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EX-31.2 - CERTIFICATION 31.2 - Puramed Bioscience Inc. | pmbs_312.htm |
EX-31.1 - CERTIFICATION 31.1 - Puramed Bioscience Inc. | pmbs_311.htm |
EX-32.1 - CERTIFICATE 32 - Puramed Bioscience Inc. | pmbs_321.htm |
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, 2009
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)
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 13,281,839 shares of Common Stock outstanding as of February 9,
2010.
PART I – FINANCIAL INFORMATION | ||
I tem 1. | CONDENSED FINANCIAL STATEMENTS | 1 |
Condensed Balance Sheets | 1 | |
Unaudited Condensed Statements of Operations | 2 | |
Unaudited Condensed Statements of Cash Flows | 3 | |
Notes to Condensed Unaudited Financial Statements | 4 | |
Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 8 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 16 |
Item 4. | Controls and Procedures | 16 |
PART II. OTHER INFORMATION | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
Item 5. | Other Information | 17 |
Item 6. | Exhibits | 17 |
PART I – FINANCIAL
INFORMATION
ITEM
1. CONDENSED FINANCIAL STATEMENTS
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Condensed
Balance Sheets
December
31,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 387,026 | $ | 38,670 | ||||
Accounts
receivable
|
130 | - | ||||||
Payroll
tax receivable
|
145 | - | ||||||
Inventory
|
29,976 | 378 | ||||||
Prepaid
expenses
|
6,136 | 5,480 | ||||||
Total
current assets
|
423,413 | 44,528 | ||||||
Property
and equipment
|
||||||||
Computer
software
|
2,125 | 1,217 | ||||||
Computer
hardware
|
1,102 | 580 | ||||||
Equipment
|
665 | - | ||||||
Accumulated
depreciation
|
(1,273 | ) | (920 | ) | ||||
Net
property and equipment
|
2,619 | 877 | ||||||
Other
assets
|
||||||||
PuraMed
Bioscience products, net of accumulated
|
||||||||
amortization
of $130,401 and $106,399, respectively
|
205,630 | 229,632 | ||||||
Trademarks
|
9,387 | 7,910 | ||||||
Patent
|
17,759 | 17,048 | ||||||
Total
other assets
|
232,776 | 254,590 | ||||||
Total
assets
|
$ | 658,808 | $ | 299,995 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 9,555 | $ | 8,754 | ||||
Accrued
wages - officers'
|
15,779 | 109,698 | ||||||
Accrued
expenses
|
7,780 | 10,336 | ||||||
Total
current liabilities
|
33,114 | 128,788 | ||||||
Long-term
liabilities
|
||||||||
Convertible
bond payable
|
500,000 | - | ||||||
Discount
on convertible bond
|
(392,156 | ) | - | |||||
Total
long-term liabilities
|
107,844 | - | ||||||
Total
liabilities
|
140,958 | 128,788 | ||||||
Stockholders'
equity
|
||||||||
Undesignated
shares, 5,000,000 shares authorized, none issued
|
- | - | ||||||
Common
stock, $.001 par value, 45,000,000 shares
|
||||||||
authorized,
13,281,839 shares and 11,597,839 shares issued
|
||||||||
and
outstanding, respectively
|
13,282 | 11,597 | ||||||
Additional
paid in capital
|
2,084,295 | 1,254,981 | ||||||
Deficit
accumulated during the development stage
|
(1,579,727 | ) | (1,095,371 | ) | ||||
Total
stockholders' equity
|
517,850 | 171,207 | ||||||
Total
liabilities & stockholders' equity
|
$ | 658,808 | $ | 299,995 |
See notes
to unaudited condensed financial statements.
1
PURAMED BIOSCIENCE, INC.
