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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 SEPTEMBER 30, 2008
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 [ü] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ü]
Indicate by checkmark whether registrant is a shell company. [ ]
There were 6,125,345 shares of Common Stock outstanding as of November 1, 2008.
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TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS
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PURAMED BIOSCIENCE, INC.
(A Development Stage Company)
Condensed Balance Sheets
| September 30, | June 30, | |||||
| 2008 | 2008 | |||||
| (Unaudited) | (Audited) | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 3,330 | $ | 1,278 | ||
| Prepaid Expenses | 4,999 | 5,099 | ||||
| Total Current Assets | 8,329 | 6,377 | ||||
| Property and Equipment | ||||||
| Computer Software | 1,218 | 1,217 | ||||
| Accumulated Depreciation - Computer Software | (597) | (495) | ||||
| Net Property and Equipment | 621 | 722 | ||||
| Other Assets | ||||||
| PuraMed Bioscience Products, net of accumulated | ||||||
| amortization of $70,396 and $58,394, respectively | 265,636 | 277,637 | ||||
| Trademarks | 6,683 | 5,401 | ||||
| Patent | 13,608 | 3,374 | ||||
| Total Other Assets | 285,927 | 286,412 | ||||
| Total Assets | $ | 294,877 | $ | 293,511 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts Payable | $ | 26,666 | $ | 4,165 | ||
| Accounts Payable - Related party | - | 233 | ||||
| Accrued Wages - Officers' | 104,212 | 52,540 | ||||
| Accrued Expenses | 10,722 | 10,965 | ||||
| Notes Payable - Officers' | 121,085 | 77,085 | ||||
| Total Current Liabilities | 262,685 | 144,988 | ||||
| Total Liabilities | 262,685 | 144,988 | ||||
| Stockholders' Equity | ||||||
| Undesignated shares, 5,000,000 shares authorized, none issued | - | - | ||||
| Common Stock, $.001 par value, 45,000,000 shares | ||||||
| authorized, 6,125,345 shares and 6,015,345 shares issued | ||||||
| and outstanding, respectively | 6,125 | 6,015 | ||||
| Additional paid in capital | 745,768 | 712,878 | ||||
| Deficit accumulated during the development stage | (719,701) | (570,370) | ||||
| Total Stockholders' Equity | 32,192 | 148,523 | ||||
| Total Liabilities & Stockholders' Equity | $ | 294,877 | $ | 293,511 | ||
| See notes to unaudited condensed financial statements. | ||||||
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PURAMED BIOSCIENCE, INC.
(A Development Stage Company)
Unaudited Condensed Statements of Operations
| Period from May 9, | |||||||||
| Three months ended September 30, | 2006 (inception) to | ||||||||
| 2008 | 2007 | September 30, 2008 | |||||||
| Revenues | |||||||||
| Total Revenues | $ | - | $ | - | $ | - | |||
| Cost of Sales | - | - | - | ||||||
| Total Cost of Sales | - | - | - | ||||||
| Gross Profit | - | - | - | ||||||
| Operating Expenses | |||||||||
| Selling, general and administrative expenses | 15,117 | 12,228 | 111,861 | ||||||
| Amortization and depreciation expense | 12,103 | 12,103 | 70,993 | ||||||
| Audit fees | 15,636 | - | 15,636 | ||||||
| Consulting fees | 39,525 | 70,808 | 292,172 | ||||||
| Research and development | 172 | 10,049 | 65,150 | ||||||
| Salaries | 17,739 | - | 65,829 | ||||||
| Officers' salaries | 48,000 | - | 96,000 | ||||||
| Total Operating Expenses | 148,292 | 105,188 | 717,641 | ||||||
| Loss from Operations | (148,292) | (105,188) | (717,641) | ||||||
| Other Expense | |||||||||
| Interest expense | 1,039 | - | 2,060 | ||||||
| Total Other Expense | (1,039) | - | (2,060) | ||||||
| Net Loss | $ | (149,331) | $ | (105,188) | $ | (719,701) | |||
| Loss per Common Share - Basic and Diluted | $ | (0.02) | $ | (0.02) | |||||
| Average number of common shares | |||||||||
| outstanding basic and diluted | 6,033,280 | 5,028,689 | |||||||
| See notes to unaudited condensed financial statements. | |||||||||
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PURAMED BIOSCIENCE, INC.
