UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF


THE SECURITIES EXCHANGE ACT OF 1934





FOR THE QUARTER ENDED DECEMBER 31, 2010





Commission File No. 000-52771





PURAMED BIOSCIENCE, INC.(Exact name of registrant as specified in its charter)




Minnesota

20-5510104(State or other jurisdiction of

(IRS Employer ID Number)Incorporation or organization)




1326 Schofield Avenue Schofield, WI

54476(Address of principal executive offices)

(Zip Code)
  (715) 359-6373


(Registrant’s telephone number)





Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þNO o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES oNO o




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):




Large accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
þ




Indicate by checkmark whether registrant is a shell company. o




There were 15,787,668 shares of Common Stock outstanding as of February 9, 2011.














TABLE OF CONTENTS





PART I – FINANCIAL INFORMATIONItem 1.
Consolidated Financial Statements.


3Condensed Consolidated Balance Sheets


3Condensed Consolidated Statements of Operations (Unaudited)


4Condensed Consolidated Statements of Cash Flows (Unaudited)


5Notes to Condensed Consolidated Financial Statements (Unaudited)


6Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.


10Item 3.
Quantitative and Qualitative Disclosures About Market Risk.


19Item 4.
Controls and Procedures.


19PART II – OTHER INFORMATIONItem 2.
Unregistered Sales of Equity Securities and Use of Proceeds.


19Item 5.
Other Information.


19Item 6.
Exhibits.


20


2




PART I – FINANCIAL INFORMATION





ITEM 1.  CONDENSED FINANCIAL STATEMENTS





PURAMED BIOSCIENCE, INC.


Condensed Balance Sheets




December 31,


June 30,2010


2010(Unaudited)ASSETSCurrent AssetsCash

$
12,312


$
13,831Accounts Receivable


160



101.00Inventory


25,661



25,831Prepaid Expenses


6,372



5,022Total Current Assets


44,505



44,785Property and EquipmentComputer Software


2,125



2,125Computer Hardware


1,102



1,102Equipment


665



665Accumulated Depreciation


(2,005
)


(1,695
)Net Property and Equipment


1,887



2,197Other AssetsPuraMed Bioscience Products, net of accumulatedamortization of $178,405 and $154,404, respectively


157,626



181,628Trademarks


13,079



11,100Patent


45,637



37,386Total other assets


216,342



230,114Total assets

$
262,734


$
277,096LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current LiabilitiesAccounts Payable

$
98,397


$
16,039Accrued Wages - Officers'


108,243



33,003Accrued Expenses


2,183



10,626Short-term Debt


67,133



70,000Total Current Liabilities


275,956



129,668Long-term LiabilitiesConvertible Bond Payable, net


244,510



176,177Total Liabilities


520,466



305,845Stockholders' Equity (Deficit)Undesignated shares, 5,000,000 shares authorized, none issued


-



-Common Stock, $.001 par value, 45,000,000 sharesauthorized, 15,112,487 shares and 13,871,839 shares issuedand outstanding, respectively


15,112



13,872Additional paid in capital


2,844,007



2,533,705Deficit accumulated


(3,116,851
)


(2,576,326
)Total Liabilities and Stockholders' Equity (Deficit)


(257,732
)


(28,749
)Total Liabilities & Stockholders' Equity

$
262,734


$
277,096
 
 See notes to unaudited condensed financial statements.


3





PURAMED BIOSCIENCE, INC.


Unaudited Condensed Statements of Operations




Three months ended


Six months endedDecember 31,

2010


December 31,

2009


December 31,

2010


December 31,

2009Total Net Revenues

$
1,869


$
2,567


$
5,472


$
2,567Cost of sales


753



289



3,507



289Gross profit


1,116



2,278



1,965



2,278Operating expensesSelling, general and administrative expenses


15,782



17,927



31,515



30,063Amortization and depreciation expense


12,155



12,207



24,312



24,355Marketing and advertising expense


56,311



99,534



144,400



201,029Professional fees


13,407



37,475



58,968



56,103Research and development


140



28,157



890



38,003Salaries


13,616



12,505



27,920



20,003Officers' salaries


48,000



48,000



96,000



96,000Total operating expenses


159,411



255,805



384,005



465,556Loss from operations


(158,295
)


(253,527
)


(382,040
)


(463,278
)Other income / (expense)Interest income


-



98



1



98Interest expense


(46,117
)


(21,176
)


(158,486
)


(21,176
)Total other expense


(46,117
)


(21,078
)


(158,485
)


(21,078
)Net loss

$
(204,412
)

$
(274,605
)

$
(540,525
)

$
(484,356
)Loss per common share - basicand diluted

$
(0.01
)

$
(0.02
)

$
(0.04
)

$
(0.04
)Average number of  common sharesoutstanding basic and diluted


14,298,419



12,857,056



14,120,488



12,403,861
 
 See notes to unaudited condensed financial statements.




4


PURAMED BIOSCIENCE, INC.


