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 January 31, 2007
| | --- | -----------------------------------------------------------------------------------------------------------------------

| | [  ] | 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: 24,539,555  as of March 14, 2007.

---



|                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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, 2006 and January 31, 2007
Statements of Operations for the three and six months ended January 31, 2007 and 2006
Statements of Cash Flows for the six months ended January 31, 2007 and 2006
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)
January 31
2007 |  | July 31
2006 |            
|----------------------------------------------------------- | --------------------------- |  | ------------ | -----------
|ASSETS                                                      |                             |  |              |            
|Current Assets                                              |                             | 
|Cash and cash equivalents                                   |                             |  | $            | 3,268,449  
|Accounts receivable, net of allowance for doubtful accounts |                             | 
|of $0 at July 31, 2006 and $0 at January 31, 2007           |                             |  |              | 86,251     
|Inventories                                                 |                             |  |              | 232,126    
|Prepaid expenses                                            |                             |  |              | 27,500     
|                                                            |                             |  |              |            
|Total current assets                                        |                             |  |              | 3,614,326  
|                                                            |                             |  |              |            
|Property, Plant and Equipment                               |                             | 
|Property, plant and equipment                               |                             |  |              | 406,712    
|                                                            |                             |  |              |            
|Total property, plant and equipment                         |                             |  |              | 406,712    
|                                                            |                             |  |              |            
|Other Assets                                                |                             | 
|Prepaid consulting                                          |                             |  |              | 249,322    
|Deposits                                                    |                             |  |              | 9,744      
|Patents and licenses                                        |                             |  |              | 2,077,408  
|                                                            |                             |  |              |            
|Total other assets                                          |                             |  |              | 2,336,474  
|                                                            |                             |  |              |            
|Total assets                                                |                             |  | $            | 6,357,512  
|                                                            |                             |  |              |            
|LIABILITIES AND STOCKHOLDERS EQUITY                         |                             | 
|Current Liabilities                                         |                             | 
|Accounts payable                                            |                             |  | $            | 254,987    
|Accrued liabilities                                         |                             |  |              | 84,825     
|Taxes payable                                               |                             |  |              | 2,400      
|                                                            |                             |  |              |            
|Total current liabilities                                   |                             |  |              | 342,212    
|                                                            |                             |  |              |            
|Total liabilities                                           |                             |  |              | 342,212    
|                                                            |                             |  |              |            
|Stockholders' Equity                                        |                             | 
|Preferred Stock                                             |                             |  |              |           
|Class A common stock, no par value:                         |                             | 
|50,000,000 shares authorized                                |                             | 
|23,983,002 issued and outstanding at July 31, 2006, and     |                             | 
|24,589,555 issued and outstanding at January 31, 2007       |                             |  |              | 27,882,539 
|Warrants:                                                   |                             | 
|391,698 issued and outstanding at July 31, 2006, and        |                             | 
|391,698 issued and outstanding at January 31, 2007          |                             |  |              | 245,825    
|Accumulated deficit                                         |                             |  |              | (22,113,064
|                                                            |                             |  |              |            
|Total stockholders' equity                                  |                             |  |              | 6,015,300  
|                                                            |                             |  |              |            
|Total liabilities and stockholders' equity                  |                             |  | $            | 6,357,512  
|                                                            |                             |  |              |            

The accompanying notes
are an integral part of the financial statements

F-1

---



# CONSOLIDATED
STATEMENTS OF OPERATIONS

|                                             | For the Six Months Ended
January 31 |  | For the Three Months Ended
January 31 |           
|-------------------------------------------- | ----------------------------------- |  | ------------------------------------- | ----------
|
|
|Net revenues                                 |                                     |  | $                                     | 196,463   
|Cost of sales                                |                                     |  |                                       | 126,924   
|                                             |                                     |  |                                       |           
|Gross profit                                 |                                     |  |                                       | 69,539    
|                                             |                                     |  |                                       |           
|Selling expenses                             |                                     |  |                                       | 398,743   
|General and administrative expenses          |                                     |  |                                       | 1,022,222 
|Research and development                     |                                     |  |                                       | 621,338   
|                                             |                                     |  |                                       |           
|Total operating costs                        |                                     |  |                                       | 2,042,303 
|                                             |                                     |  |                                       |           
|Loss from operations                         |                                     |  |                                       | (1,972,764
|                                             |                                     |  |                                       |           
|Other income and (expense):                  |                                     | 
|Interest income                              |                                     |  |                                       | 91,434    
|Other                                        |                                     |  |                                       | 5,928     
|                                             |                                     |  |                                       |           
|Total other income (expense)                 |                                     |  |                                       | 97,362    
|                                             |                                     |  |                                       |           
|Net loss before taxes                        |                                     |  |                                       | (1,875,402
|Income tax provision                         |                                     |  |                                       |          
|                                             |                                     |  |                                       |           
|Net loss after taxes                         |                                     |  |                                       | (1,875,402
|                                             |                                     |  |                                       |           
|Net loss per common share, basic and diluted |                                     |  | $                                     | (0.08     
|                                             |                                     |  |                                       |           