(A Development Stage Company)
Unaudited Condensed Statements of Cash Flows
| Period from May 9, | |||||||||
| Three months ended September 30, | 2006 (inception) to | ||||||||
| 2008 | 2007 | September 30, 2008 | |||||||
| Cash Flows from operating activities | |||||||||
| Net Loss | $ | (149,331) | $ | (105,188) | $ | (719,701) | |||
| Changes on non cash working capital items: | |||||||||
| Stock issued for services | 33,000 | - | 75,000 | ||||||
| Non cash consulting expense | - | - | 92,000 | ||||||
| Depreciation | 102 | 102 | 597 | ||||||
| Amortization | 12,001 | 12,001 | 70,395 | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Prepaid Expenses | 100 | 1,632 | (4,999) | ||||||
| Accounts Payable - Related party | (233) | 29,829 | - | ||||||
| Accounts Payable | 22,500 | 698 | 26,665 | ||||||
| Accrued Wages - Officers | 51,672 | - | 104,212 | ||||||
| Accrued Expenses | (243) | 972 | 10,722 | ||||||
| Net cash used for operating activities | (30,432) | (59,954) | (345,109) | ||||||
| Cash Flows from investing activities | |||||||||
| Patent acquisition costs | (10,234) | (3,374) | (13,608) | ||||||
| Purchase of property and equipment | - | - | (1,217) | ||||||
| Trademark acquisition costs | (1,282) | - | (6,683) | ||||||
| Net cash used for investing activities | (11,516) | (3,374) | (21,508) | ||||||
| Cash Flows from financing activities | |||||||||
| Loans from officers | 44,000 | - | 121,085 | ||||||
| Proceeds from spin off | - | - | 174,393 | ||||||
| Proceeds from equity investee | - | - | 74,469 | ||||||
| Net cash provided by financing activities | 44,000 | - | 369,947 | ||||||
| Net (decrease) increase in cash | 2,052 | (63,328) | 3,330 | ||||||
| Cash at Beginning of Period | 1,278 | 97,173 | - | ||||||
| Cash at End of Period | $ | 3,330 | $ | 33,845 | $ | 3,330 | |||
| 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 | |||
| Interest paid | $ | - | $ | - | $ | 135 | |||
| See notes to unaudited condensed financial statements. | |||||||||
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PURAMED BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Condensed Unaudited Financial Statements
A. Basis of Presentation
The condensed balance sheet as of September 30, 2008, the condensed statements of operations for the three month periods ended September 30, 2008 and 2007 and the condensed statements of cash flows for the three month periods ended September 30, 2008 and 2007 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, results of operations and cash flows as of September 30, 2008 and for the three month period ended September 30, 2008 and 2007 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, 2008 included in the Annual Report on Form 10-K of the Company filed with the SEC on September 5, 2008.
B. Going Concern
At September 30, 2008, the Company had negative working capital of $254,356 and thus has none of the funds needed to accomplish its planned business strategy or support its projected expenses. The Company plans to obtain the needed working capital primarily through sales of 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.
D. Related Party Transactions
In April 2007, the Company entered into consulting agreements with Messrs. Mitchell and Higgins. Under the terms of the agreements, the Company pays Messrs. Mitchell and Higgins each $8,000 monthly for a period of twelve months. Either party may terminate the agreements for any reason at any time. As of December 31, 2007 the agreements were terminated and on March 10, 2008, the officers agreed to forgive the amounts owed to them which totaled $92,000. This $92,000 in consulting services was treated as additional paid-in capital contributed by the officers. In addition, for the first quarter of 2008, the officers have elected not to receive a salary.
From November 2007 through September 2008, Russell Mitchell, a principal stockholder, loaned the Company a total of $50,085 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand.
From January 2008 through September 2008, James Higgins, a principal stockholder, loaned the Company a total of $71,000 for working capital purposes, for which he received a promissory note bearing an interest rate of 4% and is payable on demand.
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PURAMED BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Condensed Unaudited Financial Statements
D. Related Party Transactions (Continued)
Prior to calendar year 2008, the Company reimbursed Accelerated Drug Delivery, LLC (ADD), a company owned by Messrs. Mitchell and Higgins, monthly for salaries incurred by ADD, LLC's office manager and controller. As of January 1, 2008, all payroll salaries are paid by PuraMed rather than outsourcing through ADD.
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 valued at $12,000.
In September 2008, the Company issued 110,000 shares of common stock for services related to establishing a trading market for our common stock.
F. Subsequent Events
During October 2008, officers loaned the Company an additional $7,000, which is payable on demand.
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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, 2008 filed with the SEC on September 5, 2008.