(A
Development Stage Company)
Unaudited
Condensed Statements of Operations
Three
months ended
|
Six
months ended
|
Period
from May 9, 2006 (inception)
to |
||||||||||||||||||
December
31, 2009
|
December
31, 2008
|
December
31, 2009
|
December
31, 2008
|
December
31, 2009
|
||||||||||||||||
Revenues
|
$ | 2,567 | $ | - | $ | 2,567 | $ | - | $ | 2,567 | ||||||||||
Total
revenues
|
2,567 | - | 2,567 | - | 2,567 | |||||||||||||||
Cost
of sales
|
289 | - | 289 | - | 289 | |||||||||||||||
Total
cost of sales
|
289 | - | 289 | - | 289 | |||||||||||||||
Gross
profit
|
2,278 | - | 2,278 | - | 2,278 | |||||||||||||||
Operating
expenses
|
||||||||||||||||||||
Selling,
general and administrative expenses
|
53,647 | 14,146 | 76,938 | 29,505 | 228,107 | |||||||||||||||
Amortization
and depreciation expense
|
12,207 | 12,103 | 24,355 | 24,206 | 131,675 | |||||||||||||||
Audit
fees
|
2,500 | 862 | 20,218 | 16,498 | 45,528 | |||||||||||||||
Consulting
fees
|
20,500 | 242 | 20,500 | 39,525 | 312,672 | |||||||||||||||
Marketing
and advertising expense
|
78,289 | - | 169,539 | - | 227,933 | |||||||||||||||
Directors'
fees
|
- | - | - | - | 60,000 | |||||||||||||||
Research
and development
|
28,157 | - | 38,003 | 172 | 110,947 | |||||||||||||||
Salaries
|
12,505 | 10,092 | 20,003 | 27,831 | 107,930 | |||||||||||||||
Officers'
salaries
|
48,000 | 48,000 | 96,000 | 96,000 | 336,000 | |||||||||||||||
Total
operating expenses
|
255,805 | 85,445 | 465,556 | 233,737 | 1,560,792 | |||||||||||||||
Loss
from operations
|
(253,527 | ) | (85,445 | ) | (463,278 | ) | (233,737 | ) | (1,558,514 | ) | ||||||||||
Other
income / (expense)
|
||||||||||||||||||||
Interest
income
|
98 | 1,925 | 98 | 886 | (37 | ) | ||||||||||||||
Interest
expense
|
(21,176 | ) | - | (21,176 | ) | - | (21,176 | ) | ||||||||||||
Total
other expense
|
(21,078 | ) | 1,925 | (21,078 | ) | 886 | (21,213 | ) | ||||||||||||
Net
loss
|
$ | (274,605 | ) | $ | (83,520 | ) | $ | (484,356 | ) | $ | (232,851 | ) | $ | (1,579,727 | ) | |||||
Loss
per common share - basic
|
||||||||||||||||||||
and
diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.04 | ) | ||||||||
Average
number of common shares
|
||||||||||||||||||||
outstanding
basic and diluted
|
12,857,056 | 6,850,827 | 12,403,861 | 6,442,053 |
See notes
to unaudited condensed financial statements.
2
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Unaudited
Condensed Statements of Cash Flows
Six months ended |
Period
from May 9,
|
|||||||||||
December
31, 2009
|
December
31, 2008
|
2006
(inception) to December 31, 2009
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
$ | (484,356 | ) | $ | (232,851 | ) | $ | (1,579,727 | ) | |||
Changes
on non cash working capital items:
|
||||||||||||
Stock
issued for services
|
150,000 | 33,000 | 225,000 | |||||||||
Non-cash
consulting expense
|
- | - | 92,000 | |||||||||
Stock
issued for directors' fees
|
- | - | 60,000 | |||||||||
Depreciation
|
353 | 203 | 1,273 | |||||||||
Amortization
|
24,002 | 24,002 | 130,401 | |||||||||
Accretion
on discount on convertible bond
|
17,843 | - | 17,843 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accounts
receivable
|
(130 | ) | 0 | (130 | ) | |||||||
Payroll
tax receivable
|
(145 | ) | 0 | (145 | ) | |||||||
Inventory
|
(29,598 | ) | 0 | (29,976 | ) | |||||||
Prepaid
expenses
|
(656 | ) | 205 | (6,136 | ) | |||||||
Accounts
payable
|
801 | 13,351 | 9,555 | |||||||||
Accounts
payable - related party
|
- | (233 | ) | - | ||||||||
Accrued
wages - officers
|
(93,919 | ) | 116,343 | 156,779 | ||||||||
Accrued
expenses
|
(2,556 | ) | (2,261 | ) | 7,780 | |||||||
Net
cash used for operating activities
|
(418,361 | ) | (48,241 | ) | (915,483 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Patent
acquisition costs
|
(711 | ) | (12,499 | ) | (17,759 | ) | ||||||
Purchase
of property and equipment
|
(2,095 | ) | - | (3,892 | ) | |||||||
Trademark
acquisition costs
