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EX-3.1 - ARTICLES OF INCORPORATION - Puramed Bioscience Inc.pmbs_ex31.htm
EX-31.1 - CERTIFICATION - Puramed Bioscience Inc.pmbs_ex311.htm
EX-31.2 - CERTIFICATION - Puramed Bioscience Inc.pmbs_ex312.htm
EX-32.1 - CERTIFICATION - Puramed Bioscience Inc.pmbs_ex321.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 

FORM 10-K

 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED JUNE 30, 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 Incorporation or organization)
 
(IRS Employer ID Number)
 
1326 Schofield Avenue, Schofield, WI   54476
(Address of principal executive offices)    (Zip Code)
 
(715) 359-6373
(Registrant’s telephone number)
 
Securities to be registered under Section 12(b) of the Act: None
 
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ¨
 
Indicate by checkmark whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  ¨
 
Check whether the Issuer (1) has filed all reports required 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 þ  No ¨
 
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.   ¨
 
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  ¨  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  þ
Indicate by checkmark whether registrant is a shell company.   ¨

The aggregate market value of the Common Stock held by nonaffiliates of the Registrant as of September 22, 2010 was approximately $8,392,108 based upon the closing price of the Registrant’s Common Stock on such date.
 
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
 
Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. YES  ¨ NO ¨
 
APPLICABLE ONLY TO CORPORATE REGISTRANTS
 
There were 13,986,847 shares of Common Stock outstanding as of September 22, 2010.
 
DOCUMENTS INCORPORATED BY REFERENCE: None
 
Transitional Small Business Disclosure Format (check one).   YES  ¨  NO þ
 


 
 

 
 
TABLE OF CONTENTS
 
 
PART I      
         
 Item 1.   Description of Business     1  
 Item 1A.  Risk Factors     6  
 Item 2.  Description of Property     9  
 Item 3.    Legal Proceedings     9  
 Item 4.  Removed and Reserved     9  
           
PART II        
           
 Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.     10  
 Item 6.    Selected Financial Data     10  
 Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.     10  
 Item 8.    Financial Statements and Supplementary Data      14  
 Item 9.   Changes In and Disagreements With Accountants On Accounting And Financial Disclosure     14  
 Item 9A(T). Controls And Procedures     14  
 Item 9B.    Other Information     14  
           
PART III        
           
 Item 10.  Directors and Executive Officers and Control Persons     15  
 Item 11.   Executive Compensation      16  
 Item 12.   Security Ownership of Certain Beneficial Owners and Management     16  
 Item 13.  Certain Relationships and Related Transactions      17  
 Item 14.   Principal Accountant Fees and Services      17  
           
PART IV        
           
 Item 15.   Exhibits and Financial Statement Schedules      18  
           
 SIGNATURES       19  
 
 
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PART I
 
ITEM 1.
DESCRIPTION OF BUSINESS
 
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.
 
Detailed information regarding this spin-off of PuraMed from Wind Energy America, Inc. (formerly Dotronix, Inc.) is contained in a Form 8-K and exhibit thereto which were filed with the SEC April 10, 2007, and can be readily accessed at the SEC website www.sec.gov.
 
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 Lipigesic™ brand and trademark. In an effort to add continuity to all of the PuraMed Bioscience™ products, the Company trademarked the brand name Lipigesic™. The Company has recently completed all product development and design packaging for its initial three products, LipiGesic™ M (Migraine), LipiGesic™ PM (Insomnia), and LipiGesic™ H (Tension Headache), and began their commercial introduction to the marketplace in the fourth quarter of calendar 2009.
 
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 intends to enter the OTC healthcare products marketplace by employing “direct to consumer” marketing via television commercials and print articles 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 Lipigesic™ brand products.  In addition to the direct response advertising campaign, PuraMed is now preparing its public relations effort utilizing it clinical evidence.  In addition to a strong consumer emphasis, this program will have a major component that promotes our Lipigesic™ M product directly to the medical professionals who treat headaches.
 
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.
 
 
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Corporate Contact Data
 
The address of the Company in suburban Wausau, Wisconsin is 1326 Schofield Avenue, Schofield, WI 54476; its telephone number is (715) 359-6373; and its website address is www.puramedbioscience.com.
 
LipiGesic™ M
 
Lipigesic™ 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 50 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.
 
Lipigesic™ M is effective, available as a non-prescription remedy, without any known side effects, and at a significantly lower cost compared to more expensive prescription migraine drugs.
 
Lipigesic™ PM
 
Lipigesic™ 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 non-prescription sleep aid market features products based on antihistamines which are designed to treat allergies.
 
Accordingly, the Lipigesic™ 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 Lipigesic™ 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.
 
Lipigesic™ H
 
LipiGesic™ H provides relief for tension-type headaches which affect up to 90% of Americans at some point in their lives. LipiGesic™ H is a unique sublingually delivered formulation utilizing acetylsalicylic acid and St. John’s Wort.

The combination of these two ingredients provides for not only pain relief but, also relief from the anxiety that often exacerbates that pain. Current non prescription tension headache pills often take up to an hour to begin working and they often exhibit unwanted and dangerous side effects including stomach damage, liver damage and rebound headaches. Prescription formulations often list even more dangerous side effects and are significantly more expensive.

Due to the use of sublingual delivery, the LipiGesic™ H formulation can provide a safer, faster acting alternative while also dramatically reducing the potential for harmful side effects. LipiGesic™ H will offer the hundreds of millions of Americans who suffer from tension type headaches relief that is superior while also lowering their cost and risks of harmful side effects.
 
 
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Future Lipigesic™ 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:
 
Lipigesic™ Smoker’s Pal – provides relief from the symptoms associated with nicotine withdrawal with the added benefit of an appetite suppressant.
 
Lipigesic™ RLS – provides relief of problematic leg cramps associated with Restless Leg Syndrome (RLS) affecting a large segment of the population in the U.S.
 
Lipigesic™ GI – provides relief of symptoms associated with nighttime reflux disorders.
 
Lipigesic™ CS – provides fast relief for canker sore outbreaks.
 
When introduced commercially, these other products will be packaged and branded much like the initial Lipigesic™ 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 Lipigesic™ M, Lipigesic™ PM and Lipigesic™ 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 medications 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 production costs and manufacturing time related to making the product commercially available.  The second quarter of calendar year 2010 (June 30, 2010) marks the first quarter that PuraMed stopped reporting as a Developmental Stage Company.  With the commercial launch of our LipiGesic™ M migraine product we are now reporting as a Smaller Reporting Company.
 
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.
 
