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, 2005
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------

| | [  ] | 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

State
the number of shares outstanding of each of the issuers classes of common equity as
of the latest practicable date: 17,563,306 as of June 13, 2005.

---

|        |                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                          
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part 1. | Financial Information
Item 1.              
                     
                     
                     
Item 2.              
Item 3.                 | Financial Statements
Balance Sheets as of July 31, 2004 and April 30, 2005 
Statements of Operations for the three and nine months ended April 30, 2005 and 2004
Statements of Cash Flows for the nine months ended April 30, 2005 and 2004
Management's Discussion and Analysis of Financial Condition and Results of Operations
Controls and Procedures
|Part II | Other Information
Item 1.          
Item 2.          
Item 3.          
Item 4.          
Item 5.          
Item 6.          
Signatures and Certifications | 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

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|CONSOLIDATED BALANCE SHEETS                        |  | 
|-------------------------------------------------- |  | 
|
|ASSETS                                             |  | 
|Current Assets                                     |  | 
|Cash and cash equivalents                          |  | 
|Accounts receivable, net of allowance for doubtful |  | 
|accounts of $59,000 at July 31, 2004               |  | 
|and $15,500 at April 30, 2005                      |  | 
|Inventories                                        |  | 
|Prepaid expenses                                   |  | 
|Interest receivable                                |  | 
|                                                   |  | 
|Total current assets                               |  | 
|                                                   |  | 
|Property, Plant and Equipment                      |  | 
|Property, plant and equipment                      |  | 
|                                                   |  | 
|Total property, plant and equipment                |  | 
|                                                   |  | 
|Other Assets                                       |  | 
|Trust deed receivable                              |  | 
|Deposits                                           |  | 
|Patents and licenses                               |  | 
|                                                   |  | 
|                                                   |  | 
|Total other assets                                 |  | 
|                                                   |  | 
|Assets of the water division held for resale       |  | 
|                                                   |  | 
|Total assets                                       |  | 
|                                                   |  | 
|LIABILITIES AND STOCKHOLDERS EQUITY                |  | 
|Current Liabilities                                |  | 
|Accounts payable                                   |  | 
|Accrued liabilities                                |  | 
|Notes payable                                      |  | 
|Loans from shareholders                            |  | 
|                                                   |  | 
|Total current liabilities                          |  | 
|                                                   |  | 
|Liabilities of the water division held for resale  |  | 
|                                                   |  | 
|Stockholders' Equity                               |  | 
|Preferred Stock                                    |  | 
|Class A common stock, no par value: authorized     |  | 
|50,000,000 shares, issued and outstanding          |  | 
|15,457,310 at July 31, 2004 and                    |  | 
|17,549,306 at April 30, 2005                       |  | 
|Warrants: issued and outstanding 1,639,723         |  | 
|warrants                                           |  | 
|Accumulated deficit                                |  | 
|                                                   |  | 
|Total stockholders' equity                         |  | 
|                                                   |  | 
|Total liabilities and stockholders' equity         |  | 
|                                                   |  | 

The accompanying notes are an integral part of these financial statements

3

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|CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |  |  |   |           
|------------------------------------------------- |  |  | - | ----------
|
|
|Net revenues                                      |  |  | $ | 117,818   
|Cost of sales                                     |  |  |   | 45,394    
|                                                  |  |  |   |           
|Gross profit                                      |  |  |   | 72,424    
|                                                  |  |  |   |           
|                                                  |  |  |   |           
|Selling expenses                                  |  |  |   | 363,215   
|General and administrative expenses               |  |  |   | 697,976   
|Research and development                          |  |  |   | 925,579   
|                                                  |  |  |   |           
|Total operating costs                             |  |  |   | 1,986,770 
|                                                  |  |  |   |           
|Loss from operations                              |  |  |   | (1,914,346
|                                                  |  |  |   |           
|                                                  |  |  |   |           
|Other income and (expense)                        |  | 
|Interest income                                   |  |  |   | 100,835   
|Interest expense                                  |  |  |   | (106,110  
|Other                                             |  |  |   | (13,882   
|                                                  |  |  |   |           
|Total other income (expense)                      |  |  |   | (19,157   
|                                                  |  |  |   |           
|Loss from continuing operations                   |  |  |   | (1,933,503
|                                                  |  |  |   |           
|Discontinued operations:                          |  | 
|Income from discontinued operations               |  |  |   | 483,432   
|                                                  |  |  |   |           
|Net loss                                          |  |  | $ | (1,450,071
|                                                  |  |  |   |           
|Net loss per common share, basic and diluted      |  | 
|Continuing operations                             |  |  | $ | (0.12     
|Discontinued operations                           |  |  |   | 0.03      
|                                                  |  |  |   |           
|Net loss                                          |  |  | $ | (0.09     
|                                                  |  |  |   |           

|CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS | (Unaudited)
Nine Months
Ended
April 30
2005 | Year
Ended
July 31
2004
|----------------------------------------------- | ------------------------------------------- | -----------------------
|Balance, beginning of period                    |                                             |                        
|                                                |                                             |                        
|Net income (loss)                               |                                             |                        
|                                                |                                             |                        
|Balance, end of period                          |                                             |                        
|                                                |                                             |                        