|
(1,477 | ) | (1,282 | ) | (9,387 | ) | ||||||
Net
cash used for investing activities
|
(4,283 | ) | (13,781 | ) | (31,038 | ) | ||||||
Cash
Flows from financing activities
|
||||||||||||
Convertible
bond proceeds
|
500,000 | - | 500,000 | |||||||||
Loans
from officers
|
- | 61,000 | 148,685 | |||||||||
Repayments
to officers for related party loans
|
- | - | (15,000 | ) | ||||||||
Proceeds
from sale of stock
|
271,000 | - | 451,000 | |||||||||
Proceeds
from spin off
|
- | - | 174,393 | |||||||||
Proceeds
from equity investee
|
- | - | 74,469 | |||||||||
Net
cash provided by financing activities
|
771,000 | 61,000 | 1,333,547 | |||||||||
Net
(decrease) increase in cash
|
348,356 | (1,022 | ) | 387,026 | ||||||||
Cash
at beginning of period
|
38,670 | 1,278 | - | |||||||||
Cash
at end of period
|
$ | 387,026 | $ | 256 | $ | 387,026 | ||||||
Supplemental
disclosures of noncash investing and financing
activities and other cash flow information:
|
||||||||||||
Assets
acquired in connection with spin off
|
$ | - | $ | - | $ | 217,687 | ||||||
Stock
issued for acquisition of assets
|
$ | - | $ | - | $ | 174,393 | ||||||
Beneficial
conversion feature on convertible debt
|
$ | 305,000 | $ | - | $ | 305,000 | ||||||
Stock
warrants issued with convertible debt
|
$ | 104,999 | $ | - | $ | 104,999 | ||||||
Interest
paid
|
$ | 3,333 | $ | - | $ | 3,468 |
See notes
to unaudited condensed financial statements.
3
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Notes to
Condensed Unaudited Financial Statements
For the
Six Month Periods Ended December 31, 2009 and 2008
A. Basis
of Presentation
The
condensed balance sheet as of December 31, 2009, the condensed statements of
operations for the three and six month periods ended December 31, 2009 and 2008
and the condensed statements of cash flows for the six month periods ended
December 31, 2009 and 2008 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, 2009 and the results of
operations and cash flows for the three and six month periods ended December 31,
2009 and 2008 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, 2009 included in
the Annual Report on Form 10-K of the Company filed with the SEC on September
25, 2009.
B. Going
Concern
At
December 31, 2009, the Company had working capital of $390,299, and requires
additional funds to accomplish its planned business strategy or support its
projected expenses. The Company plans to obtain the needed working
capital primarily through sales of both equity and debt securities, which there
is no assurance it will be able to accomplish. If the Company cannot
obtain substantial working capital through common stock sales or other sources
(if any), it will be forced to curtail its planned business
operations. If the Company is unable to obtain additional financing,
its ability to continue as a going concern is doubtful.
C. Accounting
Policies
Loss per
common share - Basic loss per common share is computed by dividing net loss by
the weighted average number of common shares outstanding. Diluted
loss per common share assumes the exercise of stock options and warrants using
the treasury stock method, if dilutive.
Recently
Enacted Accounting Standards
In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.
4
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Notes
Condensed to Unaudited Financial Statements
For the
Six Month Periods Ended December 31, 2009 and 2008
D. 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.
E. Stockholder’s
Equity
In May
2008, the Company issued common stock for services to its employees and certain
contractors. There were a total of 400,000 common shares issued at
$0.03 per share or a total value of $12,000.
In
September 2008, the Company issued 110,000 shares of common stock at a rate of
$0.30 per share for services related to establishing a trading market for our
common stock for a total value of $33,000.
