U.S. Securities and
Exchange Commission 
Washington, D.C. 20549

Form 10-QSB

(Mark One)

| | [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the period ended April 30, 2006
| | --- | ---------------------------------------------------------------------------------------------------------------------

| | [  ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No
Fee Required] For the transition period from______ to _______
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------

Commission
File number 0-21019

PURE Bioscience (Name of small business
issuer in its charter)

|                                                                                         |                                  
|---------------------------------------------------------------------------------------- | ---------------------------------
|California                                                                               | 33-0530289                       
|(State or other jurisdiction of incorporation or     
                     organization) | (IRS Employer Identification No.)

1725 Gillespie Way, El
Cajon, California 92020(Address of principal
executive offices)

619 596 8600Issuers telephone
number

Check
whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X   No

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes XNo

State
the number of shares outstanding of each of the issuers classes of common equity as
of the latest practicable date: 23,500,002 as of June 13, 2006.

---



Index

|                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part I          
                
                
                
                
                
                
Part II | Financial Information
Item 1.                       
                              
                              
                              
Item 2.                       
Item 3.                       
                     
Other Information
Item 1.                       
Item 2.                       
Item 3.                       
Item 4.                       
Item 5.                       
Item 6.                       
               
Signatures and Certifications | Financial Statements
Balance Sheets as of July 31, 2005 and April 30, 2006
Statements of Operations for the three and nine months ended April 30,, 2006 and 2005
Statements of Cash Flows for then nine months ended April 30, 2006 and 2005
Management's Discussion and Analysis of Financial Condition and Results of Operations
Controls and Procedures
Legal Proceedings
Changes in Securities
Defaults Upon Senior Securities: None
Submission of Matters to a Vote of Security Holders: None
Other Information
Exhibits and Reports on Form 8-K
|                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

2

---



CONSOLIDATED BALANCE
SHEETS

---

|                                                         | (Unaudited)
April 30
2006 |  | July 31
2005 |            
|-------------------------------------------------------- | ------------------------- |  | ------------ | -----------
|ASSETS                                                   |                           |  |              |            
|Current Assets                                           |                           | 
|Cash and cash equivalents                                |                           |  | $            | 5,798,618  
|Accounts receivable, net of allowance for doubtful       |                           | 
|accounts of $ 8,000 at July 31, 2005 and                 |                           | 
|$8,000 at April 30, 2006                                 |                           |  |              | 70,826     
|Other receivables                                        |                           |  |              |           
|Notes receivable                                         |                           |  |              |           
|Inventories                                              |                           |  |              | 128,172    
|Prepaid expenses                                         |                           |  |              | 59,776     
|Interest receivable                                      |                           |  |              |           
|                                                         |                           |  |              |            
|Total current assets                                     |                           |  |              | 6,057,392  
|                                                         |                           |  |              |            
|Property, Plant and Equipment                            |                           | 
|Property, plant and equipment                            |                           |  |              | 196,146    
|                                                         |                           |  |              |            
|Total property, plant and equipment                      |                           |  |              | 196,146    
|                                                         |                           |  |              |            
|Other Assets                                             |                           | 
|Prepaid consulting                                       |                           |  |              | 473,711    
|Deposits                                                 |                           |  |              | 9,744      
|Patents and licenses                                     |                           |  |              | 2,076,736  
|                                                         |                           |  |              |            
|Total other assets                                       |                           |  |              | 2,560,191  
|                                                         |                           |  |              |            
|Total assets                                             |                           |  | $            | 8,813,729  
|                                                         |                           |  |              |            
|LIABILITIES AND STOCKHOLDERS' EQUITY                     |                           | 
|Current Liabilities                                      |                           | 
|Accounts payable                                         |                           |  | $            | 125,905    
|Accrued liabilities                                      |                           |  |              | 193,173    
|Income taxes payable                                     |                           |  |              |           
|                                                         |                           |  |              |            
|Total current liabilities                                |                           |  |              | 319,078    
|                                                         |                           |  |              |            
|Commitments and Contingencies                            |                           | 
|Temporary equity (See Note 4)                            |                           |  |              | 2,347,612  
|                                                         |                           |  |              |            
|Total commitments and contingencies                      |                           |  |              | 2,347,612  
|                                                         |                           |  |              |            
|Total liabilities                                        |                           |  |              | 2,666,690  
|                                                         |                           |  |              |            
|Stockholders' Equity                                     |                           | 
|Preferred Stock                                          |                           |  |              |           
|Class A common stock, no par value:                      |                           | 
|50,000,000 shares authorized                             |                           | 
|23,615,502 issued and outstanding at April 30, 2006, and |                           | 
|17,713,306 issued and outstanding at July 31, 2005       |                           |  |              | 24,669,419 
|Warrants:                                                |                           | 
|978,127 issued and outstanding at April 30, 2006, and    |                           | 
|640,929 issued and outstanding at July 31, 2005          |                           |  |              | 432,498    
|Accumulated deficit                                      |                           |  |              | (18,954,878
|                                                         |                           |  |              |            
|Total stockholders' equity                               |                           |  |              | 6,147,039  
|                                                         |                           |  |              |            
|Total liabilities and stockholders' equity               |                           |  | $            | 8,813,729  
|                                                         |                           |  |              |            

The accompanying notes
are an integral part of these financial statements

3

---



CONSOLIDATED STATEMENTS
OF OPERATIONS

---

|                                             | For the Nine Months Ended
April 30 |  | For the Three Months Ended
April 30 |           
|-------------------------------------------- | ---------------------------------- |  | ----------------------------------- | ----------
|
|Net revenues                                 |                                    |  | $                                   | 158,925   
|Cost of sales                                |                                    |  |                                     | 66,585    
|                                             |                                    |  |                                     |           
|Gross profit                                 |                                    |  |                                     | 92,340    
|                                             |                                    |  |                                     |           
|Selling expenses                             |                                    |  |                                     | 410,418   
|General and administrative expenses          |                                    |  |                                     | 1,278,435 
|Research and development                     |                                    |  |                                     | 815,958   
|                                             |                                    |  |                                     |           
|Total operating costs                        |                                    |  |                                     | 2,504,811 
|                                             |                                    |  |                                     |           
|Loss from operations                         |                                    |  |                                     | (2,412,471
|                                             |                                    |  |                                     |           
|Other income and (expense):                  |                                    | 
|Interest income                              |                                    |  |                                     | 24,904    
|Interest expense                             |                                    |  |                                     | (460      
|Other                                        |                                    |  |                                     | (12,115   
|                                             |                                    |  |                                     |           
|Total other income (expense)                 |                                    |  |                                     | 12,329    
|                                             |                                    |  |                                     |           
|Loss from continuing operations              |                                    |  |                                     | (2,400,142
|Discontinued operations:                     |                                    | 
|Income from discontinued operations          |                                    |  |                                     |          
|                                             |                                    |  |                                     |           
|Net loss before taxes                        |                                    |  |                                     | (2,400,142
|Income tax provision                         |                                    |  |                                     |          
|                                             |                                    |  |                                     |           
|Net loss after taxes                         |                                    |  | $                                   | (2,400,142
|                                             |                                    |  |                                     |           
|Net loss per common share, basic and diluted |                                    | 
|Continuing operations                        |                                    |  | $                                   | (0.13     
|Discontinued operations                      |                                    |  |                                     |          
|Income tax provision                         |                                    |  |                                     |          
|                                             |                                    |  |                                     |           
|Net loss                                     |                                    |  | $                                   | (0.13     
|                                             |                                    |  |                                     |           

