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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED DECEMBER 31, 2011

Commission File No. 000-52771
 
PURAMED BIOSCIENCE®, INC.
(Exact name of registrant as specified in its charter)
 
 Minnesota       20-5510104
 (State or other jurisdiction of      (IRS Employer ID Number)
Incorporation or organization)    
 
1326 Schofield Avenue
Schofield, WI       
   54476
(Address of principal executive offices)   (Zip Code)

(715) 359-6373
(Registrant’s telephone number)
 
Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

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

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

Indicate by checkmark whether registrant is a shell company. o

There were 21,558,625 shares of Common Stock outstanding as of February 9, 2012.
 


 
 

 
TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION  
   
3
 
           
ITEM 1. 
CONDENSED FINANCIAL STATEMENTS  
   
3
 
           
 
Condensed Balance Sheets   
   
3
 
           
 
Unaudited Condensed Statements of Operations   
   
4
 
           
 
Unaudited Condensed Statements of Stockholders’ Equity  
   
5
 
           
 
Unaudited Condensed Statements of Cash Flows     
   
6
 
           
 
Notes to Condensed Unaudited Financial Statements
   
7
 
           
ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
12
 
           
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
23
 
           
ITEM 4.
CONTROLS AND PROCEDURES
   
23
 
           
PART II.  OTHER INFORMATION 
   
24
 
           
ITEM 2.  
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   
   
24
 
           
ITEM 5. 
OTHER INFORMATION   
   
24
 
           
ITEM 6. 
EXHIBITS
   
24
 
 
 
2

 

PART I – FINANCIAL INFORMATION

ITEM 1.  CONDENSED FINANCIAL STATEMENTS
PURAMED BIOSCIENCE, INC.
Condensed Balance Sheets
 
   
December 31,
   
June 30,
 
   
2011
   
2011
 
   
(Unaudited)
       
ASSETS
           
Current Assets
           
Cash
  $ 255,683     $ 93,879  
Accounts receivable
    -       316  
Inventory
    126,628       93,468  
Prepaid expenses
    42,954       4,513  
Total Current Assets
    425,265       192,176  
                 
Property and Equipment
               
Computer software
    2,483       3,760  
Computer hardware
    5,338       5,259  
Equipment
    2,136       2,136  
Accumulated depreciation
    (1,663 )     (2,326 )
Net Property and Equipment
    8,294       8,829  
                 
Other Assets
               
PuraMed Bioscience Products, net of accumulated
               
amortization of $226,411 and $202,409, respectively
    109,621       133,623  
Trademarks, net of accumulated amortization of $332 and $0
    15,804       15,543  
Patent
    68,547       53,491  
Total Other Assets
    193,972       202,657  
                 
Total assets
  $ 627,531     $ 403,662  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
Current Liabilities
               
Accounts payable
  $ 126,442     $ 116,064  
Accrued wages - Officers'
    141,522       122,505  
Accrued expenses
    4,937       17,769  
Convertible bond payable, net
    381,176       -  
Short-term convertible debt
    125,000       180,000  
Derivative liability
    268,948       318,355  
Total Current Liabilities
    1,048,025       754,693  
                 
Long-term Liabilities
               
Convertible bond payable, net
    -       312,843  
Total Long-term Liabilities
    -       312,843  
                 
Total Liabilities
    1,048,025       1,067,536  
                 
Stockholders' Equity (Deficit)
               
Undesignated shares, 5,000,000 shares authorized, none issued
    -       -  
Common stock, $.001 par value, 45,000,000 shares
               
   authorized, 21,558,625 shares and 19,288,643 shares issued
               
   and outstanding, respectively
    21,559       19,289  
Additional paid in capital
    3,943,087       3,400,671  
Deficit accumulated
    (4,385,140 )     (4,083,834 )
                 
Total Stockholders' Equity (Deficit)
    (420,494 )     (663,874 )
                 
Total Liabilities & Stockholders' Equity (Deficit)
  $ 627,531     $ 403,662  
 
See notes to unaudited condensed financial statements.
 
 
3

 
 
PURAMED BIOSCIENCE, INC.
Unaudited Condensed Statements of Operations
 
      Three months ended       Six months ended  
   
December 31, 2011
   
December 31, 2010
   
December 31, 2011
   
December 31, 2010
 
                                 
Total Net Revenues
  $ 608,676     $ 1,869     $ 613,931     $ 5,472  
                                 
                                 
Cost of sales
    118,095       753       121,311       3,507  
                                 
Gross profit
    490,581       1,116       492,620       1,965  
                                 
                                 
Operating expenses
                               
Selling, general and administrative expenses
    43,288       15,782       66,584       31,515  
Amortization and depreciation expense
    12,775       12,155       25,494       24,312  
Marketing and advertising expense
    164,944       56,311       268,647       144,400  
Professional fees
    125,146       13,407       158,988       58,968  
Research and development
    117       140       2,247       890  
Salaries
    18,535       13,616       36,803       27,920  
Officers' salaries
    108,000       48,000       156,000       96,000  
Total operating expenses
    472,805       159,411       714,763       384,005  
                                 