On
November 24, 2008, the Board of Directors authorized the conversion of notes
payable in the amount of $58,585 to Mr. Mitchell and $84,000 to Mr. Higgins into
PuraMed common stock at a rate of $0.15 per share. This results in an issuance
of 390,567 and 560,000 common stock shares, respectively.
On the
same day, the Board of Directors authorized the conversion of accrued wages in
the amount of $64,000 each to Messrs. Mitchell and Higgins at a rate of $0.15
per share. This resulted in an issuance of 426,667 shares (each) of common
stock.
On
February 25, 2009, the Board of Directors authorized the sale of 2,000,000
shares of restricted common stock to a 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 common stock at a rate of $0.06 per
share. This resulted in an issuance of 68,334 shares of common
stock.
On March
20, 2009, the Board of Directors authorized the sale of 1,000,000 shares of
restricted common stock to a private individual at a price of $0.06 per
share.
5
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Notes
Condensed to Unaudited Financial Statements
For the
Six Month Periods Ended December 31, 2009 and 2008
E. Stockholder’s
Equity (Continued)
On May
21, 2009, the Company issued 600,000 shares of common stock valued at $0.10 per
share (total value of $60,000) to be divided equally among its board of
directors in consideration for their serving on the Board of
Directors.
From July
2009 to November 2009 the Company issued 120,000 shares of restricted common
stock to three persons for the promotion of the Company to independent
investors. These shares were valued at $0.25 per share for a total
value of $30,000.
On
September 11, 2009, the Company issued 30,000 shares of restricted common stock
for partial payment of services related to the creation of the Company’s direct
response television commercial. These shares were valued at $0.25 per
share for a total value of $7,500.
During
the three months from July 2009 through September 2009, the Company sold 518,000
shares of restricted common stock to seven private individual investors at a
rate of $0.25 per share.
During
the three months from October 2009 through December 2009, the Company sold
566,000 shares of restricted common stock to eighteen private individual
investors at a rate of $0.25 per share.
On
October 29, 2009, the Company issued 400,000 shares of restricted common stock
that was divided between Russell Mitchell and James Higgins for recognition of
past extensive work and accomplishments on behalf of the
company. These shares were valued at $0.25 per shares for a total
value of $100,000.
On
October 29, 2009, the Company issued 50,000 shares of restricted common stock to
an attorney for legal services rendered to the company. These shares
were valued at $0.25 per shares for a total value of $12,500.
On
November 13, 2009, the Company issued a convertible bond payable for
$500,000. The bond has an interest rate of 8% due 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 (see
valuation below) 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%.
6
PURAMED
BIOSCIENCE, INC.
(A
Development Stage Company)
Notes
Condensed to Unaudited Financial Statements
For the
Six Month Periods Ended December 31, 2009 and 2008
E. Stockholder’s
Equity (Continued)
The value
of the beneficial conversion feature is calculated as follows:
Allocation
of Proceeds:
|
||||
Total
Proceeds received from the Convertible Debt Instrument
|
$ | 500,000 | ||
Value
of these proceeds assigned to the warrants
|
$ | (104,999 | ) | |
Proceeds assigned to the convertible debt | 395,001 | |||
Effective
Conversion Price of the Convertible Debt
|
||||
Value
of Proceeds assigned to the Convertible Debt
|
$ | 395,001 | ||
Shares
that the Convertible Debt can be converted into
|
$ | 500,000 | ||
Effective
Conversion Price per Share
|
$ | 0.79 | ||
Beneficial
Conversion Feature Valuation
|
||||
Fair
Value per Share on Date of Agreement - 11/13/09
|
$ | 1.40 | ||
Less:
Effective Conversion Price per Share
|
(0.79 | ) | ||
Beneficial
Conversion Feature per Share
|
$ | 0.61 | ||
Shares
that the Convertible Debt can be converted into
|
500,000 | |||
Beneficial
Conversion Feature
|
$ | 305,000 | ||
Discount
on Convertible Debt Instrument
|
||||
Value
assigned to Warrants
|
$ | 104,999 | ||
Value
of Beneficial Conversion Feature
|
305,000 | |||
Total
Discount on Convertible Debt Instrument
|
409,999 | |||
Accumulated
Accretion at 12/31/09
|
(17,843 | ) | ||
Balance
of Discount on Convertible Debt Instrument at 12/31/09
|
$ | 392,156 |
F. Subsequent
Events
On
February 2, 2010 the company entered into a Private Equity Credit Agreement with
Southridge Partners II, LP, a limited partnership.