The accompanying notes are an integral part of these financial statements

4

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|CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)      |  | 
|------------------------------------------------------ |  | 
|
|
|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 warrants |  | 
|Income from discontinued operations                    |  | 
|Changes in assets and liabilities:                     |  | 
|(Increase) decrease in accounts receivable             |  | 
|(Increase) decrease in due from officers and employees |  | 
|(Increase) decrease in prepaid expense                 |  | 
|(Increase) decrease in interest receivable             |  | 
|(Increase) decrease in inventory                       |  | 
|(Increase) decrease in deposits                        |  | 
|Increase (decrease) in accounts payable                |  | 
|Increase (decrease) in accrued liabilities             |  | 
|Increase (decrease) notes payable                      |  | 
|                                                       |  | 
|Net cash provided (used) by operating                  |  | 
|activities                                             |  | 
|                                                       |  | 
|Cash flows from investing activities                   |  | 
|Purchase of patents and licenses                       |  | 
|Purchase of property, plant and equipment              |  | 
|                                                       |  | 
|                                                       |  | 
|Net cash (used) in investing activities                |  | 
|                                                       |  | 
|Cash flows from financing activities                   |  | 
|Proceeds from debt obligations                         |  | 
|Payments on debt obligations                           |  | 
|Proceeds from sale of common stock                     |  | 
|                                                       |  | 
|Net cash provided by financing activities              |  | 
|                                                       |  | 
|Cash flows 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                                    |  | 
|Noncash investing and financing activities             |  | 
|Value of shares issued for assets and services         |  | 
|Value of options issued for services                   |  | 
|Trust deed received in exchange for stock              |  | 

The accompanying notes are an
integral part of these financial statements

5

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# NOTES TO FINANCIAL
STATEMENTS

Note 1. Financial
Statements
The financial statements included
herein have been prepared by PURE Bioscience (the Company) 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 PURE Bioscience believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these financial
statements be read in conjunction with the July 31, 2004 audited financial statements and
the accompanying notes thereto. While management believes the procedures followed in
preparing these financial statements are reasonable, the accuracy of the amounts are in
some respects dependent upon the facts that will exist and procedures that will be
accomplished by PURE Bioscience later in the year. The results of operations for the
interim periods are not necessarily indicative of the results of operations for the full
year.

Certain reclassifications have been
made to previously reported statements to conform to the Companys current financial
statement format.

The management of the Company
believes 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, certain information is disclosed based on the way management organizes
financial information for making operating decisions and assessing performance. In
determining operating segments, the Company 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.

The Companys business activity
was divided, managed and conducted in two basic business segments, the Water Treatment
segment and the Bioscience segment. These two segments were determined by management based
upon the inherent differences in the end use of the products, the inherent differences in
the value added processes made by the Company, the differences in the regulatory
requirements and the inherent differences in the strategies required to successfully
market finished products. The Water Treatment segment included Commercial Water and
Residential Retail products and the Nutripure Water Dealer Program. Bioscience includes
the silver dihydrogen citrate antimicrobial and the Innovex line of pest control products.
Because the Company has sold the Water Treatment segment, it is now reported as
Discontinued Operations in the financial statements.

Segment information is presented in
accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related
Information. This standard is based on a management approach, which requires segmentation
based upon the Companys internal organization and disclosure of revenue and
operating income based upon internal accounting methods. The Companys financial
reporting systems present various data for management to run the business, including
internal profit and loss statements prepared on a basis not consistent with U.S. generally
accepted accounting principles.

|FOR THE THREE MONTHS ENDED
APRIL 30, 2004 | Water
Treatment
(Discontinued) | Bioscience | Reconciling
Amounts | Consolidated
|----------------------------------------- | ------------------------------ | ---------- | ------------------- | ------------
|Revenues                                  |                                |            |                     |             
|Commercial Water Treatment                |                                |           
|Fillmaster Products                       |                                |            | $                   | 187,900     
|Replacement Filters (Includes CSP 2000)   |                                |            |                     | 210,200     
|Residential Water Treatment               |                                |            |                     | 5,400       
|Water Dealer Program                      |                                |            |                     |            
|Antimicrobials                            |                                |            |                     |            
|Pesticides                                |                                |            |                     |            
|                                          |                                |            |                     |             
|Total Revenues                            |                                |            | $                   | 403,500     
|                                          |                                |            |                     |             
|Operating Income/(Loss)                   |                                |            | $                   | 147,200     
|                                          |                                |            |                     |             
|Segment Assets                            |                                |            | $                   | 294,700     
|                                          |                                |            |                     |             

|FOR THE THREE MONTHS ENDED
APRIL 30, 2005 | Water
Treatment
(Discontinued) | Bioscience | Reconciling
Amounts | Consolidated
|----------------------------------------- | ------------------------------ | ---------- | ------------------- | ------------
|Revenues                                  |                                |            |                     |             
|Commercial Water Treatment                |                                |           
|Fillmaster Products                       |                                |            | $                   | 251,400     
|Replacement Filters (Includes CSP 2000)   |                                |            |                     | 179,600     
|Residential Water Treatment               |                                |            |                     | 3,400       
|Water Dealer Program                      |                                |            |                     |            
|Antimicrobials                            |                                |            |                     |            
|Pesticides                                |                                |            |                     |            
|                                          |                                |            |                     |             
|Total Revenues                            |                                |            | $                   | 434,400     
|                                          |                                |            |                     |             
|Operating Income/(Loss)                   |                                |            | $                   | 92,200      
|                                          |                                |            |                     |             
|Segment Assets                            |                                |            | $                   | 251,600     
|                                          |                                |            |                     |             
|                                          |                                |           

6

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|FOR THE NINE MONTHS ENDED
APRIL 30, 2004 | Water
Treatment
(Discontinued) | Bioscience | Reconciling
Amounts | Consolidated
|---------------------------------------- | ------------------------------ | ---------- | ------------------- | ------------
|Revenues                                 |                                |            |                     |             
|Commercial Water Treatment               |                                |           
|Fillmaster Products                      |                                |            | $                   | 708,200     
|Replacement Filters (Includes CSP 2000)  |                                |            |                     | 540,300     
|Residential Water Treatment              |                                |            |                     | 53,600      
|Water Dealer Program                     |                                |            |                     | 36,400      
|Antimicrobials                           |                                |            |                     |            
|Pesticides                               |                                |            |                     |            
|                                         |                                |            |                     |             
|Total Revenues                           |                                |            | $                   | 1,338,500   
|                                         |                                |            |                     |             
|Operating Income/(Loss)                  |                                |            | $                   | 411,900     
|                                         |                                |            |                     |             
|Segment Assets                           |                                |            | $                   | 294,700     
|                                         |                                |            |                     |             