CONSOLIDATED STATEMENTS
OF ACCUMULATED DEFICITS

---

|                             | (Unaudited)
                                                                      Year-to-Date 
                                                                         Ended  
                                                                       April 30  
                                                                          2006 |  | Year  
 Ended 
July 31
 2005 |             |   |   |             |  
|---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | - | ----------- | -
|Balance, beginning of period |                                                                                                                                                                                                                                                                                                                                                   |  | $                            | (16,554,736 | ) | $ | (16,237,666 | )
|                             |                                                                                                                                                                                                                                                                                                                                                   |  |                              |             |   |   |             |  
|Net income (loss)            |                                                                                                                                                                                                                                                                                                                                                   |  |                              | (2,400,142  | ) |   | (317,070    | )
|                             |                                                                                                                                                                                                                                                                                                                                                   |  |                              |             |   |   |             |  
|Balance, end of period       |                                                                                                                                                                                                                                                                                                                                                   |  | $;                           | (18,954,878 | ) | $ | (16,554,736 | )
|                             |                                                                                                                                                                                                                                                                                                                                                   |  |                              |             |   |   |             |  

The accompanying notes
are an integral part of these financial statements

4

---



CONSOLIDATED STATEMENTS
OF CASH FLOWS

---

|                                                                             | For the Nine Months Ended
April 30 | 
|---------------------------------------------------------------------------- | ---------------------------------- | 
|
|Cash flows from operating activities:                                        |                                    | 
|                                                                             |                                    | 
|Net loss                                                                     |                                    | 
|                                                                             |                                    | 
|Adjustments to reconcile net income to net cash                              |                                    | 
|provided by operating activities:                                            |                                    | 
|Amortization                                                                 |                                    | 
|Depreciation                                                                 |                                    | 
|Services and interest paid for with stock and options                        |                                    | 
|Pre-tax income from discontinued operations                                  |                                    | 
|                                                                             |                                    | 
|Changes in assets and liabilities:                                           |                                    | 
|Accounts receivable                                                          |                                    | 
|Other receivables                                                            |                                    | 
|Notes receivable                                                             |                                    | 
|Prepaid expense                                                              |                                    | 
|Interest receivable                                                          |                                    | 
|Inventory                                                                    |                                    | 
|Accounts payable                                                             |                                    | 
|Accrued cash liabilities                                                     |                                    | 
|Income tax payable                                                           |                                    | 
|                                                                             |                                    | 
|Net cash (used) in operating activities                                      |                                    | 
|                                                                             |                                    | 
|Cash flows from investing activities                                         |                                    | 
|                                                                             |                                    | 
|Investment in capitalized patents and licenses                               |                                    | 
|Purchase of property, plant and equipment                                    |                                    | 
|                                                                             |                                    | 
|Net cash (used) in investing activities                                      |                                    | 
|                                                                             |                                    | 
|Cash flows from financing activities                                         |                                    | 
|                                                                             |                                    | 
|Proceeds from short-term loans                                               |                                    | 
|Payment of short-term loans                                                  |                                    | 
|Proceeds from sale of common stock (including temporary equity)              |                                    | 
|                                                                             |                                    | 
|Net cash provided by financing activities                                    |                                    | 
|                                                                             |                                    | 
|Cash flows from discontinued operations:                                     |                                    | 
|                                                                             |                                    | 
|Cash flows from operation of Water Treatment Division                        |                                    | 
|                                                                             |                                    | 
|Net cash from discontinued operations                                        |                                    | 
|                                                                             |                                    | 
|Net increase (decrease) in cash and cash equivalents                         |                                    | 
|                                                                             |                                    | 
|Cash and cash equivalents at beginning of period                             |                                    | 
|                                                                             |                                    | 
|Cash and cash equivalents at end of period                                   |                                    | 
|                                                                             |                                    | 
|Supplemental disclosures of cash flow information                            |                                    | 
|Cash paid for interest                                                       |                                    | 
|Cash paid for taxes                                                          |                                    | 
|                                                                             |                                    | 
|Non-cash investing and financing activities:                                 |                                    | 
|Value of options issued in exchange for services - prepaid                   |                                    | 
|Temporary equity classified as a liability on the balance sheet (See Note 4) |                                    | 

The accompanying notes
are an integral part of these financial statements

5

---



# NOTES TO FINANCIAL
STATEMENTS

# Note 1. Financial
Statements

The financial statements included
herein have been prepared by PURE Bioscience (we, us) without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been condensed
or omitted as allowed by such rules and regulations, and we believe that the disclosures
are adequate to make the information presented not misleading. These financial statements
should be read in conjunction with our audited financial statements for the period ending
July 31, 2005 and their accompanying notes, as filed with the Securities and Exchange
Commission in our 10K-SB on October 31, 2005. While management believes the procedures
followed in preparing the financial statements included in this quarterly report on Form
10Q-SB are reasonable, the accuracy of the amounts are at least partially dependent upon
facts that will exist and results that will be accomplished by us later in the fiscal
year. The results of operations for the interim periods are not necessarily indicative of
the results of operations for the full year.

We believe that the accompanying
unaudited financial statements contain all adjustments (including normal recurring
adjustments) necessary to present fairly the operations and cash flows for the periods
presented.

# Note 2. Business Segment
and Sales Concentrations

In accordance with the provisions of
SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, certain
information may be disclosed based on the way we organize financial information for making
operating decisions and assessing performance. SFAS 131 requires that we apply standards
based on a management approach, and requires segmentation based upon our internal
organization and disclosure of revenue and operating income based upon internal accounting
methods. In determining operating segments, we have reviewed the current management
structure reporting to the chief operating decision-maker (CODM) and analyzed
the reporting the CODM receives to allocate resources and measure performance.

Our business activity was
historically divided, managed and conducted in two basic business segments; the Water
Treatment division, including Commercial Water and Residential Retail products and the
Nutripure Water Dealer program; and the Bioscience division, consisting of our silver
dihydrogen citrate antimicrobial and the Innovex line of pest control products. However,
in May 2005 we sold the assets of our Water Treatment Division to Maryland-based
Innovative Medical Services, LLC. In the financial statements included in this report, the
Water Treatment division is included as a Discontinued Operation in the Consolidated
Statements of Operations and Cash Flows presented for comparative purposes relating to the
periods ending April 30, 2005.

Subsequent to the sale of the Water
Treatment division, we have determined that based upon the end use of our products, the
value added processes made by us, the regulatory requirements, the customers and partners,
and the strategy required to successfully market finished products, we are operating in a
single segment.

During the nine months ended April
30, 2006, 88% of sales were made to three strategic partners that are also developing
markets for our products. 42% of sales during the first nine months of the current fiscal
year were made to U.S. domestic customers, and 58% were made to international customers.

# Note 3. Reclassifications

Certain reclassifications have been
made to previously reported statements to conform to our current financial statement
format.

# Note 4. Financing Events

On March 27, 2006, we conducted a
private placement in which we issued 3,952,209 shares of common stock at $1.65 per share
to accredited investors, for a total of $6,521,145. Net proceeds to us, after fees and
expenses, were $5,911,608. Taglich Brothers, Inc. acted as placement agent and in
accordance with the placement agent agreement, Taglich Brothers, Inc. received a cash fee
of $469,522 and a five year warrant to purchase 355,698 shares of our common stock at an
exercise price of $2.556. The fair value of the warrants at the time of the private
placement was $351,459 (based on the Black Scholes Option Pricing Model assuming no
dividend yield, volatility of 72.35% and a risk-free interest rate of 5.00%). Other cash
fees paid to third parties, for legal and other fees associated with the private
placement, were $140,014.