Unaudited Condensed Statements of Cash Flows




Six months endedDecember 31,

2010


December 31,

2009Cash flows from operating activitiesNet loss

$
(540,525
)

$
(484,356
)Changes on non cash working capital items:Stock issued for services


63,242



150,000Depreciation


310



353Amortization


24,002



24,002Accretion on discount on convertible bond


68,333



17,843Beneficial conversion feature


65,000



-Changes in operating assets and liabilities:Accounts receivable


(59
)


(130
)Payroll tax receivable


-



(145
)Inventory


170



(29,598
)Prepaid expenses


(1,350
)


(656
)Accounts payable


82,358



801Accrued wages - officers


75,240



(93,919
)Accrued expenses


(3,510
)


(2,556
)Net cash used for operating activities


(166,789
)


(418,361
)Cash flows from investing activitiesPatent acquisition costs


(8,251
)


(711
)Purchase of property and equipment


-



(2,095
)Trademark acquisition costs


(1,979
)


(1,477
)Net cash used for investing activities


(10,230
)


(4,283
)Cash Flows from financing activitiesConvertible bond proceeds


65,000



500,000Proceeds from sale of stock


107,000



271,000Stock warrants issued with sale of common stock


3,500



-Net cash provided by financing activities


175,500



771,000Net (decrease) increase in cash


(1,519
)


348,356Cash at beginning of period


13,831



38,670Cash at end of period

$
12,312


$
387,026Supplemental disclosures of noncash investing andfinancing activities and other cash flow information:Beneficial conversion feature on convertible debt

$
-


$
305,000Stock warrants issued with convertible debt

$
-


$
104,999Short-term debt converted to common stock

$
72,800


$
-Interest paid with cash

$
20,000


$
3,333
 See notes to unaudited condensed financial statements.


5


PURAMED BIOSCIENCE, INC.


Notes to Condensed Unaudited Financial Statements


For the Six Month Periods Ended December 31, 2010 and 2009





A.  Basis of Presentation





The condensed balance sheet as of December 31, 2010, the condensed statements of operations for the three and six month periods ended December 31, 2010 and 2009 and the condensed statements of cash flows for the six month periods ended December 31, 2010 and 2009 have been prepared by PuraMed Bioscience, Inc. (the "Company") without audit.  In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of December 31, 2010 and the results of operations and cash flows for the three and six month periods ended December 31, 2010 and 2009 presented herein have been made.





Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  These financial statements should be read in conjunction with the Company's financial statements and notes thereto for the fiscal year ended June 30, 2010 included in the Annual Report on Form 10-K of the Company filed with the SEC on September 28, 2010.





B.  Going Concern





At December 31, 2010, the Company had a negative working capital of $231,451, and requires additional funds to accomplish its planned business strategy or support its projected expenses.  The Company plans to obtain the needed working capital primarily through sales of both equity and debt securities, which there is no assurance it will be able to accomplish.  If the Company cannot obtain substantial working capital through common stock sales or other sources (if any), it will be forced to curtail or cease its planned business operations.  If the Company is unable to obtain additional financing, its ability to continue as a going concern is doubtful.





C.  Accounting Policies





Loss per common share - Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding.  Diluted loss per common share assumes the exercise of stock options and warrants using the treasury stock method, if dilutive.





Recently Enacted Accounting Standards





,





6




PURAMED BIOSCIENCE, INC.


Notes Condensed to Unaudited Financial Statements


For the Six Month Periods Ended December 31, 2010 and 2009





D.  Inventory





Inventory consists of raw materials and finished goods.  Raw materials are the components, including boxes, inserts, liquid medicine and packaging materials that have not been combined into the final product, ready for sale.  Finished goods are the final product, available for sale.  The raw materials inventory will be assembled and placed in finished goods inventory when that amount is significantly reduced. Due to the lack of degradation of the material, no adjustment for obsolesce is necessary.  The following is inventory as of December 31, 2010 and June 30, 2010:


December 31, 2010


June 30, 2010Raw Materials

$
18,659


$
18,659Finished Goods


7,002



7,172Total Inventory

$
25,661


$
25,831





E. Notes Payable Transactions





On November 13, 2009, the Company issued a convertible bond payable for $500,000.  The bond has an annual interest rate of 8% paid monthly and matures on November 13, 2012.  The note was also issued with 75,000 warrants to purchase a share of common stock per warrant at $0.75.  The note is convertible immediately through maturity at $1.00 per share or 500,000 shares of common stock, which created a beneficial conversion feature.  The amount of the beneficial conversion feature, $305,000, was recorded as a discount and will be accreted over the life of the debt.  The warrants issued in conjunction with this note have a three year term, includes a cashless exercise option and are exercisable at $0.75 per share.  The Company performed a valuation of these warrants using the Black-Scholes model, which resulted in a valuation of $104,999.  The following assumptions were used: market price of $1.40, exercise price of $0.75, term of 3 years, interest rate of 1.02%, a dividend rate of 0% and volatility of 510.49%.