|FOR THE NINE MONTHS ENDED
APRIL 30, 2005 | Water
Treatment
(Discontinued) | Bioscience | Reconciling
Amounts | Consolidated
|---------------------------------------- | ------------------------------ | ---------- | ------------------- | ------------
|Revenues                                 |                                |            |                     |             
|Commercial Water Treatment               |                                |           
|Fillmaster Products                      |                                |            | $                   | 1,207,000   
|Replacement Filters (Includes CSP 2000)  |                                |            |                     | 369,500     
|Residential Water Treatment              |                                |            |                     | (2,200      
|Water Dealer Program                     |                                |            |                     |            
|Antimicrobials                           |                                |            |                     |            
|Pesticides                               |                                |            |                     |            
|                                         |                                |            |                     |             
|Total Revenues                           |                                |            | $                   | 1,574,300   
|                                         |                                |            |                     |             
|Operating Income/(Loss)                  |                                |            | $                   | 483,400     
|                                         |                                |            |                     |             
|Segment Assets                           |                                |            | $                   | 251,600     
|                                         |                                |            |                     |             

Significant customers primarily
consisted of domestic retail chain pharmacies. Sales concentrations to major chain stores
were approximately $261,000 and export sales were $47,800 for the quarter ended April 30,
2005. Sales concentrations to major chain stores were approximately $272,300 and export
sales were $42,800 for the three months ended April 30, 2004. In the current quarter,
three major retail chain pharmacies accounted for 49% of consolidated sales.

Note 3. Common StockIn August, the Company issued 200,000
options to purchase common stock in exchange for consulting and legal services valued at
$85,000. Also in August, the Company conducted a private placement which consisted of
125,000 shares of common stock at a price of $.39 per share and a one-year warrant to
purchase 12,500 shares of common stock at $1.50 valued at $1,154 ($0.01 per share based on
the Black Scholes Option Pricing Model assuming no dividend yield, volatility of 137.78%
and a risk-free interest rate of 2.25%) for a total of $50,000. In September, the Company
issued 7,000 shares valued at $2,275 ($0.33 per share) for payment of directors
expenses. In addition, in September the Company issued 200,000 shares valued at $90,000
($0.45 per share) in exchange for the assignment of two patent rights.

In November, the Company issued
200,000 shares valued at $100,000 ($0.50 per share) of common stock in exchange for
consulting and legal services. The Company also issued options on 275,000 shares in
exchange for consulting services with exercise prices ranging from $0.50 to $0.80 valued
at $94,491 (based on the Black Scholes Option Pricing Model assuming no dividend yield,
volatility of 137.78% and a risk-free interest rate of 2.25%) In December, the Company
issued 300,000 shares of common stock ($0.50 per share) for consulting services valued at
the fair value of the services of $150,000. Also in December, the Company conducted two
private placements valued at $200,000 (366,667 shares of common stock at an average price
of $0.5455 per share). The Company also received $10,500 from the exercise of employee
options.

In January, the Company issued 5,000
shares of common stock ($0.87 per share) valued at $4,350 (based on the market price of
the stock at the time the services were rendered) in exchange for business services. Also
in January, the Company conducted a private placement which consisted of 60,000 shares of
common stock at a price of $.49 per share and a one-year warrant to purchase 6,000 shares
of common stock at $1.00 valued at $674 ($0.01 per share based on the Black Scholes Option
Pricing Model assuming no dividend yield, volatility of 137.78% and a risk-free interest
rate of 2.25%) for a total of $30,000. The value of the shares and warrants were
apportioned based on their relative market values.

In February, the Company issued
50,000 shares of common stock at a price of $.436 per share and a one year warrant to
purchase an additional 100,000 shares of common stock valued at $13,182 ($0.263 per share
based on the Black Scholes Option Pricing Model assuming no dividend yield, volatility of
112.30% and a risk-free interest rate of 2.25%) for a total value of $35,000 in exchange
for business services.

In March, the Company conducted two
private placements which consisted of 1,330,000 shares of common stock issued between
$0.30 and $0.50 per share for a total value of $605,000 (average price of $.45 per share).
In March, the Company also conducted a private placement in which it sold two units of
Company securities. Each unit consisted of 200,000 shares of common stock at a price of
$.449 per share and a one-year warrant to purchase 50,000 shares of common stock at $1.00
valued at $10,196 ($0.051 per share based on the Black Scholes Option Pricing Model
assuming no dividend yield, volatility of 112.30% and a risk-free interest rate of 2.25%)
for a total value of $100,000 per unit. Also in March, the Company issued 30,000 shares of
common stock valued at $33,000 (based on the market price of the stock at the time the
services were rendered) in exchange for consulting services. In addition, the Company
received $40,500 from the exercise of options on 100,000 shares.

7

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In April, the Company conducted a
private placement which consisted of 458,329 shares of common stock issued at $.60 per
share for the total value of $275,000. Also in April, the Company issued 30,000 shares of
common stock valued at $30,000 (based on the market price of the stock when the services
were rendered) in exchange for consulting services. In addition, the Company received
$80,000 from the exercise of options on 100,000 shares.

Subsequent to quarter end, in May
2005, the Company issued 74,000 shares of common stock valued at $74,000 (based on the
market price of the stock when the services were rendered) in exchange for consulting
services.

Note 4. Warranty LiabilityIn November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. Interpretation
45 is effective for financial statements of interim or annual periods fiscal years ending
after December 15, 2002 and requires the following disclosures of the Companys
product warranties.