 
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Sales and Marketing
 
PuraMed intends to launch its initial three products commercially through the following three-phase process:
 
Phase One Rollout: Direct Response. PuraMed utilized a 60- and 120-second Direct Response Television commercial to introduce its migraine product marketed under our LipiGesic™ M brand name to the American consumer. PuraMed started the testing phase of the commercial in December 2009. After refining the initial message we anticipate a nationwide roll-out of the commercial will follow. To that end PuraMed has engaged Consumer Marketing Directive as our strategic advisor.  CMD offers a broad range of campaign management services that encompasses all aspects of direct to consumer advertising. PuraMed will also employ website and toll-free telephone access in conjunction with its TV direct response campaigns. PuraMed will also begin a nationwide direct response print campaign that will begin Mid-September 2010.  PuraMed has commenced its Phase One Rollout.
 
Phase Two Rollout: Retail Drugstores. PuraMed expects to develop substantial product sales and a defined customer base from its direct response marketing phase. It will then begin marketing through approximately 18,000 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.
 
Intellectual Property
 
PuraMed owns and asserts proprietary intellectual property rights regarding its various products, including trademarks, formulation technology, ingredients and drug delivery procedures or methods. The future growth and success of the Company will depend in large part upon its ability to protect its trademarks, trade names and trade secrets. In addition to applying for certain product patents, PuraMed will rely upon trade secrets, proprietary know-how, and continuing development and innovation to compete in its OTC marketplace. Although no claims or threats of product or patent infringement have arisen regarding PuraMed or its products, there is no assurance PuraMed will be able to protect its intellectual property effectively and any failure to do so would be harmful to PuraMed.
 
 
4

 
 
Competition
 
The non-prescription healthcare market in which PuraMed is engaged is intensely competitive and will face the same challenges as other start-up and established OTC drug companies within their respective product classes. Virtually all direct competitors to the PuraMed product line have substantially greater financial, personnel, development, marketing and other resources than those possessed by PuraMed, which places PuraMed at a definite competitive disadvantage. Main competitors of PuraMed will have substantially larger sales volumes than PuraMed expects to realize, and also greater business diversification in most cases.
 
PuraMed also must compete with numerous small companies selling products into the same mainstream marketing channels targeted by PuraMed. PuraMed also expects to encounter additional competitors emerging from time to time.
 
PuraMed believes that the principal competitive factors in its industry include quality and pricing of products, product effectiveness, customer preferences, brand awareness, and marketing and distribution networks. There is no assurance PuraMed will be able to compete successfully against current or future competitors or that the competitive pressures faced by PuraMed will not harm its business materially.
 
Employees and Facilities
 
PuraMed has four employees including its two executive officers, an office administrator and a financial controller. PuraMed anticipates hiring one or more experienced marketing personnel to support the upcoming material launch of its initial products.
 
PuraMed operations are conducted from 1,800 square feet of office and development spaces in suburban Wausau, Wisconsin for which PuraMed pays monthly rental of $1,025.
 
 
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ITEM 1A.
RISK FACTORS
 
Our business and any investment in our securities involves many significant risks and our business, operating results and financial condition could be harmed seriously due to one or more of the following material risks. Any person evaluating our Company or its business should carefully consider these described risks and uncertainties as well as the other information and risks elsewhere in this annual report.
 
Because of the nature of our business, our securities are highly speculative.
 
Our securities are speculative and involve a high degree of risk.  This is the first quarter that we stopped reporting as a Development Stage Company and began reporting as a Smaller Reporting Company. There is no assurance we will ever generate the revenue necessary to fully support our business operations. Any future profitability achieved from our business will be dependent upon realizing production and sales of our healthcare products in significant commercial quantities, which there is no assurance will ever happen.
 
We have limited operating history primarily involved in product development, and we have just commenced generating commercial revenues to date.
 
Through June 30, 2010, we have experienced cumulative losses of $2,501,327, and we expect to continue to incur material losses until we produce and sell our healthcare products in sufficient volume to attain profitability, which there is no assurance will ever happen. Our operations are particularly subject to the many risks and uncertainties inherent in the start-up and early stages of a business enterprise without any commercial operating history. There can be no assurance that our business plan will prove successful.
 
If we are unable to obtain significant additional financing as needed, our business plan most likely will be unsuccessful.
 
Our ability to succeed commercially will depend in large part on our being able to raise significant additional financing. Without significant additional financing from either debt or equity sources, we cannot implement our business plan to engage in commercial operations. We have negative cash flow from our business and do not anticipate any positive cash flow until we have met our initial capitalization goal. Accordingly, we are completely dependent upon raising additional funding for our operations, which we plan to do through our available equity or debt sources. There can be no assurance, however, that we will succeed in obtaining any material funding through either equity or debt sources.
 
Our ability to generate future revenues will depend upon a number of factors, some of which are beyond our control.
 
These factors include the rate of acceptance of our healthcare products, competitive pressure in our industry, effectiveness of our marketing structure, adapting to changing customer preferences, and general economic trends. We cannot forecast accurately what our revenues will be in future periods.  Our operations have been limited to designing and developing our products, establishing our initial marketing network, the initial commercializing of our LipiGesic™ M migraine product, obtaining suppliers for raw materials and packaging and outsourcing future production of our healthcare products. These past activities only provide a limited basis to assess our ability to succeed in commercializing our healthcare products.

We have limited experience in producing healthcare products.
 
Our products must be developed and produced to meet high quality standards in a cost-effective manner. Because of our lack of experience in production operations, we may have difficulty in timely producing of our products through outsourced subcontractors and vendors. Any material production delays could frustrate our marketing network and their customers and cause a negative perception of our Company and products. If we are unable to manufacture our products effectively in terms of quality, timing and cost, our ability to generate revenues and profits will be impaired.
 
 
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We will depend upon a limited number of outside suppliers.
 
Our heavy reliance upon outside vendors and suppliers for our products involves risk factors such as limited control over prices, timely delivery and quality control. We have no written agreements to ensure continued product supply, and we currently are unable to determine whether our outside suppliers will be able to timely supply us with commercial production needs. Our inability to obtain timely delivery of quality materials, or our loss or interruption of services of our current suppliers, or any material increases in the cost of our components, could result in material production delays and reductions in our shipments to our customers, which could then seriously impair our ability to generate revenues.
 
We will be very dependent upon our distribution network of sales representatives.
 
We will depend heavily on our independent sales representatives to sell our products and promote our brand. If we fail to maintain our relationships with our sales representatives effectively, our business will be harmed seriously. Our sales representatives are not required to sell our products on an exclusive basis and also are not required to purchase any minimum quantity of PuraMed products. The failure of our marketing network to generate sales of our products and promote our brand effectively would impair our operations seriously.
 
We will face significant challenges in obtaining market acceptance of PuraMed products and establishing our PuraMed brand.
 