On April 24 2006, we filed a
registration statement with the Securities and Exchange Commission as required under the
placement agreement, for the resale of shares issued in the private placement. The
registration statement included all shares of common stock issued in the private
placement, as well as the shares to be issued upon the exercise of the warrants. Under the
terms of the placement agreement, as amended on April 21, 2006, if the registration
statement is not declared effective within 150 days of the filing date (April 24, 2006),
we will be subject to liquidated damage penalties. We will be obligated to pay to each
investor a cash penalty of two percent (2%) of their purchase price for each thirty (30)
day period, or any part thereof, beyond the 150 day period, until the registration
statement is declared effective; however the maximum cash payment to each investor is
thirty-six percent (36%) of such investors purchase price.

Following the guidance set forth in
EITF D-98, Classification and Measurement of Redeemable Securities, we have determined
that the maximum potential liquidated damage payment of 59.4 cents per share, or
$2,347,612, should be classified as temporary equity on the balance sheet. EITF D-98
requires the classification outside of permanent equity because the registration of the
common shares is not solely within our control. When the registration process is complete
and the common shares issued in the private placement are no longer subject to liquidated
damages, the remaining balance of temporary equity will be reclassified to permanent
equity.

Under the terms of the placement
agreement, as amended on April 21, 2006, there are no liquidated damage penalties
associated with the warrants, and the fair value of the warrants is therefore accounted
for as stockholders equity on the Balance Sheet as at April 30, 2006.

6

---



# Note 5. Common Stock

In November 2005, we sold 39,999
shares of common stock in a private placement to an accredited investor, for $0.75 per
share (a total value of $30,000). In December 2005, we issued 25,000 shares of common
stock valued at $19,250 ($0.77 per share, based on the market price of the stock at the
time services were rendered) in exchange for regulatory and consulting services. In the
same month we issued options on 50,000 shares in exchange for investor relations and
investment banking consulting services, at an exercise price of $0.75, valued at $17,229
(based on the Black Scholes Option Pricing Model assuming no dividend yield, volatility of
82.23% and a risk-free interest rate of 4.25%). Additionally, in December 2005 we issued
options on 50,000 shares in exchange for business development consulting services, at an
exercise price of $0.80, valued at $15,426 (based on the Black Scholes Option Pricing
Model assuming no dividend yield, volatility of 82.23% and a risk-free interest rate of
4.25%).

In January 2006, we sold 500,000
shares of unregistered common stock in a private placement to an unaffiliated, accredited
investor at $0.75 per share (a total value of $375,000). In the same month, we issued
options on 300,000 shares in exchange for investor relations and investment banking
consulting services, at an exercise price of $1.00, valued at $154,390 (based on the Black
Scholes Option Pricing Model assuming no dividend yield, volatility of 82.23% and a
risk-free interest rate of 4.25%).

Also during the quarter ended January
31, 2006, we agreed to issue an aggregate of 2,300,000 options to two newly elected
directors of the Company, related to two-year consulting agreements for domestic and
international business development, with vesting of all options in future periods subject
to performance under the consulting agreements. See Note 7 for more detail on the
accounting treatment of these option agreements.

In February 2006, we sold 500,000
shares of unregistered common stock in a private placement to a director of the Company,
at $0.90 per share. In the same month, there was a net exercise of an option on 15,000
shares of common stock that resulted in the issuance of 5,196 shares of common stock, and
we received $10,000 from the exercise of a warrant to purchase 33,333 shares of
unregistered common stock. Additionally, we issued options on 100,000 shares in exchange
for formulation, blending and packaging services, at an exercise price of $1.18, valued at
$64,060 (based on the Black Scholes Option Pricing Model assuming no dividend yield,
volatility of 72.35% and a risk-free interest rate of 5.00%), and we issued options on
25,000 shares in exchange for chemistry and formulation consulting services, at an
exercise price of $0.80, valued at $20,881 (based on the Black Scholes Option Pricing
Model assuming no dividend yield, volatility of 72.35% and a risk-free interest rate of
5.00%). Also in February 2006, we agreed to issue 2,000 shares of common stock in exchange
for retail marketing consulting services valued at $2,900.

In March 2006, we conducted a private
placement in which we issued 3,952,209 shares of common stock at $1.65 per share to
accredited investors, for a total of $6,521,145, resulting in net proceeds to us of
$5,911,608. In addition, the placement agent received a five year warrant to purchase
355,698 shares at an exercise price of $2.556. See Note 4 for further details of this
transaction.

Also in March 2006, we received
$12,500 from the exercise of an option on 25,000 shares of common stock, and $75,000 from
the exercise of an option on 50,000 shares of common stock. Additionally, we received
$41,040 from the exercise of an option on 72,000 shares of common stock issued under an
employee option plan.

In April 2006, there was a net
exercise of an option on 100,000 shares that resulted in the issuance of 63,640 shares of
common stock. We also received $40,810 from the exercise of an option on 77,000 shares of
common stock. In the same month, there was a net exercise of an option on 47,500 shares
under an employee stock option plan that resulted in the issuance of 41,496 shares of
common stock, and we received the following amounts from the exercise of options under
employee option plans: $2,500 from an option on 5,000 shares of common stock, $15,960 from
an option on 28,000 shares of common stock, and $8,250 from an option on 16,500 shares of
common stock. Additionally in April 2006, there were net exercises of options issued under
our Directors and Officers Option Plan on 418,460 shares which resulted in the issuance of
337,823 shares of common stock, and we also received $15,900 from the exercise by a
director of the Company of an option on 30,000 shares of common stock under the same plan.

# Note 6. Stock Option
Plans

In accordance with Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), we have chosen to continue to account for employee
stock-based compensation utilizing the intrinsic value method.
As permitted by SFAS 123, we have applied the methods of APB 25 and related interpretations in
accounting for stock options issued to employees.


The value of the
stock-based award is determined using a pricing model whereby compensation cost is the
excess of the fair value of the stock as determined by the model at grant date, or other
measurement date, over the amount an optionee must pay to acquire the stock. We account
for stock-based compensation to third parties for services by recording the fair value of
the stock options granted over the anticipated service period.

Had compensation cost for employee
stock options been determined based upon the fair value at the grant date for awards,
consistent with the methodology prescribed under FAS 123, our net loss in the nine months
ended April 30, 2006 would have been approximately $5,780,009 or $(0.20) per share on a
fully-diluted basis. The effect of applying FAS 123 on the nine months ended April 30,
2006 pro forma net loss is not necessarily representative of the effects on reported net
loss for the year ended July 31, 2006 or for future years due, among other things, to the
vesting period of the stock options and the fair value of additional stock options in
future periods.

Compensation cost of $418,777 for
stock-based compensation to third parties for services was charged to income in the nine
months ended April 30, 2006, including the amortization of prepaid options as discussed in
Note 7. The weighted average fair value of options and warrants issued to third parties
for services during the nine months ended April 30, 2006 is estimated at $0.31 per share,
using the Black-Scholes option-pricing model.

The weighted average fair value for
all options and warrants granted during the nine months ended April 30, 2006 is estimated
at $0.69 per share on the date of grant, using the Black-Scholes option-pricing model.
Assumptions used in calculating the fair value for options and warrants using the
Black-Scholes model during the nine months ended April 30, 2006 were: no dividend yield,
volatility of between 72.35% and 82.23%, and a risk-free interest rate of between 4.25%
and 5.00%.

