PURE BIOSCIENCE, INC. (Form: 10-Q, Received: 03/13/2014 16:08:09)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Commission File Number 001-14468

Pure Bioscience, Inc.

(Exact name of registrant as specified in its charter)


Delaware		33-0530289
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1725 Gillespie Way El Cajon, California		92020
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (619) 596-8600

Indicate by check mark whether the registrant: (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 x No ¨

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 x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 07, 2014, there were 27,158,128 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

Pure Bioscience, Inc.

Form 10-Q

for the Quarterly Period Ended January 31, 2014

Table of Contents


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24
Item 4.	Controls and Procedures		24

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3.	Defaults Upon Senior Securities		38
Item 4.	Mine Safety Disclosures		38
Item 5.	Other Information		38
Item 6.	Exhibits		39
	Signatures		40

Item 1. Financial Statements

Pure Bioscience, Inc.

Condensed Consolidated Balance Sheets


	January 31,			July 31,
	2014			2013
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	236,000		$	32,000
Accounts receivable, net		9,000			18,000
Inventories, net		429,000			365,000
Prepaid expenses		221,000			71,000

Total current assets		895,000			486,000
Property, plant and equipment, net		115,000			146,000
Patents, net		1,403,000			1,430,000

Total assets	$	2,413,000		$	2,062,000

Liabilities and stockholders’ equity (deficit)
Current liabilities
Accounts payable	$	629,000		$	1,134,000
Restructuring liability		676,000			—
Note payable, current		—			368,000
Accrued liabilities		154,000			600,000
Derivative liability		54,000			51,000

Total current liabilities		1,513,000			2,153,000
Note payable, less current portion		—			887,000
Deferred rent		10,000			13,000

Total liabilities		1,523,000			3,053,000

Commitments and contingencies
Stockholders’ equity (deficit)
Preferred stock, $0.01 par value:
5,000,000 shares authorized, no shares issued		—			—
Common stock, $0.01 par value:
100,000,000 shares authorized, 25,808,128 shares issued and outstanding at January 31, 2014, and 12,569,503 shares issued and outstanding at July 31, 2013		259,000			126,000
Additional paid-in capital		77,128,000			69,054,000
Accumulated deficit		(76,497,000	)		(70,171,000	)

Total stockholders’ equity (deficit)		890,000			(991,000	)

Total liabilities and stockholders’ equity (deficit)	$	2,413,000		$	2,062,000

See accompanying notes.

Pure Bioscience, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Six months ended						Three months ended
	January 31,						January 31,
	2014			2013			2014			2013
Net product sales	$	156,000		$	373,000		$	41,000		$	263,000
Operating costs and expenses
Cost of goods sold		56,000			88,000			20,000			57,000
Selling, general and administrative		2,168,000			2,763,000			1,243,000			1,427,000
Research and development		502,000			694,000			289,000			347,000
Share-based compensation		1,421,000			430,000			1,332,000			242,000
Other share-based expenses		308,000			—			308,000			—
Restructuring costs		2,754,000			—			70,000			—

Total operating costs and expenses		7,209,000			3,975,000			3,262,000			2,073,000

Loss from operations		(7,053,000	)		(3,602,000	)		(3,221,000	)		(1,810,000	)
Other income (expense)
Change in derivative liability		(59,000	)		240,000			(1,000	)		12,000
Interest expense, net		(5,000	)		(589,000	)		(2,000	)		(1,000	)
Gain on extinguishment of debt		727,000			—			727,000			—
Other income (expense), net		64,000			(27,000	)		15,000			(25,000	)

Total other income (expense)		727,000			(376,000	)		739,000			(14,000	)

Net loss	$	(6,326,000	)	$	(3,978,000	)	$	(2,482,000	)	$	(1,824,000	)

Basic and diluted net loss per share	$	(0.28	)	$	(0.40	)	$	(0.10	)	$	(0.17	)

Shares used in computing basic and diluted net loss per share		22,842,753			9,853,575			24,997,773			10,986,170

See accompanying notes.

Pure Bioscience, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six months ended
	January 31,
	2014			2013
Operating activities
Net loss	$	(6,326,000	)	$	(3,978,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		1,421,000			430,000
Stock issued under severance agreements		825,000			—
Stock issued to investors to amend subscription agreements		285,000			—
Fair value of penalty warrants issued		23,000			—
Gain on extinguishment of debt		(727,000	)		—
Amortization of stock issued for services		636,000			24,000
Troubled debt restructuring loss		—			25,000
Depreciation and amortization		140,000			158,000
Amortization of deferred financing costs		—			215,000
Change in fair value of derivative liability		59,000			(240,000	)
Amortization of debt discount		—			371,000
Changes in operating assets and liabilities:
Accounts receivable		9,000			5,000
Inventories		(64,000	)		25,000
Prepaid expenses		(16,000	)		23,000
Accounts payable and accrued liabilities		(275,000	)		234,000
Deferred rent		(3,000	)		(1,000	)

Net cash used in operating activities		(4,013,000	)		(2,709,000	)

Investing activities
Investment in patents		(61,000	)		(131,000	)
Purchases of property, plant and equipment		(21,000	)		(11,000	)

Net cash used in investing activities		(82,000	)		(142,000	)

Financing activities
Net proceeds from the sale of common stock		4,664,000			4,227,000
Net proceeds from the exercise of warrants		163,000			—
Payment of Bridge Loan		—			(1,333,000	)
Payment on note payable		(528,000	)		—

Net cash provided by financing activities		4,299,000			2,894,000

Net increase in cash and cash equivalents		204,000			43,000
Cash and cash equivalents at beginning of period		32,000			877,000

Cash and cash equivalents at end of period	$	236,000		$	920,000

Supplemental disclosure of cash flow information
Cash paid for taxes	$	4,000		$	—
Supplemental disclosure of non-cash investing and financing activities
Common stock issued for prepaid services	$	175,000		$	—
Common stock issued in connection with financing	$	283,000		$	—
Settlement of warrant liability	$	56,000		$	—
During the six months ended January 31, 2013, we recorded a reduction of approximately $1,519,000 in accounts payable in exchange for a note payable of $1,125,000, accrued interest of $174,000, and warrants valued at $245,000, with a resulting $25,000 restructuring loss.

See accompanying notes.

Pure Bioscience, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of Pure Bioscience, Inc. and its wholly owned subsidiary, ETIH2O Corporation, a Nevada corporation. ETIH2O Corporation currently has no business operations and no material assets or liabilities and there have been no significant transactions related to ETIH2O Corporation during the periods presented in the consolidated financial statements. All inter-company balances and transactions have been eliminated. All references to “PURE,” “we,” “our,” “us” and the “Company” refer to Pure Bioscience, Inc. and our wholly owned subsidiary.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information pursuant to the instructions to Form 10-Q and Article 10/Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended January 31, 2014 are not necessarily indicative of the results that may be expected for other quarters or the year ending July 31, 2014. The July 31, 2013 balance sheet was derived from audited financial statements but does not include all disclosures required by GAAP and included in our Annual Report on Form 10-K. For more complete information, these unaudited financial statements and the notes thereto should be read in conjunction with the audited financial statements for the year ended July 31, 2013 included in our Annual Report on Form 10-K covering such period filed with the Securities and Exchange Commission, or SEC, on October 24, 2013.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Recent Corporate Developments

New Board of Directors and Management Team

On August 13, 2013, the following managerial and corporate governance changes occurred to create a new Board of Directors, or Board, and management team:

•

Michael L. Krall, Donna Singer, and Dennis Brovarone resigned as members of the Board;

•

Michael L. Krall, Donna Singer, and Dennis Atchley resigned all positions respectively held by them as officers of the Company;

•

Dave Pfanzelter was appointed by the Board to be the Chairman of the Board;

•

Dave Pfanzelter was appointed by the Board to serve as Interim Chief Executive Officer;

•

Gary D. Cohee was appointed by the Board to serve as a member of the Board; and

•

Peter C. Wulff was appointed by the Board to serve as Chief Financial Officer, Chief Operating Officer, and Corporate Secretary.

As previously disclosed on our Form 8-K filed on July 25, 2013, on July 22, 2013, Jon Carbone and Paul Maier resigned as directors of the Company and as members of the Audit and Compensation Committees.

On September 10, 2013, the Board appointed Henry R. Lambert to serve as Chief Executive Officer and a member of the Board. In connection with the hiring of Mr. Lambert to serve as our Chief Executive Officer, Dave Pfanzelter resigned his position as our Interim Chief Executive Officer. Mr. Pfanzelter will continue to render significant services to us and will continue to serve as our Chairman of the Board.

In October 2013, we appointed three additional members to the Board; Dr. David Theno, Jr., Craig Culver and William Otis. The Board now consists of six members who provide professional experience in business and finance; food science and food safety; and foodservice and food manufacturing.

On December 11, 2013, the Company entered into a five-year strategic collaboration agreement with St. Louis-based Intercon Chemical Company (ICC). The agreement consists of a multi-prong approach to accelerate the commercialization of PURE’s unique and proprietary SDC-based products. The strategic collaboration agreement provides:

•

ICC licenses from PURE its patents and technology know-how for the exclusive manufacture for PURE of all SDC-based products.

•

ICC will invest in plant improvements to allow for expanded SDC production.

•

ICC’s R&D team will collaborate on SDC product line development.

•

ICC licenses the distribution rights for SDC-based products into its core businesses of institutional cleaning and sanitation products.

•

ICC will also develop a new initiative focused on US hospital, healthcare and medical facilities.

•

PURE earns royalty income on SDC-products sold by ICC and its affiliates.

The agreement may be terminated by mutual written consent, or by either party upon the material breach of the terms of the agreement by the other party.

2. Liquidity & Going Concern Uncertainty

These unaudited condensed consolidated financial statements have been prepared and presented on a basis assuming we will continue as a going concern. The factors below raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

Since our inception, we have financed our operations primarily through public and private offerings of securities, debt financing, and revenue from product sales and license agreements. We have a history of recurring losses, and as of January 31, 2014, we have incurred a cumulative net loss of $76,497,000.

We do not have, and may never have, significant cash inflows from product sales or from other sources of revenue to fund our operations. As of January 31, 2014, we had $236,000 in cash and cash equivalents, and $1,513,000 of current liabilities, including $629,000 in accounts payable and $676,000 in restructuring liabilities. As of January 31, 2014, we have no long-term debt. We do not currently believe that our existing cash resources are sufficient to meet our anticipated needs over the next twelve months.

Until we can generate significant cash from operations, we expect to continue to fund our operations with the proceeds of offerings of our equity and debt securities. However, we cannot assure you that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business. Further, any contracts or license arrangements we enter into to raise funds may require us to relinquish our rights to our products or technology, and we cannot assure you that we will be able to enter into any such contracts or license arrangements on acceptable terms, or at all. Having insufficient funds may require us to delay or scale back our marketing, distribution and other commercialization activities or cease our operations altogether.

We do not have any unused credit facilities or other sources of capital available to us at this time. We intend to secure additional working capital through sales of additional debt or equity securities. Our intended financing initiatives are subject to risk, and we cannot provide any assurance about the availability or terms of these or any future financings.

If we are unable to obtain sufficient capital, it will have a material adverse effect on our business and operations. It could cause us to fail to execute our business plan, fail to take advantage of future opportunities, or fail to respond to competitive pressures or customer requirements. It also may require us to significantly modify our business model and operations to reduce spending to a sustainable level, which may include delaying, scaling back or eliminating some or all of our ongoing and planned investments in corporate infrastructure, research and development projects, regulatory submissions, business development initiatives, and sales and marketing activities, among other investments. If adequate funds are not available when needed, we may be required to reduce or cease operations altogether.

The financial statements do not include any adjustment relating to recoverability or classification of recorded assets and classification of recorded liabilities.

3. Net Loss Per Share

Basic net loss per common share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Our diluted net loss per common share is the same as our basic net loss per common share because we incurred a net loss during each period presented, and the potentially dilutive securities from the assumed exercise of all outstanding stock options, restricted stock units, and warrants would have an anti-dilutive effect. As of January 31, 2014 and

2013, the number of shares issuable upon the exercise of stock options, the vesting of restricted stock units, and the exercise of warrants, none of which are included in the computation of basic net loss per common share, was 7,602,488 and 1,380,059, respectively.

4. Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities and foreign currency translation adjustments. For the three and six months ended January 31, 2014 and 2013, our comprehensive loss consisted only of net loss.

5. Inventory

Inventories are stated at the lower of cost or net realizable value, and net of a valuation allowance for potential excess or obsolete material. Cost is determined using the average cost method. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold.

Inventories consist of the following:


	January 31,		July 31,
	2014		2013
Raw materials	$	100,000	$	70,000
Finished goods		329,000		295,000

	$	429,000	$	365,000

During the fiscal year ended July 31, 2013, we established an inventory reserve for $347,000. The majority of the reserve related to components such as, plastic bottles, spray triggers, miscellaneous plastics, and numerous corrugated cardboard configurations.

During the six months ended January 31, 2014, we received $20,000 from the sale of inventory which was previously reserved during the fiscal year ended July 31, 2013. The $20,000 gain is reflected in the other income (expense) section of the consolidated statement of operations.

6. Commitments and Contingencies

In connection with Mr. Krall’s separation from the Company (See Note 1), the Company entered into a Purchase, Severance, and Release Agreement effective August 13, 2013 with Mr. Krall (the “Krall Release Agreement”). The Krall Release Agreement provides for a mutual release of all claims between Mr. Krall and the Company. Mr. Krall is also prohibited from engaging in certain competitive activities until July 2017. Pursuant to the Krall Release Agreement, Mr. Krall (i) was paid $25,000 on August 13, 2013; and, (ii) is entitled to receive $30,000 per month for 18-months following August 13, 2013, during which time Mr. Krall shall provide consulting services to the Company. In consideration of Mr. Krall’s transfer to the Company of certain enumerated intellectual property rights, the Company also (i) paid Mr. Krall the sum of $125,000 on August 13, 2013; and, (ii) issued to Mr. Krall 850,000 shares of common stock on August 21, 2013 (the “Krall Shares”). The Krall Shares are subject to certain registration rights intended to register the Krall Shares. The Krall Shares are also subject to a Voting Support Agreement and Irrevocable Proxy (the “Krall Proxy”). The Krall Proxy gives our CEO the right to vote the Krall Shares for so long as Mr. Krall owns the Krall Shares. Mr. Krall will also continue to receive health insurance coverage over the term of the severance period, which will cost the Company $20,000.

In connection with Ms. Singer’s separation from the Company (See Note 1), we entered into a Purchase, Severance, and Release Agreement effective August 13, 2013 with Ms. Singer (the “Singer Release Agreement”). The Singer Release Agreement provides for a mutual release of all claims between Ms. Singer and the Company. Ms. Singer is also prohibited from engaging in certain competitive activities until August 2017. Pursuant to the Singer Release Agreement, Ms. Singer (i) was paid $45,000 on August 13, 2013; (ii) is due the amount of her continued health insurance coverage until August 2014; and, (iii) is entitled to $17,000 per month for 12-months following August 13, 2013, during which time Ms. Singer shall

provide consulting services to the Company. In consideration of Ms. Singer’s transfer to the Company of certain enumerated intellectual property rights, the Company also issued to Ms. Singer 300,000 shares of common stock on August 21, 2013 (the “Singer Shares”). The Singer Shares are subject to certain registration rights intended to register the Singer Shares. The Singer Shares are also subject to a Voting Support Agreement and Irrevocable Proxy (the “Singer Proxy”). The Singer Proxy gives our CEO the right to vote the Singer Shares for so long as Ms. Singer owns the Singer Shares. Ms. Singer will also continue to receive health insurance coverage over the term of the severance period, which will cost the Company $18,000.

In connection with Mr. Brovarone’s separation from the Company (See Note 1), we entered into a Severance and Release Agreement effective August 13, 2013 with Mr. Brovarone (the “Brovarone Release Agreement”). The Brovarone Release Agreement provides for a mutual release of all claims between Mr. Brovarone and the Company. In addition, Mr. Brovarone will receive $91,000, payable in 60 monthly installments of $1,600, commencing 120 days after the separation date for amounts previously accrued as of July 31, 2013.

On January 23, 2014, we entered into a General Release and Settlement Agreement with a former employee (“Employee Settlement”). Under the terms of the Employee Settlement, we will pay $50,000 over a six-month period with payments commencing in March 2014, and issue 15,000 shares of unregistered common stock.

During the three and six months ended January 31, 2014, the Company expensed approximately $70,000 and $1,859,000 respectively, related to the Employee Settlement and the Purchase, Severance, and Release Agreements for Mr. Krall, Ms. Singer, and Mr. Brovarone. Approximately $676,000 remains payable under the severance agreements and is included in the accrued restructuring liability section of the condensed consolidated balance sheets as of January 31, 2014.

7. Promissory Note

On January 25, 2013, we entered into a Letter Agreement (the “Agreement”) with Morrison & Foerster LLP (“Morrison”). Under the terms of the Agreement, we issued a Promissory Note (the “Note”) in favor of Morrison in the principal amount of $1,125,000. In consideration for the Note, Morrison agreed to waive $1,519,000 of amounts due and payable to Morrison for legal services rendered. The Note bore interest at the rate of 7.5% per annum, but the then outstanding balance would accrue interest at the rate of 10% per annum upon the occurrence of an event of default (as defined in the Note). Beginning March 31, 2013, and on or before the last business day of each calendar month thereafter, we are required to pay all accrued but unpaid interest on the then unpaid amount of outstanding principal. Beginning on February 28, 2014, we were required to pay equal monthly principal installments of approximately $47,000, plus interest. We could prepay the outstanding balance under the Note in full or in part at any time, which would result in a discount of the then outstanding balance as more fully described in the Note. The Note was to mature on February 28, 2016, unless accelerated pursuant to an event of default or upon the consummation of a change of control (as defined in the Note). As a result of the Agreement, we reclassified the amount due and payable to Morrison from a current liability to long-term debt, except any payments due under the Letter Agreement within twelve months from the date of the balance sheet which will continue to be classified as a current liability.

In consideration for Morrison’s acceptance of the Note in lieu of payment for its legal services, we issued Morrison a warrant to purchase 375,000 shares of our common stock at an exercise price of $0.83 per share. The warrant was exercisable immediately and expires on January 24, 2018. The warrant may be exercised by Morrison with a cash payment or, in lieu thereof, at its election, through a net exercise, as set forth in the warrant agreement. Neither the warrant nor the shares to be issued upon exercise thereof are registered for sale or resale under the Securities Act of 1933, as amended (the “Securities Act”), and have been or will be issued in reliance on an exemption from registration under the Securities Act pursuant to Section 4(a)(2) thereof based on the offering of such securities to one investor and the lack of any general solicitation or advertising in connection with such issuance. We determined that the warrants issued in connection with the Note were equity instruments and did not represent derivative instruments. The fair value of the warrants issued to Morrison was $245,000, based on the Black-Scholes valuation method assuming no dividend yield, volatility of 134%, a risk-free interest rate of 0.35%, and an expected life of 5 years.

This transaction was accounted for as a troubled debt restructuring. During the year ended July 31, 2013, we recorded $25,000 of other expense resulting from the excess of the total cash outflows under the troubled debt restructuring, plus the expense related to the fair value of the warrant issued in conjunction with the debt, over the carrying amount of the Morrison payables prior to the restructuring. In accordance with the applicable guidance, interest to be paid under the Note of approximately $174,000 was added to the carrying amount of the Note, and future payments of interest will be reflected as a reduction to the carrying amount of the debt.

During the three months ended January 31, 2014, we entered into a Promissory Note Payoff Agreement (“Payoff Agreement”) with Morrison. Under the Payoff Agreement, we paid $500,000 in cash to Morrison to extinguish $1,227,000 in unsecured debt owed to Morrison under the Note, dated January 25, 2013. We have no further obligations or liability under the Note. As a result of the Payoff Agreement, we recorded a gain of $727,000 that is reflected in the other income (expense) section of the consolidated statement of operations.

During the six months ended January, 31, 2014, prior to the Payoff Agreement, we paid $28,000 under the terms of the Note.

8. Impairment of Long-Lived Assets

In accordance with GAAP, if indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the asset to the fair value of the asset and we record the impairment as a reduction in the carrying value of the related asset and a charge to operating results. Estimating the undiscounted future cash flows associated with long-lived assets requires judgment, and assumptions could differ materially from actual results. During the six months ended January 31, 2014 and 2013, no impairment of long-lived assets was indicated or recorded.

9. Convertible Note and Derivative Liability

On June 26, 2012, and July 10, 2012 we received an aggregate of $1,200,000 in cash consideration from nine lenders in exchange for our issuance to such lenders of secured convertible promissory notes, or the Notes, in an aggregate principal amount of $1,333,000 and certain other consideration (including shares of our common stock and warrants to acquire shares of our common stock). We refer to such transaction as the “Bridge Loan”. Pursuant to the terms of the Notes and the other agreements entered in connection with the Bridge Loan, all amounts owed thereunder became due and payable upon the closing of our underwritten public offering on September 17, 2012, and accordingly all such amounts were repaid during the three months ended October 31, 2012. Additionally, due to the repayment of the Bridge Loan the debt discounts and deferred financing costs related to the Bridge Loan of $371,000 and $215,000, respectively, were recorded as interest expense during the three months ended October 31, 2012.