Pursuant
to this Equity Credit Agreement, Southridge Partners II shall commit to purchase
up to $7,500,000 of the Company’s common stock over the course of 24
months.
Complete
details of this agreement can be found in the Company’s 8-K filing that was
published on 2/8/2010.
The
Company has evaluated subsequent events from the balance sheet date through
February 10, 2010, and no other significant events have
occurred
7
ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following discussion should be read and considered along with our condensed
financial statements and related notes included in this 10-Q. These
financial statements were prepared in accordance with United States Generally
Accepted Accounting Principles (U.S. GAAP). This discussion and
analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. Our actual results may differ substantially from
those anticipated in these forward-looking statements as a result of various
factors including those set forth in the “Risk Factors” section of our Form 10-K
filing for fiscal year ending June 30, 2009 filed with the SEC on September 25,
2009.
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 completed all
product development and design packaging for its initial three products,
LipiGesic™ M (Migraine), LipiGesic™ PM (Insomnia), and LipiGesic™ H (Tension
Headache), and commenced commercial introduction of the LipiGesic™ M (Migraine)
product 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 recently entered the OTC healthcare products marketplace by employing
“direct to consumer” marketing via a 2-minute Direct Response television
commercial. This initial effort will be followed by broad retail
distribution through mainstream mass merchandisers, drug stores and food chains
which is scheduled to begin in the third quarter of 2010. PuraMed is currently
undergoing substantial activities directed toward its initial commercial launch
of Lipigesic™M migraine product.
8
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 positive results from its
initial research and management, which we expect will assist us in the future
development of a new generation of botanically derived anti-inflammatory and
pain management products with broad applications.
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.
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.
9
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.
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.
10
Sales and
Marketing
PuraMed
intends to launch its initial three products commercially through the following
three-phase process:
Phase One
Rollout: Direct Response. In December 2009 Puramed began
running its two-minute direct response television commercials via selected
national cable television stations. The media spend over the initial
ninety day test phase will be modest in an effort to optimize the television
campaign. The media spend is scheduled to increase substantially once the
commercial begins to perform in the marketplace.
PuraMed
will also employ website and toll-free telephone access in conjunction with its
TV direct response campaigns. A Social Media Campaign conducted on the internet
via popular internet networking sites will also be implemented to drive
customers to our eCommerce websites. PuraMed has begun Phase One Rollout during
the fourth quarter of calendar year 2009.
Phase Two
Rollout: Retail Drugstores. PuraMed expects to develop
substantial product sales and a defined customer base from its direct response
marketing phase by the third quarter of 2010. It will then begin marketing
through approximately 25,000 retail drugstores already targeted by PuraMed,
including Walgreens, Rite Aid, CVS and others. Due to PuraMed’s management
having extensive and good relationships with targeted retail outlets for PuraMed
products, PuraMed believes it has the ability to place its products on the shelf
in all its targeted retail outlets.
Phase Three
Rollout: Further Retail Outlets. A few months after beginning
the Phase Two Rollout, PuraMed will launch Phase Three which will consist of
placing PuraMed products in a further approximately 21,000 targeted retail
outlets including mass merchandisers such as Wal-Mart and Target, food store
chains such as SuperValu, Kroger and Safeway, and additional well-known regional
drugstores.
PuraMed
has selected its targeted retailers according to various material criteria,
including cost of entry, geography, demographics and consumer
preference.
After
achieving initial distribution for PuraMed products, PuraMed will initiate a
comprehensive and ongoing promotional campaign directed toward consumer groups
it has identified from its product rollouts.
Results of
Operations
Revenues
Revenues
consist of website and telephone sales of the LipiGesic M migraine
product.
Cost
of Sales
Cost of
sales consists of 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 intellectual property received during our spin-off from our
parent company in April 2007.
11
Audit
fees consist of quarterly reviews and our annual audit required for our SEC
filings.
Consulting
fees include fees paid to consultants and brokers for services related to being
a public company.