# CONSOLIDATED
STATEMENTS OF ACCUMULATED DEFICITS

|                             | Year-to-Date
Ended
January 31
2007 |  | Year
Ended
July
2006 |            
|---------------------------- | ---------------------------------- |  | -------------------- | -----------
|Balance, beginning of period |                                    |  | $                    | (20,237,662
|                             |                                    |  |                      |            
|Net income (loss)            |                                    |  |                      | (1,875,402 
|                             |                                    |  |                      |            
|Balance, end of period       |                                    |  | $                    | (22,113,064
|                             |                                    |  |                      |            

The accompanying notes
are an integral part of the financial statements

F-2

---



# CONSOLIDATED
STATEMENTS OF CASH FLOWS

|                                                                   | For the Six Months Ended
January 31 | 
|------------------------------------------------------------------ | ----------------------------------- | 
|
|
|Cash flows from operating activities:                              |                                     | 
|                                                                   |                                     | 
|Net loss                                                           |                                     | 
|                                                                   |                                     | 
|Adjustments to reconcile net income to net cash                    |                                     | 
|provided by operating activities:                                  |                                     | 
|Amortization and depreciation                                      |                                     | 
|Services paid for with stock and options                           |                                     | 
|Changes in assets and liabilities:                                 |                                     | 
|Accounts receivable                                                |                                     | 
|Other receivables and interest receivable                          |                                     | 
|Notes and other amounts receivable (Water Treatment Division sale) |                                     | 
|Prepaid expense                                                    |                                     | 
|Inventory                                                          |                                     | 
|Accounts payable and 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                                 |                                     | 
|                                                                   |                                     | 
|Net cash provided by financing activities                          |                                     | 
|                                                                   |                                     | 
|                                                                   |                                     | 
|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                  |                                     | 
|                                                                   |                                     | 
|Non-cash investing and financing activities:                       |                                     | 
|Value of options issued in exchange for services - prepaid         |                                     | 

The accompanying notes
are an integral part of the financial statements

F-3

---



# NOTES TO FINANCIAL
STATEMENTS

Note 1. Financial StatementsThe
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, 2006 and their
accompanying notes, as filed with the Securities and Exchange Commission in our
10K-SB on October 27, 2006. 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 in subsequent periods. The
results of operations for interim periods are not necessarily indicative of the
results of operations for the full year, or any future periods.

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
ConcentrationsIn 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.

We have  determined  that based upon
the end use of our  products,  the value added  contributions  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 three months ended
January 31, 2007,  92% of sales were made to three  strategic  partners that are also
developing  markets for our  products.  During the six months  ended  January 31,  2007,
 93% of sales were made to these  three  strategic  partners.  All of our sales for both
the  three  and six month  periods  were made to U.S. domestic customers.

Note 3. ReclassificationsCertain
reclassifications have been made to previously reported statements to conform to our
current financial statement format.

Note 4. Equity and Common StockIn
October 2006, we issued options on 100,000 shares in exchange for operations,
manufacturing and facility development consulting services, at an exercise price of
$1.83, valued at $91,250 (based on the Black-Scholes Option Pricing Model assuming no
dividend yield, volatility of 70.84% and a risk-free interest rate of 5.25%).

During the three  months  ended
 October 31,  2006,  we  received  an  aggregate  of $51,500  from the  exercise of
non-employee options on 51,500 shares of common stock at an average exercise price of
$1.00.

In November  2006, we issued 30,000
shares of common stock at a market price of $2.17 for research and  development services
valued at $65,100.

In January  2007,  there were net
 exercises  of options  which were due to expire and which were issued  under the 2002
 Non-Qualified  Stock  Option Plan (See Note 5 for a further  description  of this
 Plan).  Options on 450,000 shares under this plan were  exercised,  resulting in the
issuance of 338,553  shares of common stock.  We also, in the same month,  received
 $53,000 from the exercise by a director of the Company of an option on 100,000 shares of
common stock under the same Plan.

During the three  months  ended
 January  31,  2007 we  received  an  aggregate  of $74,000  from the  exercise  of
non-employee  options on 86,500  shares of common stock at an average  exercise  price of
$0.86.  In the same three month period we also  recorded  $2,465 of employee  stock
option  expense (See Note 5 for a further  discussion  of this expense).

Note 5. Share-Based CompensationThe
Company has, or has had during the fiscal years presented herein, the following
stock option plans (the Plans) pursuant to which options to acquire common stock
have been granted: the 1996 Directors And Officers Stock Option Plan (terminated on
April 17, 2006); the 1998 Directors And Officers Stock Option Plan; the 2001
Directors And Officers Stock Option Plan; the 2001 ETIH2O Stock Option Plan; the 2001
Consultants and Advisors Stock Option Plan; the 2002 Non-Qualified Stock Option Plan;
the 2002 Employee Incentive Stock Option Plan; and the 2004 Consultants and Advisors
Stock Option Plan. Subsequent to the end of the fiscal period ended January 31, 2007
the shareholders of the Company approved a new Plan, the 2007 Equity Incentive Plan,
which has a share reserve of 5,000,000 shares.