Income/(loss) from operations
    17,776       (158,295 )     (222,143 )     (382,040 )
                                 
Other income / (expense)
                               
Interest income
    -       -       -       1  
Interest expense
    (118,255 )     (46,117 )     (215,356 )     (158,486 )
Gain/(loss) on disposal of assets
    (302 )     -       (302 )     -  
Gain/(loss) on derivative liability
    206,249       -       136,495       -  
                                 
Total other income/(expense)
    87,692       (46,117 )     (79,163 )     (158,485 )
                                 
Net income/(loss)
  $ 105,468     $ (204,412 )   $ (301,306 )   $ (540,525 )
                                 
Income/(loss) per common share - basic
                               
   and diluted
  $ 0.00     $ (0.01 )   $ (0.01 )   $ (0.04 )
                                 
Average number of  common shares
                               
   outstanding basic and diluted
    21,182,732       14,298,419       20,505,100       14,120,488  
 
See notes to unaudited condensed financial statements.
 
 
4

 
 
PURAMED BIOSCIENCE, INC.
Unaudited Condensed Statements of Shareholder’s Equity
 
   
Common Stock
         
Additional
   
Deficit
       
   
Shares
   
Amount
   
Paid In Capital
   
Accumulated
   
Total
 
                               
Balances at July 1, 2010
    13,871,839     $ 13,871     $ 2,533,706     $ (2,576,326 )   $ (28,749 )
                                         
Stock issued for cash
    261,427       262       102,738       -       103,000  
Stock issued for private placement
                                       
@ $0.30 per unit
    244,000       244       24,156       -       24,400  
Stock issued for private placement
                                       
@ $0.50 per unit
    1,321,000       1,321       (1,321 )     -       0  
Stock issued for note payable conversion
    1,624,289       1,624       138,776       -       140,400  
Stock issued for services
    1,966,088       1,966       351,526       -       353,492  
Stock warrants issued
                    12,200       -       12,200  
Beneficial conversion feature
                    245,000               245,000  
Cost of issuance
                    (6,110 )             (6,110 )
Net loss
                            (1,507,508 )     (1,507,508 )
                                         
Balances at June 30, 2011
    19,288,643       19,289       3,400,671       (4,083,834 )     (663,874 )
                                         
Stock issued for cash
    199,602       200       49,800       -       50,000  
Stock issued for private placement
                                       
@ $0.50 per unit
    418,000       418       13,017       -       13,435  
Stock issued for note payable conversion
    1,450,850       1,451       185,749       -       187,200  
Stock issued for services
    201,530       201       48,682       -       48,883  
Stock warrants issued
                    123,978       -       123,978  
Beneficial conversion feature
                    121,190       -       121,190  
Net loss
                            (301,306 )     (301,306 )
                                         
Balances at December 31, 2011
    21,558,625       21,559       3,943,087       (4,385,140 )     (420,494 )
 
See notes to financial statements.
 
 
5

 
 
PURAMED BIOSCIENCE, INC.
Unaudited Condensed Statements of Cash Flows
 
      Six months ended  
   
December 31, 2011
   
December 31, 2010
 
Cash flows from operating activities
           
Net loss
  $ (301,306 )   $ (540,525 )
                 
Changes on non cash working capital items:
               
Stock issued for services
    48,883       63,242  
Depreciation
    1,160       310  
Amortization
    24,334       24,002  
Warrants issued for services
    120,000       -  
Accretion on discount on convertible bond
    68,333       68,333  
Beneficial conversion feature
    121,190       65,000  
(Gain)/loss on derivative liability
    (136,495 )     -  
(Gain)/loss on disposal of assets
    302       -  
Changes in operating assets and liabilities:
               
    Accounts receivable
    316       (59 )
    Inventory
    (33,160 )     170  
Prepaid expenses
    (38,441 )     (1,350 )
Accounts payable
    10,378       82,358  
Accrued wages - officers
    19,017       75,240  
Accrued expenses
    (5,631 )     (3,510 )
Net cash used for operating activities
    (101,120 )     (166,789 )
                 
Cash flows from investing activities
               
Patent acquisition costs
    (15,056 )     (8,251 )
Purchase of property and equipment
    (927 )     -  
Trademark acquisition costs
    (593 )     (1,979 )
Net cash used for investing activities
    (16,576 )     (10,230 )
                 
Cash Flows from financing activities
               
Short-term convertible debt proceeds
    125,000       65,000  
Proceeds from sale of stock with warrants
    154,500       110,500  
Net cash provided by financing activities
    279,500       175,500  
                 
Net (decrease) increase in cash
    161,804       (1,519 )
Cash at beginning of period
    93,879       13,831  
                 
Cash at end of period
  $ 255,683     $ 12,312  
                 
Supplemental disclosures of noncash investing and
               
  financing activities and other cash flow information:
               
Short-term debt converted to common stock
  $ 187,200     $ 72,800  
Interest paid with cash
  $ 20,571     $ 20,000  
 
See notes to unaudited condensed financial statements.
 
