8. Stockholders’ Equity

Preferred Stock

As of July 31, 2015, 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, 2015 and 2014, there were no shares of preferred stock issued and outstanding.

Common Stock

As of July 31, 2015, 100,000,000 shares of common stock with a par value of $0.01 per share are authorized for issuance.

Private Placements

During the fiscal year ended July 31, 2015, we issued a total of 10,086,025 shares of common stock and warrants to purchase 4,652,312 shares of common stock for gross proceeds of $7,493,000. After deducting fees of $92,000, the net proceeds to us were $7,401,000. The warrants have a five-year term, are exercisable immediately, and have exercise prices ranging from $0.01 to $0.75 per share. A fair value of $4,397,000 was estimated for the warrants using the Black-Sholes valuation method using a volatility of 133.74%, an interest rate of 1.50% and a dividend yield of zero. We determined that the warrants issued in connection with the private placements were equity instruments and did not represent derivative instruments.

During the three months ended July 31, 2014, we completed private placements pursuant to which we sold 511,440 shares of our common stock, resulting in net proceeds of $455,000.

During the three months ended April 30, 2014, we completed private placements pursuant to which we sold 1,575,000 shares of our common stock, resulting in approximately $1,545,000 in aggregate gross proceeds to the Company. After deducting fees of $47,000, the net proceeds to us were $1,498,000.

During the three months ended January 31, 2014, we completed private placements pursuant to which we sold 1,611,817 shares of our common stock, resulting in approximately $1,514,000 in aggregate gross proceeds to the Company. After deducting fees of $13,000, the net proceeds to us were $1,501,000.

On October 14 and October 16, 2013, we completed private placements pursuant to which we sold 2,441,270 shares of our common stock. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $1,831,000 in aggregate gross proceeds to the Company. After deducting fees of $49,000, the net proceeds to us were $1,782,000. In addition, between October 17, 2013 and October 31, 2013, we sold 442,667 shares of our common stock in private placements. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $332,000 in aggregate gross proceeds to the Company. After deducting fees of $8,000, the net proceeds to us were $324,000. During December 2013, we amended the subscription agreement for an investor who participated in the $0.75 private placements. As a result, the per share purchase price of $0.75 was reduced to $0.70 per share, resulting in the issuance of an additional 218,938 shares of common stock. We recorded $285,000 of expense associated with the price adjustment in the other share-based expenses section of the consolidated statement of operations. After the purchase price adjustment to $0.70 per share, the total shares issued under the October private placements was 3,102,875, for aggregate net proceeds of $2,106,000.

In August 2013, we completed a private placement pursuant to which we sold 5,500,000 shares of our common stock. The shares were sold at a per share purchase price of $0.20, resulting in approximately $1,100,000 in aggregate gross proceeds to the Company. After deducting fees of $43,000, the net proceeds to us were $1,057,000.

In October 2014, we filed a resale registration statement on Form S-1 with the SEC, which was declared effective on January 12, 2015, registering up to 20,256,280 shares of our common stock in connection with the resale of:

up to 13,470,324 shares of common stock issued to certain of the selling security holders in the registrant’s private placement offerings, which occurred during the fiscal year ended July 31, 2014 and the three months ended October 31, 2014;

up to 4,652,313 shares of our common stock issuable upon the exercise of warrants issued to certain of the selling security holders in the offerings that occurred on August 27, 2014 and August 29, 2014;

up to 2,033,643 shares of our common stock issued to certain of the selling stockholders for services provided to the Company during the fiscal year ended July 31, 2014; and

up to 100,000 shares of our common stock issuable upon the exercise of warrants issued to certain of the selling security holders for services provided to the Company during the fiscal year ended July 31, 2014.

Corporate Governance Restructuring Activity

The following transactions occurred on August 13, 2013:

We entered into a two-year service agreement with Pillar Marketing Group, Inc. for general advisory services with respect to corporate finance and capital raising activities, merger and acquisition transactions, and other related endeavors. In accordance with the agreement with Pillar we issued 250,000 shares of common stock, with a value of $175,000. The value was capitalized to prepaid expense and is being amortized over the term of the agreement. During the fiscal years ended July 31, 2015 and 2014, we recognized $89,000 and $85,000 of expense related to these services, respectively. We also issued 300,000 shares of registered common stock to the principal of Pillar for certain corporate reorganization services, valued at $210,000. Pillar also received a onetime payment of $150,000 for certain corporate reorganization activities previously provided. The fair value of the stock issued and the onetime payment was expensed to restructuring costs.

We issued 300,000 shares of common stock to Bibicoff & McInnis for investor relations services related to restructuring activities, valued at $210,000. On issuance, the $210,000 was expensed to restructuring costs.

We issued 250,000 shares of common stock, with a value of $175,000, for corporate finance and restructuring activities to Wulff Services, Inc. Wulff Services, Inc. is primarily owned by our prior Chief Financial Officer / Chief Operation Officer, Peter C. Wulff. In addition, Wulff Services, Inc. received a onetime payment of $75,000 related to the corporate finance and restructuring efforts. The fair value of the stock issued and the onetime payment was expensed to restructuring costs.

We issued 300,000 shares of common stock, with a value of $210,000, to Donna Singer, per Ms. Singer’s separation agreement, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act. Ms. Singer was the Company’s Executive Vice President and served as a member of the Board. Additionally, as part of this issuance, we granted certain registration rights with respect to the shares issued to Ms. Singer. On issuance, the $210,000 was expensed to restructuring costs (See Note 7).