On May 3, 2010, the Company issued a convertible bond payable for $70,000.  The bond has an annual interest rate of 8% which accrues monthly and matures on February 3, 2011.  Using the stated conversion rate, a beneficial conversion feature of $70,000 was calculated and recorded immediately because the note was convertible at anytime.  The following assumptions were used:  market price of $0.99, conversion rate of $0.45, term of nine months and an annual interest rate of 8%.  During the quarter ended December 31, 2010, the note was fully converted for 811,467 shares of common stock.





On June 21, 2010, the Company issued a convertible bond payable for $30,000.  The bond has an annual interest rate of 8% which accrues monthly and matures on March 21, 2011.  Using the stated conversion rate, a beneficial conversion feature of $30,000 was calculated and recorded immediately because the note was convertible at anytime.  The following assumptions were used:  market price of $0.70, conversion rate of $0.34, term of nine months and an annual interest rate of 8%.





On September 14, 2010, the Company issued a convertible bond payable for $35,000.  The bond has an annual interest rate of 8% which accrues monthly and matures on June 14, 2011.  Using the stated conversion rate, a beneficial conversion feature of $35,000 was calculated and recorded immediately because the note was convertible at anytime.  The following assumptions were used:  market price of $0.51, conversion rate of $0.32, term of nine months and an annual interest rate of 8%.





7




PURAMED BIOSCIENCE, INC.


Notes Condensed to Unaudited Financial Statements


For the Six Month Periods Ended December 31, 2010 and 2009




F.  Stockholder’s Equity





From July 1, 2009 to December 31, 2009, the Company issued 600,000 shares of restricted common stock to four individuals and three companies for services at a rate of $0.25 per share.





During the year ended June 30, 2010, the Company sold 1,084,000 shares of restricted common stock to twenty-five private individual investors at a rate of $0.25 per share.





The Company issued common stock for services to employees and certain contractors valued at $430,000 for the year ending June 30, 2010.





On April 2, 2010, the Company issued 25,000 shares of restricted common stock to two investment groups to terminate an agreement.  Each group was issued 12,500 shares at a rate of $0.50 per share.





On May 7, 2010 the Company issued 15,000 shares of PuraMed common stock based on $0.50 per share to Lincoln Park Capital Fund, LLC.  This stock was paid to Lincoln Park to cover legal expenses associated with completing the documentation necessary for an S-1 stock registration.





On May 7, 2010, the Company issued 30,000 shares of PuraMed common stock based on $0.50 per share to an independent consultant.  The 30,000 shares represent a one time payment to engage the consultant in the areas of providing market awareness services, business advisory, shareholder information and public relations.





On May 24, 2010, the Company signed a $5 million purchase agreement with Lincoln Park Capital Fund, LLC (LPC).  PuraMed received $100,000 under the $5 million dollar commitment in exchange for 200,000 shares of our restricted common stock and Warrants to purchase 100,000 shares of our common stock at an exercise price of $1.25 per share and warrants to purchase 100,000 shares of our common stock at $1.75.  We also entered into a registration rights agreement with LPC whereby we agreed to file a registration statement related to the transaction with the U.S. Securities & Exchange Commission ("SEC") covering the shares that have been issued or may be issued to LPC under the purchase agreement. Pursuant to this registration statement which was effective with the SEC on June 24, we have the right over a 30-month period to sell our shares of common stock to LPC in amounts up to $500,000 per sale, depending on certain conditions as set forth in the purchase agreement, up to the aggregate commitment of $5 million.  In consideration for entering into the $5 million agreement which provides for an additional $4.9 million of future funding, we issued to LPC 150,000 shares of our common stock as a commitment fee and shall issue an equivalent amount of shares pro rata as LPC purchases the additional $4.9 million.  Additional information is contained in the Company’s 8-K filing with the Securities and Exchange Commission dated May 28, 2010.





On June 10, 2010, the Company issued 170,000 shares of common stock to Media4Equity.  The initial 150,000 shares, priced at $1.00 per share, were compensation shares due initially at the beginning of the contract.  The additional 20,000 shares represent the cost for the monthly execution fee starting on June 15, 2010, and continuing through the term of the agreement. This fee can be paid in cash, stock or a combination thereof.  For the purposes of the agreement the minimum stock price is $1.00 per share and the maximum stock price is based on a calculation using the closing market price of the stock.  Media4Equity promotes companies by writing and placing newspaper articles in major newspapers across the nation.  The agreement has a term of twelve (12) months and it calls for $2 million in advertising based on the placement of the news articles in conjunction with the papers standard rate card.





8




PURAMED BIOSCIENCE, INC.


Notes to Condensed Unaudited Financial Statements


For the Six Months Ended December 31, 2010 and 2009





F.  Stockholder’s Equity (Continued)





On July 12, 2010, the Company agreed to provide 30,000 total shares of PuraMed common stock based on $0.50 per share to an independent consultant.  The terms of the agreement call for 10,000 shares per month for three months.  On August 24, 2010, the Company issued 10,000 of the 30,000 shares.  The remaining 20,000 shares were issued on October 6, 2010.