The  Plans  are  administered  by an
 Administrative  Committee.  The  exercise  price  for  Options  is set by the
Administrative  Committee  but  shall  not be for less  than the fair  market  value of
the  shares on the date the Option is granted.  Fair market  value is defined  under the
Plans  based on the market  price of our common  stock for a specified  number of trading
 days prior to the date the option is granted.  The period in which  Options can be
exercised  and their  vesting  schedule is set by the  Administrative  Committee but is
not to exceed five years from the date of Grant.

F-4

---



On August 1, 2006, we adopted the
provisions of SFAS 123R,  requiring the Company to recognize  expense  related to the
fair value of  share-based  compensation  awards to employees  and  directors.  Prior to
this date, we followed the intrinsic value method set forth in APB Opinion 25,
 `Accounting  for Stock Issued to Employees'  (`APB 25') in accounting  for our stock
 option  plans.  We have  elected  to use the  modified-prospective-transition  method as
permitted by SFAS 123R and therefore  have not restated our  financial  results for prior
 periods.  As at July 31, 2006, all outstanding  share-based awards were fully vested,
 with the exception of the consultant options recorded in our  balance  sheets as
 "prepaid  consulting"  and as more fully  described  in Note 6. There is  therefore  no
compensation  expense  recorded for the three or six month periods  ending  January 31,
2007 related to awards made prior to August 1, 2006.  Share-based  compensation  expense
 for awards  granted  subsequent  to July 31,  2006 is based on the  grant  date  fair
 value  estimated  in  accordance  with the  provisions  of SFAS  123R,  using  the
Black-Scholes  option pricing model. We recognize  compensation  expense for stock option
awards on a straight-line basis over the applicable service period of the award, which is
the vesting period.

As a result of adopting  SFAS 123R,
 our net loss for the three  months ended  January 31, 2007 was $2,465  greater than that
which we would have  reported had we continued to account for  employee  share-based
 compensation  under APB 25. Our net loss for the six months  ended  January 31, 2007 was
also $2,465  greater  than that which we would have  reported had we  continued  under
APB 25.  Basic and diluted  earnings per share  (rounded to the nearest one cent) for the
three and six month  periods  ended October 31, 2007 would have been  unchanged  from
those  reported had we not adopted SFAS 123R.

The following table sets forth the
share-based  compensation  expense  recorded in our  Consolidated  Statements of
Operations for the three and six months ended January 31, 2007 resulting from share-based
 compensation  awarded to our employees,  directors and third party service  providers,
 excluding the amortization of prepaid  consulting as detailed in Note 6:

|                                                                 | Three Months Ended
January 31, 2007 |  | Six Months Ended
January 31, 2007 |       
|---------------------------------------------------------------- | ----------------------------------- |  | --------------------------------- | ------
|Share-based compensation for employees and directors:            |                                     |  |                                   |       
|Selling expense                                                  |                                     |  | $                                 |      
|General and administrative expenses                              |                                     |  |                                   | 2,465 
|Research and development                                         |                                     |  |                                   |      
|                                                                 |                                     |  |                                   |       
|Total share-based compensation for employees and directors       |                                     |  |                                   | 2,465 
|Share-based compensation for third party service providers:      |                                     | 
|Selling expense                                                  |                                     |  | $                                 |      
|General and administrative expenses                              |                                     |  |                                   |      
|Research and development                                         |                                     |  |                                   | 65,100
|                                                                 |                                     |  |                                   |       
|Total share-based compensation for third party service providers |                                     |  |                                   | 65,100
|                                                                 |                                     |  |                                   |       
|Total share-based compensation expense                           |                                     |  | $                                 | 67,565
|                                                                 |                                     |  |                                   |       

For comparative purposes to our
Consolidated Statements of Operations for the three and six month periods ended January
31, 2007, the following table illustrates the pro forma effect on net loss and net loss
per common share of applying the fair value recognition provisions of SFAS 123 to
share-based compensation during the three and six month periods ended January 31, 2006:

|                                                                        | Three Months Ended
January 31, 2006 |  | Six Months Ended
January 31, 2006 |         
|----------------------------------------------------------------------- | ----------------------------------- |  | --------------------------------- | --------
|Net loss, as reported                                                   |                                     |  | $                                 | (919,156
|Employee stock-based compensation expense under fair-value method       |                                     |  |                                   | (31,030 
|Employee stock-based compensation expense included in reported net loss |                                     |  |                                   |        
|                                                                        |                                     |  |                                   |         
|Pro forma net loss                                                      |                                     |  | $                                 | (950,186
|Net loss per share:                                                     |                                     | 
|As reported                                                             |                                     |  | $                                 | (0.05   
|Pro forma                                                               |                                     |  | $                                 | (0.05   