 
6

 

PURAMED BIOSCIENCE, INC.
Notes to Condensed Unaudited Financial Statements
For the Three and Six Month Periods Ended December 31, 2011 and 2010

A.  Basis of Presentation

The condensed balance sheet as of December 31, 2011, the condensed statements of operations for the three and six month periods ended December 31, 2011 and 2010 and the condensed statements of cash flows for the six month periods ended December 31, 2011 and 2010 have been prepared by PuraMed BioScience, Inc. (the "Company") without audit.  In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of December 31, 2011 and the results of operations and cash flows for the three and six month periods ended December 31, 2011 and 2010 presented herein have been made.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  These financial statements should be read in conjunction with the Company's financial statements and notes thereto for the fiscal year ended June 30, 2011 included in the Annual Report on Form 10-K of the Company filed with the SEC on September 28, 2011.

B.  Going Concern

At December 31, 2011, the Company had a negative working capital of $353,812, excluding derivative liabilities because they are expected to be paid with common stock.  The Company requires additional funds to accomplish its planned business strategy or support its projected expenses. In addition revenue received from the successful roll-out of our product at national retail drug stores will now play an increased role in our capital needs.   The Company plans to obtain the needed working capital primarily through sales of both equity and debt securities, which there is no assurance it will be able to accomplish.  If the Company cannot obtain substantial working capital through common stock sales or other sources (if any), it will be forced to curtail or cease its planned business operations.  If the Company is unable to obtain additional financing, its ability to continue as a going concern is doubtful.

C.  Accounting Policies

Income/(loss) per common share - Basic income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding.  Diluted income/(loss) per common share assumes the exercise of stock options and warrants using the treasury stock method, if dilutive.
 
Product AmortizationPuraMed 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.
 
Recently Enacted Accounting Standards
 
In December 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-28—Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force). 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).  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.

 
7

 

PURAMED BIOSCIENCE, INC.
Notes to Condensed Unaudited Financial Statements
For the Three and Six Month Periods Ended December 31, 2011 and 2010

D.  Inventory

Inventory consists of raw materials and finished goods.  Raw materials are the components, including boxes, inserts, liquid medicine and packaging materials that have not been combined into the final product, ready for sale.  Finished goods are the final product, available for sale.  The raw materials inventory will be assembled and placed in finished goods inventory when that amount is significantly reduced. Due to the lack of degradation of the material, no adjustment for obsolescence is necessary.  The following is inventory as of December 31, 2011 and June 30, 2011:

   
December 31, 2011
   
June 30, 2011
 
Raw Materials
  $ 58,026     $ 87,215  
Finished Goods
    68,602       6,253  
Total Inventory
  $ 126,628     $ 93,468  

E.  Notes Payable Transactions

During the fiscal year ended June 30, 2011, the Company issued convertible notes payable to certain accredited investors in the total principal amount of $215,000 and all having an interest rate of 8% per annum and maturing nine months from their issuance.  These notes were convertible at various rates ranging from $0.09 to $0.28 per share.  These notes were all converted during September to December, 2011 for a total issuance by the Company of 1,450,850 common shares.
 
During the six months ended December 31, 2011, the Company issued 8% convertible notes payable to certain accredited investors in the total principal amount of $125,000, which mature 9 months from their issuance, and are convertible at rates ranging from $0.13 to $0.21 per share.  None of the principal of these notes has been converted into common stock.
 
Because all of the foregoing notes are convertible at any time, they included a beneficial conversion amount which was calculated based on stated conversion rates, market prices of common stock of the Company, term of the notes and their interest rates. The amount of such beneficial feature for each note was basically equal to the principal amount of the note.

F.  Stockholder’s Equity

During August to October 2010, pursuant to the S-1 Registration, the Company sold a total of 174,760 shares of common stock at prices ranging from $0.41 to $0.74 per share, for total proceeds of $90,000 to Lincoln Park Capital, LLC.  In addition 2,754 shares, in the amount of $1,492, were provided to Lincoln Park Capital, LLC as financing commitment shares. This leaves 1,475,240 registered shares available for future sales pursuant to the effective S-1 Registration Statement.
 
During November 2011, pursuant to the S-1 Registration, the Company sold a total of 199,602 shares of common stock at prices ranging from $0.25 to $0.251 per share, for total proceeds of $50,000 to Lincoln Park Capital, LLC.  In addition 1,530 shares, in the amount of $1,492, were issued to Lincoln Park Capital, LLC as financing commitment shares. This leaves 1,275,638 registered shares available for future sales pursuant to the effective S-1 Registration Statement.
 
Convertible Notes
 
During the fiscal year ended June 30, 2011, the Company issued a total of 811,467 common shares for the full conversion of notes payable in the total amount of $70,000, which notes had been sold in private transactions during the year ended June 30, 2010.

 
8

 
 
PURAMED BIOSCIENCE, INC.
Notes to Condensed Unaudited Financial Statements
For the Three and Six Month Periods Ended December 31, 2011 and 2010

F.  Stockholder’s Equity (Continued)

During the fiscal year ended June 30, 2011, the Company issued convertible notes payable to an accredited investor in the total principal amount of $65,000 and all having an interest rate of 8% per annum and maturing nine months from their issuance.  These notes were convertible at various rates ranging from $0.09 to $0.28 per share.  These notes were all converted during the fiscal year ended June 30, 2011 for a total issuance by the Company of 812,822 common shares.
 