A summary of stock option activity
during the period ended April 30, 2006 is as follows:

7

---



|                          | Number of
Shares |  | Weighted-Average
Exercise Price ($)
|------------------------- | ---------------- |  | -----------------------------------
|Balance at July 31, 2005  |                  |  |                                    
|Granted                   |                  |  |                                    
|Exercised                 |                  |  |                                    
|Forfeited                 |                  |  |                                    
|                          |                  |  |                                    
|Balance at April 30, 2006 |                  |  |                                    
|                          |                  |  |                                    

|               |  | Outstanding |  | Exercisable
|-------------- |  | ----------- |  | -----------
|
|$0.50 to $0.75 |  |             |  | 6,485,960  
|$0.80 to $1.20 |  |             |  | 1,800,000  
|$1.50 to $2.75 |  |             |  | 4,600,000  
|               |  |             |  |            
|               |  |             |  | 11,356,500 
|               |  |             |  |            

# Note 7. Prepaid
Consulting

During the quarter ended January 31,
2006, we entered into a two-year consulting agreement with Mr. Michael Sitton for domestic
and international business development, the compensation for which is a fee of $12,500 per
month and an option on two million shares of unregistered common stock, which vest over
three years. We also entered into a two-year consulting agreement with Secretary Tommy
Thompson, for domestic and international business development, the compensation for which
is a fee of $12,500 per month and an option on three hundred thousand shares of
unregistered common stock, which vest over three years. During the quarter ended April 30,
2006, Mr. Sitton transferred the rights to 300,000 options to Secretary Thompson. Mr.
Sitton is now therefore the beneficial owner of 1,700,000, and Secretary Thompson is the
beneficial owner of 600,000 of these options.

Under the option agreements, unvested
options will not be issued if the associated consulting agreements are terminated prior to
their two year term, and we do not have an obligation to register the underlying shares
within a specified period. Mr. Sitton and Secretary Thompson were each elected to our
Board of Directors during the quarter ended January 31, 2006.

During the quarter ended January 31,
2006, we recorded the value of the unvested options as a prepaid asset which will be
amortized over the life of the consulting agreements. Mr. Sittons and Secretary
Thompsons options were valued at an aggregate of $598,372 based on their weighted
average exercise prices of between $1.00 to $2.75, and the Black Scholes Option Pricing
Model assuming no dividend yield, volatility of 82.23% and a risk-free interest rate of
4.25%. This amount is being amortized over the two year life of the consulting agreements
at $24,932 per month. During the quarter ended April 30, 2006 we amortized $74,797. Since
December 2005 we have amortized five months of expense, or $124,661, and as a result, we
reported a prepaid asset of $473,711 as Prepaid consulting on the face of the
balance sheet as at April 30, 2006.

# Note 8. Subsequent Events

Subsequent to the end of the quarter
ended April 30, 2006, we received $16,250 from the exercise of an option on 32,500 shares
of common stock issued under an employee option plan, and issued 250,000 shares of common
stock pursuant to a net exercise of 377,586 warrants granted to a third party for
financial services.

8

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ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis
should be read in conjunction with the audited and unaudited financial statements of PURE
Bioscience.

# OVERVIEW

PURE Bioscience began as a provider
of pharmaceutical water purification products; however, we are now expanding into markets
with broader potential by developing new, proprietary bioscience products based upon our
patented silver ion antimicrobial technologies and patent-pending boric acid based
pesticide technologies. In May 2005, we sold the assets of our Water Treatment Division to
Maryland-based Innovative Medical Services, LLC for $2,375,000. We used a portion of the
proceeds of the sale to retire substantially all debt, and the remainder to capitalize the
continuing commercialization of our current and future bioscience products.

# Bioscience Technology

Our flagship bioscience technology is
an aqueous disinfectant, silver dihydrogen citrate (SDC). A patented new
molecule, SDC is an electrolytically generated source of stabilized ionic silver that can
serve as the basis for a broad range of products in diverse markets. SDC liquid is
colorless, odorless, tasteless, non-caustic and formulates well with other compounds. As a
platform technology, our SDC-based antimicrobial is distinguished from competitors in the
marketplace because of its superior efficacy combined with reduced toxicity. We produce
and market pre-formulated, ready-to-use products, as well as varying strengths of SDC
concentrate as an additive or raw material for inclusion in other companies
products.

We currently have Environmental
Protection Agency (EPA) registration for our 2400-parts per million (ppm) technical grade
SDC concentrate (trade name Axenohl®) as well as for our Axen® and Axen®30
hard surface disinfectant products for commercial, industrial and consumer applications
including restaurants, homes and medical facilities. The Axen30 EPA registration includes
a 30 second kill time on standard indicator bacteria, a 24 hour residual kill on standard
indicator bacteria, a 2 minute kill time on some resistant strains of bacteria, a 10
minute kill time on fungi, a 30 second kill time on HIV Type I, and a 10 minute kill time
on other viruses. These claims distinguish the efficacy of Axen30 from many of the leading
commercial and consumer products currently on the market, while maintaining lower toxicity
ratings. Based on the EPA toxicity categorization of antimicrobial products that ranges
from Category I (high toxicity) down to Category IV, Axen30 is an EPA Category IV
antimicrobial for which precautionary labeling statements are normally not required. This
compares with Category II warning statements for most leading brands of disinfectant
products.

Our technology also shows promise as
a broad-spectrum antimicrobial and anti-fungal for use in human and veterinary healthcare
products. We have chosen to pursue certain approvals for human use through the U.S. Food
and Drug Administration (FDA) by partnering with Therapeutics, Incorporated
(Therapeutics). Therapeutics has elected to focus on development of multiple
potential SDC-based products for the treatment and prevention of dermatological and
womens health related bacterial, viral and fungal mediated diseases and conditions,
and has assumed responsibility for funding and managing the testing and regulatory
processes for these potential FDA-regulated products. Subsequent to the signing of a
Development and Licensing Agreement granted to Therapeutics in September 2003,
Therapeutics initially focused on the development of womens health and acne
treatment products. In April 2006, after the initial period contemplated in the
Development and Licensing Agreement for evaluation and characterization of SDC as an
active pharmaceutical ingredient had been substantially completed, we amended and expanded
the joint development initiative with Therapeutics to include the development of SDC as an
active pharmaceutical ingredient in products for the treatment of dermatophytoses such as
Tinea pedis (athletes foot), onychomycosis (nail fungus), as well as the development
of antimicrobial skin wash products, beginning with a hand sanitizer. Our SDC technology
also shows promise as a broad-spectrum antimicrobial for multiple other medical
indications, including wound and burn care, as well as for dental and veterinary
indications, though these opportunities are not currently under active development.

We also market a patent-pending
pesticide technology, Triglycylboride which, like SDC, provides effective results
without human toxicity and is an alternative to traditional poisons. Triglycylboride has
been formulated into EPA registered RoachX® and AntX, the key products in our
Innovex® line of pest control products. In addition, the Innovex® line features
our EPA-exempt non-toxic TrapX® rodent lure, and our EPA registered CleanKill,
the SDC-based hard surface disinfectant for the pest control industry. The pest control
products are being marketed to both commercial pest control and consumer products
companies.

RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED APRIL 30, 2006 VERSUS THREE MONTHS ENDED APRIL 30, 2005In May
2005, we sold the assets of our Water Treatment Division and are now completely focused on
the development of our bioscience technologies. In the financial statements included in
this Report on Form 10Q-SB, the Water Treatment division is included as a Discontinued
Operation in the Consolidated Statements of Operations and Cash Flows presented for
comparative purposes relating to the periods ending April 30, 2005.

We are at an early stage in the
development and marketing of our bioscience technologies in highly competitive markets,
and we anticipate that market acceptance of our novel technology may be a long term
achievement. Even when our SDC products have been approved by regulatory authorities and
are available for commercial sale, there is often an extended period of time in which
potential users formulate and test them before committing to significant purchases. Each
formulation of our products requires regulatory approval for each respective jurisdiction
in which it is sold, and in addition to competitive challenges, we believe that the
investment necessary to pursue research, testing and regulatory approval for SDC-based
products will continue to be significant. However, we believe we are in a position to
accelerate additional regulatory approvals and negotiate distribution, development and
marketing agreements for the inclusion of SDC into multiple global products. For example,
during the quarter ended January 31, 2006, we announced that we had entered into a supply
and distribution agreement with Enviroguard Sciences LLC, initially for the supply and
distribution of our hard surface disinfectant. As a result of this and other agreements,
we expect sales of our SDC-based products and, to a lesser extent, our pesticide products,
to accelerate in future periods.