The fair value of share-based option
awards is estimated using the Black-Scholes option pricing model, with expected volatility
based on historical actual volatility, and a risk-free interest rate based on the U.S.
Treasury yield in effect at the time of the respective grant. We use the shortcut method
described in SAB 107 in determining the expected life of employee options, whereby the
expected term is estimated using the midpoint between the vesting date and the end of the
contractual term. Our estimation of expected life for non-employee director and third
party advisor awards is based on the contractual term of the award. The following
assumptions were used for awards made during the three months ended January 31:

|                        | 2007 |  | 2006
|----------------------- | ---- |  | ----
|Expected volatility     |      |  |     
|Expected dividend yield |      |  |     
|Risk-free interest rate |      |  |     
|Expected life           |      |  |     

F-5

---



A summary of stock option activity is
as follows:

|                            | Number of
Shares |  | Weighted-Average
Exercise Price ($) |            | Aggregate Intrinsic
Value ($000's)
|--------------------------- | ---------------- |  | ----------------------------------- | ---------- | ----------------------------------
|Balance at July 31, 2006    |                  |  |                                     | 11,634,000 |                                   
|Granted                     |                  |  |                                     | 100,000    |                                   
|Exercised                   |                  |  |                                     | (51,500    | )                                 
|Forfeited / Terminated      |                  |  |                                     |           |                                   
|                            |                  |  |                                     |           
|Balance at October 31, 2006 |                  |  |                                     | 11,682,500 |                                   
|Granted                     |                  |  |                                     | 25,000     |                                   
|Exercised                   |                  |  |                                     | (525,053   | )                                 
|Forfeited /  Terminated     |                  |  |                                     | (111,447   | )                                 
|                            |                  |  |                                     |           
|Balance at January 31, 2007 |                  |  |                                     | 11,071,000 |                                   
|                            |                  |  |                                     |           

|               |  | Outstanding | Exercisable
|-------------- |  | ----------- | -----------
|
|$0.50 to $0.75 |  |             |            
|$0.80 to $1.20 |  |             |            
|$1.50 to $2.00 |  |             |            
|               |  |             |            
|               |  |             |            
|               |  |             |            

Cash received from options exercised
for the three months ended January 31, 2007 and 2006, was $127,000 and $53,000
respectively. The weighted-average grant date fair value of equity options granted during
the three months ended January 31, 2007 and 2006, was $1.92 and $1.55, respectively, and
the intrinsic value of options exercised during the three months ended January 31, 2007
and 2006, was $901,189 and $89,000 respectively.

Cash received from options exercised
for the six months ended January 31, 2007 and 2006, was $178,500 and $53,000 respectively.
The weighted-average grant date fair value of equity options granted during the six months
ended January 31, 2007 and 2006, was $1.85 and $1.51, respectively, and the intrinsic
value of options exercised during the six months ended January 31, 2007 and 2006, was
$953,719 and $89,000 respectively.

As of January 31, 2007, there was
$17,254 of unrecognized non-cash compensation cost related to non-vested options, in
addition to $249,332 recorded on the face of the consolidated balance sheets as
prepaid consulting and further discussed in Note 6.

Note 6. Prepaid
ConsultingDuring the three months ended January
31, 2006, we entered into a two-year consulting agreement with Mr. Michael Sitton for
domestic and international business development, the compensation being a fee of $12,500
per month and an option on 2,000,000 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 being a
fee of $12,500 per month and an option on 300,000 shares of unregistered common stock,
which vest over three years. Mr. Sitton subsequently transferred the rights to 700,000
options to Secretary Thompson. Mr. Sitton is now therefore the beneficial owner of
1,300,000, and Secretary Thompson is the beneficial owner of 1,000,000 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. Mr. Sitton and Secretary Thompson were each elected to our Board of
Directors during the quarter ended January 31, 2006, however in October 2006 Mr. Sitton
resigned from the Board of Directors. Mr. Sittons consulting agreement is not
affected by his resignation from our Board of Directors.

On their granting during the three
months ended January 31, 2006, we recorded the value of the aggregate of 2,300,000
unvested options as a prepaid asset to be amortized over the life of the consulting
agreements. The 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 three months ended January 31, 2007 we amortized $74,797
of the prepaid asset to selling expense, and during the six months ended January 31, 2007
we amortized $149,593 of the prepaid asset to selling expense. To date we have amortized
fourteen months, or $349,050, of the asset to selling expense and as a result we reported
a prepaid asset of $249,322 as Prepaid consulting on the face of the
consolidated balance sheets as at January 31, 2007.

Note 7. Subsequent EventsSubsequent to the end of the quarter
ended January 31, 2007, we received $89,190 from the exercise of options on 100,000 shares
of common stock, issued in prior periods for services provided to the Company.

F-6

---



ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following
discussion and analysis should be read in conjunction with the audited and unaudited
financial statements of PURE Bioscience.

OVERVIEWPURE 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
and are now focused exclusively on the development and commercialization of our current
and future bioscience products.

Bioscience TechnologyOur 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 are pursuing certain approvals for human use through the U.S. Food and Drug
Administration (FDA), initially by partnering with Therapeutics, Incorporated
(Therapeutics). Therapeutics has elected to focus on development 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. 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. In December 2006 Therapeutics submitted an
Investigational New Drug (IND) application with the FDA for an SDC-based hand sanitizer,
to enable initiation of the first clinical trial of a product containing SDC as an active
pharmaceutical ingredient. After reviewing the submission the FDA determined that the
product testing in man may begin as proposed.