We accounted for the 132,420 warrants issued in connection with the Bridge Loan in accordance with the accounting guidance for derivatives. The applicable accounting guidance sets forth a two-step model to be applied in determining whether a financial instrument is indexed to an entity’s own stock, which would qualify such financial instruments for a scope exception. This scope exception specifies that a contract that would otherwise meet the definition of a derivative financial instrument would not be considered as such if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the stockholders’ equity section of the entity’s balance sheet. We determined the warrants were ineligible for equity classification due to anti-dilution provisions set forth therein.

We recorded the fair value of the warrants issued in connection with the Bridge Loan as a warrant liability due to anti-dilution provisions requiring the strike price of the warrants to be adjusted if we subsequently issue common stock at a lower stock price. The Company revalues the warrants as of the end of each reporting period. The fair value of the warrants at January 31, 2014 and July 31, 2013 was $54,000 and $51,000, respectively. The change in fair value of the warrant liability for the three and six months ended January 31, 2014 was an increase of $1,000 and $59,000, respectively, which was recorded as a change in derivative liability in the consolidated statement of operations.

During the six months ended January 31, 2014, there were net exercises on an aggregate of 90,699 of the warrants issued in connection with the Bridge Loan, which resulted in the issuance of 73,290 shares of our common stock. As these warrants were net exercised, as permitted under the respective warrant agreements, we did not receive any cash proceeds. The warrants were revalued as of the settlement dates, and the change in fair value was recognized to earnings. The Company also recognized a reduction in the warrant liability based on the fair value as of the settlement date for the warrants exercised, with a corresponding increase in additional paid-in capital. As of January 31, 2014, there are 41,721 warrants outstanding issued in connection with the Bridge Loan.

The estimated fair value of the derivative liability was computed using a Monte Carlo option pricing model based the following assumptions:


	January 31,			July 31,
	2014			2013
Volatility		155.8	%		144.5	%
Risk-free interest rate		0.98	%		0.97	%
Dividend yield		0.0	%		0.0	%
Expected life		2.9 years			3.4 years

10 . Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities.

•

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In connection with the Bridge Loan, we issued warrants and convertible notes that are accounted for as derivative liabilities.

We used Level 3 inputs for the valuation methodology of the derivative liabilities. The estimated fair values were computed using a Monte Carlo option pricing model based on various assumptions. Our derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value of the derivative liabilities.

The following table provides a reconciliation of the beginning and ending balances of the derivative liabilities for the six months ended January 31, 2014:


				Conversion
	Warrant			Feature
	Liability			Liability			Total
Balance at July 31, 2012	$	286,000		$	33,000		$	319,000
Issuances		—			—			—
Settlement of conversion feature liability		—			(33,000	)		(33,000	)
Adjustments to estimated fair value		(235,000	)		—			(235,000	)

Balance at July 31, 2013	$	51,000		$	—		$	51,000
Issuances		—			—			—
Settlement of warrant liability		(56,000	)		—			(56,000	)
Adjustments to estimated fair value		59,000			—			59,000

Balance at January 31, 2014	$	54,000		$	—		$	54,000

11. Stockholders’ Equity

Private Placements

In August 2013, we completed a private placement pursuant to which we sold 5,500,000 shares of our common stock. The shares were sold at a per share purchase price of $0.20, resulting in approximately $1,100,000 in aggregate gross proceeds to the Company. After deducting fees of $43,000, the net proceeds to us were $1,057,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act of 1933, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements.

On October 14 and October 16, 2013, we completed private placements pursuant to which we sold 2,441,270 shares of our common stock. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $1,831,000 in aggregate gross proceeds to the Company. After deducting fees of $49,000, the net proceeds to us were $1,782,000. In addition, between October 17, 2013 and October 31, 2013, we sold 442,667 shares of our common stock in private placements. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $332,000 in aggregate gross proceeds to the Company. After deducting fees of $8,000, the net proceeds to us were $324,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. During December 2013, we amended the subscription agreements for investor who participated in the $0.75 private placements. As a result, the per share purchase price of $0.75 was reduced to $0.70 per share, resulting in the issuance of an additional 218,938 shares of unregistered common stock. We recorded $285,000 of expense associated with the price adjustment in the other share-based expenses section of the consolidated statement of operations. After the purchase price adjustment to $0.70 per share, the total shares issued under the October private placements was 3,102,875, for aggregate net proceeds of $2,106,000.

During the three months ended January 31, 2014, we completed private placements pursuant to which we sold 1,611,817 shares of our common stock, resulting in approximately $1,514,000 in aggregate gross proceeds to the Company. After deducting fees of $13,000, the net proceeds to us were $1,501,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. We have used, and intend to continue to use, the remaining proceeds from the offering for working capital and general corporate purposes.

Corporate Governance Restructuring Activity

The following transactions occurred on August 13, 2013:

•

We entered into a two-year service agreement with Pillar Marketing Group, Inc. for general advisory services with respect to corporate finance and capital raising activities, merger and acquisition transactions, and other related endeavors. Per the agreement with Pillar we issued 250,000 shares of unregistered common stock, with a value of $175,000. The value was capitalized to prepaid expense and is being amortized over the term of the agreement. During the three and six months ended January 31, 2014, we recognized $22,000 and $41,000, respectively, of expense related to these services. We also issued 300,000 shares of registered common stock to the principal of Pillar for certain corporate reorganization services, valued at $210,000. Pillar also received a onetime payment of $150,000 for certain corporate reorganization activities previously provided. The fair value of the stock issued and the onetime payment was expensed to restructuring costs.

•

We issued 300,000 shares of unregistered common stock to Bibicoff & McInnis for investor relations services related to restructuring activities, valued at $210,000. On issuance, the $210,000 was expensed to restructuring costs.

•

We issued 250,000 shares of unregistered common stock, with a value of $175,000, for corporate finance and restructuring activities to Wulff Services, Inc. Wulff Services, Inc. is primarily owned by our current Chief Financial Officer / Chief Operation Officer, Peter C. Wulff. In addition, Wulff Services, Inc. received a onetime payment of $75,000 related to the corporate finance and restructuring efforts. The fair value of the stock issued and the onetime payment was expensed to restructuring costs.

•

We issued 300,000 shares of common stock, with a value of $210,000, to Donna Singer, per Ms. Singer’s separation agreement, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act. Ms. Singer was the Company’s Executive Vice President and served as a member of the Board. Additionally, as part of this issuance, we granted certain registration rights with respect to the shares issued to Ms. Singer. On issuance, the $210,000 was expensed to restructuring costs.

•

We issued 850,000 shares of common stock, with a value of $595,000, to Michael L. Krall, per Mr. Krall’s separation agreement, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act. Mr. Krall

was the Company’s Chief Executive Officer and served as a member of the Board. Additionally, as part of this issuance, we granted certain registration rights with respect to the shares issued to Mr. Krall. On issuance, the $595,000 was expensed restructuring costs.

Other Activity

On October 1, 2013, we received $163,000 from the exercise of a warrant to purchase 250,000 shares of our common stock.

In addition, during the six months ended January 31, 2014, there were net exercises on an aggregate of 90,699 warrants, which resulted in the issuance of 73,290 shares of our common stock. As these warrants were net exercised, as permitted under the respective warrant agreements, we did not receive any cash proceeds.

During the six months ended January 31, 2014, we paid approximately $113,000, and issued 348,143 shares of unregistered common stock, to Gary Cohee and/or his affiliates for investor relations and financial advisor services, valued at $283,000, pursuant to the terms of the director service agreement with Mr. Cohee. The amounts paid and the fair value of the stock issued were offset to additional paid-in capital. Mr. Cohee is a member of our Board.

During the three months ended January 31, 2014, we issued 87,500 shares of common stock to employees for restricted stock units that vested, based on performance conditions, and issued 15,000 shares of unregistered common stock to a former employee, valued at $20,000 (See Note 6).

In connection with the April 24, 2013 private placement, the Company granted certain registration rights, under which the Company agreed to file a registration statement covering the resale of the shares of common stock sold in the financing, as well as those shares issuable upon exercise of the warrants. In the event that we have not filed to register for resale the shares and warrant shares issued as part of the April 24, 2013 private placement, within 45 days of the closing date, the Company will issue 100 warrant shares for each day that such filing is not completed, not to exceed 18,000 warrant shares. As of January 31, 2014, the shares and warrant shares have not been registered for resale. As a result, the private placement participant will receive the entire 18,000 warrant shares as of January 31, 2014. The expense associated with the warrants was $23,000 and is included in the other share-based expenses section of the consolidated statement of operations.

On September 17, 2012, we closed an underwritten public offering of an aggregate of 4,341,615 shares of our common stock, including shares issued pursuant to the exercise of the underwriter’s overallotment option, at a price to the public of $1.10 per share. The gross proceeds from the offering were approximately $4,776,000 and, after deducting $549,000 for transaction costs, including discounts, commissions, and other offering expenses, such as legal and accounting fees, the net proceeds to us from the offering were approximately $4,227,000. We used $1,333,000 of the net proceeds from the offering to pay the full amount of the indebtedness we incurred in connection with the Bridge Loan, described in further detail under Note 9 above.

12. Share-Based Compensation

On October 23, 2013 the Board authorized the issuance of 5,100,000 Restricted Stock Units (“RSUs”) to our directors and officers. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU vests, as set forth in the Restricted Stock Unit Agreement. The breakdown is as follows:

•

Chairman RSU Award: We granted Mr. Pfanzelter an award consisting of two million eight hundred thousand (2,800,000) RSUs. The RSUs vest 25% on February 15, 2014, 25% on February 15, 2015 and 50% on February 15, 2016.

•

Henry Lambert RSU Award: We granted Mr. Lambert an award consisting of five hundred thousand (500,000) RSUs. The RSUs vest 60% on September 10, 2014 and the vesting of the remaining 40% depends on the achievement of certain quarterly sales goals over a two year period. If the sales goals are not achieved, 40% of the award will be forfeited.

•

Peter Wulff RSU Award: We granted Mr. Wulff an award consisting of one million (1,000,000) RSUs.The RSUs vest 25% on March 15, 2014, 25% on March 15, 2015 and 50% on March 15, 2016.

•

Director RSU Awards: We granted Messrs. Cohee, Culver, Otis and Dr. Theno, awards consisting of two hundred thousand (200,000) RSUs, respectively. The RSUs vest (i) 50% on the earlier of the date of the annual meeting in 2015 or January 15, 2015 and (ii) 50% on the earlier of the date of the annual meeting in 2016 or January 15, 2016.

None of the RSUs granted to our directors and officers were granted pursuant to any compensatory, bonus, or similar plan maintained or otherwise sponsored by the Company. Additionally, during the six months ended January 31, 2014, none of these RSUs vested.

On October 30, 2013 the Company authorized the issuance of 900,000 RSUs to key employees. The RSUs vest based on performance conditions. If the performance conditions are not met or expected to be met, no compensation cost will be recognized on the underlying RSUs. In addition, if the performance conditions are not achieved, then the corresponding RSUs will be forfeited.

On December 16, 2013 the Company authorized the issuance of 30,000 RSUs to key employees. The RSUs vest quarterly over a one year period.

During the quarter ended January 31, 2014, 87,500 restricted stock units vested based on performance conditions. Of the remaining 5,942,500 RSUs granted during the six months ended January 31, 2014, we currently expect 4,992,500 to vest. As of January 31, 2014, there was $5,732,000 of unrecognized non-cash compensation cost related to the RSUs, which will be recognized over a weighted average period of 2.0 years.

During the three months ended January 31, 2014, we issued options to purchase 300,000 shares of our common stock to key employees, at an exercise price of $1.40, valued at $216,000 (based on the Black-Scholes Option Pricing Model assuming no dividend yield, volatility of 108% and a risk-free interest rate of 0.45%). The options vest quarterly over three years with the first two quarter vesting after six months. In addition, during the three months ended January 31, 2014, 195,000 options were forfeited or canceled.

As of January 31, 2014, there was $237,000 of unrecognized non-cash compensation cost related to unvested options, which will be recognized over a weighted average period of 2.54 years.

For the three months ended January 31, 2014 and 2013, share-based compensation expense was $1,332,000 and $242,000, respectively. For the six months ended January 31, 2014 and 2013, share-based compensation expense was $1,421,000 and $430,000, respectively.

13. Recent Accounting Pronouncements

No recent accounting pronouncements or other authoritative guidance have been issued that management considers likely to have a material impact on our consolidated financial statements.

14. Subsequent Events

Subsequent to our fiscal quarter ended January 31, 2014, we received approximately $1,320,000 from the sale of 1,350,000 shares of our common stock in private placements. The shares of common stock issued were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. We have used, and intend to continue to use, the remaining proceeds from the offering for working capital and general corporate purposes.

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

All references in this Item 2 and elsewhere in this Quarterly Report to “PURE,” “we”, “our,” “us” and the “Company” refer to Pure Bioscience, Inc. and our wholly owned subsidiary, ETIH2O Corporation, a Nevada corporation. ETIH2O Corporation currently has no business operations and no material assets or liabilities and there have been no significant transactions related to ETIH2O Corporation during the periods presented in the consolidated financial statements contained elsewhere in this Quarterly Report.

The discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “would” or “will” or the negative of these terms or other comparable terminology, but their absence does not mean that a statement is not forward-looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which could cause our actual results to differ from those projected in any forward-looking statements we make. Several risks and uncertainties we face are discussed in more detail under “Risk Factors” in Part II, Item 1A of this Quarterly Report or in the discussion and analysis below. You should, however, understand that it is not possible to predict or identify all risks and uncertainties and you should not consider the risks and uncertainties identified by us to be a complete set of all potential risks or uncertainties that could materially affect us. You should not place undue reliance on the forward-looking statements we make herein because some or all of them may turn out to be wrong. We undertake no obligation to update any of the forward-looking statements contained herein to reflect future events and developments, except as required by law. The following discussion should be read in conjunction with the consolidated financial statements and the notes to those financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Company Overview

We are focused on developing and commercializing our proprietary antimicrobial products that provide solutions to the health and environmental challenges of pathogen and hygienic control. Our technology platform is based on patented stabilized ionic silver, and our initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent that is manufactured as a liquid delivered in various concentrations. We currently distribute and contract the manufacture and distribution of, our SDC-based disinfecting and sanitizing products, which are registered by the Environmental Protection Agency, or EPA. We also contract manufacture and sell SDC-based formulations to manufacturers for use as a raw material ingredient in the production of personal care products. We believe our technology platform has potential application in a number of industries. We intend to focus our current resources on providing food safety solutions to the food industry.

Our goal is to become a sustainable company by commercializing our proprietary technology platform to deliver leading antimicrobial products through our sales and marketing efforts focused on the food industry and through licensing collaborations in other industries. Our current products are as follows:


Product Name	Product Use	EPA Registration
PURE Complete Solution:
PURE ^® Hard Surface	Disinfectant and sanitizer	SDC3A
PURE Multi-Purpose Cleaner Concentrate	Cleaner	Not applicable
Axen ^® 30	Disinfectant	Axen30
Axenohl ^®	Raw material ingredient	Axenohl
Silvérion ^®	Raw material ingredient	Not applicable

PURE Complete Solution

Our PURE Complete Solution is comprised of PURE ^® Hard Surface and a concentrated cleaning product that was launched as a companion product to PURE ^® Hard Surface. The PURE Complete Solution offers a comprehensive, cost-effective and user-friendly cleaning, disinfecting and sanitizing product line to end-users including our targeted foodservice, food manufacturing and food processing customers. We can also target this product to hospital and medical care facilities; janitorial service providers and the distributors that supply them.

PURE ^® Hard Surface Disinfectant and Sanitizer (Ready-to-Use)

PURE ^® Hard Surface is our SDC-based, patented and EPA-registered, ready-to-use hard surface disinfectant and food contact surface sanitizer. We contract manufacture both consumer and commercial versions of the product. PURE Hard Surface combines high efficacy and low toxicity with 30-second bacterial and viral kill times and 24-hour residual protection. The product completely kills resistant pathogens such as MRSA and Carbapenem-resistant Klebsiella pneumoniae (NDM-1), and effectively

eliminates dangerous fungi and viruses including HIV, Hepatitis B, Hepatitis C, Norovirus, Influenza A, Avian Influenza and H1N1. It also eradicates hazardous food pathogens such as E. coli, Salmonella, Campylobacter and Listeria. PURE Hard Surface delivers broad-spectrum efficacy yet remains classified as least-toxic by the EPA. The active ingredient, SDC, has been designated as Generally Recognized as Safe, or GRAS, for use on food processing equipment, machinery and utensils.

PURE Multi-Purpose Cleaner Concentrate (End-User Dilutable)

PURE ^® Multi-Purpose Cleaner, is an environmentally responsible cleaning product that is protected by SDC. SDC ensures the quality and safety of PURE Multi-Purpose Cleaner without human or environmental exposure to toxic chemical preservatives. PURE Multi-Purpose Cleaner is non-toxic and non-flammable and contains no EDTA, phosphates, ammonia or bleach as well as no VOCs or NPEs. PURE Multi-Purpose Cleaner provides professional strength cleaning in a concentrate formula that yields a 1:96 – 1:256 use dilution that is safe for use on all resilient surfaces, including floors, glass and food contact surfaces.

Axen ^® 30 (Ready-to-Use)

Axen ^® 30 is our patented and EPA-registered hard surface disinfectant and is a predecessor ready-to-use product to PURE ^® Hard Surface. Axen30 is currently sold on a limited basis by distributors under their respective private labels and which we intend to phase out.

Axenohl ^® (Raw Material Ingredient)

Axenohl ^® is our patented and EPA-registered SDC-based antimicrobial formulation for use as a raw material ingredient in the manufacturing of EPA-registered products. Axenohl is a colorless, odorless and stable solution that provides fast acting efficacy against bacteria, viruses and fungi when manufactured into consumer and commercial disinfecting and sanitizing products.

SILVÉRION ^® (Raw Material Ingredient)

SILVÉRION ^® is our patented SDC-based antimicrobial formulation for use as a raw material ingredient in the manufacturing of personal care products. It can be used as either an active ingredient or a preservative. SILVÉRION is a colorless, odorless and stable solution that provides ionic silver in a water-soluble form. It provides fast acting efficacy at low concentrations against a broad-spectrum of bacteria, viruses, yeast and molds. SILVÉRION is currently sold outside of the United States in various personal care products.

We were incorporated in the state of California in August 1992 as Innovative Medical Services. In September 2003, we changed our name to Pure Bioscience. In March 2011, we reincorporated in the state of Delaware under the name “Pure Bioscience, Inc.” We operate in one business segment.

Recent Developments

New Board of Directors and Management Team

On August 13, 2013, the following managerial and corporate governance changes occurred to create a new Board of Directors, or Board, and management team:

•

Michael L. Krall, Donna Singer, and Dennis Brovarone resigned as members of the Board;

•

Michael L. Krall, Donna Singer, and Dennis Atchley resigned all positions respectively held by them as officers of the Company;

•

Dave Pfanzelter was appointed by the Board to be the Chairman of the Board;

•

Dave Pfanzelter was appointed by the Board to serve as Interim Chief Executive Officer;

•

Gary D. Cohee was appointed by the Board to serve as a member of the Board; and

•

Peter C. Wulff was appointed by the Board to serve as Chief Financial Officer, Chief Operating Officer, and Corporate Secretary.

On September 10, 2013, the Board appointed Henry R. Lambert to serve as Chief Executive Officer and a member of the Board. In connection with the hiring of Henry R. Lambert to serve as our Chief Executive Officer, Dave Pfanzelter resigned his position as our Interim Chief Executive Officer. Mr. Pfanzelter will continue to render significant services to us and will continue to serve as our Chairman of the Board.

•

ICC licenses from PURE its patents and technology know-how for the exclusive manufacture for PURE of all SDC-based products.

•

ICC will invest in plant improvements to allow for expanded SDC production.

•

ICC’s R&D team will collaborate on SDC product line development.

•

ICC licenses the distribution rights for SDC-based products into its core businesses of institutional cleaning and sanitation products.

•

ICC will also develop a new initiative focused on US hospital, healthcare and medical facilities.

•

PURE earns royalty income on SDC-products sold by ICC and its affiliates.

The agreement may be terminated by mutual written consent, or by either party upon the material breach of the terms of the agreement by the other party.

Liquidity & Going Concern Update

Our consolidated financial statements included in this Quarterly Report have been prepared and presented on a basis assuming we will continue as a going concern. The factors below raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

Since our inception, we have financed our operations primarily through public and private offerings of securities, debt financing, and revenue from product sales and license agreements. We have a history of recurring losses, and as of January 31, 2014 we have incurred a cumulative net loss of $76,497,000.

Our financial statements do not include any adjustment relating to recoverability or classification of recorded assets and classification of recorded liabilities.

Financial Overview

This financial overview provides a general description of our revenue and expenses.

Revenue

We contract manufacture and sell SDC-based products for end use, and as a raw material for manufacturing use. We also license our products and technology to development and commercialization partners. Revenue is recognized when realized or realizable and earned. Any amounts received prior to satisfying revenue recognition criteria are recorded as deferred revenue.

Cost of Goods Sold

Cost of goods sold for product sales includes direct and indirect costs to manufacture products, including materials consumed, manufacturing overhead, shipping costs, salaries, benefits, reserved inventory, and related expenses of operations. Depreciation related to manufacturing is systematically allocated to inventory produced, and expensed through cost of goods sold at the time inventory is sold.

Selling, General and Administrative

Selling, general and administrative expense consists primarily of salaries and other related costs for personnel in business development, sales, finance, accounting, information technology, and executive functions. Other selling, general and administrative costs include product marketing, advertising, and trade show costs, as well as public relations and investor relations, facility costs, and legal, accounting and other professional fees.