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 stockholders 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.
The actual distribution date for PuraMed stock from this spin-off could not occur until after our Form 10-SB Registration Statement of PuraMed became effective with the Securities and Exchange Commission (SEC). Our Form 10-SB registration is now effective and on February 22, 2008, the company started the distribution process of common stock related to the spin-off.
Detailed information regarding this spin-off of PuraMed from Wind Energy America, Inc. (formerly Dotronix, Inc.) is contained in a Form 8-K and exhibit thereto which were filed with the SEC April 10, 2007, and can be readily accessed at the SEC website www.sec.gov.
Overview of Business
The Company is engaged in the business of developing and marketing a line of non-prescription medicinal or healthcare products to be marketed through various retail channels under the LipiGesic™ brand and trademark. In an effort to add continuity to all of the PuraMed Bioscience™ products the Company trademarked the brand name LipiGesic™. The Company has recently completed all product development and design packaging for its initial two products, LipiGesic™ M (Migraine) and LipiGesic™ PM (Sleep), and expects to begin their commercial introduction to the marketplace by the first quarter of calendar year 2009.
Product development and design packaging of all PuraMed products have been conducted entirely by the Company’s two principal officers, Russell Mitchell and James Higgins. Messrs. Mitchell and Higgins have extensive and lengthy experience in new product development and marketing of non-prescription medical products and nutritional supplements and the many varied promotional activities involved in their marketing rollouts. For example, Mitchell Health Technologies served as the master broker for the launch of Quigley Corp’s “Cold-Eeze” treatment for common colds, which within 18 months exceeded $70 million in annual wholesale revenues. The Company considers the long and successful professional involvement of its management team in our industry to be a valuable asset to draw upon to achieve the future growth and profitability anticipated by the Company.
The Company intends to enter the OTC healthcare products marketplace by employing “direct to consumer” marketing via print and television commercials followed by broad retail distribution through mainstream mass merchandisers, drug stores and food chains. PuraMed is currently undergoing substantial activities directed toward its initial commercial launch of LipiGesic™ brand products.
The Company also intends to continue to develop and grow its intellectual property portfolio which is expected to substantially enhance stockholder value. Our scientific team has gained significant and exciting evidence from its initial research and management expects to develop a new generation of botanically derived anti-inflammatory and pain management products with broad applications.
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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.
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.
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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.
Sales and Marketing
PuraMed intends to launch its initial two products commercially through the following three-phase process:
Phase One Rollout: Direct Response. A series of print advertisements will be published nationally in secondary market newspapers, which initial ads will allow PuraMed to test and refine our advertising message. After refining this initial advertising and identifying primary customer bases, PuraMed will create and have broadcasted television infomercials as well as standard TV commercials. PuraMed will also employ website and toll-free telephone access in conjunction with its print and TV direct response campaigns. PuraMed anticipates beginning its Phase One Rollout during the first 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 summer of 2009. It will then begin marketing through approximately 18,000 retail drugstores already targeted by PuraMed, including Walgreens, Rite Aid, CVS and others. Due to PuraMed’s management having extensive and good relationships with targeted retail outlets for PuraMed products, PuraMed believes it has the ability to place its products on the shelf in all its targeted retail outlets.
Phase Three Rollout: Further Retail Outlets. A few months after beginning the Phase Two Rollout, PuraMed will launch Phase Three which will consist of placing PuraMed products in a further approximately 21,000 targeted retail outlets including mass merchandisers such as Wal-Mart and Target, food store chains such as SuperValu, Kroger and Safeway, and additional well-known regional drugstores.
PuraMed has selected its targeted retailers according to various material criteria, including cost of entry, geography, demographics and consumer preference.
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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
Since our 2006 inception, we have generated no revenues.
Operating Expenses
From our inception in May 2006, through September 30, 2008, we have incurred total operating expenses of $717,641 including $111,861 of selling, general and administrative expenses, $70,993 of amortization and depreciation expenses, $15,636 of audit fees, $292,172 of consulting expenses, $65,150 of research and development expenses, $65,829 of salaries and $96,000 of officers’ salaries.
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 amortization of our intellectual property received during our spin-off from our parent company in April 2007.
Audit fees consist of three quarterly reviews and our annual audit required for our SEC filings.
Consulting fees include salaries paid to our management and salaries outsourced for accounting and administrative personnel prior to January 1, 2008, and payments for services related to being a public company.
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 as of January 1, 2008.