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 are also developing 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. Marketing efforts behind these pesticide products to date, and resulting sales,
have been limited. During the current year we intend to develop additional formulations of
these products to subsequently be sold, subject to evaluation of market potential, with
wider distribution and increased marketing efforts.

RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JANUARY 31, 2007 VERSUS THREE MONTHS ENDED JANUARY 31, 2006During
the three months ended January 31, 2007 revenues of $168,800 increased by $109,300, or
184%, compared with the three months ended January 31, 2006. 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. In October 2006, Enviroguard announced the
initial distribution of Staph Attack, a new hard surface disinfectant containing SDC, for
institutional evaluation.

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Gross profit for the three months
ended January 31, 2007 was $54,000 versus $30,300 in the same quarter of the prior fiscal
year. The gross margin percentage declined from 50.9% in the prior year to 30.2% in the
current period, due primarily to product and customer mix. The most significant factor
affecting variability in our overall margins is, and is expected in future periods to be,
product mix. Our margins on the sale of finished packaged products, such as our ready to
use hard surface disinfectants, are less than the margins on the sale of bulk products
such as our SDC concentrate. During the three months ended January 31, 2007, sales were
primarily from finished packaged products. In future periods, we expect sales of bulk
concentrate to contribute a greater proportion of our revenues.

Operating costs increased by 17.6%,
from $949,600 in the three months ended January 31, 2006, to $1,117,100 in the three
months ended January 31, 2007. Within these aggregate operating costs, selling expenses
increased by $72,700, to $216,600 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 ongoing product launches.
General and administrative expenses decreased by $17,600, to $553,600 in the three months
ended January 31, 2007, compared with the three months ended January 31, 2006. The
decrease in expense for the most recent quarter is primarily due to the issuance of stock
options in the prior year for, and other expenses related to, investor relations and
investment consulting services incurred in advance of our March 2006 private placement.
Included in general and administrative expenses for the three months ended January 31,
2007 is $2,465 of employee stock option expense. Research and development costs, including
patent, license and product registration expenditures, increased for the three months
ended January 31, 2007 by 47.9% to $347,000, compared with the same period in the prior
fiscal year. This is primarily due to increased consulting fees paid to outside advisors,
including $65,100 of non-cash expense for the issuance of 30,000 shares of common stock at
a market price of $2.17, and additional testing expenses to support regulatory filings.
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 increased by $143,800, from a net loss of $919,300 in the three months ended January
31, 2006 to a net loss of $1,063,100 in the three months ended January 31, 2007. Other
income improved by $54,900 for the three months ended January 31, 2007 compared with the
prior year, primarily due to increased interest income resulting from higher cash
balances. Additionally, other income was offset by capital asset write-downs associated
with our facility reconstruction and infrastructure investments. We made no income tax
provision related to the periods ending January 31, 2007 or 2006, as any tax liabilities
are offset by current period losses or available federal and California net operating loss
carry-forwards. As a result, our net loss after taxes increased by $89,000, from a net
loss of $919,200 in the three months ended January 31, 2006 to a net loss of $1,008,100 in
the three months ended January 31, 2007.

RESULTS OF OPERATIONS FOR THE SIX
MONTHS ENDED JANUARY 31, 2007 VERSUS SIX MONTHS ENDED JANUARY 31, 2006During the six
months ended January 31, 2007 revenues of $196,500 increased by 81,900, or 71%, compared
with the six months ended January 31, 2006. Our revenues for the six months ended January
31, 2007 include the early results of the launch of Staph Attack, and to a lesser extent
products sold by our other distributors.

Gross profit for the six months ended
January 31, 2007 was $69,500 versus $70,600 in the same period of the prior fiscal year.
The gross margin percentage declined from 61.6% in the prior year to 35.4% in the current
period, due primarily to product and customer mix. During the six months ended January 31,
2007, the majority of sales were from finished packaged products, while during the same
period of the prior fiscal year bulk concentrate contributed a significantly higher
proportion of revenues.

Operating costs increased by 28.3%,
from $1,591,900 in the six months ended January 31, 2006, to $2,042,300 in the six months
ended January 31, 2007. Within these aggregate operating costs, selling expenses increased
by $157,100, to $398,700 in the current period compared with the same period 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 product launches. General and administrative
expenses increased by $155,500, to $1,022,200 in the six months ended January 31, 2007,
compared with the six months ended January 31, 2006, primarily due to consulting fees and
option expenses related to investments in corporate infrastructure. Included in general
and administrative expenses for the six months ended January 31, 2007 are non-cash items
including $2,465 of employee stock option expense, and $91,250 of expense for the issuance
of options in exchange for manufacturing and facility development consulting services.
These cost increases were partially offset by the issuance of stock options in the prior
year for, and other expenses related to, investor relations and investment consulting
services incurred in advance of our March 2006 private placement. Research and development
costs, including patent, license and product registration expenditures, increased for the
six months ended January 31, 2007 by 28.5% to $621,300, compared with the same period in
the prior fiscal year. This is primarily due to increased consulting fees paid to outside
advisors, including $65,100 of non-cash expense for the issuance of 30,000 shares of
common stock at a market price of $2.17, and additional testing expenses to support
regulatory filings.