Research and Development

Our research and development activities are focused on leveraging our technology platform to develop additional proprietary products and applications. Research and development expense consists primarily of personnel and related costs, product registration expenses, and third-party testing. We expense research and developments costs as incurred.

Other Income (Expense)

We record interest income, interest expense, change in derivative liabilities, as well as other non-operating transactions, as other income (expense) in our consolidated statements of operations.

Results of Operations

Fluctuations in Operating Results

Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our results of operations will be affected for the foreseeable future by several factors that may contribute to these periodic fluctuations, including the demand for our products, the timing and amount of our product sales, and the progress and timing of expenditures related to sales and marketing, as well as product development. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a reliable indication of our future performance.

Comparison of the Three Months Ended January 31, 2014 and 2013

Net Product Sales

Net product sales were $41,000 and $263,000 for the three months ended January 31, 2014 and 2013, respectively. The decrease of $222,000 was primarily attributable to sales fluctuations within our legacy customer base.

For the three months ended January 31, 2014, three individual customers each accounted for 10% or more of our net product sales. One customer accounted for 26%, another for 24%, and the other for 17%. No other individual customer accounted for 10% or more of our net product sales. The geographic breakdown of net product sales was as follows: 100% U.S.

For the three months ended January 31, 2013, two individual customers each accounted for 10% or more of our net product sales. One customer accounted for 73% and the other for 10%. No other individual customer accounted for 10% or more of our net product sales. The geographic breakdown of net product sales was as follows: 100% U.S.

Cost of Goods Sold

Cost of goods sold was $20,000 and $57,000 for the three months ended January 31, 2014 and 2013, respectively. The decrease of $37,000 was attributable to decreased net product sales.

Gross margin as a percentage of net product sales, or gross margin percentage, was 51% and 78% for the three months ended January 31, 2014 and 2013, respectively. This decrease in gross margin percentage was primarily attributable to the sale of higher margin formulations and packaging configurations of our products during the quarter ended January 31, 2013 as compared to the current quarter.

Selling, General and Administrative Expense

Selling, general and administrative expense was $1,243,000 and $1,427,000 for the three months ended January 31, 2014 and 2013, respectively. The decrease of $184,000 was primarily attributable to reductions in personnel costs and professional services.

Research and Development Expense

Research and development expense was $289,000 and $347,000 for the three months ended January 31, 2014 and 2013, respectively. The decrease of $58,000 was primarily attributable to decreases in personnel costs.

Share-Based Compensation

Share-based compensation expense was $1,332,000 and $242,000 for the three months ended January 31, 2014 and 2013, respectively. The increase of $1,090,000 is primarily due to the restricted stock units granted to employees and directors supporting our selling, general and administrative, and research and development functions (See Note 12).

Other Share-Based Expenses

Other share-based expense was $308,000 and zero for the three months ended January 31, 2014 and 2013, respectively. The increase is due to $285,000 of expense incurred from the amendment of the subscription agreements for investors who participated in the October 2013 private placements and $23,000 of expense associated with warrants issued in connection with the April 24, 2013 private placement (See Note 11).

Restructuring Expense

Restructuring expense was $70,000 and zero for the three months ended January 31, 2014 and 2014, respectively. The increase is related to a settlement agreement with a former employee. Under the terms of the agreement, we will pay $50,000 over a six-month period with payments commencing in March 2014, and issue 15,000 shares of unregistered common stock, valued at $20,000.

Change in Derivative Liability

Change in derivative liability for the three months ended January 31, 2014 and 2013 was an increase of $1,000 and a decrease of $12,000, respectively. The change is primarily due to an increase in the stock price as of January 31, 2014.

Interest Expense

Interest expense for the three months ended January 31, 2014 and 2013 was $2,000 and $1,000, respectively.

Gain on Extinguishment of Debt

Gain on extinguishment of debt for the three months ended January 31, 2014 and 2013 was $727,000 and zero respectively. The $727,000 gain is attributable to the repayment of the Promissory Note (See Note 7)

Other Income (Expense)

Other income for the three months ended January 31, 2014 was $15,000, compared to other expense of $25,000 for the three months ended January 31, 2013. The increase is primarily attributable to the vendor settlements recorded during the quarter.

Comparison of the Six Months Ended January 31, 2014 and 2013

Net Product Sales

Net product sales were $156,000 and $373,000 for the six months ended January 31, 2014 and 2013, respectively. The decrease of $217,000 was primarily attributable to sales fluctuations within our legacy customer base.

For the six months ended January 31, 2014, three individual customers each accounted for 10% or more of our net product sales. One customer accounted for 25%, another for 21%, and the other for 17%. No other individual customer accounted for 10% or more of our net product sales. The geographic breakdown of net product sales was as follows: 100% U.S.

For the six months ended January 31, 2013, three individual customers each accounted for 10% or more of our net product sales. One customer accounted for 51%, another for 14%, and the third for 12%. No other individual customer accounted for 10% or more of our net product sales. The geographic breakdown of net product sales is as follows: 86% U.S. and 14% foreign.

Cost of Goods Sold

Cost of goods sold was $56,000 and $88,000 for the six months ended January 31, 2014 and 2013, respectively. The decrease of $32,000 was attributable to decreased net product sales.

Gross margin as a percentage of net product sales, or gross margin percentage, was 64% and 76% for the six months ended January 31, 2014 and 2013, respectively. This decrease in gross margin percentage was primarily attributable to the sale of higher margin formulations and packaging configurations of our products during the quarter ended January 31, 2013 as compared to current quarter.

Selling, General and Administrative Expense

Selling, general and administrative expense was $2,168,000 and $2,763,000 for the six months ended January 31, 2014 and 2013, respectively. The decrease of $595,000 was primarily attributable to reductions in personnel costs, professional services, and facility costs.

Research and Development Expense

Research and development expense was $502,000 and $694,000 for the six months ended January 31, 2014 and 2013, respectively. The decrease of $192,000 was primarily attributable to decreases in personnel costs and related expenses, offset by an increase in third-party research and testing activities.

Share-Based Compensation

Share-based compensation expense was $1,421,000 and $430,000 for the three months ended January 31, 2014 and 2013, respectively. The increase of $991,000 is primarily due to the restricted stock units granted to employees and directors supporting our selling, general and administrative, and research and development functions (See Note 12).

Other Share-Based Expenses

Other share-based expense was $308,000 and zero for the six months ended January 31, 2014 and 2013, respectively. The increase is due to $285,000 of expense incurred from the amendment of the subscription agreements for investors who participated in the October 2013 private placements and $23,000 of expense associated with warrants issued in connection with the April 24, 2013 private placement (See Note 11).

Restructuring Expense

Restructuring expense was $2,754,000 and zero for the six months ended January 31, 2014 and 2013, respectively. As discussed above, on August 13, 2013, Michael L. Krall, Donna Singer, and Dennis Brovarone resigned all positions respectively held by them as officers and directors of the Company and a new management team and Board were appointed. Based on the corporate governance change we incurred the following expenditures:

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Mr. Krall and Ms. Singer received a onetime separation payment of $150,000 and $45,000, respectively; Mr. Brovarone’s received $91,000, payable in 60 monthly installments of $1,600, commencing 120 days after the separation date; Mr. Krall is entitled to receive a cash severance of $540,000 payable over an eighteen month period; Ms. Singer is entitled to receive a cash severance of $204,000 payable over a twelve month period; Mr. Krall received 850,000 unregistered shares of common stock, valued at $595,000; Ms. Singer received 300,000 unregistered shares of common stock, valued at $210,000; and Mr. Krall and Ms. Singer will continue to receive health insurance coverage over the terms of their respective severance periods. Medical and dental insurance for Mr. Krall and Ms. Singer will cost the Company $20,000 and $18,000, respectively. Per the terms of the agreements, we recorded a onetime expense of $1,782,000 related to Mr. Krall’s and Ms. Singer’s separation payments, future severance payments, unregistered stock received, and future medical and dental insurance payments. All but $7,000 due to Mr. Brovarone was accrued in prior periods for services previously provided.

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We issued 300,000 shares of unregistered common stock to Bibicoff & McInnis for investor relations services related to the corporate restructuring, valued at $210,000.

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We issued 250,000 shares of unregistered common stock, with a value of $175,000, for corporate finance and restructuring activities to Wulff Services Inc. Wulff Services, Inc. is primarily owned by our current Chief Financial Officer / Chief Operating Officer, Peter Wulff. In addition, Wulff Services, Inc. received a onetime payment of $75,000 related to the corporate finance and restructuring efforts.

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We issued 300,000 shares of registered common stock, with a value of $210,000, for corporate reorganization services previously provided by the principal of Pillar Marketing Group, Inc. In addition, Pillar also received a onetime payment of $152,000 related to the reorganization efforts.

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We incurred $73,000 in legal fees associated with the corporate finance and restructuring activities.

In addition, on January 23, 2014, we entered into a settlement agreement with a former employee. Under the terms of the agreement, we will pay $50,000 over a six-month period with payments commencing in March 2014, and issue 15,000 shares of unregistered common stock valued at $20,000.

Change in Derivative Liability

Change in derivative liability for the six months ended January 31, 2014 and 2013 was an increase of $59,000 and a decrease of $240,000, respectively. The change is due to the settlement of the derivative liability associated with the conversion feature of the Bridge Loan (See Note 9), offset by an increase in the stock price as of January 31, 2014.

Interest Expense

Interest expense for the six months ended January 31, 2014 and 2013 was $5,000 and $589,000, respectively. The decrease was primarily attributable to non-cash amortization of debt discounts related to the secured convertible promissory notes that we issued in July 2012 in connection with the Bridge Loan.

Gain on Extinguishment of Debt

Gain on extinguishment of debt for the six months ended January 31, 2014 and 2013 was $727,000 and zero respectively. The $727,000 gain is attributable to the repayment of the Promissory Note (See Note 7).

Other Income (Expense)

Other income for the six months ended January 31, 2014 was $64,000, compared to other expense of $27,000 for the six months ended January 31, 2013. The increase is primarily attributable to the sale of reserved inventory and accounts payable vendor settlements.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through public and private offerings of securities, debt financing, and revenue from product sales and license agreements. We have a history of recurring losses, and as of January 31, 2014 we have incurred a cumulative net loss of $76,497,000.

On August 13, 2013, we completed a private placement pursuant to which we sold 5,500,000 shares of our common stock. The shares were sold at a per share purchase price of $0.20, resulting in approximately $1,100,000 in aggregate proceeds to the Company. After deducting fees of $43,000, the net proceeds to us were $1,057,000. The shares of common stock issued under the private placement were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”), or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements.

On October 1, 2013, we received $163,000 from the exercise of a warrant to purchase 250,000 shares of our common stock.

On October 14 and October 16, 2013, we completed a private placement pursuant to which we sold 2,441,270 shares of our common stock. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $1,831,000 in aggregate proceeds to the Company. After deducting fees of $49,000, the net proceeds to us were $1,782,000. In addition, between October 17, 2013 and October 31, 2013, we sold 442,667 shares of our common stock. The shares were sold at a per share purchase price of $0.75 per share, resulting in approximately $332,000 in aggregate proceeds to the Company. After deducting fees of $8,000, the net proceeds to us were $324,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements.

During the three months ended January 31, 2014, we completed private placements pursuant to which we sold 1,611,817 shares of our common stock, resulting in approximately $1,514,000 in aggregate proceeds to the Company. After deducting fees of $13,000, the net proceeds to us were $1,501,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. We have used, and intend to continue to use, the remaining proceeds from the offering for working capital and general corporate purposes.

During the six months ended January 31, 2014, there were no exercises of stock options.

During the three months ended January 31, 2014, we entered into a promissory note payoff agreement with Morrison & Foerster LLP (“Morrison”). Under the payoff agreement, we paid $500,000 to Morrison to extinguish $1,227,000 in unsecured debt owed to Morrison under the note, dated January 25, 2013. We have no further obligations or liability under the note.

As of January 31, 2014, we had $236,000 in cash and cash equivalents compared to $32,000 in cash and cash equivalents as of July 31, 2013. The net increase in cash and cash equivalents was primarily attributable to proceeds from our issuance of common stock in the private placements noted above. Additionally, as of January 31, 2014, we had $1,513,000 of current liabilities, including $629,000 in accounts payable, compared to $2,153,000 of current liabilities, including $1,134,000 in accounts payable as of July 31, 2013. The net decrease in current liabilities primarily relates to the repayment of the Morrison promissory note, offset by the terms of Mr. Krall’s and Ms. Singer’s separation agreements discussed above. All future severance and medical and dental insurance liabilities for Mr. Krall, Ms. Singer, and Mr. Brovarone have been accrued and are reflected in the restructuring liability section of the consolidated balance sheets.

We do not have, and may never have, significant cash inflows from product sales or from other sources of revenue to fund our operations. We do not currently believe that our existing cash resources are sufficient to meet our anticipated needs over the next twelve months. The uncertainties surrounding our ability to continue to fund our operations raise substantial doubt about our ability to continue as a going concern.

We do not have any unused credit facilities or other sources of capital available to us at this time. We intend to secure additional working capital through sales of additional debt or equity securities, including through private placements of our securities. Our intended financing initiatives are subject to risk, and we cannot provide any assurance about the availability or terms of these or any future financings.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following accounting policies and estimates are critical to aid you in understanding and evaluating our reported financial results.

Revenue Recognition

We sell our products to distributors and end users. We record revenue when we sell products to our customers, rather than when our customers resell products to third parties. When we sell products to our customers, we reduce the balance of our inventory with a corresponding charge to cost of goods sold. We do not currently have any consignment sales.

Product sales are recognized when delivery of the products has occurred, title has passed to the customer, the selling price is fixed or determinable, collectability is reasonably assured and we have no further obligations. Any amounts received prior to satisfying these revenue recognition criteria are recorded as deferred revenue. We record product sales net of discounts at the time of sale and report product sales net of such discounts.

We also license our products and technology to development and commercialization partners. License fee revenue consists of product and technology license fees earned. If multiple-element arrangements require on-going services or performance, then upfront product and technology license fees under such arrangements are deferred and recognized over the period of such services or performance. Non-refundable amounts received for substantive milestones are recognized upon achievement of the milestone. Any amounts received prior to satisfying these revenue recognition criteria are recorded as deferred revenue.

Share-Based Compensation

We grant equity-based awards under share-based compensation plans or stand-alone contracts. We estimate the fair value of share-based payment awards using the Black-Scholes option valuation model. This fair value is then amortized over the requisite service periods of the awards. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. Share-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures. Changes in assumptions used under the Black-Scholes option valuation model could materially affect our net loss and net loss per share.

Impairment of Long-Lived Assets

For purposes of testing impairment, we group our long-lived assets at the lowest level for which there are identifiable cash flows independent of other asset groups. Currently, there is only one level of aggregation for our intangible assets. We assess the impairment of long-lived assets, consisting of property, plant, and equipment and our patent portfolio, whenever events or circumstances indicate that the carrying value may not be recoverable. Examples of such events or circumstances include:

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an asset group’s ability to continue to generate income from operations and positive cash flow in future periods;

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loss of legal ownership or title to the asset(s);

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significant changes in our strategic business objectives and utilization of the asset(s); and

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the impact of significant negative industry or economic trends.

Additionally, on a quarterly basis we review the significant assumptions underlying our impairment assessment to determine whether our previous conclusions remain valid.

Recoverability of assets to be held and used in operations is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the assets. The factors used to evaluate the future net cash flows, while reasonable, require a high degree of judgment and the results could vary if the actual results are materially different than the forecasts. In addition, we base useful lives and amortization or depreciation expense on our subjective estimate of the period that the assets will generate revenue or otherwise be used by us. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less selling costs.

We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from which we expect to realize cash flows from the assets. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow or market or foreign currency risks.

We review the terms of the common stock, warrants and convertible debt we issue to determine whether there are derivative instruments, including embedded conversion options, that are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including a conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

Derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative

instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

Recent Accounting Pronouncements

None.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, or the Exchange Act, and as provided in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission, or SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by Rule 13a-15(b) under the Exchange Act, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective.

Changes in Our Controls

There were no changes in our internal controls over financial reporting during the three months ended January 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – Other Information

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and any adverse result in these or other matters may arise from time to time that could harm our business. We are not currently aware of any such legal proceedings or claims to which we or our wholly owned subsidiary is a party or of which any of our property is subject that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

You should carefully consider the following information about risks and uncertainties that may affect us or our business, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the notes thereto, and the information in other reports we file with the SEC, including our Annual Report on Form 10-K for the year ended July 31, 2013 and our audited consolidated financial statements and the notes thereto included therein. If any of the following events, described as risks, actually occur, either alone or taken together, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment in our securities. An investment in our securities is speculative and involves a high degree of risk. You should not invest in our securities if you cannot bear the economic risk of your investment for an indefinite period of time and cannot afford to lose your entire investment. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business and financial position.

Risks Related to Our Business and Industry

As a result of our historical lack of financial liquidity, we do not currently have sufficient working capital to fund our planned operations and may not be able to continue as a going concern, and, as a result, we will need to raise additional capital in the future in order to continue operating our business and developing new products and technologies, which capital may not be available on acceptable terms or at all.

Our existing cash resources are not sufficient to meet our anticipated needs over the next twelve months. In addition the factors below raise substantial doubt about our ability to continue as a going concern.

We have a history of recurring losses, and as of January 31, 2014 we have incurred a cumulative net loss of approximately $76 million.

As of January 31, 2014, we had $236,000 in cash and cash equivalents, $1,513,000 of current liabilities, including $629,000 in accounts payable. During the quarter ended January 31, 2014, our cash outflows for operating activities and for investments in patents and fixed assets were $4.1 million. As a result, we need to raise additional capital in the future to continue operating our business and developing new products and technologies, which capital may not be available on acceptable terms, or at all.

Our capital requirements will depend on many factors, including, among others:

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the acceptance of, and demand for, our products;

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the timing and success of executing our business strategy;

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our success and that of our strategic partners in developing and selling products derived from our technology;

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the costs of further developing our existing, and developing new, products or technologies and obtaining necessary regulatory approvals;

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the extent to which we invest in new technology, testing and product development;

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the timing of vendor payments and the collection of receivables, among other factors affecting our working capital;

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the exercise of outstanding options or warrants to acquire our common stock;

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the number and timing of acquisitions and other strategic transactions in which we participate, if any; and

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the costs associated with the continued operation, and any future growth, of our business.

arrangements we enter into to raise funds may require us to relinquish our rights to our products or technology, and we cannot assure you that we will be able to enter into any such contracts or license arrangements on acceptable terms, or at all. Having insufficient funds may require us to delay or scale back our marketing, distribution and other commercialization activities or cease our operations altogether.

The above circumstances, along with our history and near term forecast of incurring significant net losses and negative operating cash flows, raise substantial doubt on our ability to continue as a going concern. If we do not obtain additional capital from external sources, we will not have sufficient working capital to fund our planned operations or be able to continue as a going concern.

We have a history of losses, and we may not achieve or maintain profitability.

We had a loss of $2.5 million for the quarter ended January 31, 2014, and a loss of $1.8 million for the quarter ended January 31, 2013. As of January 31, 2014, we have incurred a cumulative net loss of approximately $76 million. Although we expect to continue to have losses in future periods, we are unable to predict the extent of our future losses or when or if we will become profitable, and it is possible we will never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

None of our existing agreements contain provisions that guarantee us any minimum revenues. If the penetration into the marketplace of silver dihydrogen citrate, or SDC, and SDC-based products is unsuccessful, revenue growth is slower than anticipated or operating expenses exceed expectations, it may take an unforeseen period of time to achieve or maintain profitability and we may never achieve or maintain profitability. Slower than anticipated revenue growth could force us to reduce research, testing, development and marketing of our technologies, and/or force us to reduce the size and scope of our operations, to sell or license our technologies to third parties, or to cease operations altogether.

The risks associated with our business may be more acute during periods of economic slowdown or recession. In addition to other consequences, these periods may be accompanied by decreased consumer and institutional spending in general, as well as decreased demand for, or additional downward pricing pressure on, our products. Accordingly, any prolonged economic slowdown or a lengthy or severe recession with respect to either the U.S. or the global economy is likely to have a material adverse effect on our results of operations, financial condition and business prospects. As a result, given the current weakness and uncertainties in the U.S. and in certain overseas economies, we expect that our business will continue to be adversely affected for so long as, and to the extent that, such adverse economic conditions and uncertainty exist.

Raising additional funds by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

We expect that we will need to increase our liquidity and capital resources in our current fiscal year and in future periods. We have a history of raising funds through offerings of our common stock, and we may in the future raise additional funds through public or private equity offerings, debt financings or corporate collaborations and licensing arrangements. To the extent that we raise additional capital by issuing equity securities, our stockholders’ ownership will be diluted. Additionally, any debt financing we obtain may involve covenants that restrict our operations. These restrictive covenants may include, among other things, limitations on borrowing, specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens on our assets, pay dividends on or redeem our capital stock or make investments. In addition, if we raise funds through collaboration and licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to us or relinquish potentially valuable rights to our products or proprietary technologies. We may be required in future collaborations to relinquish all or a portion of our sales and marketing rights with respect to our products or license intellectual property that enable licensees to develop competing products in order to complete any such transaction.