Our commercial success depends primarily on the acceptance of our products by consumers. Virtually all potential consumers of our products are not familiar with their use and have no knowledge of our brand. Consumer acceptance of our products will depend on many factors including price, product effectiveness, product packaging, differentiation from competing products, establishing an effective brand image, and overcoming existing consumer loyalties to other brands.
 
Our business is substantially dependent upon our current employees and our ability to attract, recruit and retain additional key employees.
 
Our future success depends upon the efforts of our current executive officers and other key employees, and the loss of services of one or more of them could impair our growth materially. If we are unable to retain current employees, or hire and retain additional key personnel when needed, our business and operations would be adversely affected substantially. We do not have any “key person” insurance covering any of our employees, and we also do not have any written employment agreements with a key employee.
 
Introduction of new products by our competitors could reduce the demand for our products materially.
 
Products offered in our industry from time to time often change significantly due to product design and formulation advances or changing tastes of consumers. Our future success will be dependent materially on our ability to anticipate and respond to evolving industry changes. If we cannot introduce acceptable new products on a regular basis, or if our products fail to compete effectively with new products introduced by competitors, our business will suffer substantially.
 
Our business depends substantially on our ability to protect our intellectual property rights, and any material failure to protect these rights would be harmful to us.
 
The future growth and success of our business will depend substantially upon our ability to protect our trademarks, trade names, and any future patent right, and to preserve our trade secrets. We hold trademark rights, (including our logo design), for the use of our PuraMed Company name and the Lipigesic™ brand, and we have applied for certain patent rights. There is no assurance, however, that any future trademark, patent or other registration will result in a registered and protectable right. Moreover, there is no assurance that competitors or other users of similar rights will not challenge our brands or future patent rights. If one or more challenges against us are successful, we could be forced to discontinue use of our brand or withdraw challenged products, which would then harm us seriously.
 
 
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Although we expect to obtain additional trademark rights and various patents relating to our healthcare products, we are not relying heavily on any future registered rights we may receive, and we do not expect to receive any significant patent protection. Rather, we will rely mainly upon trade secrets, proprietary know-how, and continuing technological innovation to compete in our market. There is no assurance that our competitors will not independently develop technologies or products equal to or similar to ours, or otherwise obtain access to our trade rights that could prevent, limit or interfere with our ability to produce and market our products. Third parties also could assert infringement claims against us in the future, causing us to incur costly litigation to protect and defend our intellectual property rights. Moreover, if we are adjudged to infringe on any rights of others, we could suffer substantial damages and even discontinue offering our products. Any claim of infringement against us would involve substantial expenditures and divert the time and effort of our management materially.
 
We must comply with many governmental regulations relating to our products
 
Our business is governed by many federal and state regulations with respect to the production, sale and use of our healthcare products. Our failure to comply with any of these governmental regulations could delay introduction of products, subject us to governmental or judicial sanctions and penalties, and seriously impair our ability to generate revenues and achieve profitability.
 
We do not intend to pay any cash dividends on our common stock.
 
We have never paid or declared any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.
 
The price of our common stock may be volatile and fluctuate significantly.
 
The trading of our common stock is on the over-the-counter (OTC) stock market, and stocks trading in the OTC market generally feature a high degree of volatility and relatively low volumes of trading. Public market prices for early stage companies such as ours have historically been very volatile due to many factors not affecting established companies. The market price of our common stock may fluctuate significantly, making it difficult for any investor to resell our common stock on reasonable terms.
 
Even though a public trading market for our securities has been initiated, there are no assurances it will become more active. Unless an active public trading market is developed for our common stock, it will be difficult for our shareholders to sell our common stock at a reasonable price when they wish to make such sales.
 
Our current management team owns approximately 43% of our outstanding stock and thus most likely controls our company and they may make material decisions with which other shareholders disagree.
 
Our two executive officers, Messrs. Mitchell and Higgins, own 43% of our outstanding common stock, resulting in their most likely having the ability to control all transactions requiring shareholder approval, including the election and removal of directors, significant mergers or other business combinations, any significant acquisitions or dispositions of assets, and any changes in controls of our company.
 
Additional shares of our authorized capital stock which are issued in the future will decrease equity ownership percentages of existing shareholders, could also be dilutive to existing shareholders, and could delay or prevent a change of control of our company.
 
We are authorized to issue up to 45,000,000 shares of common stock, and our Board of Directors has the sole authority to issue unissued authorized stock without further shareholder approval. To the extent that additional common shares are issued in the future, they will decrease existing shareholders’ percentage equity ownership and, depending upon the prices at which they are issued, could be dilutive to existing shareholders.
 
Issuance of additional common shares also could have the effect of delaying or preventing a change of control of our company without requiring any action of our shareholders, particularly if such shares are used to dilute the stock ownership or voting rights of a person seeking control of our company.
 
 
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ITEM 2.
DESCRIPTION OF PROPERTY
 
The Company does not own any real estate. All development, marketing and administrative operations of the Company are conducted from its suburban Wausau, WI leased facilities of 1,800 square feet located in a building leased by its principal officers. These facilities are leased on a month-to-month oral lease requiring monthly payments of $1,025.
 
The company does not own any material personal property.
 
ITEM 3.
LEGAL PROCEEDINGS
 
PuraMed Bioscience’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is the subject.
 
ITEM 4.
REMOVED AND RESERVED
 
 
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PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
Market Information
 
Our common stock trades on the NASDAQ OTC Bulletin Board under the symbol “PMBS”. The following quotes represent the high and low recent sales prices as reported by NASDAQ. These quotes reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.

   
Fiscal Year Ended
 June 30, 2010
   
Fiscal Year Ended
June 30, 2009
 
   
High
   
Low
   
High
   
Low
 
Quarter ended September 30th
  $ 1.01     $ 0.18     $ 0.60     $ 0.15  
Quarter ended December 31st
  $ 1.99     $ 0.21     $ 0.40     $ 0.15  
Quarter ended March 31st
  $ 1.02     $ 0.55     $ 0.49     $ 0.06  
Quarter ended June 30th
  $ 1.19     $ 0.51     $ 0.46     $ 0.08  

Shareholders
 
As of September 22, 2010, the Company had approximately 320 shareholders of record.
 
Dividends
 
The Company did not declare or pay any cash dividends on its common stock during the last two fiscal years ended June 30, 2010 and 2009, and does not expect to pay cash dividends for the foreseeable future.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
The Company has no established equity compensation plans for the issuance of common stock as payment for employees, consultants or other parties. The Company may utilize its common stock or options thereof from time to time for equity compensation on a transactional basis. In the future, the Company may establish some type of an equity compensation plan to provide incentive to current or future employees.
 
There were no issuer repurchases by the Company during the fiscal year ended June 30, 2010.
 