Our net loss from operations before
taxes increased by $451,500, from a net loss of $1,521,300 in the six months ended January
31, 2006 to a net loss of $1,972,800 in the six months ended January 31, 2007. Other
income improved by $104,800 for the three months ended January 31, 2007 compared with the
prior year, primarily due to increased interest income resulting from higher cash
balances. Additionally, other income was offset by capital asset write-downs associated
with our facility reconstruction and infrastructure investments. We made no income tax
provision related to the periods ending January 31, 2007 or 2006, as any tax liabilities
are offset by current period losses or available federal and California net operating loss
carry-forwards. As a result, our net loss after taxes increased by $346,700, from a net
loss of $1,528,700 in the six months ended January 31, 2006 to a net loss of $1,875,400 in
the six months ended January 31, 2007.

LIQUIDITY AND CAPITAL
RESOURCESFrom inception through the present,
we have financed our operations primarily through our initial public offering in August of
1996, by subsequent private placement common stock sales, through lines of credit and the
issuance of debentures, and in May 2005 by the sale of our Water Treatment Division. We
currently have no long-term debt.

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As at January 31, 2007, we had
current assets of $3,614,300, a decrease of $1,452,300 from July 31, 2006. Cash and cash
equivalents at January 31, 2007 were $3,268,400 after net cash outflows for the six month
period of $1,451,900. During the six months ended January 31, 2006, we received $333,100
in amounts related to the May 2005 sale of our Water Treatment Division, however if these
amounts are excluded from cash inflows for the period, our net cash outflow for the
comparable period of the prior fiscal year was $666,400.

During the six months ended January
31, 2007, cash used in operating activities was $1,286,700, including approximately
$60,000 invested in additional inventory to support our partners product launches.
During the same period in the prior fiscal year, excluding the amounts received related to
the May 2005 sale of our Water Treatment Division as discussed above, cash used in
operating activities was $1,103,600.

During the six months ended January
31, 2007, cash used in investing activities was $343,700, including investments in
property, plant and equipment of $286,600. These investments are primarily due to
activities to develop the manufacturing and office areas of our El Cajon location, based
on our anticipated facility needs, and to improve our computer hardware and software
infrastructure. During the six months ended January 31, 2007 we also wrote down the value
of our capitalized property, plant and equipment by approximately $200,000 based on our
evaluation of obsolescence and assets that are to be replaced during our ongoing facility
development. As a result, property, plant and equipment on the consolidated balance sheets
at January 31, 2007 grew by $53,400 over the six month period from July 31, 2006.

Other assets during the six months
ended January 31, 2007 declined by $208,900, primarily due to an excess of patent
amortization over patent investment, and $149,600 of prepaid consulting amortization as
detailed in Note 6 to the consolidated financial statements. The capitalized value of
patents and licenses at January 31, 2007, primarily related to our silver dihydrogen
citrate technology, was $2,077,400, a decline of $59,300 from July 31, 2006.

During the six months ended January
31, 2007, cash flows from financing activities were $178,500, all of which came from the
exercise of options by non-employees on 238,000 shares of common stock at an average
exercise price of $0.75 per share. In the corresponding period of the prior fiscal year,
we received $458,000 from the proceeds of sales of common stock. This consisted of
$405,000 from the sale of 539,999 shares of common stock in two private placements to
accredited investors, each at $0.75 per share, and $53,000 from the exercise of options on
100,000 shares at $0.53 per share.

At January 31, 2007, we had current
liabilities of $342,200, a decrease of $69,700 from July 31, 2006, primarily due to the
timing of the payment of accounts payable.

RISKS RELATED TO OUR
CAPITAL RESOURCESAt January 31, 2007, we had current
assets of $3,614,300, current liabilities of $342,200 and no outstanding long-term debt;
however we do not yet have significant cash inflows from product sales to offset our
ongoing planned investments in infrastructure, manufacturing capacity, product launches,
research and development projects and regulatory submissions, among other investments.

In future periods we may need to seek
additional capital through the issuance of debt, equity, convertible securities or through
other means, any one of which could reduce the value to us, perhaps substantially, of the
commercialization of our bioscience technology. The issuance of debt or equity, or
convertible securities, could lead to the dilution of our existing shareholders. There is
no guarantee that we would be able to obtain capital on terms acceptable to us, or at all.
Insufficient funds could 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.

RISKS RELATED TO OUR
OPERATIONSWe had a loss of $3,680,500 from
continuing operations before taxes in the fiscal year ending July 31, 2006, and a loss of
$1,875,400 before taxes in the six months ended January 31, 2007. We may continue to have
losses in the future. If our revenue growth is slower than anticipated or operating
expenses exceed expectations, it may take an unforeseen period of time to achieve or
sustain profitability and we may never achieve or sustain profitability. Slower than
anticipated revenue growth from new products would force us to scale back research,
testing, product development and marketing of new products, at which time we would reduce
the size and scope of our operations, or cease operations. We are currently investing in
expansion and improvement of our manufacturing facility, and to a lesser extent our office
space, and our future revenues may not provide an adequate return, if any, on such
investments.