During August to October 2010, pursuant to the S-1 Registration, the Company sold a total of 174,760 shares of common stock at prices ranging from $0.41 to $0.74 per share, for total proceeds of $90,000 to Lincoln Park Capital, LLC.  In addition 2,754 shares were provided to Lincoln Park Capital, LLC as financing commitment shares. This leaves 1,475,475 registered shares available for future sales pursuant to the effective S-1 Registration Statement.





On July 14, 2010 and August 26, 2010 the Company issued Media4Equity 20,000 shares of restricted common stock, a total of 40,000 shares, at a rate of $1.00 per share, as compensation for the second and third months of our consulting contract with Media4Equity.


In December 2010, the Company issued 45,000 shares of common stock to three independent consultants for services, valued at $0.15 per share.





During the quarter ended December 31, 2010, the Company sold 70,000 shares of restricted common stock with warrants for $10,500, $7,000 for stock and $3,500 for the warrants, to a private investor at a rate of $0.30 per unit, of which there are two shares of common stock and one warrant share per unit.
 
 During the quarter ended December 31, 2010, the Company sold 66,667 shares of restricted common stock for $10,000, to a private investor at a rate of $0.15 per share.


On May 3, 2010, the Company issued a convertible bond payable for $70,000.  During the quarter ended December 31, 2010, the note was fully converted for 811,467 shares of common stock.





G.  Subsequent Events





On January 17, 2011, the Company issued a convertible bond payable for $75,000.  The bond has an annual interest rate of 8% which accrues monthly and matures on October 17, 2011.





On June 21, 2010, the Company issued a convertible bond payable for $30,000.  During January 2011, the note was fully converted for 356,181 shares of common stock.





On January 24, 2011, the Company issued 125,000 shares of common stock to three independent consultants for services valued at $0.15 per share.





During January 2011, the Company sold 194,000 shares of common stock to four private investors at a rate of $0.15 per share.


9




ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion should be read and considered along with our condensed financial statements and related notes included in this 10-Q.  These financial statements were prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).  This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.  Our actual results may differ substantially from those anticipated in these forward-looking statements as a result of various factors including those set forth in the “Risk Factors” section of our Form 10-K filing for fiscal year ending June 30, 2010 filed with the SEC on September 28, 2010.





Background





PuraMed BioScience, Inc. (“PuraMed” or the “Company”) was incorporated in Minnesota on May 9, 2006 as a wholly-owned subsidiary of Wind Energy America, Inc. (formerly “Dotronix, Inc.”) for the purpose of engaging in the business of developing and marketing non-prescription over-the-counter healthcare products to remedy various ailments.





In late 2006, PuraMed’s former parent company decided to spin off its PuraMed subsidiary and related healthcare products business. Accordingly, on April 12, 2007, Wind Energy America, Inc. affected a spin-off of PuraMed to shareholders of Wind Energy America, Inc. on a pro rata dividend basis of one common share of PuraMed for each five common shares of Wind Energy America, Inc. Since the April 12, 2007 effective date of the spin-off, PuraMed and Wind Energy America, Inc. have operated separately, with their respective managements, businesses, assets and capital structures being completely independent from each other.





Overview of Business





The Company is engaged in the business of developing and marketing a line of non-prescription medicinal or healthcare products to be marketed through various retail channels under the LipigesicTM brand and trademark. In an effort to add continuity to all of the PuraMed BioscienceTM products, the Company trademarked the brand name LipigesicTM. The Company has completed all product development and design packaging for its initial three products, LipiGesicTM M (Migraine), LipiGesicTM PM (Insomnia), and LipiGesicTM H (Tension Headache), and began their commercial introduction to the marketplace.




Product development and design packaging of all PuraMed products have been conducted entirely by the Company’s two principal officers, Russell Mitchell and James Higgins.  Messrs. Mitchell and Higgins have extensive and lengthy experience in new product development and marketing of non-prescription medical products and nutritional supplements and the many varied promotional activities involved in their marketing rollouts. For example, Mitchell Health Technologies served as the master broker for the launch of Quigley Corp’s “Cold-Eeze” treatment for common colds, which within 18 months exceeded $70 million in annual wholesale revenues. The Company considers the long and successful professional involvement of its management team in our industry to be a valuable asset to draw upon to achieve the future growth and profitability anticipated by the Company.




The Company entered the OTC healthcare products marketplace by employing “direct to consumer” marketing via television commercials and print articles.  This will be followed by broad retail distribution through mainstream drug store chains, mass merchandisers, and food chains. PuraMed is currently undergoing substantial activities directed toward its initial commercial launch of LipigesicTM brand products.  In addition to the direct response advertising campaign, PuraMed is now preparing its public relations effort utilizing it clinical evidence.  The company also plans to implement a robust Social Marketing effort utilizing popular social internet sites like Facebook, YouTube, Twitter, and the abundance of “blogs”to drive consumers and revenue by obtaining access to large audiences and influencers.   In addition to a strong consumer emphasis, this program will have a major component that promotes our LipigesicTM M product directly to the medical professionals who treat headaches.