ITEM 6.
SELECTED FINANCIAL DATA
 
This item is not applicable to PuraMed Bioscience™, Inc.
 
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
This Annual Report on Form 10-K contains “forward-looking statements” within in the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933. Forward looking statements typically contain words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” or similar other words. Statements expressing expectations regarding our future business and prospects or projections we make relating to products, sales, revenues and earnings are typical of such forward-looking statements.
 
 
10

 
 
All forward-looking statements are subject to the risks and uncertainties inherent in attempting to predict future results and activities. Our actual results may differ materially from those projected, stated or implied in our forward-looking statements as a result of many factors including, but not limited to, our overall industry environment, customer and retail outlet acceptance of our products, effectiveness of our marketing and promotional activities, failure to develop and commercialize new products, material delay in the introduction of products, government regulatory matters, production and/or quality control problems, product liability matters, competitive pressures, inability to raise sufficient working capital, general economic conditions and our financial condition.
 
Our forward-looking statements relate only as of the date made by us. We undertake no obligation to update or revise any such statements to reflect new circumstances or unanticipated events as they occur, and you are urged to review and consider all disclosures we make in this and other reports which relate to risk factors germane to our business and industry.
 
Results of Operations for the Fiscal Years Ended June 30, 2010 and 2009
 
Revenues
 
Revenues were $32,176 and $0 for the fiscal years ended June 30, 2010 and 2009.  The revenue increase is due to the commercialization of our Lipigesic™ M migraine product.  Product sales began in December 2009.
 
Cost of Sales
 
Cost of Sales were $13,889 and $0 for the fiscal years ended June 30, 2010 and 2009.  The increase in cost of sales is due to the activities associated with the commercialization of our Lipigesic™ M migraine product.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses for the fiscal year ended June 30, 2010 were $65,667 compared to $51,721 for the year ended June 30, 2009. Selling, general and administrative expenses for fiscal 2010 increased compared to fiscal 2009 due to the commercial rollout of the Lipigesic™ M product in December 2009.
 
Amortization and Depreciation
 
Amortization and depreciation expenses for the fiscal year ended June 30, 2010 were $48,780 compared to $48,430 for the fiscal year ended June 30, 2009, which are similar.
 
Professional Fees
 
Professional fees for the fiscal year ended June 30, 2010 were $139,759 compared to $125,875 for the fiscal year ended June 30, 2009, which increase was due primarily to increased audit expenses.  Professional fees consist of consulting, audit, legal, directors and transfer agent fees.
 
Marketing and Advertising Expense
 
Marketing and advertising expense for the fiscal year ended June 30, 2010 were $641,344 compared to $60,058 for the fiscal year ended June 30, 2009. Increased expenses for 2010 are due primarily to payments for public relations, and advertising consistent with the commercialization of products, and certain stock promotion activities.
 
 
11

 
 
Director Fees
 
Director fees for the fiscal year ended June 30, 2010 were discontinued.
 
Research and Development Expenses
 
Research and development expenses for the fiscal year ended June 30, 2010 were $109,485 compared to $7,966 for the fiscal year ended June 30, 2009. Increased research and development expenses were due to a clinical study and product testing.
 
Salaries
 
Salaries for the fiscal year ended June 30, 2010 were $48,081 compared to $39,837 for the fiscal year ended June 30, 2009, which are relatively consistent.
 
Officer Salaries
 
Officer salaries for the fiscal years ended June 30, 2010 and 2009 were $192,000 for each year.
 
Interest Expense
 
Interest expense for the fiscal year ended June 30, 2010 was $179,509 compared to $886 for the fiscal year ended June 30, 2009.  The increase in interest expense was due to the interest paid on the convertible note obtained in fiscal year 2010.
 
Net Losses
 
Net losses for the fiscal year ended June 30, 2010 were $1,405,956 compared to $525,001 for the fiscal year ended June 30, 2009. These increased losses were due primarily to commencement of commercial operations to market our developed products.
 
Financial Condition, Liquidity and Capital Resources
 
As of June 30, 2010, the Company had cash of $13,831 and a working capital deficit of $84,883.
 
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.
 
PuraMed’s current business strategy is to continue development and promotion of its initial non-prescription consumer healthcare products in order to commence their commercial retail drug chain introduction by the end of the 4th quarter of calendar year 2010 with product expected on the initial retailer shelves in the first quarter of 2011. PuraMed’s primary goal is to achieve continual material growth of Lipigesic™ product sales through mainstream drug, mass merchandiser and food retail channels while at the same time promoting Lipigesic™ 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 Lipigesic™ 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.
 
Commercialize PuraMed Products – PuraMed’s primary focus for the remainder of calendar year 2010 will be to complete, test and nationally roll-out our direct response advertising print campaign featuring our migraine product marketed under our LipiGesic™M brand name. In addition our website and eCommerce efforts will be enhanced to optimize our internet sales as a result of our new print campaign.  PuraMed also has plans to test direct response radio advertising and upgrade its Social Marketing efforts that include Facebook, Twitter, and Youtube.
 
 
12

 
 
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 Lipigesic™ 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 Lipigesic™ 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
 
$
1,100,000
 
Purchase of product inventory, packaging and raw materials
   
600,000
 
Research and development activities
   
100,000
 
General and administrative expenses including rent, fixed overhead and management compensation
   
350,000
 
   
$
2,150,000
 

Critical Accounting Policies
The discussion in this Plan of Operation should be considered in conjunction with our audited financial statements and related notes included in this registration statement. 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.
 
Product Amortization: – PuraMed Bioscience™ 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.  The Company believes that no impairment exists at June 30, 2010.
 
Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements.
 
Accounting Pronouncements
 
In August of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-22, Accounting for Various Topics, Technical Corrections to SEC Paragraphs, and Update No. 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies (SEC Update).  In April of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-12, Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts (SEC Update). In February of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements, and Update No. 2010-08, Technical Corrections to Various Topics. In January of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-04, Accounting for Various Topics, Technical Corrections to SEC Paragraphs (SEC Update).  Adoption of any of these Updates will have no material impact on the Company’s financial reporting.

We have considered other recent accounting pronouncements of which we are aware, and we believe their adoption has not had, and will not have, any material impact on our financial position or results of operations.
 
 
13

 
 
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The consolidated financial statements of PuraMed Bioscience, Inc. are included with an accompanying index in a separate financial section at the end of this Annual Report on Form 10-K.
 
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None
 
ITEM 9A(T).
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.
 
ITEM 9B.
OTHER INFORMATION
 
None
 
 
14

 
 
PART III
 
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS AND CONTROL PERSONS
 
The directors of the Company serve until their successors are elected and shall qualify. Executive officers are elected by the Board of Directors and serve at the discretion of the directors. There are no family relationships among our directors and executive officers.
 