We are a bioscience company focused
on the marketing, selling and continued development of silver dihydrogen citrate
antimicrobial technology and 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 is a platform technology
rather than a single use applied 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 (the EPA) registration for our
2400-parts per million (ppm) technical grade SDC concentrate (trade name Axenohl), as well
as for our Axen and Axen30 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 are
pursuing certain approvals through the U.S. Food and Drug Administration (FDA) by
partnering with Therapeutics, Incorporated, which has assumed responsibility for the
testing and regulatory process for selected potential FDA regulated silver dihydrogen
citrate-based products. We expect that the development of SDC-based products could lead to
multiple IND, NDA and/or 510-K filings for silver dihydrogen citrated-based healthcare
products with the FDA. In December 2006 Therapeutics submitted an Investigational New Drug
(IND) application with the FDA for an SDC-based hand sanitizer, to enable initiation of
the first clinical trial of a product containing SDC as an active pharmaceutical
ingredient. After reviewing the submission the FDA determined that the product testing in
man may begin as proposed. However, 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, Incorporated, any other
potential partner, 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. It
may be several years before we are able to introduce any FDA regulated antimicrobial
pharmaceutical products, if at all.

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We are marketing our new antimicrobial silver ion technology to industrial and
consumer markets. We also have begun marketing our environmentally safe
pesticides. These products have not yet been accepted into the marketplace.
Risks involved in introducing these new products include liability for product
effectiveness and safety, and competition from existing or emerging sources.
Additionally, Government regulation in the United States and in other countries
is a significant factor in the development, manufacturing and marketing of many
of our products and in our ongoing research and development activities.
Complying with applicable government regulations and obtaining necessary
clearances or approvals can be time consuming and expensive, and there can be no
assurance that regulatory review will not involve delays or other actions
adversely affecting the marketing and sale of our products. We also cannot
predict the extent or impact of future legislation or regulation. Some of our
new bioscience applications for the healthcare markets and food preparation
markets will require approval by government agencies prior to marketing or sale
in the United States. We have not yet applied for Food and Drug Administration
or Department of Agriculture approval to market any such products. If any future
applications are not approved, we will not be able to market or sell such
products, which would limit the revenues which may be realized. Even after
approval, if any, we will remain subject to changing governmental policies
regulating antimicrobial products. We also intend to take these technologies to
the international marketplace, and doing business internationally carries a
great deal of risk, with regard to foreign government regulation, banking and
other factors.

Our silver ion, pesticide and other
products will be competing in markets dominated by extremely large, well financed and
internationally recognized chemical and pharmaceutical companies. Our ability to compete
will depend upon developing brand recognition and distribution methods. Many of our
competitors already have well established brands and distribution, as well as many times
our financial ability. Focused competition by such chemical and pharmaceutical giants
could substantially limit our potential market and ability to profit from these products.

We expect that sales of SDC will
constitute a substantial portion of our revenues during the fiscal year ending July 31,
2007 and in future periods. Any material decrease in the overall level of sales or
expected sales of, or the prices for SDC, whether as a result of competition, change in
consumer demand, or any other factor, would have a material adverse effect on our
business, financial condition and results of operations.

LEGAL RISKS RELATED TO
OUR BUSINESSWe rely and may in the future rely on
a combination of patent, trademark, trade secret and copyright law and contractual
restrictions to protect the proprietary aspects of our technology and business. These
legal protections afford only limited protection for our intellectual property and trade
secrets. Despite efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our proprietary technology or otherwise obtain and use
information that we regard as proprietary.

We have filed for U.S. and foreign
patent applications and trademark registrations for our patents and trademarks. It is
possible that competitors or others will create and use products in violation of our
patents and/or adopt service names similar to our service names. Such patent infringement
could have a material, adverse effect on our business. Adopting similar names and
trademarks by competitors could lead to customer confusion. Any claims or customer
confusion related to our trademarks could negatively affect our business.

Litigation may be necessary to
enforce our intellectual property rights and protect our trade secrets. If third parties
prepare and file applications in the United States or other countries that claim
trademarks used or registered by us, we may oppose those applications and may be required
to participate in proceedings before the regulatory agencies who determine priority of
rights to such trademarks. Any litigation or adverse priority proceeding could result in
substantial costs and diversions of resources, and could seriously harm our business and
operating results.

To the extent that we operate
internationally, the laws of many countries may not protect our proprietary rights to as
great an extent as do the laws of the United States. Many countries have a
first-to-file trademark registration system. As a result, we may be prevented
from registering or using our trademarks in certain countries if third parties have
previously filed applications to register or have registered the same or similar
trademarks. Our means of protecting our proprietary rights may not be adequate, and our
competitors could independently develop similar technology.