10




The Company also intends to continue to develop and grow its intellectual property portfolio which is expected to substantially enhance shareholder value. Our scientific team has gained significant and exciting evidence from its initial research and management, which we expect will assist us in the development of a new generation of botanically derived anti-inflammatory and pain management products with broad applications.




LipiGesicTM M





LipiGesicTM M provides acute relief from migraine headaches, and contains the herbs feverfew and ginger as principal ingredients. PuraMed believes that its specific formulation of these herbs for its migraine remedy is unique and proprietary, providing relief from these severe headaches in minutes. The Company believes it will capture a material segment of the huge migraine headache remedy market. We believe that Americans spend in excess of $6 billion annually on headache pain relievers, and that over half of sufferers of migraine headaches rely exclusively on non-prescription medications.





We believe that at least 30 million Americans suffer from chronic migraine headaches with over 20 million of them having “severe” migraine conditions. Thus migraine headaches constitute a severe and disabling condition for millions of people. We further believe that the economic burden alone to the U.S. economy is in excess of $20 billion annually.





LipiGesicTM M is effective, available as a non-prescription remedy, without any known side effects, and affordable compared to more expensive migraine drugs based on prescription chemical formulations.





LipiGesicTM PM





LipiGesicTM PM is a new class of non-prescription sleep aid without any known side effects, and contains a proprietary blend of natural ingredients including Valerian, St. John’s Wort, and Chamomile. We believe that the proprietary blend of these ingredients provides an effective remedy for insomnia and other sleep disorders. The sleep aid market features products based primarily on chemical antihistamines.





Accordingly, the LipiGesicTM PM product provides a wide open market opportunity for an effective, natural alternative to prescription medications, which are somewhat addictive and often cause withdrawal symptoms and other side effects.  We have priced LipiGesicTM PM as a premium sleep aid product, which provides us with a projected gross margin of approximately 80%. This large margin should leave us substantial room for ample introductory promotion, product allowances and other incentives conducive to achieving rapid market penetration.





Similar to the migraine remedy market, the market for sleep aid products represents a very large segment of the overall healthcare products marketplace. We believe that over half of all adults in the U.S. suffer from sleep disorders, and that many of them experience persistent insomnia. The National Center on Sleep Disorders has reported that there are as many as 70 million problem sleepers in the U.S. with many of them suffering from chronic sleep disorders. We believe that insomnia is second only to pain as a healthcare complaint.





Future LipiGesicTM Products





We have completed development of additional non-prescription products, which we intend to launch commercially over the next couple years after establishing a solid market for our initial two products. These other PuraMed products include:




11


LipiGesicTM H – provides relief for common tension headaches which afflict a majority of American adults from time to time. This remedy provides headache relief features a unique proprietary formulation of St. John’s Wort and common aspirin.





LipiGesicTM Smoker’s Pal –provides relief from the symptoms associated with nicotine withdrawal with the added benefit of an appetite suppressant.





LipiGesicTM RLS– provides relief of problematic leg cramps associated with Restless Leg Syndrome affecting a large segment of the population in the U.S.





LipiGesicTM GI – provides relief of symptoms associated with nighttime reflux disorders.





LipiGesicTM CS – provides fast relief for canker sore outbreaks.





When introduced commercially, these other products will be packaged and branded much like the initial LipiGesicTM products, since we intend to devote substantial efforts and resources toward gaining a favorable and consistent brand and packaging for all PuraMed products to attempt to make them instantly recognizable on retail store shelves.





Sublingual Delivery System





The LipiGesicTM M, LipiGesicTM PM and LipiGesicTM H are non-prescription, liquid medications that will be absorbed under-the tongue known as “sublingual.” The use of sublingual delivery provides fast relief for whatever ailment or condition is being treated. Unlike the majority of pills and medications absorbed through the stomach directly, PuraMed products are placed and absorbed directly under the tongue. Advantages of sublingual dispensing of drugs and medications include faster acting absorption for quick relief, improved efficacy, less stomach upset, and fewer side effects.





PuraMed has secured reliable contract manufacturers to produce and package PuraMed products in easy-to-use, sublingual dispensers.  These selected contractors are experienced in the production and packaging of this type of dispenser. PuraMed believes that its benchmark use of sublingual dispensers will distinguish its products favorably in comparison to most competing OTC products now in the marketplace.





Regulation of PuraMed Products





Unlike prescription drugs or medications, non-prescription healthcare remedies such as PuraMed products do not require FDA approval prior to entering the market. They are nonetheless subject to substantial FDA and other federal regulations governing their use, labeling, advertising, manufacturing and ingredients. PuraMed believes that its current and proposed development, formulation, marketing and other practices and procedures will comply fully with all governmental regulations applicable to PuraMed Products.





Business Structure





PuraMed will function primarily as a research and development, marketing and sales organization. Product manufacturing, packaging, product fulfillment and other operations will be outsourced to experienced and reliable third parties through contracts controlled by PuraMed. PuraMed believes this structure will reduce significantly the development stage costs and development time related to launching each PuraMed product commercially.