During the fiscal year ended June 30, 2011, the Company issued convertible notes payable to an accredited investor in the total principal amount of $180,000 and all having an interest rate of 8% per annum and maturing nine months from their issuance.  These notes were convertible at various rates ranging from $0.09 to $0.21 per share.  These notes were all converted during the six months ended December 31, 2011 for a total issuance by the Company of 1,450,850 common shares.
 
During the six months ended December 31, 2011, the Company issued 8% convertible notes payable to an accredited investor in the total principal amount of $125,000, which mature 9 months from their issuance, and are convertible at rates ranging from $0.13 to $0.21 per share.  None of the principal of these notes has been converted into common stock.
 
Because all of the foregoing notes are convertible at any time, they included a beneficial conversion amount which was calculated based on stated conversion rates, market prices of common stock of the Company, term of the notes and their interest rates. The amount of such beneficial feature for each note was basically equal to the principal amount of the note.

Common Stock for Services
 
During the fiscal year ended June 30, 2011, the Company issued a total of 666,088 common shares to certain persons in consideration for financial, management, marketing, legal and promotional services, valued at a total of $158,492 based on common stock prices ranging from $0.15 to $1.00.
 
During the six months ended December 31, 2011, the Company issued a total of 201,530 common shares to certain persons in consideration for financial, management, marketing, legal and promotional services, valued at a total of $48,883 based on common stock prices ranging from $0.15 to $0.25.
 
On March 25, 2011, the Company issued 800,000 shares of PuraMed common stock based on $0.15 per share to be divided equally among its two Board of director members, Messrs. Mitchell and Higgins in consideration for their serving on the Board of Directors for the current year.
 
On April 4, 2011, Company issued 500,000 shares of restricted common stock to Mr. Russell Mitchell, the CEO of the Company, for the successful completion and publication of the clinical study.  The stock was valued at $0.15 per share.

Equity Securities for Cash
 
During the year ended June 30, 2011, the Company issued a total of 86,667 common shares to accredited or qualified investors in isolated transactions for a total amount of $13,000 at $0.15 per share.
 
During the year ended June 30, 2011, the Company sold 244,000 shares of restricted common stock with warrants for $36,600, $24,400 for stock and $12,200 for the warrants, to accredited or qualified investors in isolated transactions, at prices ranging from $0.30 to $0.50 per unit, of which there are two shares and one warrant per unit.
 
 
9

 
 
PURAMED BIOSCIENCE, INC.
Notes to Condensed Unaudited Financial Statements
For the Three and Six Month Periods Ended December 31, 2011 and 2010

F.  Stockholder’s Equity (Continued)

During the year ended June 30, 2011, the Company sold 1,321,000 shares of restricted common stock with warrants for $330,250, to thirty-three private investors at a rate of $0.50 per unit, of which there are two shares and one warrant per unit.  In accordance with guidance in ASC 815-40-25-1 and ASC 815-40-25-8, the Company has determined the warrants issued have net cash settlement provisions that require classification as derivative liabilities rather than permanent equity. In accordance with such accounting rules, derivative instruments are recorded at fair value and marked-to-market each period until they are exercised or expire, with any change in the fair value charged or credited to income each period. Because these warrants do not trade in an active securities market, their fair value was estimated using the Black Scholes model.

During the six months ended December 31, 2011, the Company sold 38,000 shares of restricted common stock with warrants for $9,500, $5,522 for stock and $3,978 for the warrants, to two private investors at a rate of $0.50 per unit, of which there are two shares and one warrant per unit.
 
During November 2011, the Company issued 200,000 cashless warrants, at a conversion rate of $0.25 per share, to two retail brokerage consulting firms in connection with the successful entry into the largest drugstore chain in the United States.  Because these warrants do not trade in an active securities market, their fair value was estimated using the Black Scholes model and were valued at $60,000.  These warrants expire after three years from date of issuance.  The Company classifies these warrants within permanent equity as additional paid-in capital in accordance with FASB ASC 815-40.

During November 2011, the Company issued 200,000 cashless warrants, at a conversion price of $0.25 per share, to CEO Russell W. Mitchell in connection with the successful entry into the largest drugstore chain in the United States.  Because these warrants do not trade in an active securities market, their fair value was estimated using the Black Scholes model, and were valued at $60,000.  These warrants expire after three years from date of issuance.  The Company classifies these warrants within permanent equity as additional paid-in capital in accordance with FASB ASC 815-40.

During the six months ended December 31, 2011, the Company sold 380,000 shares of restricted common stock with 190,000 warrants for $95,000, to four private investors at a rate of $0.50 per unit, of which there are two shares and one warrant per unit.  In accordance with guidance in ASC 815-40-25-1 and ASC 815-40-25-8, the Company has determined the warrants issued have net cash settlement provisions that require classification as derivative liabilities rather than permanent equity. In accordance with such accounting rules, derivative instruments are recorded at fair value and marked-to-market each period until they are exercised or expire, with any change in the fair value charged or credited to income each period. Because these warrants do not trade in an active securities market, their fair value was estimated using the Black Scholes model.