As a result of the reverse stock split that we recently effected, the number of our outstanding shares of common stock was reduced at a ratio of one-for-eight, while the number of our authorized shares of common and preferred stock did not change. Accordingly, our authorized common stock remains 100,000,000 shares. In addition to capital raising activities, other possible business and financial uses for our authorized common stock include, without limitation, future stock splits, acquiring other companies, businesses or products in exchange for shares of common stock, issuing shares of our common stock to partners in connection with strategic alliances, attracting and retaining employees by the issuance of additional securities under our various equity compensation plans, satisfying any debt we may have by issuing equity securities, or other transactions and corporate purposes that our Board of Directors, or Board, deems are in our best interest. Additionally, shares of common stock could be used for anti-takeover purposes or to delay or prevent changes in control or management of the Company. For example, without further stockholder approval, our Board could approve the sale of shares of common stock in a private transaction to purchasers who may oppose a takeover or favor our current Board. We cannot provide assurances that any issuances of common stock will be consummated on favorable terms or at all, that they will enhance stockholder value, or that they will not adversely affect our business or the trading price of our common stock.

Under our Certificate of Incorporation, our Board could also authorize the issuance of up to 5,000,000 shares of preferred stock on terms determined by the Board. If any common or preferred stock is issued, the interests of holders of our common stock could be diluted, and shares of preferred stock could be issued in a financing in which investors purchase preferred stock with rights, preferences and privileges that may be superior to those of the common stock, and the market price of our common stock could decline.

If outstanding options and warrants to purchase shares of our common stock are exercised, the interests of our stockholders could be diluted.

As of January 31, 2014, in addition to 25,808,128 shares of common stock issued and outstanding, we had 548,566 shares reserved for issuance under equity compensation plans for vested and unvested stock options and 5,942,500 shares reserved for issuance for vested and unvested restricted stock units. We also had 1,111,422 shares reserved for issuance on the exercise of outstanding warrants.

We may elect to reduce the exercise price of outstanding warrants as a means of providing additional financing to us. The exercise of options and warrants, and the sale of shares underlying such options or warrants, could have an adverse effect on the market for our common stock, including the price that an investor could obtain for their shares. Investors may experience dilution in the net tangible book value of their investment upon the exercise of options and warrants currently outstanding, as well as options and warrants that may be granted or issued in the future.

Because we are an early stage company, it is difficult to evaluate our prospects and our financial results may fluctuate, which may cause our stock price to fall.

Since acquiring the rights to our SDC technology, we have encountered and likely will continue to encounter risks and difficulties associated with introducing or establishing our products in rapidly evolving markets. These risks include the following, among others:

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we may not increase our sales to our existing customers and/or expand our customer base;

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we may not succeed in materially penetrating markets and applications for our SDC technology;

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our new sales and marketing strategy, which is built on our direct control of the sales and marketing of our products, may not be successful;

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we may not be successful in obtaining any required regulatory approvals on a timely basis, or at all;

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we or our partners and/or distributors may not establish or maintain effective marketing programs to create product awareness or brand identity;

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our partners’ and/or distributors’ goals and objectives may not be consistent with our own;

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we may not attract and retain key business development, technical and management personnel;

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we may not maintain existing, or obtain new, regulatory approvals for our technology and products;

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we may not succeed in locating strategic partners and licensees of our technology;

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we may not effectively manage our anticipated growth, if any; and

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we may not be able to adequately protect our intellectual property.

Any failure to successfully address these risks and uncertainties could seriously harm our business and prospects. We may not succeed given the technological, marketing, strategic and competitive challenges we face. In addition, because of our limited operating history and the early stage of market development for our SDC technology, we have limited insight into trends that may emerge and affect our business. Forecasting future revenues is difficult, especially because our technology is novel, and market acceptance of our products could change rapidly. In addition, our customers and potential customers in the foreseeable future are highly concentrated. Fluctuations in the buying patterns of our current or potential customers could significantly affect the level of our sales on a period to period basis. As a result, our financial results could fluctuate to an extent that may adversely affect our stock price. There are a number of other factors that could cause our financial results to fluctuate unexpectedly, including product sales, the mix of product sales, the cost of product sales, our ability for any reason to be able to meet demand, the achievement and timing of research and development and regulatory milestones, changes in expenses, including non-cash expenses such as the fair value of stock options granted, and manufacturing or supply issues, among other factors.

A loss of one or more of our key customers could adversely affect our business.

From time to time, one or a small number of our customers may represent a significant percentage of our revenue. Our three largest customers accounted for 63% of our revenue for the six months ending January 31, 2014. One customer accounted for 25%, another for 21%, and the other for 17%. Although we have agreements with many of our customers, these agreements typically do not prohibit customers from purchasing products and services from competitors. A decision by any of our major customers to significantly reduce the amount of product ordered or license fees paid, or their failure or inability to pay amounts owed to us in a timely manner, or at all, could have a significant adverse effect on our business.

We are dependent on our core SDC technology and if our efforts to achieve or maintain market acceptance of our core SDC technology are not successful, we are unlikely to attain profitability.

We have and are currently focusing substantially all of our time and financial resources in the development and commercialization of our core SDC technology. We believe SDC has applications in multiple industries and we expect that sales of SDC and SDC-based products will constitute a substantial portion, or all, of our revenues in future periods. Any material decrease in the overall level of sales or expected sales of, or the prices for, SDC or SDC-based products, whether as a result of competition, change in customer demand, or any other factor, would have a materially adverse effect on our business, financial condition and results of operations. We are marketing our antimicrobial silver ion technology to industrial and consumer markets. These technologies and the products that incorporate them have not yet been accepted into the marketplace, and may never be accepted. In addition, even if our products achieve market acceptance, we may not be able to maintain product sales or other forms of revenue over time if new products or technologies are introduced that are more favorably received than our products, are more cost-effective or otherwise render our products less attractive or obsolete.

We are subject to intense competition.

Our SDC-based products compete in highly competitive markets dominated by prominent chemical and pharmaceutical companies. Most of our competitors have been in business for a longer period of time than we have, and have a greater number of products on the market and greater financial and other resources than we do. Many of our competitors already have well established brands and distribution capabilities, and in some cases are able to leverage the sale of other products with more favorable terms for products competing with our own. We also have significantly fewer employees than virtually all of our competitors. Furthermore, recent trends in this industry are for large chemical and pharmaceutical companies to consolidate into a smaller number of very large entities, which further concentrates financial, technical and market strength and increases competitive pressure in the industry. If we directly compete with these very large entities for the same markets and/or products, their financial strength could prevent us from capturing a share of those markets. It is also possible that developments by our competitors will make our technologies or products noncompetitive or obsolete. Our ability to compete will depend upon our ability, and the ability of our distributors and other partners, to develop brand recognition and novel distribution methods, and to displace existing, established and future products in our relevant target markets. We, or our distributors and partners, may not be successful in doing so, which would have a materially adverse effect on our business, financial condition and results of operations.

We have limited sales, marketing and product distribution experience.

We have limited experience in the sales, marketing and distribution of our products. While we previously relied primarily on product distribution arrangements and/or sales and marketing services provided by third parties, we have now developed and obtained registration by the Environmental Protection Agency, or EPA, of our proprietary brand, PURE ^® Hard Surface disinfectant and food contact surface sanitizer, and have resumed direct control of our sales of this product through a restructuring of our sales strategy and operations. Our new sales and marketing strategy requires that we enact various operational changes in our business, including making significant investments in our own sales and marketing organization. We intend to market and sell our PURE ^® Hard Surface and related SDC-based products into consumer, commercial and institutional markets through both traditional and alternative distribution channels. We have commenced the launch of a multi-channel national sales program, which involves our development of an internal team of industry sales experts to manage each of our key channels and our deployment of contract sales representatives within each of those channels. Our current sales and marketing strategies and programs may not be successful, and we may not be able to establish the sales, marketing, and distribution capabilities necessary to directly control and manage these aspects of our operations. If we are not able to successfully sell, market and distribute these products directly, we may seek to establish product distribution arrangements with third parties, which may not be available on terms acceptable to us, if at all.

We rely on third parties to develop SDC-based products, and they may not do so successfully or diligently.

On December 11, 2013, we entered into a five-year strategic collaboration agreement with St. Louis-based Intercon Chemical Company (ICC) where we granted ICC distribution and certain development rights and rights to be the exclusive manufacture for all our SDC-based products.

We may also rely in part, on other third parties to whom we license rights to our technology to develop and commercialize products containing SDC for many of the applications for which we believe SDC-based products have, or may have, market opportunities.

Our reliance on ICC and other third parties for development activities reduces our control over these activities. In such arrangements, we have relied, and expect in the future to rely, on the third party to fund and direct product development activities and appropriate regulatory filings. Any of these third parties may not be able to successfully develop such SDC-based products due to, among other factors, a lack of capital, a lack of appropriate diligence, insufficient devotion to sales efforts, a change in

the evaluation by the third party of the market potential for SDC-based products, technical failures, and poorer than expected results from testing or trial use of any products that may be developed. If the third parties on which we rely are not successful in such development activities, our business and operating results would be adversely affected.

If we are unable to successfully develop or commercialize new applications of our SDC technology, or if such efforts are delayed, our operating results will suffer.

In addition to its use on hard surfaces, we are pursuing potential applications of our SDC technology as a broad-spectrum antimicrobial for use in direct contact processing aid where it is applied as a wash for produce, meat and poultry as an intervention to prevent or kill various food-borne pathogens. Any product that may be developed in these fields may be delayed or may never achieve regulatory approval or be commercialized. Delays in achieving regulatory approvals for particular applications of our products could significantly impact our product development costs. If indications are commercialized, we may not receive a share of future revenues that provides an adequate return on our historical or future investment.

We are dependent on third-party manufacturers, over whom we have limited control, to manufacture our products.

We do not have any manufacturing facilities ourselves and we currently rely on ICC to manufacture our SDC-based products and may in the future rely one or more third-party manufacturers to properly manufacture our products. We may not be able to quickly replace our manufacturing capacity if ICC is unable to manufacturer our products as a result of a fire, natural disaster (including an earthquake), equipment failure or other difficulty, or if such ICC facilities are deemed not in compliance with current “good manufacturing practices”, and the noncompliance could not be rapidly rectified. ICC is our single manufacturer for our SDC-based products and may not be replaced without significant effort and delay in production. A supply interruption or an increase in demand beyond our current manufacturer’s capabilities could harm our ability to manufacturer such products until new manufacturers are identified and qualified, which would have a significant adverse effect on our business and results. Any third-party manufacturer that we find may not match our quality standards or be able to meet customer requirements.

Additionally, our inability or reduced capacity to have our products manufactured would prevent us from successfully evaluating or commercializing our proposed products. Our dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our ability to develop and deliver proposed products on a timely and competitive basis.

If we are not able to manage any growth we achieve effectively, we may not become profitable.

If our efforts to achieve and maintain market acceptance of our SDC technology are successful, we will need to expand our business operations. We may not have sufficient resources to do so. If we invest in additional infrastructure, we may not be effective in expanding our operations and our systems, procedures or controls may not be adequate to support any such expansion. In addition, we would need to provide additional sales and support services to our partners, potentially in multiple markets, which we may not be able to do. Failure to properly manage increased customer demands, if any, could result in a material adverse effect on customer satisfaction, our ability to meet our contractual obligations, and our operating results.

The industries in which we operate are heavily regulated and we may be unable to compete effectively.

We are focused on the marketing and continued development of our SDC antimicrobial technology. We believe that products derived from our SDC technology, or products that may be derived from our SDC technology in future periods, require or will require approval by government agencies prior to marketing or sale in the U.S. or in foreign markets. Complying with applicable government regulations and obtaining necessary approvals can be, and has historically been, time consuming and expensive, due in part, we believe, to the novel nature of our technology. Regulatory review could involve delays or other actions adversely affecting the development, manufacture, marketing and sale of our products. While we cannot accurately predict the outcome of any pending or future regulatory review processes or the extent or impact of any future changes to legislation or regulations affecting review processes, we expect such processes to remain time consuming and expensive as we, or our partners, apply for approval to make new or additional efficacy claims for current products or to market new product formulations. Obtaining approvals for new SDC-based products in the U.S., or in markets outside the U.S., could take several years, or may never be accomplished.

SDC is a platform technology rather than a single use applied technology. As such, products developed from the platform may fall under the jurisdiction of multiple U.S. and international regulatory agencies. Our disinfectant and sanitizer products are regulated in the U.S. by the EPA. In addition to the EPA, each of the 50 United States has its own government agencies that regulate the sale or shipment of our products into their state. We have obtained registration for these products from the EPA and all states into which such products are currently marketed and sold. We are required to meet certain efficacy, toxicity and labeling requirements and pay ongoing fees in order to maintain such registrations. We may not be able to maintain these registrations in the future, which may eliminate our continued ability to market and sell our products in some or all parts of the U.S. We also may not be able to obtain necessary registrations with the EPA and applicable states for other SDC disinfectant and sanitizer products that we or our partners may develop, which would limit our ability to sell any such products in the future.

Some potential applications of SDC, such as those aimed at healthcare, veterinary and certain food preparation markets, may require approval of other government agencies prior to marketing or sale in the U.S. or in foreign markets, such as the U.S Food and Drug Administration, or FDA, or the United States Department of Agriculture, or USDA. Obtaining FDA and/or USDA approval is a complicated and expensive process and such approvals may never be obtained for any SDC products. If FDA and/or USDA approvals are obtained, the approvals may limit the uses for which SDC products may be marketed such that they may not be profitable to us, and the applicable products would be subject to pervasive and continuing regulation by the FDA and/or USDA that could lead to withdrawal or limitation of any product approvals.

We intend to fund and manage certain of our EPA-regulated product development internally, in conjunction with engaging regulatory consultants and partnering with other third parties. We have partnered, or intend to partner, with third parties who are seeking, or intend to seek, approvals to market SDC-based products in markets outside the U.S., and with other third parties who are developing FDA-regulated SDC-based products who, upon such development, would seek FDA approvals of

such products. Our ability to market and sell our products is dependent on our and our partners’ ability to obtain and maintain required registrations and approvals of applicable regulatory agencies. Failure by our partners or us to comply with applicable regulations could result in fines or the withdrawal of approval for us or our partners and distributors to market our products in some or all jurisdictions or for certain indications, which could cause us to be unable to successfully commercialize SDC or otherwise achieve revenues from sales of such products.

We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality processes, and our partners, including our third-party manufacture, failure to comply with applicable quality standards could affect our ability to commercialize SDC products.

The EPA and other applicable U.S. and foreign government agencies regulate our and our partners’ systems and processes for including those of ICC, manufacturing SDC-based products. These regulations require that we and our partners observe “good manufacturing practices” in order to ensure product quality, safety and effectiveness. Failure by us or our partners to comply with current or future government regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns, product recalls or related field actions, product shortages, and/or delays in product manufacturing, any or all of which could cause significant cost to us. Further, efficacy or safety concerns and/or manufacturing quality issues with respect to our products or those of our partners could lead to product recalls, fines, withdrawal of approvals, and/or declining sales, any or all of which could result in our failure to successfully commercialize SDC or otherwise achieve revenue growth.

Pricing and supply issues may have a material impact on our margins and our ability to supply our customers.

All of the supply ingredients used to manufacture our products are available from multiple suppliers. However, commodity prices for some ingredients can vary significantly and the margins that we are able to generate could decline if prices rise. For example, both silver and citric acid prices have been volatile in recent periods.

In addition to such commodities, for finished products we also rely on producers of specialized packaging inputs such as bottles and labels. Due to their specialized nature, the supply of such inputs can be periodically constrained and result in additional costs to obtain these items, which may in turn inhibit our ability to supply products to our customers.

We are generally unable to raise our product prices to our customers, partners and distributors quickly to maintain our margins, and significant price increases for key inputs could therefore have an adverse effect on our results of operations. Price increases can also result in lost sales, and any inability to supply our customers’ orders can lead to lost future sales to such customers.

While we expect to be the sole source supplier of SDC concentrate, in future periods we may use third parties to blend, package and provide fulfillment activities for our finished products. We expect that our margins would be reduced by using such third parties, and our ability to maintain product quality may not be as extensive or effective as when we produce these products in our own facility(ies). Any quality control issues could lead to product recalls and/or the loss of future sales, which would reduce our revenues and/or profits.

If we suffer negative publicity concerning the safety or efficacy of our products, our sales may be harmed.

If concerns should arise about the safety or efficacy of any of our products that are marketed, regardless of whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research, such concerns could adversely affect the market for those products. Similarly, negative publicity could result in an increased number of product liability claims, whether or not those claims are supported by applicable law.

Third parties may claim that we infringe their proprietary rights and may prevent us from manufacturing and selling some of our products.

Our manufacture, use and sale of SDC-based products may subject us to lawsuits relating to the validity and infringement of patents or other proprietary rights of third parties. Litigation may be costly and time-consuming, and could divert the attention of our management and technical personnel. If we are found to have violated the trademark, trade secret, copyright, patent or other intellectual property or proprietary rights of others, such a finding could result in the need to cease use of a trademark, trade secret, copyrighted work or patented invention in our business and our obligation to pay a substantial amount for past infringement. If the rights holders are willing to permit us to continue to use their intellectual property rights, it may be necessary for us to enter into license arrangements with unfavorable terms and pay substantial amounts in royalty and other license fees. Either having to cease use or pay such fees could prevent us, or our third-party manufacture, from manufacturing and selling our products, which could make us much less competitive in our industry and have a material adverse impact on our business, operating results and financial condition.

We may become subject to product liability claims.

As a business that manufactures and markets products for use by consumers and institutions, we may become liable for any damage caused by our products, whether used in the manner intended or not. Regardless of merit or potential outcome, product liability claims against us may result in, among other effects, the inability to commercialize our products, impairment of our business reputation, and distraction of management’s attention from our primary business. If we cannot successfully defend ourselves against product liability claims we could incur substantial liabilities. Although we maintain general and product liability insurance, our insurance may not cover potential claims and may not be adequate to indemnify for liabilities that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could harm our business and operating results.

Litigation or the actions of regulatory authorities may harm our business or otherwise distract our management.

Substantial, complex or extended litigation could cause us to incur major expenditures and would distract our management. For example, lawsuits against us or our officers or directors by employees, former employees, stockholders, partners, customers, or others, or actions taken by regulatory authorities, could be very costly and substantially disrupt our business. Such lawsuits and actions are not uncommon, and we may not be able to resolve such disputes or actions on terms favorable to us, and there may not be sufficient capital resources available to defend such actions effectively, or at all.

Maintaining compliance with our obligations as a public company may strain our resources and distract management, and if we do not remain compliant our stock price may be adversely affected.

Our common stock is registered under the Exchange Act. It is therefore subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act. Both the U.S. Congress and the SEC continue to issue new and proposed rules, and complying with existing and new rules has caused, and will continue to cause, us to devote significant financial and other resources to maintain our status as a public company. These regulatory costs and requirements will continue to increase our losses in future periods, and we expect that an increasing amount of management time and effort will be needed to meet our regulatory obligations. In addition, in April 2008 we obtained a listing of our common stock on The NASDAQ Capital Market, adding the additional cost and administrative burden of maintaining such a listing. Such costs significantly increased during the period between September 2011 and September 2012 due to a series of notices and a lengthy appeal process in connection with the potential delisting of our common stock from The NASDAQ Capital Market. However, NASDAQ delisted us and suspended trading in our securities effective with the open of business on Friday, May 17, 2013 as a result of our determination that we would be unable to evidence compliance with the $2.5 million stockholders’ equity requirement for continued listing on The NASDAQ Capital Market by June 18, 2013. On May 17, 2013 our common stock began trading on the OTCQB marketplace.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate our internal control systems and that management report on and attest to the adequacy of our internal controls. Recent SEC pronouncements suggest that in the next several years we may be required to report our financial results using new International Financial Reporting Standards, replacing GAAP, which would require us to make significant investments in training, hiring, consulting and information technology, among other investments. All of these and other reporting requirements and heightened corporate governance obligations that we face, or may face in the future, will further increase the cost to us, perhaps substantially, of remaining compliant with our obligations under the Exchange Act and other applicable laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act of 2010. In order to meet these incremental obligations, we will need to invest in our corporate and accounting infrastructure and systems, and acquire additional services from third party auditors and advisors. As a result of these requirements and investments, we may incur significant additional expenses and may suffer a significant diversion of management’s time. There is no guarantee that we will be able to continue to meet these obligations in a timely manner. If we fail to do so, we could be subject to sanctions or investigation by regulatory authorities such as the SEC. Any such actions could adversely affect the market price of our common stock, perhaps significantly.

Our publicly-filed reports are reviewed from time to time by the SEC, and any significant changes or amendments required as a result of any such review may result in material liability to us and may have a material adverse impact on the trading price of our common stock.

The reports and other securities filings of publicly-traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements. The SEC is required, pursuant to the Sarbanes-Oxley Act of 2002, to undertake a comprehensive review of a company’s reports at least once every three years, although an SEC review may be initiated at any time. While we believe that our previously filed SEC reports comply, and we intend that all future reports will comply, in all material respects with the published rules and regulations of the SEC, we could be required to modify, amend or reformulate information contained in our filings as a result of any SEC review. Any modification, amendment or reformulation of information contained in such reports could be significant and result in material liability to us and have a material adverse impact on the trading price of our common stock.

If we are unable to build and integrate our new management team, our business could be harmed.

