Significant Accounting Policies

9 Months Ended

Apr. 30, 2025

3. Significant Accounting Policies

Revenue Recognition

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

	1.	Identify the contract with the customer
	2.	Identify the performance obligations in the contract
	3.	Determine the transaction price
	4.	Allocate the transaction price to the performance obligations in the contract
	5.	Recognize revenue when (or as) each performance obligation is satisfied

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

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

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

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

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

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

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

A summary of the Company’s revenue by product type for the nine months ended April 30, 2025 and 2024 is as follows:

Summary of Revenue by Product

	2025		2024
	April 30,
	2025		2024
PURE Hard Surface	$	1,242,000	$	1,386,000
SILVÉRION		193,000		97,000
Revenue	$	1,435,000	$	1,483,000

A summary of the Company’s revenue by product type for the three months ended April 30, 2025 and 2024 is as follows:

	2025		2024
	April 30,
	2025		2024
PURE Hard Surface	$	468,000	$	350,000
SILVÉRION		21,000		90,000
Revenue	$	489,000	$	440,000

Variable Consideration

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

Use of Estimates

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

Net Loss Per Share

Basic net loss per common share is computed as net loss divided by the weighted average number of common shares outstanding for the period. The Company’s diluted net loss per common share is the same as its basic net loss per common share because the Company incurred a net loss during each period presented, and the potentially dilutive securities from the assumed exercise of all outstanding stock options, restricted stock units, and warrants would have an anti-dilutive effect. As of April 30, 2025 and 2024, stock options, shares issuable upon the conversion of debt, and shares issuable under restricted stock unit awards of 50,255,145 and 25,588,602, respectively, have been excluded from the computation of diluted shares outstanding.

	2025		2024
	April 30,
	2025		2024
Common stock options		10,060,000		8,355,625
Restricted stock units		742,500		712,500
Shares issuable upon the conversion of debt		39,452,645		16,520,477
Total		50,255,145		25,588,602

Inventory

Inventories are stated at the lower of cost or net realizable value, and net of a valuation allowance for potential excess or obsolete material. Cost is determined using the average cost method. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold.

Inventories consist of the following:

Schedule of Inventories

	April 30, 2025		July 31, 2024
Raw materials	$	22,000	$	4,000
Finished goods		109,000		52,000
Inventories	$	131,000	$	56,000

Property, Plant and Equipment

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. During the nine months ended April 30, 2024, management performed an impairment test and determined that its forecasted operations could no longer support $60,000 of computer software previously capitalized as fixed assets, and as such an impairment was recognized. There were no impairments during the nine months ended April 30, 2025.

Share-Based Compensation

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

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

Concentrations

Gross product sales. For the nine months ended April 30, 2025, two customers accounted for 13% and 10% of net product sales. For the three months ended April 30, 2025, no customers accounted for greater than 10% of net product sales. For the three and nine months ended April 30, 2024, one customer accounted for 20% and 23% of net product sales, respectively.

Accounts receivable. As of April 30, 2025, no customers comprised greater than 10% of total accounts receivable. As of July 31, 2024, the Company had accounts receivable from two customers that comprised 12% and 13% of total accounts receivable, respectively.

Purchases. For the three months ended April 30, 2025, three vendors accounted for 30%, 11% and 10% of the Company’s purchases, respectively. For the nine months ended April 30, 2025, two vendors accounted for 26% and 10% of the Company’s purchases, respectively. For the three months ended April 30, 2024, one vendor accounted for 29% of the Company’s purchases. For the nine months ended April 30, 2024, two vendors accounted for 19% and 10% of the Company’s purchases.

Accounts payable. As of April 30, 2025, the Company’s largest vendor accounted for 14% of total trade accounts payable. As of July 31, 2024, no vendors accounted for 10% or more of the total accounts payable.

Segments

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

PURE BIOSCIENCE, INC. 10-Q