Warranty Liability relates only to
products in the water treatment division. The Company provided a standard warranty of two
years for replacement parts on all Fillmaster systems sold. Most of the Companys
chain customers had entered into multi-year contracts for the Customer Service Plan 2000.
The CSP 2000 provided an extended warranty on all PURE Bioscience pharmacy products;
significant discounts on maintenance item costs; annual software upgrades for the
Fillmaster 1000e and Scanmaster; automatic replacement filter shipments; and simplified,
annual invoicing. When the customer purchased a system on the Customer Service Plan 2000
they agreed to pay a fixed annual fee that covered replacement filters and parts. The
Company monitored the costs of providing replacement parts other than filters. This cost
remained steady and was computed as a percentage of related revenues. The following is a
summary of changes in the Companys product warranty liability.

|                                 | Beginning
Liability | Expense
Incurred | Warranty
Payments | Ending
Liability
|-------------------------------- | ------------------- | ---------------- | ----------------- | ----------------
|Nine Months Ended April 30, 2004 |                     |                  | $                 | 42,430          
|                                 |                     |                  |                   |                 
|Nine Months Ended April 30, 2005 |                     |                  | $                 | 57,012          
|                                 |                     |                  |                   |                 

Note 5. Loans from
ShareholdersIn November 2004, the Company
received a loan from a director/shareholder for $90,000 with an interest rate of 8% per
annum and a warrant to purchase 18,000 shares of common stock. The note was originally due
in 30 days, but had been extended to April 29, 2005 in exchange for an additional warrant
to purchase 18,000 shares. The warrants were valued at $9,971($0.28 per share based on the
Black Scholes Option Pricing Model assuming no dividend yield, volatility of 137.78% and a
risk-free interest rate of 2.25%).

During quarter ending April 30, 2005
a $30,000 payment was made to reduce the $90,000 loan. In May 2005, the remaining loans
from shareholder of $600,000 and $60,000 respectively were paid off plus accrued interest
of $106,788.

# 

Note 6. Discontinued
OperationsOn October 29, 2003, PURE Bioscience
and subsidiaries (PURE) announced that it planed to sell substantially all of
the assets and certain related liabilities of the water treatment division, including
substantially all of the related machinery, equipment, inventory, work in process,
licenses, customer lists, certain intellectual property and certain agreements and
contracts. In May 2005, PURE Bioscience sold the water treatment division to
Maryland-based Innovative Medical Services, LLC for $2,375,000.

In accordance with SFAS 144, the
assets and liabilities of the water division are classified as held for sale and are
presented separately in the balance sheet. In addition, the results of operations from the
water division have been reported as discontinued operations, and were historically shown
as the Companys water treatment segment for financial reporting.

Components of the results of
discontinued operations are:

|               | Three Months Ended
April 30, 2005 | Three Months Ended
April 30, 2004
|-------------- | --------------------------------- | ---------------------------------
|Net revenues   |                                   |                                  
|Cost of sales  |                                   |                                  
|Other expenses |                                   |                                  
|               |                                   |                                  
|Total          |                                   |                                  
|               |                                   |                                  

|               | Nine Months Ended
April, 2005 | Nine Months Ended
April 30, 2004
|-------------- | ----------------------------- | --------------------------------
|Net revenues   |                               |                                 
|Cost of sales  |                               |                                 
|Other expenses |                               |                                 
|               |                               |                                 
|Total          |                               |                                 
|               |                               |                                 

Assets and liabilities of the water
division held for sale include:

|                                                               | April 30, 2005 | July 31, 2004
|-------------------------------------------------------------- | -------------- | -------------
|Inventories and other current assets                           |                |              
|Property, plant and equipment                                  |                |              
|                                                               |                |              
|Total                                                          |                |              
|Accrued liabilities                                            |                |              
|                                                               |                |              
|Net assets and liabilities of the water division held for sale |                |              
|                                                               |                |              

8

---

# 

Note 7. Subsequent
Events-Sale of Water Treatment DivisionIn May 2005, PURE Bioscience sold the
assets of its water treatment division to Maryland-based Innovative Medical Services, LLC
for $2,375,000. At closing, PURE received $1,950,000 in cash. In June, PURE received
$225,000, one of two post-closing payments. An additional $200,000 is due within 90 days
of closing.

The sale of the water treatment
division assets to Innovative Medical Services, LLC will be a transaction taxable for
United States federal and California income tax purposes. The Company will recognize
taxable income equal to the amount realized on the sale in excess of the tax basis in the
assets sold. The amount realized on the sale will consist of the cash received in exchange
for the assets sold, plus the amount of related liabilities assumed by Innovative Medical
Services, LLC. The realized gain to the Company on the sale is approximately $2,178,000.

Although the sale of the water
treatment division assets will result in a taxable gain, a portion of the taxable gain
will be offset to the extent of current year losses from operations plus available net
operating loss carry forwards, as currently reflected on our consolidated federal and
California income tax returns. The taxable gain will differ from the gain to be reported
in the PURE Bioscience financial statements due to temporary tax differences and certain
other differences between the tax laws and generally accepted accounting principles.

We believe we will be able to apply
our approximately $12.1 million tax loss carry forward without limitation against the
taxable gain from the sale of the water treatment division assets. However, due to the
limitation of net operating loss carry forwards under the federal alternative minimum tax
system, a portion of the taxable gain reduced by our net operating loss carry forwards is
subject to the federal alternative minimum income tax. Also, California net operating loss
carry forwards are subject to more limitations than the federal tax laws provide. The
availability and amount of net operating loss carry forwards are subject to audit and
adjustment by the Internal Revenue Service. In the event that the Internal Revenue Service
adjusts the net operating loss carry forwards, we may incur an increased tax liability.
The Company estimates its federal and California tax liability resulting from the sale to
be approximately $60,000.

The following unaudited pro forma
condensed consolidated financial statements are based on the historical consolidated
financial statements of PURE Bioscience and subsidiaries, adjusted to give effect to the
disposition of the water treatment division

The unaudited pro forma consolidated
balance sheets give effect to the transaction as if it occurred on the date of the balance
sheet. The cash proceeds and resulting gain are included in the April 30, 2005 balance
sheet. The unaudited pro forma consolidated statements of operations for the nine months
ended April 30, 2005 give effect to the transaction as if it had occurred as of the
beginning of the fiscal year, August 1, 2004.