As the adjustment for the derivative liability marked-to-market from the year ended June 2011, the Company recognized a net gain of $136,495 from the change in fair value of these warrants from the date of issuance to the quarter end, and from the year ended June 30, 2011 to December 31, 2011, for the derivative warrants issued in prior periods. Proceeds from the sale of stock with derivative warrants were allocated to the warrants during the period ended December 31, 2011, as follows:  $87,088 to the day-one fair value of the warrants, $7,912 to the common stock.  Accordingly, the portion of the net gain of $136,495 on derivative liabilities attributable to warrants granted during the period was $26,038.

 
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PURAMED BIOSCIENCE, INC.
Notes to Condensed Unaudited Financial Statements
For the Three and Six Month Periods Ended December 31, 2011 and 2010

G.  Subsequent Events (Continued)

On January 6, 2012, the board of directors appointed Sue A. Baacke as Chief Financial Officer effective January 9, 2012.
 
During January 2012, the Company sold 12,000 shares of restricted common stock with warrants for $3,000, to a private investor at a rate of $0.50 per unit, of which there are two shares and one warrant per unit.
 
The US trademark for PuraMed BioScience was pending and has been approved.  Starting January 2012, amortization will be applied to this intangible asset for the life of the trademark or ten years.  Any future fees to maintain this trademark will be expensed as incurred.
 

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

The following discussion should be read and considered along with our condensed financial statements and related notes included in this 10-Q.  These financial statements were prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).  This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.  Our actual results may differ substantially from those anticipated in these forward-looking statements as a result of various factors including those set forth in the “Risk Factors” section of our Form 10-K filing for fiscal year ending June 30, 2011 filed with the SEC on September 28, 2011.
 
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 April 12, 2007, effective date of the spin-off, PuraMed and Wind Energy America, Inc. have operated separately, with their respective managements, businesses, assets and capital structures being completely independent from each other.

Overview of Business

The Company is engaged in the business of developing and marketing a line of non-prescription medicinal or healthcare products to be marketed through various retail channels under the 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 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.
 
Product development and design packaging of all PuraMed products have been conducted entirely by the Company’s two principal officers, Russell Mitchell and James Higgins.  Messrs. Mitchell and Higgins have extensive and lengthy experience in new product development and marketing of non-prescription medical products and nutritional supplements and the many varied promotional activities involved in their marketing rollouts. For example, Mitchell Health Technologies served as the master broker for the launch of Quigley Corp’s “Cold-Eeze” treatment for common colds, which within 18 months exceeded $70 million in annual wholesale revenues. The Company considers the long and successful professional involvement of its management team in our industry to be a valuable asset to draw upon to achieve the future growth and profitability anticipated by the Company.
 
The Company entered the OTC healthcare products marketplace by employing “direct to consumer” marketing via television commercials and print articles.  This will be followed by broad retail distribution through mainstream drug store chains, mass merchandisers, and food chains. As of January 2012, PuraMed has achieved retail distribution in the top two national retail drug chains in the United States, Walgreens and CVS.  The Company is currently looking to expand its retail placement amongst national retail drug chains as well as undergoing substantial marketing activities directed toward supporting its initial commercial launch of its LipiGesic®M migraine headache relief product.
 
 
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In addition to the national retail drug chain roll-out campaign, PuraMed is now implementing its public relations effort utilizing the evidence from its recently completed clinical study.  The clinical study design was a double blind, placebo controlled, multi-site study measuring the effectiveness of LipiGesic® M for the treatment of acute migraine attacks.  The Company announced in June 2011 that their independent clinical study of LipiGesic® M has been accepted for publication in a top-ranked medical journal.  Headache, a top-tier medical journal of the American Headache Society published the clinical study of LipiGesic® M in their July/August 2011 print edition.
 
The Company has implemented a robust Social Marketing effort utilizing popular social internet sites like Facebook, YouTube, Twitter, Google+ and the abundance of “blogs” to drive consumers and revenue by obtaining access to large audiences and influencers.  In addition to a strong consumer emphasis, this program will have a major component that promotes our LipiGesic® M product directly to the medical professionals who treat headaches.
 
The Company intends to continue to develop and grow its intellectual property portfolio in 2012 which is expected to substantially enhance shareholder value. The Company is currently engaged in conducting a clinical study on its LipiGesic® M migraine product for the potential use on children and adolescents. PuraMed already has established its protocol, identified researchers, and selected sites for a new Double Blind Placebo Controlled study of LipiGesic® M for the potential use with children. There are nearly 2 million children in the USA that suffer from frequent debilitating migraines with no prescription treatments approved for use on children.

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 30 million Americans suffer from chronic migraine headaches with over 20 million of them having “severe” migraine conditions. Thus migraine headaches constitute a severe and disabling condition for millions of people. We further believe that the economic burden alone to the U.S. economy is in excess of $20 billion annually.
 