As a business which manufactures and
markets products for use by consumers, we may become liable for any damage caused by our
products when used in the manner intended. Any such claim of liability, whether
meritorious or not, could be time-consuming and/or result in costly litigation. Although
we maintain general liability insurance, our insurance may not cover potential claims of
the types described above and may not be adequate to indemnify for all liabilities that
may be imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could harm our business and operating results.

OTHER RISKS RELATED TO
INVESTING IN OUR SECURITIESAs of March 14, 2007, Michael L.
Krall, our President and Chief Executive Officer, beneficially owned, including
exercisable options, approximately 9% of our common stock. As of the same date, our
directors and officers as a group beneficially owned, including exercisable options and
warrants, approximately 25% of the common stock. As a result, our management, and Mr.
Krall in particular, are in a position to significantly influence the direction and
policies of the Company, the election of the Board of Directors of the Company and the
outcome of any other matters requiring stockholder approval.

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Since going public in August 1996,
the price and trading volume of our common stock has been highly volatile. The price has
ranged from below $1 per share to over $7 per share. In addition, the monthly trading
volume has varied from under 200,000 shares to over 3,000,000 shares. During the twelve
months prior to March 2007, the daily closing price of our common stock has ranged from
$1.38 to $2.95, and the monthly trading volume has varied from approximately 895,000
shares to approximately 4,354,000 shares. This volatility could adversely affect an
investors ability to sell shares of our common stock, and the available price for
such shares, including resulting in lower prices being available to an investor if the
investor desires to sell their shares at any given time.

Our common stock may be characterized
as a penny stock under SEC regulations. As such, broker-dealers dealing in the
common stock may be subject to the disclosure rules for transactions involving penny
stocks, which generally require that, prior to a purchase, the broker-dealer determine if
purchasing the common stock is suitable for the applicable purchaser. The broker-dealer
must also obtain the written consent of the applicable purchasers to purchase the common
stock and disclose the best bid and offer prices available for the common stock and the
price at which the broker-dealer last purchased or sold the common stock. These additional
burdens imposed upon broker-dealers may discourage them from effecting transactions in the
common stock, which could make it difficult for an investor to sell his, her or its Shares
at any given time.

We have approximately 11,362,698
shares of common stock reserved for issuance, which includes shares under equity
compensation plans, vested and unvested options, and warrants. These shares have a
weighted-average exercise price of approximately $1.19. Approximately 14,097,747 shares of
common stock remain available for future issuance under equity compensation plans or
otherwise. The exercise of options and common stock purchase warrants, and the sale of
underlying shares, could have an adverse effect on the market for our common stock.

We have never paid any cash dividends
on our common stock and do not anticipate paying cash dividends on our common stock in the
foreseeable future. The future payment of dividends on our common stock will depend on our
earnings, financial condition and other business and economic factors, which the Board of
Directors of the Company may consider relevant.

Investors may experience dilution in
the net tangible book value of their investment upon the exercise of outstanding options
and warrants granted under our stock option plans, and other options, warrants and
outstanding convertible securities.

Certain provisions of our charter and
by-laws may delay or frustrate the removal of incumbent directors and may prevent or delay
a merger, tender offer or proxy contest involving the Company that is not approved by the
Board of Directors of the Company, even if such events may be beneficial to the interests
of stockholders. For example, our Board of Directors, without stockholder approval, has
the authority and power to issue all authorized and unissued shares of common stock and
preferred stock which have not otherwise been reserved for issuance on such terms as the
Board of Directors determines. The Board of Directors could also issue 5,000,000 shares of
preferred stock and such preferred stock could have voting or conversion rights which
could adversely affect the voting power of the holders of common stock. In addition,
California law may contain provisions that have the effect of making it more difficult or
delaying attempts by others to gain control of the Company.

VALUATION OF INTANGIBLE
ASSETSSFAS 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 the development of SDC-based products in human and veterinary applications,
including those under 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.

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 sheets.

ITEM 3. CONTROLS AND
PROCEDURESWe 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.

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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.

PART IIITEM 1. LEGAL PROCEEDINGSNone

ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIESNone

ITEM 3. DEFAULTS UPON
SENIOR SECURITIESNot applicable.

ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERSOn or about January 22, 2007 we
mailed a proxy statement to shareholders for re-election of directors and approval of the
PURE Bioscience 2007 Equity Incentive Plan.  At the annual meeting of shareholders
held on March 1, 2007, 80% of shares outstanding were voted.  Of the shares voted,
each nominee for director received votes reflecting at least 95% approval, and the PURE
Bioscience 2007 Equity Incentive Plan received approximately 76% approval.

ITEM 5. OTHER INFORMATIONNot 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: 
          31.1 -- Section 302 Certification 
          31.2 -- Section 302
Certification 

          32.1 -- Section 906 Certification 
          32.2 -- Section 906
Certification

B.             Reports on Form 8-K: None.

# 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
          March 14, 2007
By: /s/ Andrew J. Buckland
          Andrew J. Buckland, CFO/Principal Accounting Officer
          March 14, 2007

7

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