The pro forma consolidated financial
information is presented for illustrative purposes only, and is not necessarily indicative
of the operating results or financial position that would have occurred if all of the
events as described above had occurred on the first day of the respective periods
presented, nor is it necessarily indicative of our future operating results or financial
position. The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical consolidated financial statements for PURE
Bioscience.

9

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|PRO FORMA CONSOLIDATED BALANCE SHEETS             |  |  |  
|------------------------------------------------- |  |  | -
|
|
|ASSETS                                            |  |  |  
|Current Assets                                    |  | 
|Cash and cash equivalents                         |  |  | $
|Notes receivable                                  |  |  |  
|Other current assets                              |  |  |  
|                                                  |  |  |  
|Total current assets                              |  |  |  
|                                                  |  |  |  
|Property, Plant and Equipment                     |  |  |  
|                                                  |  |  |  
|Noncurrent Assets                                 |  |  |  
|                                                  |  |  |  
|Assets of the water division held for resale      |  |  |  
|                                                  |  |  |  
|Total assets                                      |  |  | $
|                                                  |  |  |  
|LIABILITIES AND STOCKHOLDERS EQUITY               |  | 
|Current Liabilities                               |  | 
|Loans from shareholders                           |  |  | $
|Income taxes payable                              |  |  |  
|Other current liabilities                         |  |  |  
|                                                  |  |  |  
|Total current liabilities                         |  |  |  
|                                                  |  |  |  
|Liabilities of the water division held for resale |  |  |  
|                                                  |  |  |  
|Stockholders' Equity                              |  | 
|Class A common stock, no par value                |  |  |  
|Warrants                                          |  |  |  
|Accumulated deficit                               |  |  |  
|                                                  |  |  |  
|Total stockholders' equity                        |  |  |  
|                                                  |  |  |  
|Total liabilities and stockholders' equity        |  |  | $
|                                                  |  |  |  

(1) Gives effect of the net cash
proceeds,  gain on  disposition,  and related taxes as a result of the sale of the water
 treatment  division as if it occurred on August 1, 2004.  The cash amount  reflects the
 $2,175,000  million payment from Innovative  Medical  Services,  LLC with the remaining
 $200,000 shown as notes  receivable.  The gain reflected in accumulated  deficit is
composed  primarily of the cash proceeds,  net of the net assets sold,  direct costs, and
taxes payable less liabilities assumed by the purchaser.

10

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|PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS |  |  |  
|----------------------------------------------- |  |  | -
|
|
|Net revenues                                    |  |  | $
|Cost of sales                                   |  |  |  
|                                                |  |  |  
|Gross profit                                    |  |  |  
|                                                |  |  |  
|                                                |  |  |  
|Operating costs                                 |  |  |  
|                                                |  |  |  
|                                                |  |  |  
|Loss from operations                            |  |  |  
|                                                |  |  |  
|Other income (expense)                          |  |  |  
|                                                |  |  |  
|                                                |  |  |  
|Loss from continuing operations                 |  |  | $
|                                                |  |  |  
|Net loss per common share, basic and diluted    |  | 
|Continuing operations                           |  |  | $
|                                                |  |  |  

The Water Treatment Division has been
reported as discontinued operations beginning in October of 2003 when the Company made the
decision to dispose of the segment. Because of this the condensed pro forma statements
show no effect resulting from the sale.

Note 8. Reacquisition of
Common Stock and Transfer of Trust DeedThe Company has recently reached a
partial settlement with Lee Brukman of Next9, LLC and Data Recovery Continuum, Inc. in
which the Company reacquired 2,000,000 shares of PURE Bioscience common stock which was
recorded at $1,735,700 (based on fair market value at the date of transaction) in exchange
for the Companys conditional transfer to Brukman of the Trust Deed receivable. In
addition, Brukman forgave loans to the Company totaling $535,000 (loans from shareholder)
including accrued interest. The net result on the consolidated balance sheets was a
decrease in assets of approximately $2,327,700, a decrease in liabilities of approximately
$596,000 and an increase in common stock of $1,735,700.

11

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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 (formerly Innovative
Medical Services) began as a provider of pharmaceutical water purification products.
Although revenues during the third quarter were still primarily from the pharmacy
industry, we have expanded from our niche pharmacy market into other, broader markets with
new, proprietary bioscience products based upon our patented silver ion antimicrobial
technologies and patent pending boric acid based pesticide technologies. In November 2003,
we announced that we signed a definitive agreement to sell our water treatment business to
Data Recovery Continuum, Inc. (DRCI), a Delaware corporation based in California. The
original buyer did not perform on the contract and we began negotiations with a new party
to sell the water treatment division assets and related liabilities. In May 2005, PURE
Bioscience sold the assets of its water treatment division to Maryland-based Innovative
Medical Services, LLC for $2,375,000. At closing, PURE received $1,950,000 in cash. In
June, PURE received $225,000, one of two post-closing payments. An additional $200,000 is
due within 90 days of closing. Although we recorded the water treatment business as a
discontinued operation, we continued to operate the water treatment division and retain
the profits from that division until its sale in May 2005.

Water Treatment Division
(Discontinued Operation)The Fillmaster® pharmaceutical water purification,
dispensing and measuring products include the Pharmapure® water purification system,
the FMD 550 dispenser, the patented Fillmaster 1000e computerized dispenser and the
patented Scanmaster bar code reader. We also marketed proprietary National
Sanitation Foundation certified replacement filters for the Fillmaster Systems. Our
Nutripure® line of water treatment and filtration systems included a line of Nutripure
whole-house water softening systems, a line of Nutripure reverse osmosis point-of-use
systems, the Nutripure 2000 countertop water filtration system and the Nutripure Sport
filtered sport bottle. Results from this division are shown separately as
Discontinued Operations.