As previously announced on our Form 8-K filed with the SEC on August 20, 2013 and as described elsewhere in this Report, on August 13, 2013, Michael L. Krall, Donna Singer, and Dennis Atchley resigned all positions respectively held by them as officers of the Company and as members of the Board. Mr. Krall previously served as our Chief Executive Officer and interim Chief Financial Officer and on the Board. Ms. Singer served as our Executive Vice President and as a member of the Board and Mr. Atchley served as Corporate Secretary. Simultaneously with the resignations, Dave Pfanzelter was appointed by the Board to serve as Interim Chief Executive Officer and Chairman of the Board, Peter C. Wulff was appointed by the Board to serve as Chief Financial Officer, Chief Operating Officer, and Corporate Secretary and Gary D. Cohee was appointed by the Board to serve as a member of the Board.

In October 2013, we appointed three additional members to the Board: Dr. David Theno, Jr., Craig Culver and William Otis.

Our success depends largely on the execution of our business strategy by our management team. Management will be evaluating how to best execute our near-term strategy to drive customer adoption in the food industry by addressing food safety solutions across the supply chain in order to prevent or mitigate food contamination or the potential for food-borne illness – with specific customer focus in foodservice providers, food processors and food manufacturers. However, we cannot assure you that management will succeed in driving customer adoption in the food industry or generally execute on our business strategy in the near-term or at all, which could harm our business and financial prospects . Further, integrating new management into existing operations may be challenging. If we are unable to effectively integrate our new management, our operations and prospects could be harmed.

We depend on key personnel for our continued operations and future success, and a loss of certain key personnel could significantly hinder our ability to move forward with our business plan.

Our success depends largely upon the continued services of our executive officers and other key personnel. Our executive officers and key personnel could terminate their employment with us at any time without notice and without penalty.

We do not maintain key person life insurance policies on our executive officers or other employees. The loss of one or more of our executive officers or key employees could seriously harm our business, results of operations, financial condition, and/or the market price of our common stock. We cannot assure you that in such an event we would be able to recruit qualified personnel able to replace these individuals in a timely manner, or at all, on terms acceptable to either us or to any qualified candidate.

Because competition for highly qualified business development and bioengineering personnel is intense, we may not be able to attract and retain the employees we need to support our potential growth.

To successfully meet our objectives, we must continue to attract and retain highly qualified business development and bioengineering personnel with specialized skill sets focused on the industries in which we compete, or intend to compete. Competition for qualified business development and bioengineering personnel can be intense. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top quality people with advanced skills who understand our technology and business. In addition, it takes time for our new personnel to become productive and to learn our business. If we are unable to hire or retain qualified business development and bioengineering personnel, it will be difficult for us to sell our products or to license our technology or to achieve or maintain regulatory approvals, and we may experience a shortfall in revenue and not achieve our anticipated, or any, growth.

We have recently had significant changes to the composition of our Board of Directors.

On August 13, 2013, Michael L. Krall, Donna Singer, and Dennis Brovarone resigned as members of the Board. Subsequently on September 10, 2013, the Board appointed Henry R. Lambert to serve as Chief Executive Officer and a member of the Board. In October 2013, the Board appointed three additional members to the Board: Dr. David Theno, Craig Culver and Bill Otis. Following such resignations and appointments, the Board consists of six directors, four of whom are independent within the meaning of SEC rules.

The transition in the composition of our Board and its committees may result in inefficiencies in Board activity, disagreements regarding our business models or other operational strategies, and disruptions to our business, which may have an adverse effect on our business strategy and results of operations.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

From time to time we may consider engaging in strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including, among others, exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to develop acquired products, product candidates or technologies, difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel, and inability to retain key employees of any acquired businesses. Accordingly, although we may not choose to undertake or may not be able to successfully complete any transactions of the nature described above, any transactions that we do undertake or complete could have a material adverse effect on our business, results of operations, financial condition and prospects.

We may invest or spend our cash in ways with which you may not agree or in ways which may not yield a significant return.

Our management has considerable discretion in the use of our cash. Our cash may be used for purposes that do not increase our operating results or market value. Until the cash is used, it may be placed in investments that do not produce significant income or that may lose value. The failure of our management to invest or spend our cash effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.

We may not be able to utilize all, or any, of our tax net operating loss carry-forwards and our future after-tax earnings, if any, could be reduced.

At July 31, 2013, we had federal and California tax net operating loss carry-forwards of approximately $75.5 million and $66.8 million, respectively. Utilization of these net operating loss carry-forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code as well as similar state provisions. These ownership changes may limit the amount of net operating loss carry-forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 of the Internal Revenue Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since our formation, we have raised capital through the issuance of capital stock on several occasions (both before and after our initial public offering in 1996) which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future based upon subsequent disposition. While we believe that we have not experienced an ownership change, the pertinent tax rules related thereto are complex and subject to varying interpretations, and thus the applicable taxing authorities may take an alternative position.

Our current federal tax loss carry-forwards began expiring in the year ended July 31, 2011 and, unless previously utilized, will completely expire in the year ending July 31, 2032. The balance of our current federal net operating loss carry-forwards will expire between July 31, 2018 and July 31, 2032. Our California tax loss carry-forwards will begin to expire in the year ending July 31, 2014, and will completely expire in the year ending July 31, 2032. If we are unable to earn sufficient profits to utilize the carry-forwards by these dates, they will no longer be available to offset future profits, if any.

We are subject to tax audits by various tax authorities in multiple jurisdictions.

From time to time we may be audited by tax authorities to whom we are subject. Any assessment resulting from such audits, if any, could result in material changes to our past or future taxable income, tax payable or deferred tax assets, and could require us to pay penalties and interest that could materially adversely affect our financial results.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain or defend the patent and other intellectual property rights relating to our technology, we or our collaborators and distributors may not be able to develop and market proprietary products based on our technology, which would have a material adverse impact on our results of operations.

We rely and expect in the future to continue to rely on a combination of patent, trademark, trade secret and copyright protections, as well as contractual restrictions, to protect the proprietary aspects of our technology and business.

Legal protections of our intellectual property and proprietary rights afford only limited protection. For instance, we currently own nine U.S. patents related to our SDC technology. The lives of these patents, and any patents that we may obtain in the future, are not indefinite, and the value to us of some or all of our patents may be limited by their terms. Further, although we have a number of U.S. and international patent applications pending, some or all of those applications may not result in issued patents, and the intellectual property claims therein would be unprotected. Additionally, obtaining and maintaining patent protection depends on our compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Furthermore, the patent positions of bioscience companies can be highly uncertain and often involve complex legal, scientific and factual questions, and, therefore, we cannot predict with certainty whether we will be able to ultimately enforce our patents or other intellectual property rights. Third parties may challenge, invalidate or circumvent our patents and patent applications relating to our products, product candidates and technologies. In addition, our patent positions might not protect us against competitors with similar products or technologies because competing products or technologies may not infringe our patents.

From time to time, U.S. and other policymakers have proposed reforming the patent laws and regulations of their countries. In September 2011, after years of Congressional debate regarding patent reform legislation, President Obama signed into law the America Invents Act (the Act) considered by many to be the most substantial revision of U.S. patent law since 1952. The Act’s various provisions will go into effect over an 18-month period. The Act changes the current “first-to-invent” system to a system that awards a patent to the “first-inventor-to-file” for an application for a patentable invention. This change alters the pool of available materials that can be used to challenge patents and eliminates the ability to rely on prior research work in order to lay claim to patent rights. Disputes as to whether the first filer is in fact the true inventor will be resolved through newly implemented derivation proceedings. The Act also creates mechanisms to allow challenges to newly issued patents in the patent office in post-grant proceedings and new inter partes reexamination proceedings. Although many of the changes bring U.S. law into closer harmony with European and other national patent laws, the new bases and procedures may make it easier for competitors to challenge our patents, which could result in increased competition and have a material adverse effect on our product sales, business and results of operations. The changes may also make it harder to challenge third-party patents and place greater importance on being the first inventor to file a patent application on an invention.

In addition, to the extent that we operate internationally, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the U.S. As stated above, many countries have a “first-to-file” trademark registration system, which may prevent us from registering or using our trademarks in certain countries if third parties have previously filed applications to register or have registered the same or similar trademarks. Additionally, changes in the patent and/or trademark laws or interpretations of such laws in the U.S. or other countries could diminish the value of our intellectual property rights. Moreover, our competitors may develop competing technologies that are not covered by the claims of, and therefore do not infringe upon, our issued patents, which could render our patents less valuable to us. If certain of our proprietary rights cannot be, or are not sufficiently, protected by patent and trademark registrations, it could have a material adverse impact on our business and our ability to commercialize or license our technology and products.

Our own efforts to protect our intellectual property and other proprietary rights may also be insufficient. Despite efforts to protect our proprietary rights, including without limitation through confidentiality and other similar contractual restrictions, our means of protecting such rights may not be adequate and unauthorized parties may attempt to copy aspects of our proprietary technology, obtain and use information that we regard as proprietary, or otherwise misappropriate our intellectual property. In addition, unpatented proprietary rights, including trade secrets and know-how, can be difficult to protect and may lose their value if they are independently developed by a third party or if their secrecy is lost. It is possible that, despite our efforts, competitors or others will create and use products, adopt service names similar to our service names or otherwise violate or misappropriate our proprietary rights. The infringement of such rights could have a material negative impact on our business and on our results of operations.

Litigation may be necessary to enforce our intellectual property and other proprietary rights, which would be expensive and could consume time and other resources. The result of any such litigation may be the court’s ruling that our patents or other intellectual property rights are invalid and/or should not be enforced. Additionally, even if the validity of such rights is upheld, the court could refuse to stop a third party’s infringing activity on the ground that such activities do not infringe our rights. The U.S. Supreme Court has recently revised certain tests regarding granting patents and assessing the validity of patents to make it more difficult to obtain patents. As a consequence, issued patents may be found to contain invalid claims according to the newly revised standards. Some of our patents may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a reexamination proceeding, or during litigation, under the revised criteria.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use, our technology.

If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to these patents.

Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our products. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Because some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, and publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the PTO, to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete.

We may rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and we cannot be certain that others will not develop the same or similar technologies on their own. We have taken steps, including entering into confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors, to protect our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived by the

party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets or know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is common in the biotechnology, food, chemical and pharmaceutical industries, we employ individuals who were previously employed at other biotechnology, food, chemical or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Risks Related to our Common Stock

We failed to meet applicable NASDAQ Stock Market requirements and as a result we delisted our stock from The NASDAQ Capital Market, which could adversely affect the market liquidity of our common stock and harm our businesses.

On May 15, 2013, we received a letter indicating that the NASDAQ Listing Qualifications Panel (the “Panel”) determined to delist our common stock from The NASDAQ Stock Market LLC. Trading in our securities on NASDAQ was suspended effective with the open of business on Friday, May 17, 2013. The suspension was the result of our determination that we would be unable to evidence compliance with the $2.5 million stockholders’ equity requirement for continued listing on The NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b), by June 18, 2013, as required by the Panel’s decision in this matter. On May 17, 2013, our common stock began trading on the OTC Markets’ OTCQB marketplace under the ticker symbol “PURE”. We continue to file periodic reports with the Securities and Exchange Commission in accordance with the requirements of Section 12(g) of the Securities Exchange Act of 1934, as amended.

Our delisting from The NASDAQ Capital Market and commencement of trading on the OTCQB Marketplace has resulted and may continue to result in a reduction in some or all of the following, each of which could have a material adverse effect on our stockholders:

•

the liquidity of our common stock;

•

the market price of shares of our common stock;

•

our ability to obtain financing for the continuation of our operations;

•

the number of institutional and other investors that will consider investing in shares of our common stock;

•

the number of market markers in shares of our common stock;

•

the availability of information concerning the trading prices and volume of shares of our common stock; and

•

the number of broker-dealers willing to execute trades in shares of our common stock.

Following the delisting of our common stock from The NASDAQ Capital Market, our common stock is deemed to be “penny stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.

As a result of the delisting of our common stock from the NASDAQ, shares of our common stock are subject to the so-called “penny stock” rules as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.

Broker-dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stock. Moreover, broker-dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. Such requirements may discourage broker-dealers from effecting transactions in our common stock, which could limit the market price and liquidity of our common stock.

The price of our common stock may be volatile, which may cause investment losses for our stockholders.

The price and trading volume of our common stock have historically been volatile. For example, in the twelve months through January 31, 2014, the closing market price of our common stock ranged from $0.32 per share to $1.65 per share, and the monthly trading volume varied from approximately 579,000 shares to 1,971,000 shares. The market price of our common stock may continue to be volatile and could fluctuate substantially due to many factors, including, among others, the following:

•

actual or anticipated fluctuations in our results of operations;

•

the determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules, likely resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;

•

the sale by us of our common or preferred stock or other securities, or the anticipation of sales of such securities;

•

the trading volume of our common stock, particularly if such volume is light;

•

the trading market of our common stock;

•

the introduction of new products or services, or product or service enhancements by us or our competitors;

•

developments with respect to our or our competitors’ intellectual property rights or regulatory approvals or denials;

•

announcements of significant acquisitions or other agreements by us or our competitors;

•

sales or anticipated sales of our common stock by our insiders (management and directors);

•

conditions and trends in our industry;

•

changes in our pricing policies or the pricing policies of our competitors;

•

changes in the estimation of the future size and growth of our markets; and

•

general economic conditions.

In addition, the stock market in general, the OTCQB, and the market for shares of novel technology and biotechnology companies in particular, have experienced extreme price and volume fluctuations that in some cases may be unrelated or disproportionate to the operating performance of those companies. Further, the market prices of bioscience companies’ stock have been unusually volatile in recent periods, and such volatility may continue for the foreseeable future. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In addition, this volatility could adversely affect an investor’s ability to sell shares of our common stock, and/or the available price for such shares, at any given time.

Following periods of volatility in the market price of a company’s securities, stockholder derivative lawsuits and securities class action litigation are common. Such litigation, if instituted against us or our officers and directors, could result in substantial costs and a diversion of management’s attention and resources.

Potential future sales or issuances of our common stock to raise capital, or the perception that such sales could occur, could cause dilution to our current stockholders and the price of our common stock to fall.

Although we are pursuing various sources of potential funding, we have historically supported our operations through the issuance of equity and expect to continue to do so in the future. Although we may not be successful in obtaining financing through equity sales on terms that are favorable to us, if at all, any such sales that do occur could result in substantial dilution to the interests of existing holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock or other equity securities to any new investors, or the anticipation of such sales, could cause the trading price of our common stock to fall.

We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

The continued operation and expansion of our business will require substantial funding. Investors seeking cash dividends in the foreseeable future should not purchase our common stock. We have paid no cash dividends on any of our capital stock to date and we currently intend to retain our available cash to fund the development and growth of our business. Any determination to pay dividends in the future will be at the discretion of our Board and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, which may never occur.

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control and could also limit the market price of our stock.

Certain provisions of our charter and bylaws may delay or frustrate the removal of incumbent directors and may prevent or delay a merger, tender offer, or proxy contest involving us that is not approved by our Board, even if such events may be beneficial to the interests of stockholders. For example, our Board, without stockholder approval, has the authority and power to authorize the issuance of up to 5,000,000 shares of preferred stock and such preferred stock could have voting or conversion rights that could adversely affect the voting power of the holders of our common stock. Further, the one-for-eight reverse stock split of our outstanding common stock that we recently effected has increased the proportion of unissued and authorized

common shares to issued and outstanding common shares, which could allow our Board to issue large numbers of additional shares of our common stock that could significantly reduce the voting power of our current stockholders. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our charter documents may make it more difficult for stockholders or potential acquirers to initiate actions that are opposed by our then-current board of directors, including delaying or impeding a merger, tender offer, or proxy contest or other change of control transaction involving the Company. Any delay or prevention of a change of control transaction could cause stockholders to lose a substantial premium over the then-current market price of their shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended January 31, 2014, we completed private placements pursuant to which we sold 1,611,817 shares of our common stock, resulting in approximately $1,514,000 in aggregate proceeds to the Company. After deducting fees of $13,000, the net proceeds to us were $1,501,000. The shares of common stock issued under the private placements were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. We have used, and intend to continue to use, the remaining proceeds from the offering for working capital and general corporate purposes.

During December 2013, the purchase price for the investors who participated in the $0.75 per share private placements was reduced to $0.70 per share in consideration for those investors agreeing to waive their registration rights they obtained when they initially invested in the Company’s securities. As a result, the investors received an additional 218,938 shares of unregistered common stock.

During the three months ended January 31, 2014, we issued 25,667 shares of unregistered common stock, valued at $31,000, to Mr. Cohee and/or his affiliates for financial advisor services pursuant to the terms of his letter agreement. The fair value of $25,000 was offset to additional paid-in capital. Mr. Cohee is a member of our Board. The shares of common stock were issued without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of the investor to the Company that he is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements.

Subsequent to our fiscal quarter ended January 31, 2014, and prior to March 7, 2014 we received approximately $1,320,000 from the sale of 1,350,000 shares of our common stock in private placements. The shares of common stock issued were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The securities may not be offered or sold in the United States without an effective registration statement or pursuant to an exemption from applicable registration requirements. We have used, and intend to continue to use, the remaining proceeds from the offering for working capital and general corporate purposes.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Reference to unregistered sales of equity securities subsequent to our fiscal quarter ended January 31, 2014 is incorporated by reference in this Item 5.

Item 6. Exhibits

The following Exhibits are filed as part of this report pursuant to Item 601 of Regulation S-K:


3.1		Certificate of Incorporation of Pure Bioscience, Inc. (incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K filed with the SEC on October 29, 2012)

3.1.1		Certificate of Amendment to Certificate of Incorporation of Pure Bioscience, Inc. (incorporated by reference to Exhibit 3.1.1 of the Annual Report on Form 10-K filed with the SEC on October 29, 2012)

3.2		Bylaws of Pure Bioscience, Inc. (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K, filed with the SEC on October 29, 2012)

3.2.1		Amendment to the Bylaws of Pure Bioscience, Inc. (incorporated by reference to Exhibit 3.2.1 to the Annual Report on Form 10-K, filed with the SEC on October 29, 2012)

4.1		Form of Investor Warrant (incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K, filed with the SEC on May 22, 2009)

4.2		Form of Investor Warrant (incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K, filed with the SEC on September 2, 2009)

10.1		Form of Subscription Agreement, dated November 18, 2013 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on November 18, 2013)

10.2*		Payoff Agreement, dated as of December 18, 2013, by and between Pure Bioscience, Inc. and Morrison & Foerster LLP.

10.3*+		Strategic Collaboration Agreement, dated December 11, 2013, by and between Pure Bioscience, Inc. and Intercon Chemical Company.

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 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at January 31, 2014 and July 31, 2013; (ii) Consolidated Statements of Operations for the three and six months ended January 31, 2014 and 2013; (iii) Consolidated Statements of Cash Flows for the six months ended January 31, 2014 and 2013; and (iv) Notes to Consolidated Financial Statements.

*	Filed herewith.

+	This exhibit has been filed separately without redaction pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Signatures

Pursuant to the requirement 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.


			PURE BIOSCIENCE, INC.

Date:	March 13, 2014	By:	/s/ HENRY R. LAMBERT
			Henry R. Lambert, Chief Executive Officer (Principal Executive Officer)

Date:	March 13, 2014	By:	/s/ PETER C. WULFF
			Peter C. Wulff, Chief Financial Officer / Chief Operating Officer
			(Principal Financial and Accounting Officer)

Exhibit 10.2

PROMISSORY NOTE PAYOFF AGREEMENT

Morrison & Foerster LLP (“ Holder ”), states as follows:

1. That Holder is the legal and beneficial holder of a certain Promissory Note dated on or about January 25, 2013 in the principal amount of $1,125,000 (“ Note ”) made by Pure Bioscience, Inc., a Delaware corporation (the “ Maker ”).

2. That neither the Note nor any of the rights of the Holder thereunder have been sold, assigned, hypothecated, pledged or otherwise transferred or disposed of by Lender to anyone whomsoever.

3. Upon receipt of $500,000.00 by Holder, on or about December 23, 2013, Holder agrees that the Note has been paid and fully satisfied in all respects, and Holder releases all claims for payment of monies due under the Note.

4. Holder hereby agrees to execute and deliver such further documents and instruments, and to take such further actions as may be reasonable and necessary to fully implement the provisions of this Promissory Note Payoff Agreement.

Dated: December 18, 2013


HOLDER: Morrison & Foerster LLP

/s/ Patrick M. Cavaney
By:		Patrick M. Cavaney
Title:		Chief Operating Officer


ACKNOWLEDGED: Pure Bioscience, Inc.

/s/ Peter C. Wulff
By:		Peter C. Wulff
Title:		Chief Financial Officer and Chief Operating Officer

Exhibit 10.3

CONFIDENTIAL

Final Execution Copy December 11 2013

STRATEGIC COLLABORATION AGREEMENT

THIS STRATEGIC COLLABORATION AGREEMENT (this “ Agreement ”), effective as of December 11, 2013 (the “ Effective Date ”), is made by and between Pure Biosciences, Inc., a Delaware corporation having a place of business at 1725 Gillespie Way, San Diego, CA 92020 (“ Pure ”), and Intercon Chemical Company, a Missouri S corporation having a place of business at 1100 Central Industrial Drive, St. Louis, MO 63110, and its Affiliates (as defined below) (“ ICC ”). Pure and ICC may each be referred to herein individually as a “ Party ” and collectively as the “ Parties ”.