Comparison of Operations for Three Months Ended September 30, 2008 and 2007
Revenue
There were no revenues for the three months ended September 30, 2008 and 2007.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended September 30, 2008 were $15,117 compared to $12,228 for the three months ended September 30, 2007. Increased selling, general and administrative expenses for the 2008 period compared to 2007 were due primarily to payroll tax and health insurance benefits paid since the company starting funding the payroll function as of January 1, 2008.
Amortization and Depreciation
Amortization and depreciation expenses for the three months ended September 30, 2008 and 2007 were the same at $12,103 for each quarterly period. No additional intellectual property has been acquired; therefore, there has been no change in our monthly amortization expense.
Audit Fees
Audit fees for the three months ended September 30, 2008 were $15,636 compared to $0 for the three months ended September 30, 2007. The increase in this expense is due to operating and incurring audit expenses as a separate entity since the spin-off from our parent company in April 2007.
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Consulting Fees
Consulting fees for the three months ended September 30, 2008 were $39,525 compared to $70,808 for the three months ended September 30, 2007 which decrease was due to the Company terminating its consulting agreements with its two officers and reclassifying their monthly salaries.
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2008 were $172 compared to $10,049 for the three months ended September 30, 2007. Decreased research and development expenses were due to limited cash flow.
Salaries
Salaries for the three months ended September 30, 2008 were $17,739 compared to $0 for the three months ended September 30, 2007. Increased salaries are due to the Company funding the payroll function as of January 1, 2008, rather than outsourcing through a third party.
Officers’ Salaries
Officer salaries for the three months ended September 30, 2008 were $48,000 compared to $0 for the three months ended September 30, 2007. Increased officer salaries are due to the Company terminating its consulting agreements with its two officers and commencing monthly salaries to each of them as of April 1, 2008.
Net Losses
Net losses for the three months ended September 30, 2008 were $149,331 compared to $105,188 for the three months ended September 30, 2007. These increased losses were due primarily to operating and incurring audit expenses as a separate entity since the spin-off from our parent company in April 2007 and increased consulting expenses.
Financial Condition, Liquidity and Capital Resources
As of September 30, 2008, the Company had limited cash of $3,330 and a working capital deficit of $254,356 of which $225,297 is attributed to accrued executive salaries and executive note payables. During January 2008 through September 30, 2008, Mr. Mitchell loaned the Company $50,085 and Mr. Higgins loaned the Company $71,000 to cover monthly overhead costs. Both loan amounts are to be paid back on demand. Mr. Mitchell and Mr. Higgins will continue to loan the Company funds as needed until we obtain anticipated capital from sales of our equity and debt securities.
We intend to raise the funds needed to implement our plan of operation through both private sales of debt and equity securities. There is no assurance, however, that we will be successful in raising the necessary capital to implement our business plan, either through debt or equity sources.
PuraMed’s current business strategy is to complete development and promotion of its initial non-prescription consumer healthcare products in order to commence their commercial retail introduction by 3rd quarter of fiscal year 2009. 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:
Commercialize PuraMed Products – PuraMed’s primary focus for the remainder of calendar year 2008 will be to work with established, responsible outsourced production, packaging and fulfillment suppliers and reliable marketing channels in order to produce and market initial PuraMed products on a commercial scale. 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 obtaining a nationwide network of retail outlets and employing “direct to consumer” media advertising for its planned product sales, as well as promoting and building LipiGesic™ brand awareness. PuraMed will participate in industry trade shows and similar events, and also will engage in substantial media advertising and direct sales media campaigns to attract and secure consumers for PuraMed products.
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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.
PuraMed anticipates spending approximately $2.5 million over the next twelve months regardless of any amounts of revenues it generates from product sales during this period:
| Sales and marketing expenses | $ | 1,280,000 | |
| Purchase of 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.
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 September 30, 2008.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
This item is not applicable to PuraMed Bioscience™, Inc.
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Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures.
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in internal controls.
There were no changes in the Company’s internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 5. Other Information
None
Item 6. Exhibits
Exhibit Index
Quarterly report on Form 10-Q
For the quarter ended September 30, 2008
| 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: | November 14, 2008 | By: | /s/ Russell W. Mitchell | |
| Russell W. Mitchell, CEO |
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: | Signature: | ||
| November 14, 2008 | By: | /s/ Russell W. Mitchell | |
| Russell W. Mitchell, Director | |||
| (principal executive officer) | |||
| November 14, 2008 | By: | /s/ James W. Higgins | |
| James W. Higgins, Director | |||
| (principal financial officer) |
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