Name
 
Age
 
Position
Russell Mitchell
     
49
     
Chairman, Chief Executive Officer and Director
James Higgins
 
50
 
Chief Financial Officer, Chief Operating Officer and Director
 
Russell Mitchell was CEO/CFO of Dotronix, Inc. from April 2006 until the spin-off of our company from Dotronix in April 2007. From September 2002 until April 2005, he was the President of GelStat Corporation, a public company which developed and marketed OTC non-prescription medications. Mr. Mitchell also was a principal owner and President of Mitchell Health Marketing Alliance, Inc. (“Mitchell Health”) which he founded in 1994. Mitchell Health specialized in the marketing, product launch, and retail distribution of OTC non-prescription drugs and nutritional supplements, and has serviced over 48,000 retail locations nationwide. While establishing this large national retail sales network for Mitchell Health over the years, Mr. Mitchell has personally negotiated on an ongoing basis with key buyers and officers of the top 100 retail chains and wholesalers in the U.S.  Mitchell Health has been dormant since 2001.
 
In particular, Mr. Mitchell has been a pioneer in establishing and promoting the significance and market value of “clinical trials” to demonstrate the effectiveness of OTC non-prescription medications, and in incorporating favorable clinical trial data as a key driver in OTC product marketing.
 
James Higgins was the Chief Operating Officer of Dotronix, Inc. from April 2006 to April 2007. From September 2002 until April 2005 he was Executive Vice President of GelStat Corporation. Mr. Higgins also has been the Executive Vice President of Mitchell Health up until 2001 when it went dormant. Prior to that, for 15 years he was employed by A.C. Nielsen Co. where he was responsible for managing accounts for some of the largest national consumer product companies including Kraft Foods and Unilever. Mr. Higgins has over 20 year’s extensive experience in product development, manufacturing, retail distribution and logistics for many OTC healthcare and nutraceuticals products.
 
Audit Committee
 
We do not have a separately designated audit committee at this time, but rather our entire Board of Directors serves as our audit committee.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors, and persons who beneficially own more than 10% of the Company’s common stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Based solely on copies of Section 16(a) forms and representations from the Company’s executive officers, directors and ten-percent beneficial owners, the Company believes these persons have complied with all Section 16(a) filing requirements during the fiscal year ended June 30, 2010.
 
Code of Ethics
 
The Company has adopted a Code of Ethics and Business Conduct (“the Code”), which applies to the business conduct of the principal executive officer, principal financial officer, principal accounting officer and controller. The Code is available to any shareholder who sends a written request for a paper copy to: Puramed Bioscience, Inc., ATTN: James W. Higgins, CFO, P.O. Box 677, Schofield, WI 54476. If the Company makes any substantive amendments to the Code or grants any waiver, including any implicit waiver from a provision of the Code for the directors or executive officers, the nature of such amendment or waiver will be disclosed in a Current Report on Form 8-K.
 
 
15

 
 
ITEM 11.
EXECUTIVE COMPENSATION
 
The following table sets forth the executive compensation of the executive officers of the Company for fiscal years 2010 and 2009.

Summary Compensation Table
Name and Position
 
Fiscal Year (*)
 
Salary ($)
   
Bonus ($)
 
Stock Awards  ($)
 
Russell Mitchell, CEO
 
2010
    96,000                
    2009     96,000       -0-      -0-   
James Higgins, CFO and COO
 
2010
    96,000                
    2009     96,000       -0-      -0-   
 

* The fiscal year of the Company ends on June 30.
 
Options/SAR Grants
 
The Company has not granted any stock options or SAR grants since its inception
 
Compensation of Directors
 
On May 21, 2009, the company issued 600,000 shares of PuraMed common stock based on $.10 per share to be divided equally among its board of directors in consideration for their serving on the Board of Directors.
 
Employment Contracts and Change-in-Control Arrangements
 
The Company has no written employment agreements with any employees, and the Company also does not have any change-in-control arrangements with any person.
 
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth as of June 30, 2010 certain information regarding beneficial ownership of the common stock of the Company by (a) each person or group known by the Company to be the beneficial owner of more than 5% of the outstanding common stock of the Company, (b) each director and executive officer of the Company, and (c) all directors and executive officers of the Company as a group. Each shareholder named in this table has sole voting and investment power with respect to shares of the common stock shown in table.
 
 
16

 
 
Title of Class – Common Stock
 
Shareholder
 
Shares Owned
 Beneficially
   
Percent
 of Class
 
Russell Mitchell
1326 Schofield Avenue
Schofield, WI 54476
   
3,025,780
     
21.8
%
James Higgins
1326 Schofield Avenue
Schofield, WI 54476
   
2,881,879
     
20.8
%
All directors and officers as a group (2 persons)
   
5,907,659
     
42.6
%
Chuck Phillips
35 Swamp Creek Road
Erwinna, PA 18920
   
2,000,000
     
14.4
%
Doris Kelly
448 Cardinal Court North
New Hope, PA 18938
   
1,160,000
     
8.4
%

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
Following are certain material transactions between the Company and any of its promoters, directors, executive officers and principal shareholders.
 
From November 2007 through June 2009, Russell Mitchell, a principal shareholder, loaned the Company a total of $69,685 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand.  From January 2008 through June 2009, James Higgins, a principal shareholder, loaned the Company a total of $92,000 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand.
 
On November 24, 2008, the board of directors authorized the conversion of accrued wages and notes payable in the aggregate amount of $270,585 to Messrs. Mitchell and Higgins into PuraMed common stock at a rate of $0.15 per share. Messrs. Mitchell and Higgins also elected to waive the four percent (4%) interest rate attached to the promissory notes.
 
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
Child, Van Wagoner & Bradshaw, PLLC has acted as the Company’s independent accounting firm for the fiscal years ended June 30, 2010 and 2009. The aggregate fees billed for the audit and audit related services were $25,218 and $21,710, respectively. These fees are inclusive for professional services rendered for the audit of the Company's annual financial statements and review of our quarterly financial statements.
 
There were no other fees billed to us by our auditors for tax matters, additional audit-related fees or any non-audit services.
 
The Company's Board of Directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In its review of non-audit service fees and its appointment of Child, Van Wagoner & Bradshaw, PLLC as the Company's independent accountants, the Board of Directors considered whether the provision of such services is compatible with maintaining independence.
 