Bioscience DivisionOur
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, 10 minute
kill time on fungi, 30 second kill time on HIV Type I, and 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 for use in human and veterinary healthcare products. We
have chosen to pursue approvals through the U.S. Food and Drug Administration (FDA) by
partnering with Therapeutics, Incorporated, which has assumed responsibility for funding
and managing the testing and regulatory process for potential FDA regulated SDC-based
products. Therapeutics, Incorporated is focusing on development of SDC-based products for
the treatment of bacterial, viral and fungal mediated diseases and conditions, beginning
with womens health products and acne treatment products. Therapeutics, Incorporated
expects its development work will result in multiple Investigational New Drug (IND)
filings with the US FDA.

The bioscience division also includes
a patent-pending pesticide technology, Triglycylboride which, like silver dihydrogen
citrate, 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, 2005 VERSUS THREE MONTHS ENDED APRIL 30, 2004As mentioned above, in May 2005, PURE
Bioscience sold the assets of its water treatment division to Maryland-based Innovative
Medical Services, LLC for $2,375,000. The realized gain to us on the sale is approximately
$2,178,000. We are now completely focused on our bioscience segment. Our current
bioscience technologies include our silver dihydrogen citrate-based antimicrobial products
and our boric acid-based pesticide products. Revenues and expenses of the water division
are now netted and shown on the income statement as Income from Discontinued Operations.

During the quarter ended April 30,
2005 bioscience segment revenues of $41,400 decreased 17% compared with $49,800 in the
prior period. The antimicrobial market is highly competitive, and we anticipate that
market acceptance of a brand new technology may be a long term achievement. In addition to
competition challenges, we believe that the investment necessary to pursue research
testing and regulatory approval for silver dihydrogen citrate antimicrobial products will
continue to be significant. As we receive additional regulatory approvals for silver
dihydrogen citrate, however, we expect revenues to develop quickly. For example, now that
we have received EPA approval on Axen30, our silver dihydrogen citrate-based hard surface
disinfectant, and we expect to see a shift toward increasing bioscience product sales in
the coming year, and we believe that sales of Axen30 will have a significant impact on
revenues in future.

12

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Gross profit for the quarter ended
April 30, 2005 was $18,000 versus $26,600 in 2004. Gross profit percentage of 43% in 2005
decreased compared with 53% in 2004 due to an increased proportion of pesticide sales.

Net loss from continuing operations
for the quarter ended April 30, 2005 was $528,800, versus net loss of $580,600 for the
same period in 2004. During the quarter, General and Administrative expenses decreased
$71,800, or 25%, from $282,100 for quarter ending April 30, 2004 to $210,300 in the same
period in fiscal 2005. Administrative expenses decreased mainly due to a decrease in
consulting fees. Selling expense remained virtually unchanged decreasing approximately
$10,800 from $79,600 in 2004 to $68,800 in 2005. Research and Development also remained
virtually unchanged decreasing $10,500 from $266,100 for the quarter ending April 30, 2004
to $255,600 in 2005.

RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30, 2005 VERSUS NINE MONTHS ENDED APRIL 30, 2004During the nine months ended April
30, 2005, bioscience segment revenues of $117,800 decreased 18% compared with $143,900 in
the prior period. Gross profit for the period ended April 30, 2005 was $72,400 versus
$68,900 in 2004. Gross profit percentage of 61% in 2005 increased compared with 48% in the
prior period. This was the result of a higher proportion of silver dihydrogen citrate
sales.

Net loss from continuing operations
for the nine months ended April 30, 2005 was $1,933,500 versus net loss of $2,133,100 for
the same period in 2004. During the recent nine months, General and Administrative
expenses decreased $185,000, or 21%, from $883,000 in fiscal 2004 to $698,000 in fiscal
2005. Administrative expenses decreased mainly due to a decrease in consulting fees and
salary costs. Selling expense increased approximately $217,900 from $145,300 in 2004 to
$363,200 in 2005. The increase is primarily due to marketing costs associated with silver
dihydrogen citrate antimicrobial products. Research and Development decreased
approximately 16%, or $179,800, over the same period in 2004 from $1,105,400 to $925,600.
The decrease in Research and Development is primarily due to a reduction in outside
services during the period. Of the loss in the current period, $607,600 is attributable to
non-cash items: $432,600 of services and interest paid with stock and warrants, $118,400
of amortization, and $56,600 of depreciation.

DISCONTINUED OPERATIONIncome from discontinued operations
for the nine months ended April 30, 2005 consisted of revenues of $1,574,300, cost of
sales of $862,500 and other costs of $228,400 resulting in a net income of $483,400.
Income from discontinued operations for the same period in 2004 consisted of revenues of
$1,338,200, cost of sales of $536,600 and other costs of $389,700 resulting in a net
income of $411,900.

LIQUIDITY AND CAPITAL
RESOURCESFrom inception through the present,
we have financed our operations primarily through our initial public offering in August of
1996 and by subsequent private placement stock sales. In addition, we had obtained short
term financing through a $500,000 line of credit. In September 2002, we renegotiated our
line of credit and extended it until November 2003. The extension included an increase
from $500,000 to $600,000 at an interest rate of 1 1⁄2 % per month secured against
the entire assets of the Company excluding the silver dihydrogen citrate (Axenohl) patent.

These loans were paid off in May 2005
with the proceeds of the sale of the water division. We intend to use a portion of the
proceeds of this transaction to satisfy substantially all other outstanding debt. For
details regarding the effect of the sale of the water treatment division, please refer to
the pro forma balance sheet included in Note 7. of the financial statements. We are
currently attempting to strengthen our liquidity position by working with an investment
banker because we require an outside source of capital to fund planned projects relating
to new product development and related product launches, research and development projects
and regulatory approvals. Our operations alone may not generate cash flows within the next
twelve months sufficient to fund planned expansion. To the extent that we do not obtain
sufficient capital from our bioscience revenues, we will obtain it through the issuance of
additional debt or equity or through other means, any one of which may reduce the value to
us, perhaps substantially, of any commercialization of bioscience products. There is no
guarantee that we would be able to obtain such funding on terms acceptable to us or at
all.