WHEREAS, Pure owns or controls certain intellectual property related to silver di-hydrogen citrate (“ SDC ”) and its finished form of antimicrobial products;

WHEREAS, ICC is engaged in the manufacture, packaging, marketing and distribution services of products such as the products developed and commercialized by Pure; and

WHEREAS, the Parties are entering into an agreement under which Pure will sell to ICC certain assets related to the manufacture of products containing SDC (the “ Asset Purchase Agreement ”);

WHEREAS, the Parties desire to enter into a relationship for the manufacturing, supply, promotion and distribution of Products (as defined below), all on the terms and conditions of this Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows:

1.	DEFINITIONS

1.1 “ Affiliate ” means with respect to a particular Party, any Person which controls, is controlled by or is under common control with such Party, for so long as such control exists. For purposes of this definition only, “control” shall mean direct or indirect ownership of fifty percent (50%) or more (or, if less than fifty percent (50%), the maximum ownership interest permitted by applicable Law) of the stock or shares having the right to vote for the election of directors of such corporate entity, or the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, Clearly Better, LLC is an Affiliate of ICC.

1.2 “ Applicable Law ” means, individually and collectively, any and all laws, ordinances, orders, rules, rulings, directives and regulations of any kind whatsoever of any Government Authority or Regulatory Agency within the applicable jurisdiction that are applicable to the specific activities being undertaken pursuant to this Agreement.

1.3 “ Commercialize ” or “ Commercialization ” means those activities comprising or relating to the promotion, marketing, advertising, distribution and sale of Products.

1.4 “ Commercially Reasonable Efforts ” means with respect to the efforts to be expended by any Party with respect to any objective, those reasonable, diligent, good faith

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efforts to accomplish such objective as such Party would under similar circumstances normally use to accomplish a similar objective that such Party is highly motivated to achieve. With respect to any objective relating to the Commercialization of a Product by any Party, “Commercially Reasonable Efforts” shall mean those efforts and resources normally used by such Party with respect to a product owned or controlled by such Party and considered by it to be among its principal or lead products.

1.5 “ Consignment Inventory ” means Pure’s inventory of Product existing as of the Effective Date stored at ICC Facility.

1.6 “ Defect ” means damage, nonconformance, or other defect in or relating to the manufacturing and packaging of Product, excluding freight and transit damages. Product that is subject to a Defect is considered “ Defective ”.

1.7 “ Deficiency Notice ” means a written notice from Pure claiming (a) a Defect or (b) shortages in the amount of delivered Product.

1.8 “ Distribution Channel ” means the channel for the distribution of the Product within each of the ICC Field and Pure Field as indicated in Exhibit B .

1.9 “ Facility ” means ICC’s facility located at 1100 Central Industrial Drive, St. Louis, MO 63110.

1.10 “ Field ” means the ICC Field and the Pure Field, both of which are subject to customer-specific exceptions as listed in Exhibit C .

1.11 “ Government Authority ” means any multi-national, federal, state, local, municipal or other government authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).

1.12 “ ICC Field ” means the field in which ICC has the exclusive or non-exclusive right to distribute the Product through the Distribution Channel, which field is set forth in Exhibit B , which may be amended from time to time upon mutual written approval by the Management Committee.

1.13 “ Information ” means any and all data, results, improvements, processes, methods, protocols, formulas, inventions, know-how, trade secrets and any other information, patentable or otherwise, which may include scientific, research and development, manufacturing know-how, pre-clinical, clinical, regulatory, manufacturing, and safety information or data.

1.14 “ Licensed Know-How ” means any and all proprietary Information owned or controlled by Pure that relates directly to the use or practice of the Licensed Patents and/or is otherwise necessary to Manufacture the Product.

1.15 “ Licensed Patents ” means (a) the patents and patent applications that are owned or controlled by Pure or any of its Affiliates that are necessary for the Manufacture or Commercialization of the Product, including the patents set forth in Exhibit D ; (b) all additional patent applications based on or relating to the patents and applications set forth in subclause (a)

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herein; and (c) any reissues, reexaminations, renewals, extensions, substitutions, divisionals, continuations, or continuations-in-part of any thereof

1.16 “ Licensed Technology ” means the Licensed Patents and Licensed Know-How.

1.17 “ Management Committee ” means the committee formed by the Parties as described in Section 2.1.

1.18 “ Manufacture ” or “ Manufacturing ” means activities directed to producing, manufacturing, processing, filling, finishing, packaging, labeling, quality assurance testing and release, shipping and delivery of the Product.

1.19 “ Net Sales ” means all amounts invoiced on sales of Products by ICC, its Affiliates or sublicensees to Third Parties, less the following deductions actually allowed and taken by such Third Parties and not otherwise recovered by or reimbursed to the seller whose sales are being measured:

(a) trade, quantity, cash discounts, and group purchasing organization fees and/or discounts;

(b) credits and allowances to customers on account of rejection or returns or retroactive price reductions;

(c) freight, postage and transportation charges including handling and insurance to the extent added to the sales price and set forth separately as such in the total amount invoiced; and

(d) sales (such as VAT or its equivalent) and excise taxes, other consumption taxes and customs duties to the extent added to the sales price and set forth separately as such in the total amount invoiced.

Sales between ICC, its Affiliates and sublicensees for resale shall be excluded from the computation of Net Sales. In any other sale of Products that is made on other than arms’ length terms, the amounts invoiced shall be deemed, for purposes of this definition, no less than the amount that would be invoiced in a substantially contemporaneous, arms’ length transaction.

1.20 “ Person ” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization, including a government or political subdivision, department or agency of a government.

1.21 “ Product ” means any currently existing product containing SDC. As of the Effective Date, the Products are as set forth in Exhibit A .

1.22 “ Product Label ” means the labels and other written, printed or graphic information placed upon any container, wrapper or package used with or for the Product in the Field, as approved by applicable Government Authorities or Regulatory Agencies.

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1.23 “ Pure Field ” means the field in which Pure has the exclusive or non-exclusive right to distribute the Product through the Distribution Channel, which field is set forth in Exhibit B , which may be amended from time to time upon mutual written approval by the Management Committee.

1.24 “ Registration ” means all registrations with the applicable Government Authorities or Regulatory Agencies as required by Applicable Law for Manufacturing and Commercializing the Product in the Field in the Territory.

1.25 “ Regulatory Agency ” means any regulatory authority involved in regulating any aspect of the conduct, Manufacture, market approval, Commercialization, or use of the Product. In certain situations, the Regulatory Agency may be a Government Authority.

1.26 “ SDC Concentrate ” means Pure’s patented antimicrobial, water soluble, silver salt of citric acid based on a stabilized silver ion complex produced at various concentrations by a unique electrochemical process involving silver and citric acid; this substance is used as a raw material in the production of various products and use dilutions and distributed under multiple brand names.

1.27 “ SOPs ” means Pure’s processes and procedures for the manufacture of Product, including the Quality and Environmental Guidelines, Batch Record Requirements, Testing Procedures, Equipment Specifications, Validation of Equipment Cleaning and Maintenance Processes, as set forth in Exhibit E or otherwise provided by Pure to ICC.

1.28 “ Specifications ” means the bill or materials and specifications for the Product(s) and the packaging as set forth in Exhibit F or otherwise provided by Pure to ICC.

1.29 “ Term ” means the Initial Term and any Renewal Term.

1.30 “ Territory ” means: (i) the United States and Canada and other specified countries as mutually agreed upon in writing between the parties for the ICC Field (the “ ICC Territory ”); and (ii) worldwide for the Pure Field (the “ Pure Territory ”).

1.31 “ Third Party ” means any Person other than Pure and its Affiliates and ICC and its Affiliates.

1.32 “ Trademark ” means the trademarks, trade names, designs and markings designated by Pure that are for use on or in connection with the Product.

1.33 “ Transfer Price ” means the direct materials costs (as per the Product’s bill of material and applicable scrap allowances), plus conversion costs as detailed in Exhibit G .

2.	GOVERNANCE

2.1 Establishment and Composition . Promptly after the Effective Date, the Parties shall establish a Management Committee of six (6) committee members to oversee and control the implementation of this Agreement between the Parties. The Management Committee shall consist of three (3) representatives designated by each Party, specifically the Chief Executive Officer, Chief Financial Officer and Executive Vice President of Sales. If a representative of a

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Party is unable to attend a meeting, such Party may designate an alternate representative to attend such meeting. The Management Committee shall have a secretary, who shall be an employee of the designating Party, shall serve for a term of one (1) year, and shall be selected alternately, on an annual basis, by either Party. The initial secretary shall be designated by Pure. The role of the secretary shall be to prepare and circulate agendas no later than three (3) days prior to the meeting and to ensure the preparation of minutes and any corrections thereto, but the secretary shall have no additional powers or rights beyond this role.

2.2 Scope of Authority and Responsibilities . The Management Committee shall monitor and coordinate performance under this Agreement and shall, subject to Section 2.3, have decision-making authority for specific business aspects concerning the Manufacture and Commercialization of the Product in the Field in the Territory, including:

(a) discuss and resolve any Manufacturing and Commercialization issues that arise during the Term;

(b) review and approve inventory levels and disposition strategies of any inventory held in excess of three (3) months of procurement or production;

(c) review and approve ICC’s use of the Trademark in the ICC Field, including brand marketing and positioning, to ensure consistency with Pure’s global brand strategy;

(d) approve any changes to the SOPs or Specifications;

(e) review and discuss ICC’s diligence efforts in Commercializing the Product in the ICC Field;

(f) review and approve (i) the price for Products based on the applicable Field, and (ii) any changes in the Transfer Price;

(g) review and approve changes to the Field, including customer specific exceptions as amended in writing to Exhibit C;

(h) review and approve changes to the Territory as amended in writing to Exhibit B;

(i) review and approve any development activities to be undertaken by the Parties for other SDC-based products as specified in Article 8; and

(j) address such other issues and matters as are expressly specified in this Agreement or as the Parties may agree from time to time.

2.3 Limitations on Authority . Notwithstanding anything in this Agreement to the contrary, except as otherwise expressly provided in this Agreement, the Management Committee shall have no authority to amend or supplement this Agreement, nor to waive compliance with any provision of this Agreement except to the extent mutually agreed upon by the Parties and documented in a written amendment to this Agreement executed by authorized representatives of each Party.

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2.4 Meetings . The Management Committee shall meet no less frequently than monthly. A quorum of the Management Committee requires at least the Chief Executive Officer or the Chief Financial Officer of each Party be present at the meeting. Either Party may, at its discretion, invite a reasonable number of non-voting employees, consultants or advisors to attend the meeting of the Management Committee, provided that such invitees are bound by appropriate confidentiality obligations. Meetings may be conducted via videoconference, teleconference or in person. The Management Committee shall review and approve the meeting minutes for the prior meeting.

2.5 Decisions . The Management Committee may act only by consensus. The representatives from each Party will have, collectively, one (1) vote on behalf of that Party. If the Management Committee cannot reach consensus on an issue that comes before the Management Committee and over which the Management Committee has oversight, then such matter shall be referred to the Chief Executive Officers for discussion and resolution. If the Chief Executive Officers are unable to resolve such Dispute within thirty (30) days of initiating such negotiations, unless otherwise agreed by the Parties, the Management Committee may not take any action on such issue.

3.	LICENSE

3.1 Grant . Subject to the terms and conditions of this Agreement, including the rights reserved under Section 3.2, Pure hereby grants to ICC the following licenses:

(a) An exclusive, nontransferable, non-sublicensable right and license under the Licensed Technology for ICC to Manufacture the Product for use in the Field in the Territory. Notwithstanding the foregoing, with the exception of SDC Concentrate, ICC may subcontract certain packaging services subject to Pure’s review and approval, which approval will not be unreasonably withheld.

(b) An non-exclusive right and license, with the right to grant sublicenses, to Commercialize the Product solely in the ICC Field in the ICC Territory through the Distribution Channel, which may be amended on Exhibit B and Exhibit C for specific exclusivity from time to time upon mutual written consent by the Management Committee, which shall not be unreasonably withheld. The granting of right and licenses to other prospective sellers in the ICC Fields, Distribution Channels and Territory will also be subject to written consent of the Management Committee. In support of this Collaboration Agreement and the Parties respective commercialization efforts, both Parties will make all reasonable efforts to direct any and all inquiries from prospective customers in the PURE and ICC Fields and Distribution Channels, respectively, as listed on Exhibit’s B & C.

(c) A revocable, limited, non-exclusive, non-transferable license in the Territory to use the Trademarks solely for the Product Label and Commercialization of the Product in the ICC Field.

3.2 Retained Rights . Pure retains the right to Manufacture Product during the Term of this Agreement in the event ICC is unable to supply Product to Pure in accordance with Pure’s forecasted amounts as required by Section 6 of this Agreement.

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3.3 Option Grant . If Pure wishes to have products other than the Products manufactured, then Pure shall notify ICC in writing (such notification to provide information regarding the new product sufficient to allow ICC to make a determination regarding the processes, materials and costs associated with the manufacture of such product) and ICC has the right of first refusal for the manufacture of any such new Pure products, provided that (i) ICC notifies Pure in writing within a reasonable time frame, not to exceed ninety (90) days after delivery of Pure’s notice or such longer date as the Parties may agree, that ICC wishes to exercise such right, and (ii) the Parties agree in writing on the terms and conditions of such manufacture (such terms and conditions to be substantially similar to the manufacture terms and conditions of the Product) within a reasonable time frame, not to exceed ninety (90) days after the date ICC delivers such notice to Pure.

3.4 No Other License Rights . ICC acknowledges that the rights and licenses granted under this Article 3 are limited to the scope expressly granted. Accordingly, except for the rights expressly granted under this Article 3, no right, title or interest under any intellectual property of Pure or its Affiliates, of any nature whatsoever, is granted whether by implication, estoppel, reliance or otherwise, by Pure to ICC. All rights with respect to the Licensed Technology and Product Trademarks that are not specifically granted herein, including those rights expressly reserved to Pure pursuant to Section 3.2, are reserved to Pure.

3.5 Transfer of Licensed Know-How . As soon as is reasonably practicable after the Effective Date, Pure will provide to ICC copies of all Licensed Know-How then in existence and in tangible written or other documentary form and that is reasonably necessary, in Pure’s reasonable good faith discretion, for the Manufacture of Product by ICC.

4.	CONSIGNMENT INVENTORY

4.1 Storage . Pure may, at its cost at any time after the Effective Date upon reasonable advance notice to ICC, transfer to ICC the Consignment Inventory. ICC shall store the Consignment Inventory in a secure and segregated location in ICC’s control, under acceptable quality control storage conditions required for the Products. ICC shall bear the cost of such storage, except that ICC will have the right to charge Pure the following storage and disposal fees starting on or any time after March 31, 2014.

(a) disposal fees: ^***

(b) monthly storage: ***

4.2 Disposition . ICC shall retain the Consignment Inventory solely for use and distribution in accordance with this Agreement. The Management Committee will review and approve disposition strategies of any Consignment Inventory remaining at ICC as of March 31, 2014, and thereafter will review the Consignment Inventory on a quarterly basis.

4.3 Repackaging . If either Party requires that any Products within the Consignment Inventory be repackaged, then Pure will pay for such repackaging charges as follows: (i) repackaging costs incurred on behalf of ICC will be will be invoiced to Pure for such repackaged Products, and (ii) repackaging costs incurred by ICC on behalf of Pure will be invoiced to Pure

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for such repackaged Products. For the avoidance of doubt, repackaging costs will include the cost of materials and labor costs specifically incurred or expended for repackaging of Consignment Inventory, which costs shall be without overhead or other mark up and shall be approved by the Management Committee. The financial terms set forth in Article 9 are applicable to any sale of the Consignment Inventory.

4.4 Insurance . Pure will obtain and maintain property insurance coverage for the value of the Consignment Inventory for so long as such Consignment Inventory is held by ICC, and each such policy will name ICC as additional insured. Pure will provide proof to ICC of such insurance upon ICC’s request.

5.	MANUFACTURE

5.1 Facility . ICC shall bear, at its sole expense, the capital investment and related start-up production expenses necessary to prepare, validate and license the Facility for the Manufacture of Product, including construction build-out costs associated with adapting the Facility for the Manufacture of Products.

5.2 Production Transfer . Each Party shall use Commercially Reasonable Efforts to implement the following two-stage transfer for the Manufacture of SDC Concentrate:

(a) Stage 1 . By ^*** , the validation and qualification of ICC capability to produce SDC Concentrate within Specifications utilizing four of the original Pure reactors.

(b) Stage 2 . By no later than *** from the date of approved validation and qualification of Stage One, which approval shall be by written mutual consent of the Management Committee, the final installation of the remaining reactors and final transfer of all Manufacturing to the Facility.

5.3 Manufacturing Requirements . ICC shall Manufacture all Products under this Agreement in strict conformity with the applicable SOPs, Applicable Laws, and ICC’s quality management system standards and requirements. Without limiting the generality of the foregoing:

(a) ICC is responsible, at its sole cost and expense, for the planning, management, procurement, manufacture and storage of all components necessary for the Manufacture of Product as well as the Product. ICC shall draw such components, packaging components, and Product from storage in accordance with FIFO (First In –First Out) principles.

(b) ICC shall test each batch of Product in accordance with the applicable SOPs. With respect to each batch of Product, ICC shall provide Pure with the applicable batch record, certificate of analysis and other test records generated in accordance with applicable SOPs, and such other information as requested by Pure in connection with the testing of each Product, in each case within 30 days after such records and information becomes available or is requested by Pure, as applicable. With respect to each batch of a Product, ICC shall maintain Product samples, the applicable batch record, certificate of

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analysis and such other records and information for five (5) years after shipment of the last Product from such batch.

5.4 Product Storage . ICC shall store all Product at the Facility separately from any other materials and in accordance with the applicable SOPs. ICC assumes responsibility for any loss or damage to Products while stored by ICC.

5.5 Labels . ICC shall maintain sufficient inventory of Labels to meet Pure’s forecast demand for Products in accordance with Section 6. The cost of labels and for disposal of any obsolete labels will be shared by the Parties on a pro rata basis based on the unit sales volume for the previous one-hundred and eighty (180) days, as measured from the date the Management Committee determines that such labels are obsolete. In the event label changes are required to meet Applicable Law then Pure will be responsible for the cost of such obsolete labels.

5.6 Registrations . Except as otherwise mutually agreed in writing by the Parties, Pure shall own and control all Registrations for the Products. Pure will maintain all registrations current unless otherwise agreed upon by the Management Committee.

5.7 Records . ICC shall keep complete and accurate records related to Products Manufactured and shipped by ICC. ICC shall maintain all such records for the longer of five (5) years after expiration or termination of this Agreement or such period as required by Applicable Law. ICC shall provide Pure with access to or copies of such records during normal business hours or copies of such records as requested by Pure.

5.8 Facility Audits .

(a) Pure or its designee shall be permitted to conduct an inspection or audit of the Facility. ICC shall allow Pure to make such inspection or audit of the Facility during normal business hours. ICC shall reasonably cooperate with Pure to facilitate such inspection or audit. Any such inspection or audit by Pure pursuant to this Section 5.8 shall be conducted no more frequently than twice every calendar year and shall occur as promptly as possible following written notice by Pure of its desire for such inspection or audit, but in no event later than one (1) month thereafter. Costs associated with auditing shall be solely borne by Pure.

(b) If a Government Authority or Regulatory Agency desires to conduct an inspection or audit with regard to the Product or the portion of the Facility where the Product is manufactured, ICC shall promptly notify Pure. In such case, ICC shall permit and cooperate with such inspection or audit. Pure shall have the right to have a representative observe such inspection or audit. Following receipt of the inspection or audit observations of the Government Authority or Regulatory Agency (a copy of which ICC shall immediately provide to Pure to the extent it relates to the Product or Manufacture thereof), ICC shall prepare a draft response to any such observations, in consultation with Pure, and ICC shall provide a copy to Pure of the submitted final response.

5.9 Product Withdrawals and Recalls . ICC shall maintain an effective system of batch traceability and up-to-date and accurate shipping records sufficient to enable either Party to

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implement an immediate withdrawal or recall of (or other corrective action for) any Product. Such records shall include, without limitation, customer delivery records (including batch number, delivery date, customer’s name and contact information). In the event of a Product incident, withdrawal, recall or other corrective action initiated by or on behalf of Pure or by a Government Authority, Regulatory Agency or court: (i) ICC fully shall cooperate with Pure in effecting the reporting of an incident, withdrawal, or the recall of the affected Products; and (ii) ICC promptly shall provide Pure with the location of, and all other requested information relating to, all affected Products that ICC has shipped or holds in its inventory.

6.	SUPPLY

6.1 Forecast . Commencing on the Effective Date and each month thereafter, Pure shall provide ICC with a written forecast indicating good faith estimates of Product that Pure may need for the next succeeding ^*** , which shall be updated by Pure by the fifth (5 ^th ) day of each month with respect to each of the succeeding *** prior to forecasted month (the “ Forecast ”). ICC shall produce the quantity of Product identified in the Forecast for the first month (“ Firm Order ”). The quantity of Product for the second through sixth months of the Forecast shall be non-binding and for planning purposes only in order for ICC to ensure that ICC has sufficient capacity and component inventory to meet Pure’s requirements.

6.2 Written Orders . Each Firm Order shall specify Pure’s purchase order number, quantities, delivery address(s), the required delivery date, and any other elements necessary to ensure the timely delivery of the Product.

6.3 Order Fulfillment . ICC shall, by the ship date specified in the Firm Order, provide the quantity of Product up to *** of the Forecast and shall use best efforts to deliver all Firm Orders that exceed *** of the Forecast.

