Closings") and (ii) up to 1,572,941 shares of our common stock issuable upon the exercise of warrants (the "2017 Warrants") issued to the selling security holders in the Private Placement Offering, as amended pursuant to the Post-Effective Amendment No. 1 filed on August 25, 2017 and declared effective by the Securities Exchange Commission on September 1, 2017 ("POS AM 1"), Post-Effective Amendment No. 2 filed on October 26, 2017 and declared effective by the Securities Exchange Commission on October 31, 2017 ("POS AM 2") and Post-Effective Amendment No. 3 filed on October 25, 2018 and declared effective by the Securities Exchange Commission on October 31, 2018 ("POS AM 3", together with the Original Registration Statement, POS AM 1 and POS AM 2, the "Registration Statement"). This Post-Effective amendment updates the prospectus dated November 13, 2018 to reflect the filing of the Company's Annual Report on Form 10-K for the year ended July 31, 2019. All applicable registration fees were paid at the time of the original filing of the Registration Statement.
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