By completing the asset sale, we lost
our historical revenue stream and became less diversified. By selling our water treatment
division assets, we sold approximately 87% of our current source of revenue generation
(based upon results from the July 31, 2004 fiscal year end). We are now a bioscience
company focused on the marketing, selling and continued development of our SDC
antimicrobial technology and our Triglycylboride pesticide technology. We may invest in
other complementary technologies in the future, but we have no current specific plans to
do so at this time. This transaction increases our business risk because we are less
diversified than before the sale of the water treatment division assets and because our
remaining business is in the relatively high-risk, but potentially high reward, field of
applied biotechnology.

We are now a biotechnology company in
a highly regulated field with high investment costs and high risks. We currently sell
products based upon our SDC antimicrobial technologies and boric acid based pesticide
technology. Our SDC 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
(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, and we do not expect to be able to introduce additional EPA regulated
antimicrobial products for 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 approvals through the U.S. Food and Drug Administration (FDA) by
partnering with Therapeutics, Incorporated, which has assumed responsibility for funding
and managing the testing and regulatory process for potential FDA regulated SDC-based
products. We expect Therapeutics, Inc.s 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. It may be several years before we are able
to introduce any FDA regulated antimicrobial pharmaceutical products. Uses for which no
specific antimicrobial claims are made are typically unregulated by any government agency.

13

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Even after we have invested
substantial funds in further development of our SDC-based products and related
technologies, and even if the results of our efforts are favorable, there can be no
guarantee that we will be granted necessary regulatory approvals.

If we successfully bring 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,
if for example, a competitive product has greater efficacy or is deemed more cost
effective. In addition, the market in which we will sell any such 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 also would 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 and/or adversely affect our marketing effectiveness.

At April 30, 2005, our current assets
to liabilities ratio increased from 0.21 to 0.32. Current assets decreased $87,100 from
$620,600 at July 31, 2004 to $533,600 at April 30, 2005. The 14% difference is primarily
attributed to the reduction of interest receivable associated with the trust deed
receivable discussed below. Current liabilities decreased $1,351,400 from $3,003,200 to
$1,651,800. The decrease in liabilities is mainly attributed to payment of debt that
resulted from the influx of cash flows from private placements and option exercises that
took place during quarter ending April 30, 2005.

Net fixed assets decreased
approximately $42,800 due mainly to depreciation of equipment. Other assets decreased
approximately $2,042,000 due primarily to the exclusion of the trust deed receivable.
Other assets of $2,346,900 consist almost entirely of Patents and Licenses of $2,336,150.

The Company has recently reached a
partial settlement with Lee Brukman of Next9, LLC and Data Recovery Continuum, Inc. in
which the Company reacquired 2,000,000 shares of PURE Bioscience common stock which was
recorded at $1,735,700 (based on fair market value at the date of transaction) in exchange
for the Companys conditional transfer to Brukman of the Trust Deed receivable. In
addition, Brukman forgave loans to the Company totaling $535,000 (loans from shareholder)
including accrued interest. The net result on the consolidated balance sheets was a
decrease in assets of approximately $2,327,700, a decrease in liabilities of approximately
$596,000 and an increase in common stock of $1,735,700.

Cash flows used from continuing
operations were $2,099,600 in nine months ended April 30, 2005 and $1,675,800 in 2004. For
fiscal 2005, cash flows used in investing activities included $21,300 for the purchase of
patents and licenses and $13,800 for the purchase of machinery and equipment. In fiscal
2004, cash flows used in investing activities included $45,000 for the purchase of patents
and licenses and $13,200 for the purchase of machinery and equipment.

Cash flows from financing activities
were $1,741,000 for nine months ended April 30, 2005. During the period, the Company paid
$30,000 to a director/shareholder reducing the total liability from $90,000 to $60,000. In
August, the Company conducted 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 ($0.01 per share based on the Black Scholes
Option Pricing Model assuming no dividend yield, volatility of 137.78% and a risk-free
interest rate of 2.25%) for a total of $50,000. Also in August, the Company issued 80,000
shares of common stock valued at $40,000. During the three months ending January 31, 2005
the Company engaged in the following financing activities: In December the Company
conducted two private placements valued at $200,000 (366,667 shares of common stock at an
average price of $0.5455 per share). Also in December, the Company received $150,000 from
the exercise of 300,000 shares of common stock issued at $0.50 per share. In January the
Company conducted 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
($0.01 per share based on the Black Scholes Option Pricing Model assuming no dividend
yield, volatility of 137.78% and a risk-free interest rate of 2.25%) for a total of
$30,000. In addition, the Company received $10,500 from the exercise of an employee option
during the recent quarter. During the three months ending April 30, 2005 the Company
engaged in the following financing activities: In March the Company conducted two private
placements which consisted of 1,330,000 shares of common stock issued between $0.30 and
$0.50 per share for a total value of $605,000. In March the Company also conducted a
private placement in which it sold two units of Company securities. Each unit consisted of
200,000 shares of common stock at a price of $.449 per share and a one-year warrant to
purchase 50,000 shares of common stock at $1.00 valued at $10,196 ($0.051 per share based
on the Black Scholes Option Pricing Model assuming no dividend yield, volatility of
112.30% and a risk-free interest rate of 2.25%) for a total value of $200,000.
Furthermore, the Company received $40,500 from the exercise of options. In April, the
Company conducted a private placement which consisted of 458,329 shares of common stock
issued a $.60 per share for the total value of $275,000. In addition, the Company received
$80,000 from the exercise of options. The total equity raised during the period was
$1,681,000.