6.4 Delivery . ICC shall drop ship all Products through ICC’s supply chain system, unless provided specific freight forwarding instructions, in accordance with the Firm Order. All Products per the Firm Order shall be available for pickup by the assigned carrier by the applicable shipment date. All Products shall be delivered and shipped EXW Facility (INCOTERMS 2010). Title and risk of loss and damages to Products shall pass to Pure or Pure’s customer upon delivery by ICC to the designated carrier.

6.5 Non-Conforming Orders . Subject to and in accordance with ICC’s standard operation procedure titled “Quality System Complaint Process”, which procedure and any amendments thereto shall be reviewed and approved by the Management Committee, Pure shall send to ICC any Deficiency Notice within *** after Pure’s customer’s receipt of the Product. In the event a Defect in the Product could not reasonably be discovered within this *** period (“ Latent Defect ”), Pure and its customers shall have the right to reject such Product within *** after discovering the Latent Defect. Upon receipt of a Deficiency Notice, and after review and acceptance by ICC under the terms of its “Quality System Complaint Process”, ICC shall, at its sole cost and expense: (a) replace the rejected Product with Product that is not Defective within *** , and (b) deliver such replacement Product to Pure or to Pure’s customer, as directed by Pure. ICC shall arrange, at its sole cost and

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expense, for all such Defective Product to be picked up and destroyed in accordance with all Applicable Laws

7.	COMMERCIALIZATION

7.1 General . ICC shall use Commercially Reasonable Efforts to Commercialize the Product in the ICC Field in the Territory. Each Party shall bear its own cost for its Commercialization activities.

7.2 Promotional Materials .

(a) ICC shall not use or distribute any product labels, promotional or marketing literature or materials created by ICC for the Products until such product label, literature or materials are reviewed and approved by Pure, which approval shall not be unreasonably withheld or delayed. Such materials must be consistent with Registrations for the Products as well as Pure’s global brand strategy. Pure will own all right, title, and interest in all product labels, and promotional and marketing materials related to the Products. ICC hereby irrevocably transfers, conveys and assigns to Pure in perpetuity all right, title, and interest in such materials, including all copyrights, the right to make derivative works and collective works with respect thereto. ICC shall be responsible for all costs associated with use of the promotional materials, including creation, duplication and publication.

(b) Any use or display of the Trademarks by ICC shall be in a manner that Pure agrees is commercially reasonable, which approval by Pure shall not be unreasonably withheld or delayed. Pure may, at its discretion, independently monitor ICC’s use of the Trademarks, and if Pure perceives a use or display of any Trademark that is not in accordance with previously approved submissions or is otherwise damaging to Pure, Pure may notify ICC of such and ICC shall correct such non-conformance or shall cease and desist such use or display within five (5) days of receipt of such notice.

7.3 Customer Questions, Complaints and Product Inquiries . Pure shall have the sole responsibility for responding to Product inquiries, questions, complaints and any adverse claims (“ Inquiries ”) from customers in the Pure Field and ICC shall have the sole responsibility to responding Inquiries from customers in the ICC Field. Each Party shall refer Inquiries received from a customer of the other Party within one (1) business day. Should the Parties, through the Management Committee, agree on any changes to the responsibilities set forth in this Section 7.3, such changes shall be documented in an amendment pursuant to Section 2.3.

7.4 Product Returns . Each Party shall have the responsibility, at its sole cost and expense, for handling Product returns from such Party’s customers. ICC shall provide Pure with such assistance as Pure may reasonably require to manage such returns. To the extent that such return results from, or arises out of, any Defect or Latent Defect, ICC shall: (a) use all reasonable efforts to replace, at ICC’s sole cost and expense, the returned Products with new Products within five (5) days from the date that Pure notifies ICC about the returned Product; and (b) ICC shall reimburse Pure for the sum of (i) the Transfer Price paid by Pure for the returned Product unless ICC replaces such Product, and (ii) Pure’s out-of-pocket expenses for retrieval, transportation and destruction of the returned Product, including administrative expenses.

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Products that are not Defective and are returned by Pure customers and accepted by ICC will be subject to appropriate restocking or disposal fees, determined by ICC on a case-by-case basis. ICC shall immediately notify Pure of such return, whether the Product will be restocked or destroyed, and any charges related thereto.

7.5 Customer Billing and Collections . Each Party shall be responsible for its billing, collections and credit management of their respective customers.

8.	DEVELOPMENT

8.1 Product Development . Pure and ICC shall collaborate in accordance with this Section 8 on any future SDC Concentrate-technology based product development and share resources for new product development. Each Party shall incur its respective costs for any such product development.

8.2 Management Committee Oversight . Except as set forth in Section 8.3, any SDC Concentrate-technology based product development project or new product development will only be conducted after it has been reviewed and approved by the Management Committee and the Parties have entered into a definitive written agreement setting forth the applicable terms and conditions of the project. The following information must be submitted to the Management Committee for each project: a project budget, project timeline, and market assessment. The definitive agreement for each such project will include the exclusive and non-exclusive distribution rights related to any product that results from such project and ICC’s right to exercise its manufacturing right of refusal under Section 3.3.

8.3 Development in the Food Industry . Both Parties agree that Pure’s product development efforts directed at expanding SDC-technology product registration, necessary approvals from Government Authorities and Regulatory Agencies, and commercialization in the food industry is excluded from the Management Committee review and approval process, and Pure may pursue such development efforts without any consent from the Management Committee or ICC.

9.	FINANCIAL TERMS

9.1 Transfer Price .

(a) Pure agrees to pay the Transfer Price to ICC for all Product ordered by Pure and shipped by ICC in accordance with the terms and conditions of this Agreement.

(b) ICC will invoice Pure within one business day for all Product shipped to Pure’s customers. The invoice shall be submitted by e-mail or agreed upon electronic means. Pure shall pay such invoice within thirty (30) days of the invoice date. Pure shall receive a one percent (1%) discount on the invoice amount if such invoice is paid by Pure within ten (10) days of invoice date.

(c) When cumulative Net Sales of Product by both Parties reaches ^*** , the Parties shall renegotiate the Transfer Price. In addition, the Transfer Price may be amended from time to time by mutual written consent by the Management Committee. The Management Committee will review commodity prices for

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raw materials on a monthly basis and will agree to price changes if the price of the raw materials has changed (i.e., increased or decreased) at least ^*** of Transfer Price from the previous month. Any resulting price changes due to market changes in the price of bill of material items will be reflected on next production run utilizing materials at new costs.

9.2 Royalties .

(a) ICC shall pay to Pure a *** royalty on Net Sales of Products in the ICC Field.

(b) Within twenty (20) days after the end of each month, ICC shall deliver to Pure a report stating for such month: (i) the amount of Net Sales for each Product, (ii) the names of the customers who purchased Product, (iii) the Distribution Channel categories for which each customer purchased Product, (iv) Product volume by customer, and (v) Product mix of sales. The royally payment due for the sale of the Product during such month shall be remitted to Pure no later than forty-five (45) days after the end of each such month.

9.3 Payment Method . Payments by either Party hereunder shall be paid by wire transfer, or electronic funds transfer (EFT) in immediately available funds to a bank account designated by each Party. Regardless of the amounts of any payments due from one Party to the other under this Agreement, all amounts payable under this Agreement shall be paid in full.

9.4 Taxes . Each Party shall be solely responsible for the payment of any taxes, duties and other charges that may be levied by a Government Authority for such Party’s activities under this Agreement.

9.5 Late Payments . All payments due under this Agreement not received within the period due shall bear interest from the date they are due until the date they are paid at the rate of one percent (1%) per month or the maximum rate permitted by law, whichever is less. The Party that is delinquent in making payments shall pay any and all reasonable costs, including attorneys’ fees, incurred by the other Party in collecting any amounts owed under this Agreement.

9.6 Audit . ICC shall keep complete and accurate records of the underlying revenue and expense data relating to the calculations of Net Sales and payments required under this Agreement. Pure shall have the right, at its own expense and no more than once per year, to have an independent, certified public accountant, selected by Pure and reasonably acceptable to ICC, review all such records upon reasonable notice and during regular business hours and under obligations of strict confidence, for the sole purpose of verifying the basis and accuracy of payments required and made under this Agreement within the prior thirty-six (36) month period. No calendar quarter may be audited more than one time. ICC shall receive a copy of each audit report promptly from Pure. Should the inspection lead to the discovery of a discrepancy to Pure’s detriment, ICC shall pay the amount of the discrepancy in Pure’s favor within sixty (60) days after being notified thereof. Pure shall pay the full cost of the inspection unless the discrepancy is greater than five percent (5%), in which case ICC shall pay to Pure the actual cost charged by such accountant for such inspection. If such audit shows a discrepancy in ICC’s

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favor, then ICC may credit the amount of such discrepancy against subsequent amounts owed to Pure, or if no further amounts are owed under this Agreement, then Pure shall pay ICC the amount of the discrepancy within sixty (60) days after being notified thereof.

9.7 Audit Disputes . If there is a dispute between the Parties following any audit pursuant to Section 9.6, the dispute shall be submitted to the Management Committee, which shall have ^*** after submission of the dispute to resolve any disputed issues. If the Management Committee is unable to resolve any such dispute, then either Party may refer the issue (an “ Audit Disagreement ”) to an independent certified public accountant for resolution. Where an Audit Disagreement is submitted for resolution by either Party, the Parties shall comply with the following procedures:

(a) Written notice . The Party submitting the Audit Disagreement for resolution shall provide written notice to the other that it is invoking the procedures under this Section 9.7.

(b) Selection of Independent Certified Public Accountant . Within thirty (30) days of the receipt of such written notice, the Parties shall jointly select an independent accounting firm as agreed between the Parties, to act as an independent certified public accountant to resolve such Audit Disagreement. If the Parties fail to agree on an independent certified public accountant within said *** , either Party is entitled to file a request with the American Arbitration Association, to appoint one of said four independent certified public accountants.

(c) Description of Audit Disagreement . The Parties shall describe the Audit Disagreement submitted for resolution in writing to the independent certified public accountant within ten (10) days of the unanimous selection or appointment of such independent certified public accountant.

(d) Binding Decision . The independent certified public accountant shall render a decision on the Audit Disagreement as soon as practical. The decision of the independent certified public accountant shall be final and binding unless such Audit Disagreement involves alleged fraud, breach of this Agreement or construction or interpretation of any of the terms and conditions hereof.

9.8 Fees and Expenses . All fees and expenses of the independent certified public accountant, including any Third Party support staff, or other costs incurred with respect to performance of the procedures specified at the direction of the independent certified public accountant in connection with such Audit Disagreement, shall be borne by each Party in inverse proportion to the disputed amounts awarded to the Party by the independent certified public accountant through such decision. For example, if Party A disputes $100 and the independent certified public accountant awards Party A $60, Party A must pay forty percent (40%) and Party B sixty percent (60%) of the independent certified public accountant’s costs.

10.

INTELLECTUAL PROPERTY

10.1 Intellectual Property Ownership . As between the Parties, all right, title and interest to any discovery, creation, work of authorship or invention (whether or not patentable)

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made in the performance of activities under this Agreement related to the Product, including the manufacture of the Product and the use of the Product for any purpose (each, a “ Product Improvement ”), shall be owned solely by Pure. For clarity, each Product Improvement will automatically become either Licensed Patents or Licensed Know-How, as applicable, and included within the license grants under Section 3.1 without any additional consideration. ICC shall assign, and hereby assigns, to Pure all of ICC’s right, title and interest in and to each Product Improvement. ICC will promptly disclose all Product Improvements made by or on behalf of ICC to Pure. ICC will execute and deliver such assignments and other instruments reasonably needed, and otherwise cooperate with Pure, to effect or perfect such assignments and the recordings thereof.

10.2 Prosecution and Maintenance . Pure shall, at its expense, file, prosecute, defend and maintain, including conducting re-examination, reissue, opposition and interference proceedings (and any other similar patent proceedings) regarding, the Licensed Patents before all patent authorities (collectively, “ Prosecution ”). Pure shall keep ICC reasonably informed of such Prosecution efforts and results. Pure shall not abandon any patent rights in the Licensed Patents without first notifying ICC in writing. If Pure intends to abandon any rights of any of the Licensed Patents, or does not conduct the Prosecution of any claim or patent application or patent within the Licensed Patents in any specific country, Pure shall first provide written notice thereof to ICC at least ninety (90) days prior to any such abandonment. Within sixty (60) days after receipt of Pure’s notification, ICC shall provide a response to Pure whether ICC intends to undertake the Prosecution of such claims, applications or patents at ICC’s sole cost and expense, and in such case Pure shall do all things to provide ICC with the right and opportunity to conduct the Prosecution of such claim or patent application or patent. In those instances where ICC undertakes the Prosecution of such claims, applications or patents, those claims, applications, or products shall become the property of ICC and Pure will execute and deliver such assignments and other instruments reasonably needed, and otherwise cooperate with ICC, to effect or perfect such assignments and the recording thereof.

10.3 Infringement by Third Parties . If requested by ICC, Pure may, but is not obligated to, enforce the Licensed Patents against infringers within the ICC Territory and ICC Field. Where Pure enforces the Licensed Patents, then Pure shall keep ICC fully informed of the progress and results of any such enforcement action. Any recoveries in any such enforcement actions against an infringement brought under this Section 10.3 shall be used first to reimburse Pure’s out-of-pocket costs and expenses (including attorneys’ fees) for such action and any remainder shall be retained by Pure. Pure shall not enter into any settlement of any action under this Section 10.3 that materially negatively affects ICC’s rights or interests under this Agreement without ICC’s written consent, which consent shall not be unreasonably withheld or delayed. If a Third Party is infringing a Licensed Patent by making a Product that ICC has the exclusive right under this Agreement to Manufacture (a “ Field Infringement ”), and if Pure does not enforce the Licensed Patent against such Field Infringement within ninety (90) days after request by ICC, or ceases such enforcement without causing the Field Infringement to terminate, then thereafter ICC shall have the right to enforce the applicable Licensed Patents against such Field Infringement, at its expense, and shall keep Pure reasonably informed of such enforcement. In any such enforcement by ICC, Pure agrees to join the action as a party plaintiff (at ICC’s expense) if required for ICC to have standing to pursue the action and to cooperate and provide all reasonable assistance in ICC’s enforcement. In any instance when ICC enforces the Licensed Patent, ICC shall be entitled to receive and keep any recoveries in any such enforcement action

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as reimbursement of ICC’s out of pocket costs and expenses (including Attorney’s fees) for such actions and any remainder shall be retained by ICC.

10.4 Defense of Third Party Actions . Each Party shall promptly notify the other Party upon receiving written notice of any potential infringement, or any Third Party claim or action against Pure or ICC for possible infringement, or a Third Party patent right resulting from the practice or use by ICC of the Licensed Technology under this Agreement. Pure shall be responsible for defending, and shall control the defense of, any such action brought against such Party, unless ICC assumed the Prosecution of such Patent under Section 10.2. Pure shall not enter into any settlement of any action under this Section 10.4 which materially negatively affects ICC without ICC’s prior written consent.

11.

REPRESENTATIONS AND WARRANTIES

11.1 General Representations and Warranties . Each Party represents and warrants to the other that:

(a) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation or continuance, as the case may be, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

(b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the individual executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action;

(c) this Agreement is legally binding upon it and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material applicable Law;

(d) it has not granted, and shall not grant during the Term, any right to any Third Party which would conflict with the rights granted to the other Party hereunder;

(e) it is not aware of any action, suit or inquiry or investigation instituted by any Person which questions or threatens the validity of this Agreement; and

(f) no consent or approval from any Third Party (including any governmental or administrative body or court).

11.2 Pure Representations and Warranties . Pure represents and warrants:

(a) it owns or controls all the Licensed Technology and has the full legal rights and authority to grant the licenses and rights under the Licensed Technology granted under this Agreement;

(b) as of the Effective Date, there is no pending litigation or, to the best of Pure’s actual knowledge (with no obligation of inquiry), written threat of litigation that has been received by Pure (and has not been resolved by taking a license or otherwise), which alleges that Pure’s activities with respect to the Licensed Patents or Product have

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infringed or misappropriated any of the intellectual property rights of any Third Party in the Territory; and

(c) as of the Effective Date, to the best of Pure’s actual knowledge (with no obligation of inquiry), the practice of the Licensed Technology as contemplated by this Agreement does not infringe any patent rights, or misappropriate any other intellectual property, owned by a Third Party.

11.3 ICC Representations, Warranties and Covenants . ICC represents, warrants and covenants that:

(a) it has the necessary experience and capabilities to Manufacture and Commercialize the Product pursuant to the terms and conditions of this Agreement;

(b) within thirty (30) days after completion of the transfer set forth in Section 5.2, the Facility will be properly validated and licensed by appropriate Governmental Authorities and Regulatory Agencies to Manufacture the Product;

(c) all Product delivered pursuant to this Agreement shall conform with the Specifications and shall be manufactured in compliance with the SOPs and Applicable Laws; and

(d) no Person (other than Pure or its Affiliates) shall, by reason of ICC acts or omissions, have any security interest, or lien on any Licensed Technology, Pure Confidential Information, or released finished Product.

11.4 General Covenants . Each Party covenants to the other Party:

(a) such Party shall perform its obligations and activities pursuant to this Agreement (i) with the care, skill and diligence as provided herein; (ii) in compliance with all Applicable Laws, including those concerning anti-bribery, and industry standards; and (iii) with individuals who are appropriately trained and qualified; and

(b) as of the Effective Date, such Party has (or will have at the time performance is due) maintained, and will continue to maintain and keep in full force and effect during the term of this Agreement, all filings and permits necessary for such Party to perform its obligations hereunder.

11.5 DISCLAIMER . EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 11, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING ANY WARRANTY OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

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12.

INDEMNIFICATION; INSURANCE

12.1 LIMITATION ON LIABILITY . IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE), EVEN IF SUCH PARTY WAS ADVISED OR OTHERWISE AWARE OF THE LIKELIHOOD OF SUCH DAMAGES. The limitations set forth in this Section 12.1 shall not apply with respect to (a) the Party’s indemnification obligations under Sections 12.2 or 12.3, as applicable, (b) breach of Article 13, or (c) intentional misconduct of a Party.

12.2 Indemnification by Pure . Pure shall defend, indemnify and hold harmless and ICC and its Affiliates, and its and their officers, directors, shareholders, employees, agents, representatives, successor and assigns (“ ICC Indemnitee ”) from and against any liability or expense (including reasonable legal expenses, costs of litigation and attorneys’ fees), damages, or judgments, whether for money or equitable relief (collectively, “ Losses ”) resulting from suits, proceedings, claims, actions, demands, or threatened claims, actions or demands, including, bodily, injury, risk of bodily injury, death, property damage and product liability, in each case brought by a Third Party (each, a “ Claim ”) against an ICC Indemnitee arising out of: (a) any negligent act or omission, or willful wrongdoing by Pure or its Affiliates in the performance of this Agreement, (b) the failure by Pure to comply with any Applicable Law, or (c) any breach by Pure of this agreement, including of any representation or warranty of Pure; except, in each case, to the extent any such Losses result from the gross negligence or willful misconduct of an ICC Indemnitee or from the breach of any representation or warranty or obligation under this Agreement by ICC.

12.3 Indemnification by ICC . ICC shall defend, indemnify and hold harmless Pure and its Affiliates, and its and their officers, directors, shareholders, employees, agents, representatives, successor and assigns (“ Pure Indemnitee ”) from and against any and all Losses resulting from Claims against a Pure Indemnitee arising out of: (a) any negligent act or omission, or willful wrongdoing by ICC in the performance of this Agreement, (b) the failure by ICC to comply with any Applicable Law, or (c) any breach by ICC of this Agreement, including of any representation or warranty of ICC and including the failure to supply Product that conforms to the applicable Specifications, or (d) any act or omission by ICC in the Manufacture of the Product; except, in each case, to the extent any such Losses result from the gross negligence or willful misconduct of a Pure Indemnitee or from the breach of any representation or warranty or obligation under this Agreement by Pure.

12.4 Limitations on Indemnification . The obligations to indemnify, defend, and hold harmless set forth in Sections 12.2 and 12.3 shall be contingent upon the Party seeking indemnification (the “ Indemnitee ”): (a) notifying the indemnifying Party of a claim, demand or suit within ten (10) days of receipt of same; provided, however, that Indemnitee’s failure or delay in providing such notice shall not relieve the indemnifying Party of its indemnification obligation except to the extent the indemnifying Party is prejudiced thereby; (b) allowing the indemnifying Party and/or its insurers the right to assume direction and control of the defense of any such claim, demand or suit; (c) using its best efforts to cooperate with the indemnifying

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Party and/or its insurers, at the indemnifying Party’s expense, in the defense of such claim, demand or suit; and (d) agreeing not to settle or compromise any claim, demand or suit without prior written authorization of the indemnifying Party. The Indemnitee shall have the right to participate in the defense of any such claim, demand or suit referred to in this Section utilizing attorneys of its choice, at its own expense, provided, however, that the indemnifying Party shall have full authority and control to handle any such claim, demand or suit.