Marketing
and advertising expense include payments for public relations, stock promotion
and advertising consistent with the commercialization of products.
Research
and development expenses consist primarily of product and packaging development
and marketing strategy costs.
Salaries
include payments to our office manager and corporate controller as of January 1,
2008.
Officers’
salaries include payroll to our Chief Executive Officer and our Chief Financial
Officer.
Comparison of Operations for
Three Months Ended December 31, 2009 and 2008
Revenue
Revenue
for the three months ended December 31, 2009 were $2,567 compared to $0 for the
three months ended December 31, 2008. Revenue of consists of web and
telephone sales of LipiGesic M migraine product.
Cost
of Sales
Cost of
sales for the three months ended December 31, 2009 were $289, compared to $0 for
the three months ended December 31, 2008. Cost of sales consists of
material, packaging and freight costs for the units of LipiGesic M migraine
product sold.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended December 31, 2009
were $53,647 compared to $14,146 for the three months ended December 31,
2008. Increased selling, general and administrative expenses for the
2009 period compared to 2008 were due primarily to postage, convention and
supplies paid for the preparation for the commercial rollout of our LipiGesic M
migraine product.
Amortization
and Depreciation
Amortization
and depreciation expenses for the three months ended December 31, 2009 and 2008
were similar at $12,207 compared to $12,103.
Audit
Fees
Audit
fees for the three months ended December 31, 2009 were similar at $2,500
compared to $862 for the three months ended December 31, 2008.
Consulting
Fees
Consulting
fees for the three months ended December 31, 2009 were $20,500 compared to $242
for the three months ended December 31, 2008 which increase was due to our
initial commercial product launch in 2009.
12
Marketing
and Advertising Expense
Marketing
and advertising expense for the three months ended December 31, 2009 were
$78,289 compared to $0 for the three months ended December 31, 2008, which was
due to our initial commercial product launch in 2009.
Research
and Development Expenses
Research
and development expenses for the three months ended December 31, 2009 were
$28,157 compared to $0 for the three months ended December 31,
2008. Increased research and development expenses were due to
increased product development activity in 2009.
Salaries
Salaries
for the three months ended December 31, 2009 were $12,505 compared to $10,092
for the three months ended December 31, 2008, which is attributed to the
fluctuation of hours worked by administrative personal in the previous
period.
Officers’
Salaries
Officer
salaries for the three months ended December 31, 2009 and 2008 were the same
being $48,000 for each period.
Net
Losses
Net
losses for the three months ended December 31, 2009 were $274,605 compared to
$83,520 for the three months ended December 31, 2008. These increased
losses in 2009 were due to increased operational expenses related to the
commercial rollout of our LipiGesic M migraine product.
Comparison of Operations for
Six Months Ended December 31, 2009 and 2008
Revenue
Revenue
for the six months ended December 31, 2009 were $2,567 compared to $0 for the
six months ended December 31, 2008. Revenue consists of web and
telephone sales of LipiGesic M migraine product.
Cost
of Sales
Cost of
sales for the six months ended December 31, 2009 were $289, compared to $0 for
the six months ended December 31, 2008. Cost of sales consists of
material, packaging and freight costs for the units of LipiGesic M migraine
product sold.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the six months ended December 31, 2009
were $76,938 compared to $29,505 for the six months ended December 31,
2008. Increased selling, general and administrative expenses for the
2009 period compared to 2008 were due primarily to postage, convention and
supplies paid for the preparation for the commercial rollout of our LipiGesic M
migraine product.
Amortization
and Depreciation
Amortization
and depreciation expenses for the six months ended December 31, 2009 and 2008
were similar at $24,355 compared to $24,206.
13
Audit
Fees
Audit
fees for the six months ended December 31, 2009 were $20,218 compared to $16,498
for the six months ended December 31, 2008, which increase was due to the
expanded activities in 2009.
Consulting
Fees
Consulting
fees for the six months ended December 31, 2009 were $20,500 compared to $39,525
for the six months ended December 31, 2008 which decrease was due to the Company
terminating its consulting agreements with its two officers and reclassifying
their monthly salaries.