12





Product Manufacturing





Production and packaging of PuraMed products will be outsourced to various contract manufacturers known by PuraMed’s management from prior substantial business and contract dealings. Due to the business and contacts developed by PuraMed management over the past years with leading contract manufacturers, PuraMed is convinced it can obtain professional and timely production, packaging and delivery of all PuraMed products.





Sales and Marketing





PuraMed intends to launch its initial three products commercially through the following three-phase process:





Phase One Rollout:  Direct Response. In December 2009 Puramed began running its two-minute direct response television commercials via selected national cable television stations.  The media spend over the initial ninety day test phase will be modest in an effort to optimize the television campaign. The media spend is scheduled to increase substantially once the commercial begins to perform in the marketplace.


PuraMed will also employ website and toll-free telephone access in conjunction with its TV direct response campaigns. A Social Media Campaign conducted on the internet via popular internet networking sites will also be implemented to drive customers to our eCommerce websites. PuraMed began Phase One Rollout during late fourth quarter of calendar year 2009.





Phase Two Rollout:  Retail Drugstores. PuraMed expects to drive consumer awareness and product sales from its direct response marketing phase coupled with its Social Marketing Plan to reach both consumers and medical professionals by the second quarter of 2011. It will then begin marketing through approximately 25,000 retail drugstores already targeted by PuraMed, including Walgreens, Rite Aid, CVS and others. Due to PuraMed’s management having extensive and good relationships with targeted retail outlets for PuraMed products, PuraMed believes it has the ability to place its products on the shelf in all its targeted retail outlets.





Phase Three Rollout:  Further Retail Outlets. A few months after beginning the Phase Two Rollout, PuraMed will launch Phase Three which will consist of placing PuraMed products in a further approximately 21,000 targeted retail outlets including mass merchandisers such as Wal-Mart and Target, food store chains such as SuperValu, Kroger and Safeway, and additional well-known regional drugstores.





PuraMed has selected its targeted retailers according to various material criteria, including cost of entry, geography, demographics and consumer preference.





After achieving initial distribution for PuraMed products, PuraMed will initiate a comprehensive and ongoing promotional campaign directed toward consumer groups it has identified from its product rollouts.





Results of Operations





Revenues





Revenues consist of website and telephone sales of the LipiGesic M migraine product.





Cost of Sales





Cost of sales consists of merchant fees, material, packaging and freight costs for the units sold.





Operating Expenses





Selling, general and administrative expenses consist primarily of payroll taxes, health insurance, facility rent and administrative overhead costs.




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Amortization and depreciation expenses consist primarily of depreciation of fixed assets and amortization of our intellectual property received during our spin-off from our parent company in April 2007.





Marketing and advertising expense include payments for public relations, stock promotion and advertising consistent with the commercialization of products.





Professional fees consist of audit, legal, transfer agent, consulting and directors fees.





Salaries include payments to our office manager and corporate controller.





Officers’ salaries include payroll to our Chief Executive Officer and our Chief Financial Officer.





Comparison of Operations for Three Months Ended December 31, 2010 and 2009





Revenue





Revenue for the three months ended December 31, 2010 were $1,869 compared to $2,567 for the three months ended December 31, 2009.  Revenue decreased because of reduced advertising.


Cost of Sales





Cost of sales for the three months ended December 31, 2010 were $753, compared to $289 for the three months ended December 31, 2009.  The cost of sales increased due to increased merchant fees and shipping costs.





Gross profit





The gross profit for the three months ended December 31, 2010 was $1,116, compared to $2,278 for the three months ended December 31, 2009.  The decrease is due to the reduction in sales and increase in cost of sales expenses.





Selling, General and Administrative Expenses





Selling, general and administrative expenses were similar at $15,782 and $17,927 for the three months ended December 31, 2010 and 2009, respectively.





Amortization and Depreciation





Amortization and depreciation expenses for the three months ended December 31, 2010 and 2009 were similar at $12,155 compared to $12,207.





Marketing and Advertising Expense





Marketing and advertising expense for the three months ended December 31, 2010 were $56,311 compared to $99,534 for the three months ended December 31, 2009, which was due to the start up costs of our initial commercial product launch in 2009.





Professional Fees





Professional fees for the three months ended December 31, 2010 were $13,407 compared to $37,475 for the three months ended December 31, 2009, which was due to the increased legal and consulting fees for the initial launch of the product.





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Research and Development Expenses





Research and development expenses for the three months ended December 31, 2010 were $140 compared to $28,157 for the three months ended December 31, 2009, which was due to the clinical study initiated in December 2009.





Salaries





Salaries for the three months ended December 31, 2010 were $13,616 compared to $12,505 for the three months ended December 31, 2009, which is attributed to the fluctuation of hours worked by administrative personal in the previous period.





Officers’ Salaries





Officer salaries for the three months ended December 31, 2010 and 2009 were the same being $48,000 for each period.





Interest Expense





Interest expense for the three months ended December 31, 2010 and 2009 were $55,567 and $21,176, respectively.  The increase in the expense is attributed to the additional convertible notes and the beneficial conversion features credited to those notes.