 
17

 
 
PART IV
 
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
Exhibit Index
Annual report on Form 10-K
For year ended June 30, 2010
 
 
Articles of Incorporation as amended November 12, 2007.
3.2
 
Bylaws of the Company (incorporated by reference to the Company’s Annual Registration Report on Form 10-SB for the year ended June 30, 2007).
10.1
 
Distribution Agreement for Spin-Off (incorporated by reference to the Company’s Form 8-K filing of parent Dotronix Inc. on March 20, 2007).
10.2
 
Common Stock Purchase Agreement dated May 24, 2010 with Lincoln Park Capital Fund, LLC with respect to the S-1 Stock filing (incorporated by reference to the Company’s Form 8-K filing on May 28, 2010).
10.3
 
Registration Rights Agreement dated May 24, 2010 with Lincoln Park Capital Fund, LLC with respect to the S-1 Stock filing (incorporated by reference to the Company’s Form 8-K filing on May 28, 2010).
10.4
 
Warrant dated May 24, 2010 issued by Company to Lincoln Park Capital Fund, LLC (incorporated by reference to the Company’s Form 8-K filing on May 28, 2010).
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 

*
Filed herewith
 
 
18

 
 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
 
         
PURAMED BIOSCIENCE, INC.
     
Date:  September 24, 2010
By:  
/s/ Russell W. Mitchell
   
Russell W. Mitchell
CEO
   
 
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Date:  September 24, 2010
By:  
/s/ Russell W. Mitchell
   
Russell W. Mitchell,
Director (principal executive officer)
 
 
Date:  September 24, 2010
By:  
/s/ James W. Higgins
   
James W. Higgins,
Director(principal financial officer)

 
19

 
 
Index to Financial Statements

Report of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Stockholders’ Equity
F-5
Statements of Cash Flow
F-6
Notes to Financial Statements
F-7

 
F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To The Board of Directors
PuraMed BioScience, Inc.

 
We have audited the accompanying balance sheets of PuraMed BioScience, Inc.  (the Company) as of June 30, 2010 and 2009, and the related  statements of operations, changes in  stockholders’ deficit , and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PuraMed BioScience, Inc. as of June 30, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5 to the financial statements, the Company has cash flow constraints, an accumulated deficit, and has not engaged in any significant operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Salt Lake City, Utah
September 24, 2010
 
 
F-2

 

PURAMED BIOSCIENCE, INC.

Balance Sheets

   
June 30,
   
June 30,
 
   
2010
   
2009
 
ASSETS
           
             
Current Assets
           
Cash
  $ 13,831     $ 38,670  
Accounts Receivable
    101       -  
Inventory
    25,831       378  
Prepaid Expenses
    5,022       5,480  
Total Current Assets
    44,785       44,528  
                 
Property and Equipment
               
Computer Software
    2,125       1,217  
Computer Hardware
    1,102       580  
Equipment
    665       -  
Accumulated Depreciation
    (1,695 )     (920 )
Net Property and Equipment
    2,197       877  
                 
Other Assets
               
PuraMed Bioscience Products, net of accumulated
               
amortization of $154,404 and $106,399, respectively
    181,628       229,632  
Trademarks
    11,100       7,910  
Patent
    37,386       17,048  
Total Other Assets
    230,114       254,590  
                 
Total Assets
  $ 277,096     $ 299,995  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current Liabilities
               
Accounts Payable
  $ 16,039     $ 8,754  
Accrued Wages - Officers'
    33,003       109,698  
Accrued Expenses
    10,626       10,336  
Short-term Convertible Bond
    70,000       -  
Total Current Liabilities
    129,668       128,788  
                 
Long-term Liabilities
               
Convertible Bond Payable, net
    176,177       -  
Total Liabilities
    305,845       128,788  
                 
Stockholders' Equity
               
Undesignated shares, 5,000,000 shares authorized, none issued
               
Common Stock, $.001 par value, 45,000,000 shares
               
   authorized, 13,871,839 shares and 11,597,580 shares issued
               
   and outstanding, respectively
    13,872       11,597  
Additional paid in capital
    2,533,705       1,254,981  
Deficit accumulated
    (2,576,326 )     (1,095,371 )
                 
Total Stockholders' Equity
    (28,749 )     171,207  
Total Liabilities & Stockholders' Equity
  $ 277,096     $ 299,995  
 
See notes to financial statements.

 
F-3

 

PURAMED BIOSCIENCE, INC.
 
Statements of Operations
 
   
Year Ended
June 30, 2010
   
Year Ended
June 30, 2009
 
Total Net Revenues
  $ 32,176     $ -  
                 
Total Cost of Sales
    13,889       -  
                 
Gross Profit
    18,287       -  
                 
Operating Expenses
               
Selling, general and administrative expenses
    65,667       51,721  
Amortization and depreciation expense
    48,780       48,430  
Professional fees
    139,759       125,875  
Marketing and advertising expense
    716,344       60,058  
Research and development
    109,485       7,966  
Salaries
    48,081       39,837  
Officer's salaries
    192,000       192,000  
                 
Total Operating Expenses
    1,320,116       525,887  
                 
Loss from Operations
    (1,301,829 )     (525,887 )
                 
Other Income/(Expense)
               
Interest income
    382       886  
Interest expense
    (179,509 )     -  
                 
Total Other Income/(Expense)
    (179,127 )     886  
                 
Net Loss
  $ (1,480,956 )   $ (525,001 )
                 
Loss per Common Share - Basic
               
   and Diluted
  $ (0.11 )   $ (0.05 )
                 
Average number of  common shares
               
   outstanding basic and diluted
    12,896,790       9,788,741  
 
See notes to financial statements.

 
F-4

 

PURAMED BIOSCIENCE, INC.

 
Statements of Stockholders’ Equity
 
 
   
Common Stock
   
Additional
   
Deficit
       
   
Shares
   
Amount
   
Paid In Capital
   
Accumulated
   
Total
 
Balances at July 1, 2008
    6,015,604     $ 6,015     $ 712,878     $ (570,370 )   $ 148,523  
                                         
Stock issued for services
                                       
   @ .30 per share
    110,000       110       32,890       -       33,000  
Stock issued for note conversion
                                       
  @ .15 per share
    1,803,901       1,804       268,781       -       270,585  
Stock issued for note conversion
                                       
  @ .06 per share
    68,334       68       4,032       -       4,100  
Stock issued @ .06
    3,000,000       3,000       177,000       -       180,000  
Stock issued for directors' fees
                                       
  @ .10 per share
    600,000       600       59,400                  
Net loss
                            (525,001 )     (525,001 )
Balances at June 30, 2009
    11,597,839       11,597       1,254,981       (1,095,371 )     171,207  
                                         
Stock issued @ $0.25 per share
    1,084,000       1,085       269,915       -       271,000  
Stock issued @ $0.50 per share
    200,000       200       47,779       -       47,979  
Stock issued for services
                                       
  @ $0.25 per share
    600,000       600       149,400       -       150,000  
Stock issued for services
                                       
  @ $0.50 per share
    220,000       220       109,780       -       110,000  
Stock issued for services
                                       
  @ $1.00 per share
    170,000       170       169,830       -       170,000  
Stock warrants issued
    -       -       532,020       -       532,020  
Net loss
                            (1,480,956 )     (1,480,956 )
Balances at June 30, 2010
    13,871,839     $ 13,872     $ 2,533,705     $ (2,576,327 )   $ (28,750 )

See notes to financial statements.