9

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During the quarter ended April 30,
2006, revenues of $44,300 increased by 7% over the quarter ended April 30, 2005. Gross
profit for the quarter ended April 30, 2006 was $21,700 versus $17,800 in the same quarter
of the prior fiscal year. The gross margin percentage improved from 43% in the prior year
to 49% in the current period. The improvement is due to a favorable product mix,
offsetting the absorption of the overhead costs of our manufacturing facility over a
smaller number of products during the period ended April 30, 2006 than in the prior
period. During the quarter ended April 30, 2005, we absorbed such costs over the products
of the Water Treatment Division in addition to our bioscience products.

Operating costs increased from
$534,700 in the quarter ended April 30, 2005, to $912,900 in the quarter ended April 30,
2006. Within these operating cost totals, selling expenses increased by $99,900, to
$168,700 in the current quarter compared with the same quarter in the prior fiscal year.
The increase in selling expenses is primarily due to fees and prepaid option expense
amortization and other costs associated with the introduction of silver dihydrogen citrate
products to new partners, and to pending product launches. General and administrative
expenses increased by $210,300, to $411,700 in the quarter ended April 30, 2006, compared
with the quarter ended April 30, 2005. The increase in expense for the most recent quarter
is primarily due to consulting fees and option expenses related to investments in
corporate infrastructure. In addition and to a lesser extent, insurance, and
accounting fees increased year over year. Over the same period, research and development
costs, including patent, license and product registration expenditures, increased by 30%
to $332,500, primarily due to increased consulting fees and option expenses. Our research
and development expense primarily includes costs associated with the continuing
development of our silver dihydrogen citrate technology and related investments in
patents, licenses, product registrations with regulatory agencies, and in formulation and
method development.

Our net loss from operations before
taxes, excluding earnings from the Water Treatment Division prior to its sale, increased
by $342,700, from a net loss of $528,800 in the quarter ended April 30, 2005 to a net loss
of $871,500 in the quarter ended April 30, 2006. Earnings from the Water Treatment
Division in the quarter ended April 30, 2005, shown in the Statements of Operations as
Income from discontinued operations, were $92,200, resulting in a consolidated
net loss in the prior period of $436,500.

RESULTS OF OPERATIONS FOR THE NINE
MONTHS ENDED APRIL 30, 2006 VERSUS NINE MONTHS ENDED APRIL 30, 2005In the financial
statements included in this Report on Form 10Q-SB, the Water Treatment division, which was
sold in May 2005, is included as a Discontinued Operation in the Consolidated Statements
of Operations and Cash Flows presented for comparative purposes relating to the periods
ending April 30, 2005.

During the nine months ended April
30, 2006, revenues of $158,900 increased by 35% over the nine months ended April 30, 2005.
Gross profit for the nine months ended April 30, 2006 was $92,300 versus $72,400 in the
same period of the prior fiscal year. The gross margin percentage declined from 61% to 58%
over the same period, primarily as we are now absorbing the overhead costs of our
manufacturing facility over a smaller number of products. In the prior fiscal year we
absorbed such costs over the products of the Water Treatment Division in addition to our
bioscience products.

Operating costs increased from
$1,986,800 in the nine months ended April 30, 2005, to $2,504,800 in the nine months ended
April 30, 2006. Included in these totals, selling expenses increased by $47,200, to
$410,400 in the current period compared with the same nine months in the prior fiscal
year, primarily due to costs associated with the introduction of silver dihydrogen citrate
products to new partners and to pending product launches. General and administrative
expenses increased by $580,500, to $1,278,400 in the nine months ended April 30, 2006,
compared with the nine months ended April 30, 2005. The increase in expense is primarily
due to expenses for investor relations and investment consulting services, investments in
corporate infrastructure, and to a lesser extent, increases in insurance,  and
accounting fees. Research and development costs declined by $109,600 or 12% over the same
period, to $716,000 for the nine months ended April 30, 2006, primarily due to a reduction
in patent related legal fees.

Our net loss from operations before
taxes, excluding earnings from the Water Treatment Division prior to its sale, increased
by $466,600, from a net loss of $1,933,500 in the nine months ended April 30, 2005 to a
net loss of $2,400,100 in the same period of the current fiscal year. Earnings from the
Water Treatment Division in the nine months ended April 30, 2005, shown in the Statements
of Operations as Income from discontinued operations, were $483,400, resulting
in a consolidated net loss in the prior period of $1,450,100.

# LIQUIDITY AND CAPITAL
RESOURCES

From inception through the present,
we have financed our operations primarily through our initial public offering in August of
1996, by subsequent private placement stock sales, and in May 2005 by the sale of our
Water Treatment Division.

In March 2005 we paid off a $300,000
convertible debenture and had $535,000 in loans forgiven in partial consideration for the
return of a trust deed. In addition, in May 2005 we paid off a $600,000 line of credit and
a $90,000 loan. As a result of these transactions, we currently have no long-term debt.

In May 2005, we sold the assets of
our Water Treatment Division to Maryland-based Innovative Medical Services, LLC (IMS LLC)
for $2,375,000. IMS LLC also assumed all liabilities associated with the Division. At
closing, we received $1,950,000 in cash and a promissory note in the amount of $425,000.
In June 2005, we received a cash payment of $225,000, leaving a $200,000 promissory note
(Notes receivable) on the Consolidated Balance Sheet as at July 31, 2005.
During the first quarter of the current fiscal year, we received the balance of $200,000
plus interest of $3,900 on the promissory note.

We agreed to continue to fund the
working capital of IMS LLC subsequent to the sale of the Water Treatment Division, until
such time as IMS LLC had in place their appropriate legal and tax registrations, in order
to enable the continuation of payroll and an uninterrupted supply of materials and
components for the business. At July 31, 2005, we had funded $132,521 of working capital
on IMS LLCs behalf, as shown in Other receivables on the balance sheet
as at July 31, 2005. During the first quarter of the current fiscal year, in addition to
the payment of the promissory note, IMS LLC reimbursed us for the working capital we had
provided subsequent to the sale. We are no longer providing any working capital for IMS
LLC.

10

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As at April 30, 2006 we had current
assets of $6,057,400, an increase of $5,118,500 from July 31, 2005. The increase is
primarily due to $5.9 million of cash received from our March 2006 private placement.
Under the private placement, we issued 3,952,209 shares of common stock at $1.65 per share
to accredited investors, for a total of $6,521,145. Net proceeds to us, after fees and
expenses, were $5,911,608. The placement agent also received a warrant to purchase 355,698
shares of our common stock at an exercise price of $2.556. On April 24 2006, we filed a
registration statement with the Securities and Exchange Commission as required under the
placement agreement, for the resale of shares issued in the private placement. The
registration statement included all shares of common stock issued in the private
placement, as well as the shares to be issued upon the exercise of the warrants. Under the
terms of the placement agreement, as amended on April 21, 2006, if the registration
statement is not declared effective within 150 days of the filing date (April 24, 2006),
we will be subject to liquidated damage penalties. We will be obligated to pay to each
investor a cash penalty of two percent (2%) of their purchase price for each thirty (30)
day period, or any part thereof, beyond the 150 day period, until the registration
statement is declared effective; however the maximum cash payment to each investor is
thirty-six percent (36%) of such investors purchase price. The maximum potential
liquidated damage payment of 59.4 cents per share, or $2,347,612, is classified as
temporary equity on the balance sheet. Under the terms of the placement agreement, as
amended on April 21, 2006, there are no liquidated damage penalties associated with the
warrants.