Net Losses





Net losses for the three months ended December 31, 2010 were $204,412 compared to $274,605 for the three months ended December 31, 2009.  The losses in 2009 were due to increased expenses related to the initial commercial rollout of our LipiGesic M migraine product.





Comparison of Operations for Six Months Ended December 31, 2010 and 2009





Revenue





Revenue for the six months ended December 31, 2010 were $5,472 compared to $2,567 for the six months ended December 31, 2009.  Revenue increased due to a full six months of income compared to the start-up of sales in December 2009.





Cost of Sales





Cost of sales for the six months ended December 31, 2010 were $3,507, compared to $289 for the six months ended December 31, 2009.  Cost of sales increases are due to a full six months of expenses and increases in merchant fees and shipping costs compared to the start-up of sales in December 2009.





Gross Profit





The gross profit for the six months ended December 31, 2010 was $1,965, compared to $2,278 for the six months ended December 31, 2009.  The gross profit decrease is due to a full six months of income, with reduced advertising and increases in merchant fees and shipping costs compared to the start-up of sales in December 2009.





Selling, General and Administrative Expenses





Selling, general and administrative expenses were similar at $31,515 and $30,063 for the six months ended December 31, 2010 and 2009, respectively.




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Amortization and Depreciation





Amortization and depreciation expenses for the six months ended December 31, 2010 and 2009 were similar at $24,312 compared to $24,355.





Marketing and Advertising Expense





Marketing and advertising expense for the six months ended December 31, 2010 were $144,400 compared to $201,029 for the six months ended December 31, 2009, which was due to our initial commercial product launch in 2009.





Professional Fees





Professional fees were similar at $58,968 and $56,103 for the six months ended December 31, 2010 and 2009, respectively.





Research and Development Expenses





Research and development expenses for the six months ended December 31, 2010 were $890 compared to $38,003 for the six months ended December 31, 2009, which was due to the clinical study initiated in December 2009.





Salaries





Salaries for the six months ended December 31, 2010 were $27,920 compared to $20,003 for the six months ended December 31, 2009, which is attributed to the fluctuation of hours worked by administrative personal in the previous period.





Officers’ Salaries





Officer salaries for the six months ended December 31, 2010 and 2009 were the same being $96,000 for each period.





Interest Expense





Interest expense for the six months ended December 31, 2010 and 2009 were $158,486 and $21,176, respectively.  The increase in the expense is attributed to the additional convertible notes and the beneficial conversion features credited to those notes.





Net Losses





Net losses for the six months ended December 31, 2010 were $540,525 compared to $484,356 for the six months ended December 31, 2009.  These increased losses in 2010 were due to increased operational expenses related to our LipiGesic M migraine product.





Financial Condition, Liquidity and Capital Resources





As of December 31, 2010, the Company had cash of $12,312 and negative working capital of $231,451.





As in the past, we intend to raise the funds needed to implement our plan of operation through both private sales of debt and equity securities. There is no assurance, however, that we will be successful in raising the necessary capital to implement our business plan, either through debt or equity sources.




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PuraMed’s current business strategy is to continue development and promotion of its initial non-prescription consumer healthcare products in order to complete the first phase of their commercial retail drug chain introduction by the end of the third quarter of calendar year 2011 with product expected on the initial retailer shelves in the second quarter of 2011. PuraMed’s primary goal is to achieve continual material growth of LipigesicTM product sales through mainstream drug, mass merchandiser and food retail channels while at the same time promoting LipigesicTM brand awareness to realize substantial profitability as soon as possible. To implement this strategy, PuraMed intends to execute the following activities during the next twelve months:




Plan for the Successful Outcome of the Clinical Trial -Should our anticipated outcome of our clinical study coupled with the publication of the manuscript in a peer reviewed-medial journal prove to be successful, it would provide us with numerous marketing and promotion opportunities that could significantly help with the launch of our LipigesicTM M migraine product.  PuraMed is in the process of developing a detailed marketing plan that focuses on the medical community in the anticipated event the clinical trials support such action.  Medical marketing efforts geared toward doctors, physician’s assistants, pharmacists, etc could prove to be very lucrative as a component in our overall marketing strategy.




Upon publication, we believe that the evidence from the clinical trial could provide the company with a number of enhanced public relations opportunities across a broad spectrum. Our clinical study on LipiGesic M was conducted by three of the top clinical researchers in the country who are well respected for their contribution to the development of breakthrough treatments for migraine and other types of headaches. We believe that the involvement of these researchers, along with publication in a top ranked medical journal will provide the company with a high level of credibility within the mainstream media along with a strong position promoting directly to the medical professionals.





The direct to consumer public relations campaign will include the development of a Video News Release (VNR) featuring our highly respected research team explaining the structure and the outcomes of the study along with additional materials for distribution to the radio and print channels. Additionally, marketing through the social media over the internet is expected to play a key role in the dissemination of the results and the company is laying the groundwork for that effort.





