PURE Bioscience

Kurta Law is investigating potentially unsuitable recommendations of PURE BioScience stock to investors. In its prospectus, a disclosure filed with the SEC, the company described significant risks associated with its stock.

If you have concerns about your investment in PURE Bioscience, consider contacting a securities attorney. Brokerage firms often require investors to seek remedy through FINRA arbitration rather than civil court. Contact (877) 600-0098 or email info@kurtalawfirm.com to speak to a securities attorney at no cost today.

What is PURE Bioscience?

According to the prospectus, PURE Bioscience, Inc. (PURE) produces cleaning products and technology related to their development. Its products include:

• PURE Hard Surface, a consumer and commercial hard surface disinfectant and sanitizer designed for food-contact surfaces. This product line also includes PURE Multi-Purpose Cleaner Concentrate and PURE Floor Cleaner Concentrate.
• Axen 30, predecessor to PURE Hard Surface, sold under various private label brands.

The company also reports that it produces and sells antimicrobial formulations based on silver dihydrogen citrate (SDC) as a raw material to other manufacturers.

Delisting by Nasdaq

PURE Bioscience was delisted by Nasdaq in August 2013.

What are the Risks Associated with PURE Bioscience?

Most of the risks PURE Bioscience discloses in its stock prospectus concern its potential delisting by Nasdaq and its attempt to meet the bid price requirement by effecting a reverse stock split. A reverse stock split can raise a company’s share price by reducing the outstanding number of shares, but it can also reduce investors’ liquidity.

Companies may move their stock to the OTC markets following delisting, but the prospectus notes that this can also limit investors’ liquidity, as investors and broker-dealers may lose interest in trading the stock.

Potential Default on Bridge Loan Transaction

On June 26, 2012, PURE Bioscience entered into an agreement it refers to as the “Bridge Loan.” This agreement allowed the company to borrow a maximum of $1.2 million from nine lenders in exchange for issuing nine Secured Convertible Notes with a total principal amount of $1,333,333.

PURE Bioscience states that it intends to use the proceeds from this offering to pay off the Bridge Loan, as well as for operations. This ties the success of its offering to its ability to pay back its substantial debt.

If the company were to default on this loan, the lenders could convert their Secured Convertible Notes into shares, resulting in the issuance of an additional 406,508 shares. This would dilute existing shareholders’ ownership, and a sale of a significant quantity of shares could also depress the stock price.

Immediate Dilution

Regardless of any potential future dilution, investors in this offering would experience an immediate dilution in the value of their stock. This is caused by the difference between its price per share (assumed to be $1.10) and its net tangible book value ($0.36).

Aegis Capital Corp. Underwriting    

Investors should know that Aegis Capital Corp. served as the underwriter for this offering. Underwriters take on risk in exchange for a fee, which could motivate certain investment banks to underwrite investments that pose too much risk for the average retail investor. Additionally, brokers may have conflicts of interest when they recommend shares that are underwritten by an affiliate of their brokerage firm.  

Do You Have Concerns Related to Your Shares of PURE Bioscience?

If you have concerns about your investment in PURE Bioscience, consider contacting a securities attorney today. Kurta Law attorneys regularly win fair settlements for our clients in cases of broker misconduct and unsuitable investment recommendations. Call (877) 600-0098 or email info@kurtalawfirm.com.