 
F-5

 
 
PURAMED BIOSCIENCE, INC.

 
Statements of Cash Flows
 
   
Year Ended June 30, 2010
   
Year Ended June 30, 2009
 
Cash Flows from operating activities
           
Net Loss
  $ (1,480,956 )   $ (525,001 )
                 
Changes in non cash working capital items:
               
Stock issued for services
    430,000       33,000  
Stock issued for director fees
    -       60,000  
Depreciation
    776       425  
Amortization
    48,004       48,005  
Accretion on discount on convertible bond
    86,176       -  
Beneficial conversion feature
    70,000       -  
Changes in Operating assets and liabilities:
               
Accounts receivable
    (101 )     -  
Inventory
    (25,453 )     (378 )
Prepaid expenses
    458       (381 )
Accounts payable
    7,285       4,356  
Accrued wages - Officers
    (76,695 )     185,158  
Accrued expenses
    290       (629 )
                 
Net cash used for operating activities
    (940,216 )     (195,445 )
                 
Cash Flows from investing activities
               
Patent acquisition costs
    (20,338 )     (13,674 )
Purchase of property and equipment
    (2,095 )     (580 )
Trademark acquisition costs
    (3,190 )     (2,509 )
                 
Net cash used for investing activities
    (25,623 )     (16,763 )
                 
Cash Flows from financing activities
               
Convertible bond proceeds
    570,000       -  
Loans from officers
    -       84,600  
Repayments to Officers for related party loans
    -       (15,000 )
Proceeds from sale of stock
    371,000       180,000  
                 
Net cash provided by financing activities
    941,000       249,600  
                 
Net increase (decrease) in cash
    (24,839 )     37,392  
                 
Cash at Beginning of Period
    38,670       1,278  
                 
Cash at End of Period
  $ 13,831     $ 38,670  
                 
Supplemental disclosures of noncash investing and financing activities and other cash flow information:
 
Stock issued for debt and accrued wages
  $ -     $ 274,685  
Stock warrants issued with convertible debt
  $ 188,999     $ -  
Interest paid with cash
  $ 23,333     $ -  
                 
See notes to financial statements.

 
F-6

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 
A.
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
PuraMed Bioscience, Inc was incorporated as a Minnesota corporation during May 2006 as a subsidiary of Wind Energy America, Inc. (formerly Dotronix, Inc.) As of April 12, 2007 the Company was spun-off from its parent company. PuraMed Bioscience, Inc. operates from one location in central Wisconsin. The Company is in the business of developing proprietary non-prescription drugs with unique delivery systems.
 
PuraMed was incorporated to complete development of certain over-the-counter (OTC) non-prescription medicinal or healthcare products, including PuraMed Migraine, a migraine headache remedy, and PuraMed Sleep, a sleep inducing remedy for insomnia. Past development of these PuraMed OTC products was conducted by PuraMed’s two principal officers, Russell Mitchell and James Higgins.
 
This is the first quarter that we stopped reporting as a Development Stage Company and began reporting as a Smaller Reporting Company. PuraMed entered the U.S. OTC medicine marketplace commercially in December 2009 by employing “direct to consumer” marketing via a 120-second Television commercial.  A “direct to consumer” print campaign is scheduled for September 2010 which will be followed by broad retail distribution through chain drugs stores, mass merchandisers, and food store chains. PuraMed is currently preparing its initial chain drug store commercial launch of its principal product Lipigesic™ M.  Once the market for the Lipigesic™ M Migraine Headache product is established, the LipiGesic™ PM for Insomnia and LipiGesic™ H for Tension Headaches will be launched commercially.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. The carrying value of the Company’s investments in PuraMed BioScience products represent significant estimates. Actual results could differ from those estimates.
 
Cash Equivalents
 
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
 
Revenue Recognition Policy
 
Revenue is recorded on the accrual basis and is records revenues when the following fundamental criteria are met:  (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.
 
Fair Value of Financial Instruments
 
Cash, receivables, revolving debt, accounts payable, and accrued liabilities are carried at amounts that reasonably approximate their fair value due to the short-term nature of these amounts or due to variable rates of interest that are consistent with current market rates.
 
Property and Equipment
 
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Estimated lives are three years for computer software and five years for computer hardware.
 
 
F-7

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 
A.
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Lipigesic™ Products
 
Lipigesic™ 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 life of seven years.
 
Amortization expense is expected to be $48,004 each year through 2013 and $36,003 for 2014.
 
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 June 30, 2010.
 
Intangible Assets
 
Intangible assets consist of legal fees to acquire our trademarks. As of June 30, 2010, the trademark applications have been completed and we are waiting for approval, therefore no amortization has been recorded.
 
In addition to the trademarks, the Company has completed and filed its final patent application on Lipigesic™ M. We are waiting for approval from the US Patent and Trademark Office, therefore no amortization has been recorded.
 
Research and Development
 
Research and development costs are expensed as incurred. Assets that are required for research and development activities, and have alternative future uses, in addition to its current use, are included in equipment and depreciated over their estimated useful lives.
 
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.
 
Stock Based Compensation
 
The Company accounts for equity instruments issued to non-employees for services and goods under Equity Based Payments to Non-Employees (Topic 505), the equity instruments issued for services or goods are for common shares. These shares or warrants are fully vested, non-forfeitable and fully paid or exercisable at the date of grant and require no future performance commitment by the recipient. The Company expenses the fair market value of these securities over the period in which the Company receives the related services.
 
Reclassifications
 
During the year ended June 30, 2008, the Company’s common stock was assigned a par value of $.001. All of the common stock presentations have been reclassified to represent the correct par value presentation.
 
Reclassifications to the 2009 balances were performed for account groupings on the financial statements in order to more accurately present the professional fees and advertising and marketing expenses, and deferred income taxes and resulting valuation allowance.
 
 
F-8

 

PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 
A.
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Recent Accounting Pronouncements
 
In August of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-22, Accounting for Various Topics, Technical Corrections to SEC Paragraphs, and Update No. 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies (SEC Update).  In April of 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update No. 2010-12, Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts (SEC Update). In February of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements, and Update No. 2010-08, Technical Corrections to Various Topics. In January of 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-04, Accounting for Various Topics, Technical Corrections to SEC Paragraphs (SEC Update).  Adoption of any of these Updates will have no impact on the Company’s financial reporting.  Should any of these updates pertain to the Company, it will comply with its requirements for reporting.