Marketing
and Advertising Expense
Marketing
and advertising expense for the six months ended December 31, 2009 were $169,539
compared to $0 for the six months ended December 31, 2008, which was due to our
initial commercial product launch in 2009.
Research
and Development Expenses
Research
and development expenses for the six months ended December 31, 2009 were $38,003
compared to $172 for the six months ended December 31,
2008. Increased research and development expenses were due to
increased product development activity in 2009.
Salaries
Salaries
for the six months ended December 31, 2009 were $20,003 compared to $27,831 for
the six months ended December 31, 2008, 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, 2009 and 2008 were the same being
$96,000 for each period.
Net
Losses
Net
losses for the six months ended December 31, 2009 were $484,356 compared to
$232,851 for the six months ended December 31, 2008. These increased
losses in 2009 were due to increased operational expenses related to the
commercial rollout of our LipiGesic M migraine product.
Financial Condition,
Liquidity and Capital Resources
As of
December 31, 2009, the Company had cash of $387,026 and working capital of
$390,299.
In the
near term, we intend to raise the funds needed to implement our plan of
operation through both private sales of debt and equity securities and revenue
from the sales of our products. There is no assurance, however, that we will be
successful in raising or generating the necessary capital to implement our
business plan, either through debt or equity sources or product
sales.
PuraMed’s
current business strategy is to promote our LipiGesic™ M (migraine) product via
our direct response marketing campaigns to as many consumers in the U.S. market
as possible. Once a significant level of branding has been achieved
the company will commence their commercial retail introduction by third quarter
of calendar year 2010. PuraMed’s primary goal is to achieve continual
material growth of Lipigesic™ product sales through mainstream food, drug, and
mass merchandiser 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:
14
Commercialize PuraMed
Products – PuraMed’s primary focus for the first and second quarters of
calendar year 2010 will be to continue to test and run our direct response
television commercial via nationally available cable television stations
featuring our migraine product marketed under our LipiGesic™M brand name. In
addition our eCommerce website www.lipigesic.com
will continue to be promoted via the Direct Response TV commercial and an
internet based Social Media Marketing program designed to attract potential
customers to our website to purchase our products. PuraMed has obtained all
vendors, suppliers and subcontract third parties needed for its planned
production, packaging and raw material, and will continue to identify and obtain
alternate sources for PuraMed product inventories.
Expansion of Sales and Marketing
Activities – PuraMed will continue to expand upon its marketing
activities which have been focused toward employing “direct to consumer” media
advertising for its planned product sales, as well as promoting and building
Lipigesic™ brand awareness. Marketing activities designed to promote
our nationwide retail launch will also be conducted including retailer specific
advertising and in store promotional programs. PuraMed will continue to
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
$2.5 million over the next twelve to eighteen months regardless of any
amounts of revenues we generate from product sales during this
period:
Sales
and marketing expenses
|
$
|
1,280,000
|
||
Purchase
of product inventory, packaging and raw materials
|
600,000
|
|||
Research
and development activities
|
175,000
|
|||
General
and administrative expenses including rent, fixed overhead and management
compensation
|
445,000
|
|||
$
|
2,500,000
|
Critical Accounting
Policies
The
discussion in this Plan of Operation 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.
15
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.
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, 2009.
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.
16
PART
II. OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
During
October through December 31, 2009, the Company, through private transactions,
offered and sold 566,000 shares of common stock to eighteen individual investors
for a total of $141,500 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. The proceeds from the sales of this
stock were used to increase working capital for on-going commercial
operations.
ITEM 5. OTHER
INFORMATION
None
ITEM 6. EXHIBITS
See
Exhibit Index below
17
Exhibit
Index
Quarterly
report on Form 10-Q
For the
quarter ended December 31, 2009
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
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. | |||
February
9, 2010
|
By:
|
/s/ Russell W. Mitchell | |
Russell W. Mitchell, | |||
Chief Executive Officer | |||
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.
February
9, 2010
|
By:
|
/s/ Russell W. Mitchell | |
Russell W. Mitchell,
Director (principal executive officer)
|
|||
February
9, 2010
|
By:
|
/s/ James W. Higgins | |
James W. Higgins,
Director (principal financial officer)
|
|||
19