LipiGesic® M is effective, available as a non-prescription remedy, without any known side effects, and affordable compared to more expensive migraine drugs based on prescription chemical formulations.

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 sleep aid market features products based primarily on chemical antihistamines.
 
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.
 
 
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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® H – provides relief for common tension headaches which afflict a majority of American adults from time to time. This remedy provides headache relief features a unique proprietary formulation of St. John’s Wort and common aspirin.
 
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 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 products in easy-to-use, sublingual dispensers.  These selected contractors are experienced in the production and packaging of this type of dispenser. PuraMed believes that its benchmark use of sublingual dispensers will distinguish its products favorably in comparison to most competing OTC products now in the marketplace.

Regulation of PuraMed Products

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

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

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

Sales and Marketing

PuraMed intends to launch its initial three products commercially through the following three-phase process:
 
Phase One Rollout:  Direct Response. In December 2009 PuraMed began running its two-minute direct response television commercials via selected national cable television stations.  The media spend over the initial ninety day test phase was modest in an effort to optimize the television campaign. PuraMed will also employ website and toll-free telephone access in conjunction with its TV direct response campaigns. A Social Media Campaign conducted on the internet via popular internet networking sites like Facebook, twitter and Google + has also been implemented to drive customers to our eCommerce websites. PuraMed began Phase One Rollout for its migraine produce, LipiGesic® M, during the fourth quarter of calendar year 2009.
 
Phase Two Rollout:  Retail Drugstores. PuraMed began consumer awareness and delivering product sales from its direct response marketing phase coupled with its Social Marketing Plan to reach both consumers and medical professionals by the second quarter of 2011. In the fourth quarter of calendar year 2011 it began marketing through more than 15,000 retail drugstores targeted by PuraMed, including Walgreens and CVS which are the top two national retail drug chains in the US.  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. Beginning early 2012, PuraMed will launch Phase Three which will consist of placing PuraMed products in a further approximately 25,000 targeted retail outlets including mass merchandisers such as Rite Aid, 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.
 
 
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Results of Operations

Revenues
 
Revenues consist of wholesale, website and telephone sales of the LipiGesic® M migraine product.  The wholesale sales have been to the largest drug chain store in the United States.
 
Cost of Sales
 
Cost of sales consists of merchant fees, material, packaging and freight costs for the units sold.
 
Operating Expenses
 
Selling, general and administrative expenses consist primarily of payroll taxes, health insurance, facility rent and administrative overhead costs.
 
Amortization and depreciation expenses consist primarily of depreciation of fixed assets and amortization of our LipiGesic® trademark and intellectual property received during our spin-off from our parent company in April 2007.
 
Marketing and advertising expense include payments for public relations, stock promotion and advertising consistent with the commercialization of products.
 
Professional fees consist of audit, legal, transfer agent, consulting, commission and directors fees.
 
Salaries include payments to our office manager and corporate controller.
 
Officers’ salaries include payroll to our Chief Executive Officer and our Chief Financial Officer.
 
Comparison of Operations for Three Months Ended December 31, 2011 and 2010

Revenue
 
Revenue for the three months ended December 31, 2011 were $608,676 compared to $1,869 for the three months ended December 31, 2010.  The revenue increased due to new retail distribution.
 
Cost of Sales
 
Cost of sales for the three months ended December 31, 2011 were $118,095, compared to $753 for the three months ended December 31, 2010.  The cost of sales increased due to additional raw material costs, production and freight costs for the new retail distribution.
 
 
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Gross profit
 
The gross profit for the three months ended December 31, 2011 was $490,581, compared to $1,116 for the three months ended December 31, 2010.  The increase in gross profit is due to new retail distribution.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses were $43,286 and $15,782 for the three months ended December 31, 2011 and 2010, respectively. The increase is primarily attributed to product liability insurance as a result of new retail distribution.
 
Amortization and Depreciation
 
Amortization and depreciation expenses for the three months ended December 31, 2011 and 2010 were similar at $12,775 compared to $12,155.
 
Marketing and Advertising Expense
 
Marketing and advertising expense for the three months ended December 31, 2011 were $164,944 compared to $56,311 for the three months ended December 31, 2010.  The increase in the expenses was due to the marketing and advertising necessary to support our product’s entry into retail drugstores.
 
Professional Fees
 
Professional fees for the three months ended December 31, 2011 were $125,146 compared to $13,407 for the three months ended December 31, 2010.  The increase was attributed to additional consulting fees paid to support the Company’s product entry into the retail drugstores.
 
Research and Development Expenses
 
Research and development expenses for the three months ended December 31, 2011 were similar at $117 compared to $140 for the three months ended December 31, 2010.
 
Salaries
 
Salaries for the three months ended December 31, 2011 were $18,535 compared to $13,616 for the three months ended December 31, 2010, which is attributed to the increase in hours worked by administrative personnel compared to the previous period.
 
 
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Officers’ Salaries
 
Officer salaries for the three months ended December 31, 2011 and 2010 were $108,000 and $48,000, respectively.  The increase in salaries is attributed to the warrants issued to Russell Mitchell in connection with the successful entry into the largest drugstore chain in the United States.
 