Promotion to the medical community will utilize the published results of the study which are expected to help promote LipiGesic M as a new non-prescription abortive therapy which offers a broad range of advantages over the current first line prescription abortive treatment. The company expects to exhibit and detail the product at key medical conferences throughout the country focusing on headache and primary care specialists. These specialists would include medical doctors, osteopathic physicians, physician assistants and nurse practitioners. Additionally, the company expects to partner with key national organizations specializing in headache disorders as well as regional groups and support networks.




Commercialize PuraMed Products – PuraMed’s primary focus for the first quarter of calendar year 2011 will be to complete a plan to promote the results of our clinical trial if they prove to be favorable.  In addition, the scheduling of medical conventions to present and promote the results of our clinical study to doctors and medical professionals who have the ability to drive consumer demand for our products.  The company also plans to implement a robust Social Marketing effort utilizing popular social internet sites like Facebook, YouTube, Twitter, and the abundance of “blogs” to drive consumers and revenue by obtaining access to large audiences and influencers.  In addition our eCommerce website www.lipigesic.com will continue to be promoted via Direct Response Marketing and our Social Media Marketing efforts. PuraMed has obtained all vendors, suppliers and subcontract third parties needed for its planned production, packaging and raw material, and will continue to identify and obtain alternate sources for PuraMed product inventories.




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Expansion of Sales and Marketing Activities – PuraMed will continue to expand upon its marketing activities which have been focused toward obtaining a nationwide network of retail outlets and employing “direct to consumer” media advertising for its planned product sales, as well as promoting and building LipigesicTM brand awareness. PuraMed will participate in industry trade shows and similar events, and also will engage in substantial media advertising and direct sales media campaigns to attract and secure consumers for PuraMed products.




Continuation of Product Development – Besides its already developed products, PuraMed will complete development and testing of additional non-prescription drugs and nutritional supplements to be commercially launched in the future as additional LipigesicTM products.




Assuming the company raises the capital, we anticipate spending approximately $2.1 million over the next twelve months regardless of any amounts of revenues we generate from product sales during this period:





Sales and marketing expenses

$
1,100,000Purchase of product inventory, packaging and raw materials


600,000Research and development activities


100,000General and administrative expenses including rent, fixed overhead and management compensation


350,000$
2,150,000





Critical Accounting Policies





The foregoing discussion should be considered in conjunction with our unaudited condensed financial statements and related notes included in this quarterly report.  These financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP).





The preparation of our financial statements requires us to make estimates and judgments affecting our reported amounts of assets, liabilities, revenues and expenses and related disclosures.  On an ongoing basis, we will evaluate these estimates which are based on historical experience and certain assumptions we believe to be reasonable under the circumstances.  Actual results may differ materially from our estimates under different assumptions or conditions.





LipiGesicTM Products:





PuraMed BioscienceTM products consist primarily of the cost of trade secrets, formulas, scientific and manufacturing know-how, trade names, marketing material and other intellectual property and are amortized on a straight-line basis over an estimated useful life of seven years.





Stock-Based Compensation – We intend to expense any stock-based compensation issued to our employees, contractors, consultants or others providing goods and services to us.  The fair market value of any common stock issued for goods or services will be expensed over the period in which we receive them.  Most likely, any equity securities issued by us for goods and services will consist of common shares or common stock purchase warrants, which will be fully vested, non-forfeitable, and fully paid or exercisable at the date of grant.  Regarding any future stock option or warrant grants, we intend to determine their fair value by using the Black-Scholes model of valuation.





Impairment – Soon after the end of each fiscal year and each interim period, we will conduct an impairment valuation of any material intangible assets owned by us.  If the results of any such impairment analysis indicate our recorded values for any such assets have declined materially, we will adjust our recorded asset valuations in all of our financial statements to reflect any such decline in value.




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The carrying value is reviewed periodically or when factors indicating impairment are present.  The impairment loss is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets.  The Company believes that no impairment exists at December 31, 2010.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





This item is not applicable to PuraMed BioscienceTM, Inc.





ITEM 4. CONTROLS AND PROCEDURES





Evaluation of disclosure controls and procedures.





As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.





Changes in internal controls.





There were no changes in the Company’s internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.





Part II.  Other Information





ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





During October through December 31, 2010, the Company, through private transactions, offered and sold 136,667 shares of common stock to two individual investors for a total of $20,500 net of offering expenses.  Sale of these common shares was deemed exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.  No advertising or general solicitation was involved and these shares were offered only to the individual purchasers who are accredited investors.  Moreover, the stock certificates for these shares are legended to prevent further transfer, resale or other disposition unless registered under applicable securities laws or exempt from such registration.





During December 2010, the Company issued 45,000 shares of common stock to two individual consultants at $0.15 per share.




ITEM 5.  OTHER INFORMATION





None


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ITEM 6.  EXHIBITS




See Exhibit Index below Exhibit Index Quarterly report on Form 10-Q For the quarter ended December 31, 2010





31.1*
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





31.2*
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1*
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





*Filed herewith