12.5 Insurance . During the Term and for a period of five (5) years after expiration or earlier termination of this Agreement, each Party shall obtain and maintain, at its sole cost and expense, insurance policies, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent companies similarly situated, including:

(a) Commercial general liability insurance written on an occurrence basis with combined bodily injury, property damage and personal injury liability limits of not less than with a limit of no less than ^*** per occurrence and *** annual aggregate; and

(b) Product and / or excess liability insurance with a limit of no less than *** per occurrence and *** annual aggregate; and

(c) ICC shall obtain and maintain an “all risk”, “replacement cost” and “agreed amount” form of property insurance covering its assets and in particular any equipment, machinery or like kind property used in the Manufacture of Product. The property insurance shall include but not be limited to additional coverages commonly purchased for business interruption, extra expense and contingent business interruption in limits sufficient to satisfy Pure’s reliance on the manufacturer for uninterrupted product supply.

Each Party shall name the other Party as an additional insured under its policy. Each Party shall provide written proof of the existence of such insurance to the other Party upon request. If a purchaser of the Product requests that either Party obtain insurance coverage in excess of what is described in this Section 12.5 above, then the Management Committee shall promptly address such request.

13.

CONFIDENTIALITY

13.1 Confidentiality; Exceptions . Except to the extent expressly authorized by this Agreement or otherwise agreed by the Parties in writing, during the Term and for ten (10) years thereafter, the Parties agree that the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any confidential or proprietary information or materials furnished to it by the other Party pursuant to this Agreement (collectively, “ Confidential Information ”). Confidential Information of a Party shall include all information and materials disclosed by such Party or its designee that (a) if disclosed in writing or other tangible form, is marked as “Confidential,” “Proprietary” or with similar designation at the time of disclosure, or (b) if disclosed verbally or in other intangible form, is indicated upon first disclosure as being confidential, or (c) by its nature can reasonably be expected to be considered Confidential Information by the recipient. For clarity, Confidential Information includes Information, Specifications, SOPs, Licensed Technology, Forecasts, Firm

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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Orders, all financial information (including Transfer Price, price of Products, Net Sales and royalties), information concerning customers (including identity, Fields, Distribution Channels, and Inquiries), information concerning Commercialization (including marketing plans and sales figures, whether estimated or actual), employee information, and all Management Committee agenda, discussions and minutes. Notwithstanding the foregoing, Confidential Information shall not be deemed to include information or materials to the extent that it can be established by written documentation by the receiving Party that such information or material:

(a) was already known to or possessed by the receiving Party, other than under an obligation of confidentiality (except to the extent such obligation has expired or an exception is applicable under the relevant agreement pursuant to which such obligation established), at the time of disclosure;

(b) was generally available to the public or otherwise part of the public domain at the time of its first disclosure to the receiving Party;

(c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

(d) was independently developed by the receiving Party as demonstrated by documented evidence prepared contemporaneously with such independent development; or

(e) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others.

13.2 Authorized Use and Disclosure . Each Party may use and disclose Confidential Information of the other Party as follows:

(a) under appropriate confidentiality provisions substantially equivalent to those in this Agreement, in connection with the performance of its obligations or exercise of rights granted to such Party in this Agreement; and

(b) to the extent such disclosure is reasonably necessary (i) in Prosecution efforts in accordance with this Agreement, (ii) prosecuting or defending litigation, (iii) obtaining or maintaining Registrations, or (iv) to comply with Applicable Laws, including regulations and rules promulgated by the United States Securities and Exchange Commission (“ SEC ”), and with any subpoena issued by a Government Authority of competent jurisdiction. If a Party deems it necessary to disclose Confidential Information of the other Party pursuant to clause (iv) of this Section, then such Party shall, if lawful to do so, give prompt written notice of such proposed disclosure to the other Party to permit such other Party sufficient opportunity to object to such disclosure or to take measures to limit and/or ensure confidential treatment of such Confidential Information. The receiving Party shall cooperate in good faith with the disclosing Party, at the disclosing Party’s cost, in such efforts.

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13.3 Injunctive Relief . Given the nature of the Confidential Information and the competitive damage that would result to a Party upon unauthorized disclosure, use or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damages may not be a sufficient remedy for any breach of this Article 13. In addition to all other remedies, a disclosing Party shall be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 13. Receiving Party waives its right to post any bond for the injunctive relief in a court of law.

13.4 Terms of Agreement . The Parties shall treat the existence and material terms of this Agreement as confidential and shall not disclose such information to Third Parties without the prior written consent of the other Parties or except as provided in Section 13.2 or as provided below.

13.5 Publicity .

(a) Press Releases . Except as otherwise mutually agreed by the Parties or as required by Applicable Law or the rules of any stock exchange, no Party shall issue or cause the publication of any press release or public announcement with respect to the transactions contemplated by this Agreement without the express prior approval of the other Party, which approval shall not be unreasonably withheld or delayed; provided, however, that each Party may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, or issue press releases, so long as any such public statement or press release is not inconsistent with prior public disclosures or public statements approved by the Parties pursuant to this Section 13.5 and which do not reveal non-public information about the other Parties.

(b) Required Disclosures . With respect to complying with the disclosure requirements of the SEC applicable to a Party, the Parties shall consult with each other concerning which terms of this Agreement shall be requested to be redacted in any public disclosure of the Agreement by the SEC, and each Party shall seek confidential treatment by the SEC in public disclosure of the Agreement by the agency for all sensitive commercial, financial and technical information, including any dollar amounts set forth herein.

13.6 Stock Transactions . ICC acknowledges that as a result of this Agreement, ICC has access to material, non-public information. ICC agrees that ICC’s directors, officers, employees, agents, consultants and representatives will not trade in Pure stock (“ Transaction ”) while in possession of non-public material information about Pure and shall not “tip” others in their contemplation of a Transaction. ICC hereby acknowledges that ICC is aware that any such Transaction made while in the possession of non-public material information violates U.S. Securities Laws and that any such violators are subject to significant financial and criminal penalties.

14.

TERM AND TERMINATION

14.1 Term . This Agreement shall commence on the Effective Date and, unless earlier terminated pursuant to this Agreement, shall remain in full force and effect through December 31, 2018

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(the “ Initial Term ”). This Agreement shall automatically renew for one or more subsequent periods of two (2) years (each such period, a “ Renewal Term ”) unless either party notifies the other party at least ninety (90) days before the expiration of the then-current Term that such notifying party does not intend to renew the Agreement in its entirety, in which event the Agreement shall expire at the end of the Term unless the parties agree otherwise in writing.

14.2 Termination .

(a) For Breach . A Party may terminate this Agreement in the event the other Party materially breaches this Agreement, and such breach shall have continued for thirty (30) days (or ten (10) days in the event of a breach of any payment obligation or any Applicable Law) after notice thereof was provided to the breaching Party by the non - breaching Party. Any such termination shall become effective at the end of such thirty (30) day period (or ten (10) day period in the event of a breach of any payment obligation or any Applicable Law) unless the breaching Party has cured any such breach prior to the expiration of the thirty (30) day or ten (10) day period, as applicable.

(b) Termination for Insolvency . A Party may immediately terminate this Agreement on written notice in the event (each, a “ Financial Event ”) any of the following occurs with respect to the other Party (the “ Bankrupt Party ”):

(i) such Bankrupt Party files a petition in bankruptcy or makes a general assignment for the benefit of creditors or otherwise acknowledges in writing insolvency, or is adjudged bankrupt, and such Bankrupt Party (1) fails to assume this Agreement in any such bankruptcy proceeding within thirty (30) days after filing or (2) assumes and assigns this Agreement to a Third Party;

(ii) such Bankrupt Party goes into or is placed in a process of complete liquidation;

(iii) a trustee or receiver is appointed for any substantial portion of such Bankrupt Party’s business and such trustee or receiver is not discharged within sixty (60) days after appointment;

(iv) any case or proceeding shall have been commenced or other action taken against such Bankrupt Party in bankruptcy or seeking liquidation, reorganization, dissolution, a winding-up arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or similar act or law of any jurisdiction now or hereafter in effect and is not dismissed or converted into a voluntary proceeding governed by Section 14.2(b)(i) within sixty (60) days after filing; or

(v) there shall have been issued a warrant of attachment, execution, distraint or similar process against any substantial part of the property of such Bankrupt Party and such event shall have continued for a period of sixty (60) days and none of the following has occurred: (1) it is dismissed, (2) it is bonded in a manner reasonably satisfactory to the other Party, or (3) it is discharged.

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14.3 Termination by Mutual Agreement . This Agreement may be earlier terminated upon the mutual written agreement by the Parties.

14.4 Effects of Expiration or Termination .

(a) Disposal of Inventory . Upon expiration or termination of this Agreement:

(i) Pure shall purchase, at ICC’s cost, the component inventory applicable to the Products which were reasonably purchased, produced or maintained by ICC in contemplation of filling Firm Orders, and purchase all undelivered Products which were Manufactured pursuant to a Firm Order, at the Transfer Price; and/or

(ii) ICC shall have the right to sell all undelivered Products and pay to Pure the royalty on Net Sales as set forth in Section 9.2.

(b) Rights in Bankruptcy . The rights and licenses granted under Section 3.1 of this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that in the event Pure is the Bankrupt Party, ICC shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code.

(c) Accrued Obligations . Expiration or termination of this Agreement for any reason shall not release any Party of any obligation or liability which, at the time of such expiration or termination, has already accrued or which is attributable to a period prior to such expiration or termination.

(d) Non-Exclusive Remedy . Notwithstanding anything herein to the contrary, termination of this Agreement by a Party shall be without prejudice to other remedies such Party may have at law or equity.

14.5 Survival . The following provisions shall survive any expiration or termination of this Agreement: Articles 1, 10, 12, 13, 15 and 16 and Sections 9.6, 9.7, 9.8, 11.5 and 14.4. Except as otherwise provided in this Article 14, all rights, licenses and obligations of the Parties under this Agreement shall terminate upon expiration or termination of this Agreement for any reason.

15.

GOVERNING LAW; DISPUTE RESOLUTION

15.1 Governing Law . This Agreement shall be governed by and interpreted in accordance with the substantive laws of the State of California, without regard to conflict of law principles thereof.

15.2 Disputes . In the event that any issue, controversy or claim between the Parties arises out of, relating to or in connection with, any provision of this Agreement, or the rights or obligations of the Parties hereunder (a “ Dispute ”), the Parties shall try to settle such Dispute and their differences amicably between themselves. Either Party may initiate such informal dispute resolution by sending written notice of the Dispute to the other Party, and within ten (10) days

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after such notice appropriate representatives of the Parties shall meet for attempted resolution by good faith negotiations. If such representatives are unable to resolve promptly such Dispute, it shall be referred to the Chief Executive Officers for discussion and resolution. If the Chief Executive Officers are unable to resolve such Dispute within thirty (30) days of initiating such negotiations, unless otherwise agreed by the Parties, such dispute shall be finally settled under Section 15.3.

15.3 Arbitration . For any Dispute involving amounts owed under the Agreement, or whether a Party has breached its obligations under the Agreement (and/or has cured such breach), such Dispute (if not resolved by the Parties under Section 15.2) shall be resolved by final and binding arbitration in accordance with this Section 15.3, under the Commercial Arbitration Rules and Supplementary Procedures for Large Complex Disputes of the American Arbitration Association (“ AAA ”) by a single arbitrator. Either Party may, following the end of the good faith negotiation period referenced in Section 15.2, refer any such Dispute to arbitration by submitting written notice to the other Party. Within fifteen (15) Business Days of delivery of such notice, the Parties shall meet and discuss in good faith and agree on (a) an arbitrator to resolve the issue, which arbitrator shall be neutral and independent of both Parties and all of their respective Affiliates, shall have significant experience and expertise in licensing and partnering agreements in the pharmaceutical industry and other relevant experience and (b) any changes in these arbitration provisions or the rules of arbitration which are herein adopted, in an effort to expedite the process and otherwise ensure that the process is appropriate given the nature of the dispute and the values at risk. If the Parties cannot agree on such arbitrator within fifteen (15) days of request by a Party for arbitration, then such arbitrator shall be appointed by AAA, which arbitrator must meet the foregoing criteria. The arbitration shall be held in San Diego, California, and the proceedings shall be conducted in the English language. The arbitrators may proceed to an award, notwithstanding the failure of either Party to participate in the proceedings. The arbitrator shall be instructed that time is of the essence in the arbitration proceeding. The arbitrator shall, within forty-five (45) calendar days after the conclusion of the arbitration hearing, issue a written award and statement of decision describing the essential findings and conclusions on which the award is based, including the calculation of any damages awarded (if applicable). The arbitrator shall be authorized to award compensatory damages, but shall not be authorized to (i) award non-economic or punitive damages to the extent expressly excluded under this Agreement, or (ii) reform, modify or materially change this Agreement or any other agreements contemplated hereunder; provided, however, that the damage limitations described in part (i) of this sentence will not apply if such damages are statutorily imposed. Judgment on the award rendered by the arbitrator may be enforced in any court having competent jurisdiction thereof, or application may be made to the court for a judicial recognition of the award or an order of enforcement as the case may be, subject only to revocation on grounds of fraud or clear bias on the part of the arbitrator. Notwithstanding anything contained in this Section 15.3 to the contrary, either Party shall have the right to seek equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding. The Parties agree that the arbitration shall be kept confidential and that the existence of the proceeding and any element of its (including any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions and any awards) shall not be disclosed beyond the arbitrator, the Parties, their counsel and any person

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necessary to the conduct of the proceeding, except as may lawfully be required in judicial proceedings relating to the arbitration or otherwise.

15.4 Continued Performance; No Tolling of Cure Periods . Except where clearly prevented by a Dispute, each Party agrees to continue performing its obligations under this Agreement while the Dispute is being resolved, subject to continued performance by the other Party of its obligations unless and until the Dispute is resolved or until this Agreement is terminated in accordance with the terms of this Agreement. The time frame for a Party to cure any breach of the terms of this Agreement shall not be tolled by the pendency of any dispute resolution procedures.

16.

MISCELLANEOUS

16.1 Assignment . The rights and obligations of the Parties under this Agreement shall not be assignable without the prior written consent of the non-assigning Party, not to be unreasonably withheld; except that each Party may assign this Agreement, without the need to obtain the other Party’s consent, to an entity that acquires substantially all of the business or assets of such Party pertaining to this Agreement, in each case whether by merger, transfer of assets, purchase of all outstanding shares or otherwise. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment by a Party of this Agreement in violation of this Section 16.1 shall be void

16.2 Notices . All notices or other communications that are required or permitted under this Agreement shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery or overnight courier as provided in this Agreement), or sent by internationally-recognized overnight courier to the addresses provided pursuant to this Section 16.2. Any such communication will be deemed to have been given (a) when delivered, if personally delivered, sent by facsimile on a business day (so long as a facsimile is promptly confirmed by personal delivery or overnight courier as provided in this Agreement) or e-mailed on a business day (so long as the e-mail is sent with a delivery receipt confirmation, which confirmation is retained by the sender), and (b) on the second business day after dispatch, if sent by internationally-recognized overnight courier for delivery the next business day and if such delivery is confirmed by a tracking record or similar document provided by such courier. Each Party shall have the right to change its addresses at any time by written notice to the other Party, as provided in this Section 16.2. As of the Effective Date, the mailing addresses of the Parties shall be as described below:


If to Pure:		Pure Biosciences, Inc.
		1725 Gillespie Way
		San Diego, CA 92020
		Attention: Hank Lambert, CEO
		Facsimile:

		Copy to:

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DLA Piper

4365 Executive Drive, Suite 1100

San Diego, CA 92121-2133

Attention: Jeffrey Thacker


If to ICC:		Intercon Chemical Company
		1100 Central Industrial Drive
		St. Louis, MO 63110
		Attention: Jim Epstein, CEO and President
		Facsimile:

		Copy to:

		William Biddle, CFO of ICC

16.3 Independent Status . Neither Party is an agent, employee or representative of the other. Neither Party shall have the authority to make any statements, representations or commitments of any kind, nor to take any action, which shall be binding on the other Party, except as may be explicitly authorized by the other Party in writing. This Agreement shall not constitute, create or in any way be interpreted as a joint venture, partnership or formal business organization of any kind, and this Agreement shall not be deemed to create any fiduciary duties or obligations between the Parties.

16.4 Force Majeure . Neither Party shall be liable to the other for delay or failure in the performance of the obligations on its part contained in this Agreement if and to the extent that such failure or delay is due to circumstances beyond its control which it could not have avoided by the exercise of reasonable diligence. It shall notify the other Party promptly should such circumstances arise, giving an indication of the likely extent and duration thereof, and shall use all Commercially Reasonable Efforts to resume performance of its obligations as soon as practicable; provided, however, that neither Party shall be required to settle any labor dispute or disturbance.

16.5 Entire Agreement; Amendment . This Agreement (including all exhibits), together with the Asset Purchase Agreement, shall constitute the entire agreement and understanding of the Parties relating to the subject matter of this Agreement and supersedes all prior and contemporaneous oral or written agreements, representations, understandings or arrangements between the Parties relating to the subject matter of this Agreement. No amendment, supplement or other modification to any provision of this Agreement shall be binding unless in writing and signed by both Parties.

16.6 Severability . If any provision of this Agreement or application thereof to anyone is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. Further, the judicial or other competent authority making such determination shall have the power to limit, construe or reduce the duration, scope, activity or area of such provision, or delete specific words or phrases as necessary to render, such provision enforceable in such jurisdiction.

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16.7 No Waiver . No waiver of any rights under this Agreement shall be effective unless in writing signed by the Party to be charged with such waiver. A waiver of a breach or violation of any provision of this Agreement will not constitute or be construed as a waiver of any subsequent breach or violation of that provision or as a waiver of any breach or violation of any other provision of this Agreement.

16.8 Headings; Rules of Construction . The captions and headings to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. Unless specified to the contrary, references to Articles, Sections or Exhibits shall refer to the particular Articles, Sections or Exhibits of or to this Agreement and references to this Agreement include all Exhibits hereto. Unless context otherwise clearly requires, whenever used in this Agreement:

(a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation;”

(b) the word “day,” “quarter” or “year” (and derivatives thereof, e.g., “quarterly”) shall mean a calendar day, calendar quarter or calendar year unless otherwise specified (and “annual” or “annually” refer to a calendar year);

(c) the word “notice” shall mean notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement;

(d) the word “hereof,” “herein,” “hereby” and derivative or similar word refers to this Agreement (including any Exhibits);

(e) the word “or” shall have its inclusive meaning identified with the phrase “and/or;”

(f) the words “will” and “shall” shall have the same obligatory meaning;

(g) provisions that require that a Party or the Parties hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise;

(h) words of any gender include the other gender; and

(i) words using the singular or plural number also include the plural or singular number, respectively.

1.2 Interpretation . Pure and ICC have each participated in negotiations and due diligence and consulted their respective counsel regarding this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

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1.3 Further Assurances . Each Party shall, as and when requested by the other Party, do all acts and execute all documents as may be reasonably necessary to give effect to the provisions of this Agreement

1.4 Counterparts . This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. Signatures to this Agreement that are transmitted by facsimile, electronic mail in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Agreement will have the same effect as physical delivery of the paper document bearing an original signature

[Signature page follows]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement by their duly authorized representatives.


PURE BIOSCIENCE, INC.		INTERCON CHEMICAL COMPANY

By:	/s/ Hank Lambert	By:	/s/ Jim Epstein
Name:	Hank Lambert	Name:	Jim Epstein
Title:	Chief Executive Officer	Title:	CEO and President

Date:	12-11-13	Date:	12-11-13

Exhibits :

Exhibit A — Product Exhibit B - Field

Exhibit C — Customer Specific Exceptions

Exhibit D — Licensed Patents

Exhibit E — SOPs

Exhibit F — Specifications

Exhibit G — Transfer Price

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EXHIBIT A

Products

^***

***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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EXHIBIT B

Field

Any customer-specific account that exists as of the Effective Date that is deemed by the Parties to be inconsistent with the Fields may be excluded by mutual consent by the Management Committee under Exhibit C.

Pure Field:

^***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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^***

ICC Field:

***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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^***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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EXHIBIT C

Customer Specific Exclusivity for Distribution Field and Channel

Pure:

^***

ICC:

***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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^***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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EXHIBIT D

Licensed Patents

Patent

Number

Title

Grant Date
(Filing Date)

Exp Date

Summary of Claims

^***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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EXHIBIT E

SOPs

To be provided by Pure to ICC under separate cover.

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EXHIBIT F

Specifications

To be provided by Pure to ICC under separate cover.

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EXHIBIT G

Transfer Price

^***

^***	Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Henry R. Lambert, Chief Executive Officer of PURE Bioscience, Inc., certify that:

1.	I have reviewed this report on Form 10-Q of PURE Bioscience, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: March 13, 2014	By:	/s/ HENRY R. LAMBERT
		Henry R. Lambert
		Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter C. Wulff, Chief Financial Officer / Chief Operating Officer of PURE Bioscience, Inc., certify that:

1.	I have reviewed this report on Form 10-Q of PURE Bioscience, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: March 13, 2014	By:	/s/ PETER C. WULFF
		Peter C. Wulff
		Chief Financial Officer / Chief Operating Officer

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Pure Bioscience, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)

the accompanying report on Form 10-Q of the Company for the period ended January 31, 2014, to which this Certificate is attached (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: March 13, 2014	By:	/s/ Henry R. Lambert
		Henry R. Lambert
		Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Pure Bioscience, Inc. and will be retained by Pure Bioscience, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Pure Bioscience, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER / CHIEF OPERATING OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(i)

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: March 13, 2014	By:	/s/ Peter C. Wulff
		Peter C. Wulff
		Chief Financial Officer / Chief Operating Officer