Interest Expense
 
Interest expense for the three months ended December 31, 2011 and 2010 was $118,255 and $46,117, respectively.  The increase in the expense is attributed to additional notes used to finance the Company.
 
Gain/(Loss) on Disposal of Assets
 
The loss on disposal of assets is the result of disposal of software no longer used by the Company.  The amount for December 31, 2011 was $302, there were no disposals recorded for the quarter ended December 31, 2010.
 
Gain/(Loss) on Derivative Liability
 
The gain on derivative liability is the difference in value using the lattice model for the warrants between the date issued and the quarter ended December 31, 2011 and 2010.  The amount for December 31, 2011 was $206,249, there were no derivative liabilities recorded for the quarter ended December 31, 2010.
 
Net Income/Loss
 
Net income for the three months ended December 31, 2011 was $105,470 compared to a loss of $204,412 for the three months ended December 31, 2010.  The gain in 2011 was due to new distribution in retail drugstores.

Comparison of Operations for Six Months Ended December 31, 2011 and 2010

Revenue
 
Revenue for the six months ended December 31, 2011 were $613,931 compared to $5,472 for the six months ended December 31, 2010.  The revenue increased due to new retail distribution.
 
Cost of Sales
 
Cost of sales for the six months ended December 31, 2011 were $121,311, compared to $3,507 for the six months ended December 31, 2010.  The cost of sales increased due to additional raw material costs, production and freight costs for the new retail distribution.
 
Gross Profit
 
The gross profit for the six months ended December 31, 2011 was $492,620, compared to $1,965 for the six months ended December 31, 2010.  The increase in gross profit is due to new retail distribution.
 
 
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Selling, General and Administrative Expenses
 
Selling, general and administrative expenses were $66,584 and $31,515 for the six months ended December 31, 2011 and 2010, respectively.   The increase is primarily attributed to product liability insurance as a result of new retail distribution.
 
Amortization and Depreciation
 
Amortization and depreciation expenses for the six months ended December 31, 2011 and 2010 were similar at $25,494 compared to $24,312.
 
Marketing and Advertising Expense
 
Marketing and advertising expense for the six months ended December 31, 2011 were $268,647 compared to $144,400 for the six months ended December 31, 2010.  The increase in the expenses was due to the marketing and advertising necessary to support our product’s entry into retail drugstores.
 
Professional Fees
 
Professional fees for the six months ended December 31, 2011 were $158,988 compared to $58,698 for the six months ended December 31, 2010.  The increase was attributed to additional consulting fees paid to support the Company’s product entry into the retail drugstores.
 
Research and Development Expenses
 
Research and development expenses for the six months ended December 31, 2011 were $2,247 compared to $890 for the six months ended December 31, 2010.  The increase in expense was due to design changes in retail packaging.
 
Salaries
 
Salaries for the six months ended December 31, 2011 were $36,803 compared to $27,920 for the six months ended December 31, 2010, which is attributed to the fluctuation of hours worked by administrative personal in the previous period.
 
Officers’ Salaries
 
Officer salaries for the six months ended December 31, 2011 and 2010 were $156,000 and $96,000, respectively.  The increase in salaries is attributed to the warrants issued to Mr. Mitchell in connection with the successful entry into the largest drugstore chain in the United States.
 
 
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Interest Expense
 
Interest expense for the six months ended December 31, 2011 and 2010 were $215,356 and $158,486, respectively.  The increase in the expense is attributed to additional notes used to finance the Company.
 
Gain/(Loss) on Disposal of Assets
 
The loss on disposal of assets is the result of disposal of software no longer used by the Company.  The amount for December 31, 2011 was $302, there were no disposals recorded for the six months ended December 31, 2010.
 
Gain/(Loss) on Derivative Liability
 
The gain on derivative liability is the difference in value using the Black-Scholes formula for the warrants between the date issued and the six months ended December 31, 2011 and 2010.  The amount for December 31, 2011 was $136,495, there were no derivative liabilities recorded for the six months ended December 31, 2010.
 
Day One Gain in Derivative Liability
 
The difference between the proceeds received and the value of the warrants issued resulted in a gain.  The amount for the six months ended December 31, 2011 was $7,912, there were no derivative liabilities recorded for the six months ended December 31, 2010.
 
Net Losses
 
Net losses for the six months ended December 31, 2011 were $293,394 compared to $540,525 for the six months ended December 31, 2010.  The reduction in the loss from the comparison period is due to new distribution in retail drugstores in 2011, net of the effect of additional expenses.
 
Financial Condition, Liquidity and Capital Resources

As of December 31, 2011, the Company had cash of $255,683 and negative working capital of $353,812, excluding derivative liabilities, which are expected to be paid with common stock.

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. In addition revenue received from the successful roll-out of our product at national retail drug stores will now play an increased role in our capital needs.  There is no assurance, however, that we will be successful in raising the necessary capital to implement our business plan, either through debt or equity sources.
 