In the prior nine month period ending
April 30, 2004, cash flows from financing activities were $1,020,000. During the period,
the Company borrowed $100,000 from a private lender. Also during the nine-month period
ended April 30, 2004, the Company conducted two private placements in which it issued
250,000 shares of common stock at a price of $0.50 per share for a total of $125,000. On
October 21, 2003, the Company issued a security which included 700,000 shares of common
stock at a price of $0.60 per share and a one-year warrant to purchase 84,000 shares of
common stock at $0.80 per share. The warrants were valued at $21,220 ($0.25 per share
based on the Black Scholes Option Pricing Model assuming no dividend yield, volatility of
137.78% and a risk-free interest rate of 5.25%. On January 29, 2004 the Company conducted
a private placement in which it sold two units of Company securities. Each unit consisted
of 200,000 shares of common stock at a price of $.50 per share and a one-year warrant to
purchase 50,000 shares of common stock at $1.00 valued at $20,296 ($0.20 per share based
on the Black Scholes Option Pricing Model assuming no dividend yield, volatility of
137.78% and a risk-free interest rate of 5.25%) In addition, during the prior period, the
Company conducted two private placements in which it issued 395,833 shares of common stock
at a weighted average price of $0.44 per share for a total of $175,000. The total equity
raised during the period was $920,000.

14

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VALUATION OF INTANGIBLE
ASSETSSFAS 142 requires that goodwill and
other intangible assets be tested for impairment on an annual basis and between annual
tests in certain circumstances. 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, the Company adjusts 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, Inc. We have entered into an
agreement with Therapeutics, Inc. for the development and commercialization of FDA
regulated silver dihydrogen citrate-based products for which Therapeutics, Inc. is
responsible for funding and directing all development activities and regulatory filings.
In the agreement Therapeutics, Inc. has agreed to reimburse the Company for $2.2M of
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 reimbursement of costs, depending on
the type of product, the Company will receive 40% to 90% of all sales proceeds, licensing
fees, royalty payments and all other forms of cash and non-cash consideration. The Company
will also realize revenues from the sale of silver dihydrogen citrate raw material as an
active ingredient.

Judgments made by the Company related
to the expected useful lives of long-lived assets and the Companys 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 the Company assesses the ongoing expected
cash flows and carrying amounts of our long-lived assets, these factors could cause the
Company to realize a material impairment charge, which would result in decreased results
of operations, and potentially decrease the carrying value of these assets.

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 the Companys management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of disclosure controls
and procedures in Rule 13(a)-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 period, we
carried out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and the
Companys Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on the foregoing, the Companys
Chief Executive Officer and Chief Financial 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.

# 

# 

PART II
ITEM 1. LEGAL PROCEEDINGSOn August 8, 2002, Billy Stapleton
and Susie Stapleton filed a complaint for patent infringement in the United States
District Court Eastern District of Tennessee at Knoxville, against PURE Biosciences
product RoachX. On August 12, 2002 Billy and Susie Stapleton filed an amended complaint.
On May 2, 2003 PURE Bioscience filed its answer to amended complaint, denying allegations
generally and specifically, and stating nine affirmative defenses to the amended
complaint. The trial has been continued until August 29, 2005. PURE Bioscience believes
Stapletons amended complaint is frivolous and without merit.

In late December 2003, Charles
Siddle, Colt Communications Money Purchase Pension Plan and LeeAnn Newcomb, SPS Business
Services, Inc. 401 (K) Profit Sharing Plan filed an action in the United States District
Court for the District of Arizona against PURE Bioscience for PUREs failure to
perform under the terms of its loan agreements. In May 2005, PURE settled with all
parties.

In November 2004, PURE received a
$14.2 million award resulting from its arbitration proceeding against NVID International,
Inc. through the American Arbitration Association International Center for Dispute
Resolution. In addition, due to the Arbitrators determination of material breach by
NVID International, PUREs royalty and other contractual obligations to NVID are
legally terminated. The award is the result of PUREs October 2003 arbitration action
against NVID International and Falken Industries, Ltd. PURE sought damages and relief from
continued and ongoing public dissemination of false, misleading and disparaging statements
as well as complete cooperation in enforcing and defending the Axenohl patent and related
technology. The arbitration was bifurcated and PURE proceeded first against NVID. In
January 2005, the United States District Court issued an Order granting PUREs motion
to compel Falken Industries to arbitration. Falken has filed an appeal with the U.S. Court
of Appeal for the Ninth Circuit. The arbitration has been scheduled for July 2005. PURE is
evaluating the issue of collectibility and potential liability of related individuals and
entities.

ITEM 2. CHANGES IN
SECURITIESIn March 2005, the Company conducted
private placements of 1,730,000 shares of common stock to 17 accredited investors for
$805,000. In April 2005, the Company conducted a private placement of 458,329 shares of
common stock to 12 accredited investors for $275,000. The Company issued 110,000 shares
during the quarter in exchange for services.

15

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Also during the quarter, the Company
cancelled 2,000,000 shares of common stock transferred to it by Next9 LLC., in
consideration of the Company not entertaining competing offers for its water treatment
division for a three week period which then expired.

With respect to sales made, we relied
on 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 SECURITIESNot applicable.

ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERSNone.

# 

ITEM 5. OTHER INFORMATION
Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM
8-KA. 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
|------- | -----------------------------------

|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, Inc. Agreement [CONFIDENTIAL TRREATMENT 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
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------

16

---

|(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 Item 7.01 Regulation FD Disclosure filed on April 28, 2005
| | -- | -------------------------------------------------------------------------

| | 2. | Current
Report Items 2.01 and 9.01 Completion of Acquisition or Disposition of Assets and
Financial Statements and          Exhibits filed on June 3, 2005
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURESPursuant 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 14, 2005
By:     /s/ Gary Brownell
          Gary Brownell, Chief Financial Officer
          June 14, 2005

17