B.
FINANCING ARRANGEMENTS, MANAGEMENT PLANS, AND GOING CONCERN CONSIDERATIONS
 
Financing Arrangements
 
As of June 30, 2010, the Company had cash of $13,831 and a working capital deficit of $84,883. Short-term debt accounted for $70,000 and accrued officers’ salaries accounted for $33,003.
 
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.
 
The Company incurred net losses of $1,480,956 and $525,001, for the years ending June 30, 2010 and 2009, respectively.
 
Going Concern
 
At June 30, 2010, the Company had negative working capital of $84,883 and minimal funds needed to accomplish its planned business strategy or support its projected expenses. The Company plans to obtain the needed working capital primarily through sales of its common stock, 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 its planned business operations. If the Company is unable to obtain additional financing, its ability to continue as a going concern is doubtful.
 
C.
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 following is inventory as of June 30, 2010 and 2009:
 
   
2010
   
2009
 
Raw Materials
  $ 8,659     $ 378  
Finished Goods
    7,172       0  
Total Inventory
  $ 25,831     $ 378  
 
 
F-9

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 
D.
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 in three years (11/13/2012).  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 was recorded as a discount and will be accredited 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 in nine months (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%.
 
E.
RELATED PARTY TRANSACTIONS
 
From November 2007 through June 2009, Russell Mitchell, a principal shareholder, loaned the Company a total of $69,685 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand. As of June 30, 2009, $62,685 was converted to common stock and $7,000 was repaid. Mr. Mitchell elected to waive the 4% interest.
 
From January 2008 through June 2009, James Higgins, a principal shareholder, loaned the Company a total of $92,000 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand. As of June 30, 2009, $84,000 was converted to common stock and $8,000 was repaid. Mr. Higgins elected to waive the 4% interest.
 
F.
STOCKHOLDER'S EQUITY
 
During February-March 2009, the Board of Directors authorized the sale of 3,000,000 shares of restricted common stock to two private individual at a price of $0.06 per share.
 
On March 9, 2009, the Board of Directors authorized the conversion of notes payable in the amount of $4,100 to Mr. Mitchell into PuraMed common stock at a rate of $0.06 per share. This resulted in an issuance of 68,334 shares of common stock.
 
On May 21, 2009, the Company issued 600,000 shares of PuraMed common stock based on $.10 per share to be divided equally among its board of directors in consideration for their serving on the Board of Directors.
 
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.
 
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.

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.

 
F-10

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 
F.
STOCKHOLDER'S EQUITY (Continued)
 
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.
 
The following table summarizes our warrant activities for the twelve months ended June 30, 2010:
 
   
Shares
   
Weighted Average Exercise Price
 
Outstanding at July 1, 2009
    0     $ 0.00  
Issued
    275,000     $ 1.36  
Exercised
    0     $ 0.00  
Cancelled or expired
    0     $ 0.00  
Outstanding at June 30, 2010
    275,000     $ 1.36  
 
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.
 
G.
INCOME TAXES
 
The Company accounts for income taxes in accordance with SFAS No. 109 “Accounting for Income Taxes,” which provides for an asset and liability approach to accounting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The valuation allowances have been established to offset net deferred tax assets due to the uncertainty of their realization.
 
 
F-11

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 

G.
INCOME TAXES (Continued)
 
A reconciliation of estimated income tax expense (benefit) to the amount of computed using statutory federal rates is as follows:
 
   
Year Ended June 30,
 
   
2010
   
2009
 
Tax benefit at federal statutory rate of 35%
 
$
(518,335
)
 
$
(183,750
)
State taxes net of federal benefit
   
(74,048
)
   
(26,250
)
Permanent and other differences
   
2,640
     
0
 
Change in valuation allowance
   
589,743
     
210,000
 
Provision
 
$
0
   
$
0
 

No deferred income taxes have been provided for the temporary differences between the financial reporting and income tax basis of the Company due to the valuation allowances outlined below:
 
   
Year Ended June 30,
 
   
2010
   
2009
 
   
Asset (Liability)
   
Asset (Liability)
 
Deferred tax asset - Net operating loss carry forward
 
$
979,576
   
$
370,173
 
Deferred tax asset – Depreciation
   
10,218
     
0
 
Deferred tax asset – Accrued officer salaries
   
40,097
     
69,975
 
Valuation allowance
   
(1,029,891
)
   
(440,148
)
Net deferred tax asset
 
$
0
   
$
0
 

The Company has estimated federal and state net operating loss carryforwards of $2,448,941 expiring in the years 2025 through 2028. The estimated tax benefit of these net operating loss carryforwards, based on an effective combined federal and state rate of 40% is $979,576 and $370,173 for the years ending June 30, 2010 and 2009 respectively. The Company has established a valuation allowance equal to the amount of cumulative tax assets. Accordingly, no net deferred tax assets, nor any current or deferred tax benefits, have been recognized at June 30, 2010.

H.
SUBSEQUENT EVENTS
 
The Company entered into an agreement on June 21, 2010, in which the Company issued a convertible bond payable for $30,000.  Cash for this bond was not received until July 2, 2010.  The bond has an annual interest rate of 8% which accrues monthly and matures in nine months (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 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 30,000 shares represent a total payment to engage the consultant in the areas of providing market awareness services, business advisory, shareholder information and public relations.  The terms of the agreement call for 10,000 shares per month and the term of the agreement is for three months.  A total of 10,000 shares have been paid to date.
 
On August 2, 2010, pursuant to the S-1 Registration, the Company sold 33,784 shares of common stock at a price of $0.74 each, for total proceeds of $15,000 to Lincoln Park Capital, LLC.  In addition 765 shares were provided to Lincoln Park Capital, LLC as financing commitment shares. This leaves 1,616,216 registered shares available for future sales pursuant to the effective S-1 Registration Statement.
 
 
F-12

 
 
PURAMED BIOSCIENCE, INC.

Notes to Financial Statements
For the Years Ended June 30, 2010 and 2009
 

H.
SUBSEQUENT EVENTS (Continued)
 
On August 24, 2010, pursuant to the S-1 Registration, the Company sold an additional 30,000 shares of common stock at a price of $0.50 each, for total proceeds of $15,000 to Lincoln Park Capital, LLC.  In addition 459 shares were provided to Lincoln Park Capital, LLC as financing commitment shares. This leaves 1,586,216 registered shares available for future sales pursuant to the effective S-1 Registration Statement.
 
On August 26, 2010 the Company issued Media4Equity 20,000 shares of restricted common stock as compensation for the second month of our consulting contract with Media4Equity.
 
 
 
F-13