 
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Business Strategy
 
PuraMed’s current business strategy is to continue the promotion of its initial non-prescription migraine headache relief product, LipiGesic® M, and continue with their commercial retail drug chain roll-out plan through the calendar year 2012.  The product has gained nationwide distribution in Walgreens and CVS retail drug chains with additional drug chains being targeted for distribution in calendar year 2012.  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:
 
The Successful Outcome of the Clinical Trial - The outcome of our clinical study coupled with the publication of the manuscript in the peer reviewed-medical journal “Headache, The Journal of Head and Face Pain” has proved to be very successful.  It has and is expected to continue to provide us with numerous marketing and promotion opportunities that could significantly help with the retail launch of our LipiGesic® M migraine product.  PuraMed is in the process of executing a detailed marketing plan that focuses on the medical community since the successful outcome of our clinical study trial supports such actions.  Medical marketing efforts geared toward doctors, physician’s assistants, pharmacists, etc. is expected to be very lucrative as a component in our overall marketing strategy.
 
The Company plans to continue its research efforts in 2012. PuraMed already has established its protocol, identified researchers, and selected sites for a new Double Blind Placebo Controlled study of LipiGesic M for the potential use with children. There are nearly 2 million children in the USA that suffer from frequent debilitating migraines with no prescription treatments approved for use on children. Medical professionals will not recommend any of the adult approved treatments because they have concerns of side effect profiles. Children were included in the LipiGesic M study, published earlier this year and the encouraging efficacy and safety results have paved the way to study a larger population. This study will commence in early 2012.
 
Promotion to the medical community will utilize the published results of the study which are expected to help promote LipiGesic® M as a new non-prescription abortive therapy which offers a broad range of advantages over the current first line prescription abortive treatment. The Company expects to exhibit and detail the product at key medical conferences throughout the country focusing on headache and primary care specialists. These specialists would include medical doctors, osteopathic physicians, physician assistants and nurse practitioners. PuraMed has developed a "Doctor Detailing Kit" that is currently being sent directly to health professionals, across the country that include samples, study data and use indications to inform Doctors who are unable to attend the various conferences throughout the year.  Additionally, the Company expects to partner with key national organizations specializing in headache disorders as well as regional groups and support networks.
 
Commercialize PuraMed Products – PuraMed’s primary focus for the first quarter of calendar year 2012 will be to gain distribution with one or more additional national chain drug stores.  In addition, the Company will be implementing a marketing campaign utilizing its successful clinical study.  The Company has begun the execution of our marketing campaign utilizing our Clinical Trials to overcome consumer and retailer skepticism and provide third party validation of our migraine products efficacy.  The Company’s marketing efforts will have a strong consumer emphasis including a Social Marketing campaign, medial community detailing and sampling, Continuing Medical Education (CME) program for doctors and pharmacists, Medical conference participation and Celebrity endorsements.   In addition our website and eCommerce efforts will be enhanced to optimize our internet sales as a result of our new marketing campaign.  PuraMed also has utilized newspaper advertising in ten major markets to inform consumers about our product and direct them to the national retail drug chain where we currently have distribution.  The Company also has plans to test direct response radio advertising and has implemented a  Social Marketing initiative that includes Facebook, Twitter, Google +, and YouTube.  In addition our eCommerce website www.lipigesic.com will continue to be promoted via Direct Response, Consumer Marketing and our Social Media Marketing efforts.
 
 
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Expansion of Sales and Marketing Activities – PuraMed will continue to expand upon its marketing activities which have been focused toward obtaining a nationwide network of retail outlets and employing 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 continue 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 $3.0 million over the next twelve months on the marketing of our migraine headache remedy along with the introduction of our second product offering regardless of any amounts of revenues we generate from product sales during this period:

Sales and marketing expenses
 
$
2,000,000
 
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
   
300,000
 
   
$
3,000,000
 

Critical Accounting Policies

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

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

LipiGesic® Products:

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.
 
 
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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 carrying value is reviewed periodically or when factors indicating impairment are present.  The impairment loss is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets.  The Company believes that no impairment exists at December 31, 2011.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not applicable to PuraMed BioScience™, Inc.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

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

Changes in internal controls.

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

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

During October through December 31, 2011, the Company, through private transactions, offered and sold 38,000 shares of common stock to two individual investors for a total of $9,500 net of offering expenses.  Sale of these common shares was deemed exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.  No advertising or general solicitation was involved and these shares were offered only to the individual purchasers who are accredited investors.  Moreover, the stock certificates for these shares are legended to prevent further transfer, resale or other disposition unless registered under applicable securities laws or exempt from such registration.

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

See Exhibit Index below
 
Exhibit Index
Quarterly report on Form 10-Q
For the quarter ended December 31, 2011

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

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

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

 
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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: February 9, 2012       
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.
 
  Signature  
       
Date: February 9, 2012       
By:
/s/ Russell W. Mitchell  
    Russell W. Mitchell, Director  
    (principal executive officer)  

Date: February 9, 2012       
By:
/s/ Sue A. Baacke  
    Sue A. Baacke  
    (principal financial officer)  
                                                             
 
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