Within the increase of $5,118,500 in
current assets from July 31, 2005, the $5.9 million of cash received from the March 2006
private placement is only partially offset by a reduction in Notes receivable and Other
receivables as discussed above, and by cash used in our operations as outlined in the
analysis later in this section. At April 30, 2006 we had current liabilities of $319,100,
a decrease of $34,200 from July 31, 2005.

In the nine months ended April 30,
2006, property, plant and equipment increased by $44,200 to $196,100. Subsequent to our
private placement in March 2006, we have commenced planned investments in our
manufacturing and information technology infrastructure. Other assets increased by
$337,000 over the nine months through April 30, 2006, primarily due to the recording of
unvested options as a prepaid asset (Prepaid consulting) which will be
amortized over the life of associated consulting agreements. See Note 7 to the financial
statements included in this Report on Form 10Q-SB for further details of this transaction.
The $473,700 of prepaid consulting on the balance sheet as at April 30, 2006 was partially
offset by an excess of patent amortization over patent capitalization during the nine
months through April 30, 2006, and approximately $30,000 of capitalized patents that were
written off in the current fiscal year and which related to Water Treatment Division
technology that was not acquired by IMS LLC. The capitalized value of patents and licenses
at April 30, 2006, primarily related to our silver dihydrogen citrate technology, was
$2,076,700.

Net cash flow for the nine months
ended April 30, 2006, was $5,392,700, compared with net cash flow of $146,100 for the same
period of the prior fiscal year. Net cash outlows from operating activities were
$1,541,400 for the nine months ended April 30, 2006. Excluding the receivables associated
with the sale of the Water Treatment Division as discussed above, net operating cash
outflows were $1,873,900. Net operating cash outflows for the same nine months of the
previous fiscal year were $1,799,600, or $1,316,200 when excluding cash generated from the
operation of the Water Treatment Division as a discontinued operation. The increase in
cash outflows in the current fiscal year is due to both increased cash expense and
investment in inventory, infrastructure and research and development, and the use of
working capital; in the nine months ended April 30, 2005, accounts payable and accrued
liabilities grew by $515,100, whereas in the same period of the current fiscal year they
declined by $31,400.

Net cash provided by financing
activities was $7,041,600 in the nine months ended April 30, 2006, compared with
$1,441,000 in the same period of the previous fiscal year, the most significant factor
being proceeds from sale of common stock, which were $7,041,600, including temporary
equity, in the current period and $1,681,000 during the period ended April 30, 2005.

In November 2005, we sold 39,999
shares of common stock in a private placement to an accredited investor, for $0.75 per
share (a total value of $30,000). In January 2006, we sold 500,000 shares of unregistered
common stock in a private placement to an unaffiliated, accredited investor at $0.75 per
share (a total value of $375,000). In February 2006, we sold 500,000 shares of
unregistered common stock in a private placement to a director of the Company, at $0.90
per share. In the same month, we received $10,000 from the exercise of a warrant to
purchase 33,333 shares of unregistered common stock. In March 2006, we conducted a private
placement in which we issued 3,952,209 shares of common stock at $1.65 per share to
accredited investors, for a total of $6,521,145, resulting in net proceeds to us of
$5,911,608 (See Note 4 for further details of this transaction). Also in March 2006, we
received $12,500 from the exercise of an option on 25,000 shares of common stock, and
$75,000 from the exercise of an option on 50,000 shares of common stock. Additionally, we
received $41,040 from the exercise of an option on 72,000 shares of common stock issued
under an employee option plan. In April 2006, we received $40,810 from the exercise of an
option on 77,000 shares of common stock. In the same month, we received the following
amounts from the exercise of options under employee option plans: $2,500 from an option on
5,000 shares of common stock, $15,960 from an option on 28,000 shares of common stock, and
$8,250 from an option on 16,500 shares of common stock. Additionally in April 2006, we
received $15,900 from the exercise of an option on 30,000 shares of common stock under the
Directors and Officers Option Plan.

With respect to sales of our common
stock made during the periods presented herein, we relied on Regulation D and Section 4(2)
of the Securities Act of 1933, as amended. No advertising or general solicitation was
employed in offering the securities. The securities were offered solely to accredited or
sophisticated investors, who were provided all of the current public information available
on PURE Bioscience.

In the nine months ended April 30,
2005, the sale of common stock of $1,681,000 included a private placement which consisted
of 125,000 shares of common stock at a price of $.39 per share and a one-year option to
purchase 12,500 shares of common stock at $1.50 valued at $1,154, for a total of $50,000;
the sale of 80,000 shares of common stock for $40,000 ($0.50 per share); two private
placements valued at $200,000 (366,667 shares of common stock at an average price of
$0.5455 per share); the receipt of $150,000 from the exercise of 300,000 shares of common
stock at $0.50 per share; a private placement of 60,000 shares of common stock at $0.49
per share and a one-year warrant to purchase 6,000 shares of common stock at $1.00 valued
at $674, for a total of $30,000; and the receipt of $10,500 from the exercise of an
employee option. Additionally, during the three months ending April 30, 2005 we conducted
private placements consisting of 1,330,000 shares of common stock issued between $0.30 and
$0.50 per share for a total value of $605,000, a private placement in which we sold two
units of Company securities, each unit consisting of 200,000 shares of common stock at a
price of $0.449 per share and a one-year warrant to purchase 50,000 shares of common stock
at $1.00, and a private placement which consisted of 458,329 shares of common stock issued
a $.60 per share for the total value of $275,000. We also received $120,500 from the
exercise of options.

11

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At April 30, 2006 we had remaining
cash and cash equivalents of $5,798,600. Future investments are expected to include
development and expansion of our infrastructure and manufacturing capacity, product
launches, research and development projects, and regulatory submissions.

# RISKS RELATED TO OUR
BUSINESS

By selling the Water Treatment
Division, we lost the most significant contributor to our historical revenue stream and
became less diversified. We are now a bioscience company focused on the marketing, selling
and continued development of our silver dihydrogen citrate antimicrobial technology and
our Triglycylboride pesticide technology. While the rewards in these fields are
potentially great, the risks, the regulatory hurdles and the costs of doing business are
also high.

Our silver dihydrogen citrate
technology is a platform, rather than a single use, technology. As such, products
developed from the platform fall under the jurisdiction of multiple U.S. and international
regulatory agencies. We currently have Environmental Protection Agency (EPA) registration
for our 2400-parts per million (ppm) technical grade SDC concentrate (trade name
Axenohl®) as well as for our Axen® and Axen®30 hard surface disinfectant
products for commercial, industrial and consumer applications including restaurants, homes
and medical facilities. We intend to fund and manage additional EPA regulated product
development internally and in conjunction with current regulatory consultants, however the
introduction of additional EPA regulated antimicrobial products could take several months.

Our technology also shows promise as
a broad-spectrum antimicrobial for use in human and veterinary healthcare products. We
have chosen to pursue certain approvals for human use through the U.S. Food and Drug
Administration (FDA) by partnering with Therapeutics, Incorporated
(Therapeutics). Therapeutics has elected to focus on development of a number
of potential SDC-based products for the treatment and prevention of dermatological and
womens health related bacterial, viral and fungal mediated diseases and conditions,
and has assumed responsibility for funding and managing the testing and regulatory
processes for these potential FDA-regulated products. We expect that Therapeutics
experience with drug development and FDA processing, especially with regard to dermal
pharmaceuticals, could lead to IND, NDA and/or 510-K filings for SDC-based healthcare
products with the FDA. The FDA and comparable agencies in many foreign countries impose
substantial limitations on the introduction of new products through costly and
time-consuming laboratory and clinical testing and other procedures. The process of
obtaining FDA and other required regulatory approvals is lengthy, expensive and uncertain.
There is no guarantee that either Therapeutics or ourselves will be able to obtain the
resources necessary to obtain such approvals, or that the products will meet the strict
criteria imposed by the FDA or any foreign agencies. It may be several years before we are
able to introduce any regulated antimicrobial pharmaceutical products in the U.S. or
overseas, if at all.