We issued 850,000 shares of common stock, with a value of $595,000, to Michael L. Krall, per Mr. Krall’s separation agreement, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act. Mr. Krall was the Company’s Chief Executive Officer and served as a member of the Board. Additionally, as part of this issuance, we granted certain registration rights with respect to the shares issued to Mr. Krall. On issuance, the $595,000 was expensed restructuring costs (See Note 7).

Other Activity

During the fiscal year ended July 31, 2015, we issued 1,715,000 shares of common stock to employees, directors and officers for restricted stock units that vested, based on service and performance conditions. In addition, we issued 250,000 shares of common stock, valued at $206,000 for investor relations services. The value was capitalized to prepaid expense and is being amortized over a one year term. During the fiscal year ended July 31, 2015, we recognized $27,000 of expense related to these services.

During the fiscal year ended July 31, 2014, we paid approximately $160,000, and issued 415,643 shares of common stock, to Gary D. Cohee and/or his affiliates for investor relations and financial advisor services, valued at $376,000, pursuant to the terms of the director service agreement with Mr. Cohee. The amounts paid and the fair value of the stock issued were offset to additional paid-in capital. Mr. Cohee is a member of our Board.

In addition, during the fiscal year ended July 31, 2014, we issued 15,000 shares of common stock to a former employee, valued at $20,000, and issued 20,000 shares of common stock, valued at $25,000, based on a Settlement Agreement with a former director, for services previously provided.

Warrants

During the fiscal year ended July 31, 2015, we received $4,000 from the exercise of warrants to purchase 413,332 shares of our common stock.

During the fiscal year ended July 31, 2014, we received $337,000 from the exercise of warrants to purchase 518,000 shares of our common stock. In addition, we issued 100,000 warrants in exchange for investor relations services, valued at $121,000 (based on the Black-Scholes Option Pricing Model, assuming no dividend yield, volatility of 154.07% and a risk free interest rate of 0.79%). The warrants vested immediately and were expensed on issuance. The warrants were classified as equity instruments because they do not contain any anti-dilution provisions.

In connection with the April 24, 2013 private placement, the Company granted certain registration rights, under which the Company agreed to file a registration statement covering the resale of the shares of common stock sold in the financing, as well as those shares issuable upon exercise of the warrants. In the event that we did not file to register for resale the shares and warrant shares issued as part of the April 24, 2013 private placement, within 45 days of the closing date, the Company was required to issue 100 warrant shares for each day that such filing is not completed, not to exceed 18,000 warrant shares. As of April 30, 2014, the shares and warrant shares had not been registered for resale. As a result, the private placement participant received the entire 18,000 warrant shares as of April 30, 2014. The expense associated with the warrants was $23,000 and is included in the other share-based expenses section of the consolidated statement of operations.

In addition, during the fiscal year ended July 31, 2014, there were net exercises on an aggregate of 122,711 warrants, which resulted in the issuance of 100,662 shares of our common stock. As these warrants were net exercised, as permitted under the respective warrant agreements, we did not receive any cash proceeds.

A summary of our warrant activity and related data is as follows:


		Shares
Outstanding at July 31, 2013		1,434,121
Issued		118,000
Exercised		(640,711)
Expired		(62,398)
Outstanding at July 31, 2014		849,012
Issued		4,652,312
Exercised		(413,332)
Expired		(52,836)
Outstanding at July 31, 2015		5,035,156

The following table summarizes information related to warrants outstanding at July 31, 2015:


Expiration	Exercise
Date	Price		Shares
01/13/16	$	3.52	81,280
06/26/16	$	0.50	41,667
07/10/16	$	0.50	50,000
12/14/16	$	3.61	25,000
12/24/16	$	0.20	9,709
02/24/17	$	1.00	100,000
09/17/17	$	1.38	113,520
01/24/18	$	0.83	375,000
08/29/19	$	0.75	4,238,980
			5,035,156

Restricted Stock Units

During the fiscal year ended July 31, 2015, we issued 1,715,000 shares of common stock to employees for restricted stock units that vested, based on performance and service conditions (See Note 9).

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


		Shares
Outstanding at July 31, 2013		—
Granted		6,230,000
Vested		(1,205,000)
Forfeited		(200,000)
Outstanding at July 31, 2014		4,825,000
Granted		600,000
Vested		(1,715,000)
Forfeited		(500,000)
Outstanding at July 31, 2015		3,210,000

Stock Options

In 2007, we adopted the PURE Bioscience 2007 Equity Incentive Plan, or the Plan, which 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 or the Board of Directors. The Plan is the only active plan pursuant to which options to acquire common stock or restricted stock awards can be granted and are currently outstanding. As of July 31, 2015, there were 136,596 shares of our common stock available for issuance under the Plan.

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


		Weighted-		Aggregate
		Average		Intrinsic
	Shares	Exercise Price		Value
Outstanding at July 31, 2013	443,755	$	9.52	$	—
Granted	300,000	$	1.40
Exercised	—	$	—
Cancelled	(281,412)	$	10.01
Outstanding at July 31, 2014	462,343	$	3.95	$	22,000
Granted	—	$	—
Exercised	—	$	—
Cancelled	(28,125)	$	2.20
Outstanding at July 31, 2015	434,218	$	4.07	$	—

The weighted-average remaining contractual term of options outstanding at July 31, 2015 was approximately 3.32 years.

At July 31, 2015, 309,218 options were exercisable. These options had a weighted-average exercise price of $5.14, an aggregate intrinsic value of zero, and a weighted average remaining contractual term of approximately 4.1 years.

There we no stock options granted during the fiscal year ended July 31, 2015. The weighted-average grant date fair value of equity options granted during the years ended July 31, 2015 and 2014 was zero and $0.76, respectively.