Our SDC technology also shows promise
as a broad-spectrum antimicrobial for multiple other medical indications, including wound
and burn care, as well as for dental and veterinary indications. These opportunities are
not currently under active development, and we may not be able to find partners with
sufficient resources to successfully develop or commercialize them.

If we are successful in bringing
additional EPA or FDA regulated products to market, there is no assurance that we will be
able to successfully manufacture or market the products or that potential customers will
buy them. For example, a current or future competitive product may have, or be perceived
as having, greater efficacy or cost effectiveness. While we have invested extensively in
both U.S. and international patents to protect our intellectual property, there is no
guarantee that such patents will afford protection from potential competitive
technologies. In addition, the market in which we sell, or plan to sell, products is
dominated by a number of large, well-capitalized corporations, which may impact our
ability to successfully market our products or maintain any technological advantage we
might develop. We may also be subject to changes in regulations governing the manufacture
and marketing of our products, which could increase our costs, reduce any competitive
advantage we may have, or adversely impact our marketing effectiveness.

We may require further capital in
future periods, which could include the issuance of debt or equity, or convertible
securities. The issuance of any such securities would, or could, lead to the dilution of
our existing shareholders. There is no guarantee that we will be able to obtain capital on
terms acceptable to us, or at all. Insufficient funds may require us to delay, scale back
or eliminate some or all of our research and product development programs, license to
third parties the right to commercialize products or technologies that we would otherwise
commercialize ourselves, or to reduce or cease operations.

# VALUATION OF INTANGIBLE
ASSETS

SFAS 142 requires that goodwill and
other intangible assets be tested for impairment on an annual basis, and in certain
circumstances between annual tests. Recoverability of assets to be held for use is based
on expectations of future discounted cash flows from the related operations, and when
circumstances dictate, we adjust the asset to the extent the carrying value exceeds the
fair value of the asset. Our impairment review process is based on the discounted future
cash flow approach that uses our estimates of revenue driven by assumed market segment
share and estimated costs. Also included in our analysis is an estimate of revenues
expected from our agreement with Therapeutics, Incorporated (Therapeutics). We
entered into an agreement with Therapeutics in September 2003, which was amended and
expanded in April 2006, for the development and commercialization of certain FDA regulated
silver dihydrogen citrate based products, where Therapeutics is responsible for
development activities and regulatory filings. In the agreement, Therapeutics has agreed
to reimburse us for pre-contract acquisition and development costs of the silver
dihydrogen citrate intellectual property as well as reimbursement for ongoing intellectual
property costs associated with silver dihydrogen citrate. Following the reimbursement of
both Therapeutics and our costs, depending on the type of product, we will receive a
minimum of 40% of all sales proceeds, licensing fees, royalty payments and all other forms
of cash and non-cash consideration received by the two parties. We will also realize
revenues from the sale of silver dihydrogen citrate raw material as an active ingredient.

12

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Judgments made by us related to the
expected useful lives of long-lived assets and our ability to realize discounted cash
flows in excess of the carrying amounts of such assets are affected by factors such as the
ongoing maintenance and improvements of the assets and changes in economic and market
conditions. As we assess the ongoing expected cash flows and carrying amounts of our
long-lived assets, these factors could cause us to realize a material impairment charge,
which would result in decreased results of operations and a decrease in the carrying value
of these assets on our consolidated balance sheet.

# ITEM 3. CONTROLS AND
PROCEDURES

We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, who also acts as our Principal Accounting Officer, as
appropriate, to allow timely decisions regarding required disclosure based closely on the
definition of disclosure controls and procedures in Rule 13a-14(c). In
designing and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.

As of the end of the previous fiscal
year, we carried out an evaluation under the supervision and with the participation of our
management, including our Chief Executive Officer and our Chief Financial
Officer/Principal Accounting Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer/Principal Accounting Officer concluded that our
disclosure controls and procedures were effective.

There have been no significant
changes in our internal controls or in other factors that could significantly affect the
internal controls subsequent to the date we completed our evaluation.

13

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# PART II

# ITEM 1. LEGAL PROCEEDINGS

In November 2004, we received a $14.2
million award resulting from a binding arbitration proceeding against NVID International,
Inc. through the American Arbitration Association International Centre for Dispute
Resolution. As a result, our royalty and other contractual obligations to NVID were
legally terminated. Our October 2003 arbitration action against NVID International and
Falken Industries, Ltd., sought damages and relief from continued and ongoing public
dissemination of false, misleading and disparaging statements. In March 2006, our November
2004 arbitration award against NVID was confirmed by the US District Court, Southern
District of California, as a federal judgment.

In October 2005, we received a
further $3.64 million award, including costs, resulting from the bifurcated binding
arbitration proceeding against Falken Industries. The October 2005 arbitration award
against Falken Industries, Ltd. was confirmed by Judge M. James Lorenz of the US District
Court, Southern District of California by an Order dated January 18, 2006. The Clerk of
the Court entered judgment in accordance with the award of the arbitrator on January 20,
2006. The judgment was unopposed; however, Falken Industries, Ltd. has subsequently filed
a motion to set aside the Courts Order and the resulting judgment. The matter has
been briefed and is now before the Court. On April 7, 2006 we were issued a Writ Of
Execution for Money Damages along with an Abstract of Judgment, by the US District Court,
Southern District of California for $3.74 million with daily interest of $444.80.

In June 2004, we filed an arbitration
action against Nickel Ltd. and Falken Industries Ltd., case number 50 T 133 00319 04, for
breach of contract regarding a license for Axen30. Nickel resisted arbitration; however,
on September 30, 2005, the US District Court, Southern District of California ordered
Nickel to arbitration. Nickel has appealed the US District Court order compelling Nickel
to Arbitration. The arbitration is in progress and the hearing on the merits has been moved to
 August 2006. Falken Industries was not part of the District Court matter to compel
arbitration, and has now refused to be a part of this arbitration procedure. On December
16, 2005, we filed a separate lawsuit against Falken Industries, Ltd. in the US District
Court, Southern District of California for breach of contract, injunctive relief, trade
libel, and declaratory relief regarding a license for Axen30 originally issued to Nickel,
Ltd. On December 22, 2005, Nickel, Ltd. filed for declaratory relief with the American
Arbitration Association International Centre for Dispute Resolution to clarify the
parties obligations under the Umbrella Agreement.

Nickel Ltd. has recently filed two
lawsuits under the jurisdiction of the Tribunal De Commerce De Paris. The first of these
actions was filed on October 26, 2005 against us under an agreement (the Super
Distribution Agreement) signed in January 2003, seeking an award in the amount of
approximately $14.6 million, including damages. The second lawsuit was filed on November
21, 2005 against Carline America, a Nevada corporation, and us, also under the Super
Distribution Agreement. Carline America was established by us solely for the Super
Distribution Agreement but never commenced operations or issued shares due to
Nickels breach of contract. This second lawsuit seeks an award in the amount of
approximately $21.9 million including damages from Carline, and also seeks to hold us
liable for the full amount. In January 2006, Emile Gouiran, Nickel, Ltd. and Falken
Industries, Ltd. filed a defamation lawsuit under the jurisdiction of the Tribunal De
Commerce De Paris against Michael L. Krall, Dennis Atchley, PURE Bioscience, PUREs
legal counsel, and other parties. We are currently, with our French counsel, evaluating
the three lawsuits; however, we believe each suit is frivolous, maliciously false, and
wholly without merit. These recent suits follow four previous suits brought by Nickel
against us in France, all of which were dismissed by the respective French courts.

# ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES

In February 2006, there was a net
exercise of a warrant on 15,000 shares that resulted in the issuance of 5,196 shares of
common stock. Also in February, we received $10,000 from the exercise of a warrant on
33,333 shares of common stock. In March 2006, we conducted a private placement in which we
issued 3,952,209 shares of unregistered common stock at $1.65 per share to accredited
investors, for a total of $6,521,145, resulting in net proceeds to us of $5,911,608. In
addition , the placement agents received a five year warrant to purchase 355,698 shares at
an exercise price of $2.556. See Note 4 for further details of this transaction. Also in
March 2006, we received $12,500 from the exercise of an option on 25,000 shares of common
stock. In April 2006, there was a net exercise of an option on 100,000 shares that
resulted in the issuance of 63,640 shares of common stock. Subsequent to the end of the
quarter, in June 2006, 377,586 warrants granted to a third party for financial services
were exercised via net exercise, resulting in the issuance of 250,000 shares of common
stock.

With respect to sales made, we relied
on Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising
or general solicitation was employed in offering the securities. The securities were
offered solely to accredited or sophisticated investors who were provided all of the
current public information available on PURE Bioscience.

# ITEM 3. DEFAULTS UPON
SENIOR SECURITIES

Not applicable.

# ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS

None.

# ITEM 5. OTHER INFORMATION

Not applicable.

# ITEM 6. EXHIBITS AND
REPORTS ON FORM 8-K

A.    
          The following Exhibits are filed as part of this report pursuant to Item 601 of
          Regulation S-B:

|3.1 (1) |  Articles of Incorporation, Articles of Amendment and Bylaws
|------- | -------------------------------------------------------------

|3.1.1(13) |  Articles
of Amendment dated March 11, 2002
|--------- | --------------------------------------------

|4.1 (1) |  Form of Class A Warrant
|------- | -------------------------

|4.2 (1) |  Form
of Class Z Warrant
|------- | -------------------------

|4.3 (1) |  Form
of Common Stock Certificate
|------- | ----------------------------------

14

---



|4.4 (1) |  Warrant
Agreement
|------- | -------------------

|4.5 (2) |  March
2000 Warrant
|------- | --------------------

|4.6 (3) |  January
2001 Warrant
|------- | ----------------------

|4.7 (4) | Convertible
Debenture
|------- | ----------------------

|4.8 (5) |  Convertible
Debenture Purchase Agreement
|------- | ------------------------------------------

|4.9 (6) | Convertible
Debenture Warrant
|------- | ------------------------------

|10.1 (1) | Employment
Contract/Michael L. Krall
|-------- | -------------------------------------

|10.2 (7) |   Manufacturing, Licensing and Distribution Agreement dated March 26, 2001
|-------- | ---------------------------------------------------------------------------

|10.3 (8) |  Axenohl License Agreement
|-------- | ---------------------------

|10.4 (9) |  Weaver  Roach X Assignment
|-------- | -----------------------------

|10.5 (9) |   Dodo  Agreement   [CONFIDENTIAL   TREATMENT  REQUESTED  FOR  CERTAIN  OMITTED
 INFORMATION  FILED                 SEPARATELY]
|-------- | --------------------------------------------------------------------------------------------------------------------------------

|10.6 (8) | Promissory Note of Michael Krall
|-------- | ---------------------------------

|10.7 (8) |  Promissory Note of Gary Brownell
|-------- | ----------------------------------

|10.8  (9) |  Nutripure Dealer Agreement
|--------- | ----------------------------

|10.9 (9) |  Sales Finance Agreement
|-------- | -------------------------

|10.10 (10) |  ETIH2O, Inc., Acquisition Agreement
|---------- | -------------------------------------

|10.11 (11) |  NVID Litigation Settlement Agreement
|---------- | --------------------------------------

|10.12 (12) |  Addendum #1 to NVID Settlement Agreement
|---------- | ------------------------------------------

|10.13(14) |    Therapeutics,  Incorporated  Agreement  [CONFIDENTIAL  TREATMENT  REQUESTED FOR
CERTAIN  OMITTED                 INFORMATION FILED SEPARATELY]
|--------- | --------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 (15) |   Promissory Note dated November 2003 $4,750,000
|---------- | -------------------------------------------------

|10.15 (15) |   Promissory Note dated January 26, 2004 $100,000
|---------- | --------------------------------------------------

|13 (13) |  Subsidiaries of the Registrant
|------- | --------------------------------

|14.1 (16) |  Code of Ethics
|--------- | ----------------

|31.1 |  Section
302 Certification
|---- | ---------------------------

|31.2 |  Section
302 Certification
|---- | ---------------------------

|32.1 |  Section
906 Certification
|---- | ---------------------------

|32.2 |  Section
906 Certification
|---- | ---------------------------

|(1) | Incorporated
by reference from Form SB-2 registration statement SEC File
                    #333-00434 effective August 8, 1996
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated
by reference from S-3 registration statement, SEC File #333-36248
                    effective on May 17, 2000
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated
by reference from S-3 registration statement, SEC File #333-55758
                    effective on February 26, 2001
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated
by reference from S-3 registration statement, SEC File #333-61664
                    filed on May 25, 2001
|--- | ------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated
by reference from pre-effective amendment no. 1 to S-3 registration
                    statement, SEC File #333-61664 filed on July 10, 2001
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated
by reference from pre-effective amendment no. 2 to S-3 registration
                    statement, SEC File #333-61664 filed on August 13, 2001
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated
by reference from Current Report on Form 8-K filed on May 24, 2001                     as
amended on October 19, 2001
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated
by reference from the Amended Annual Report on Form 10KSB for the
                    fiscal year ended July 31, 2000 filed on October 19, 2001
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated
by reference from Amended Form 10QSB for the nine month period                     ended
April 30, 2001 filed on October 19, 2001
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated
by reference from the Amended Annual Report on Form 10KSB for the
                    fiscal year ended July 31, 2001 filed on November 13, 2001
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated
by reference from Current Report on Form 8-K filed on December 6,
                    2001
|---- | -------------------------------------------------------------------------------------------------------

|(12) | Incorporated
by reference from Amended Current Report on Form 8-K filed on
                    December 7, 2001
|---- | ---------------------------------------------------------------------------------------------------------------

|(13) | Incorporated
by reference from the Annual Report on Form 10KSB for the fiscal                     year
ended July 31, 2002 filed on October 29, 2003
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated
by reference from the Amended Annual Report on Form 10KSB for the
                    fiscal year ended July 31, 2003 filed on January 30, 2004
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated
by reference from the Amended Quarterly Report for the three month
                    period ended October 31, 2003 filed on February 27, 2004
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated
by reference from the Annual Report on Form 10KSB for the fiscal                     year
ended July 31, 2004 filed on October 29, 2004
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------

# B. Reports on Form 8-K:

| | 1. | Current
Report Items 3.02 and 9.01 Unregistered Sales of Equity Securities and
                    Exhibits filed on March 30, 2006
| | -- | -----------------------------------------------------------------------------------------------------------------------------------

# SIGNATURES

Pursuant to the requirement of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

| | PURE Bioscience                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | By:   /s/ Michael L. Krall
          Michael L. Krall, President/CEO
          June 13, 2006
By:   /s/ Andrew J. Buckland
          Andrew J. Buckland, Chief Financial Officer
          June 13, 2006

15

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