10-Q

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: September 30, 2013

OR

[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from: ___ to ___.

Commission File Number: 001-336180

ULURU Inc.

(Exact Name of Registrant as Specified in its Charter)

Nevada	41-2118656
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

4452 Beltway Drive Addison, Texas	75001
(Address of Principal Executive Offices)	(Zip Code)

(214) 905-5145

Registrant's Telephone Number, including Area Code

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  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

    Yes  þ    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerate filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

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

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

As of November 14, 2013, there were 18,444,893 shares of the registrant’s Common Stock, $0.001 par value per share, and nil shares of Series A Preferred Stock, $0.001 par value per share, issued and outstanding.

ULURU Inc.

INDEX TO FORM 10-Q

For the Quarter Ended SEPTEMBER 30, 2013

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012 (audited)	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2013 and 2012	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and 2012	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	38
Item 4.	Controls and Procedures.	38
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	39
Item 1A.	Risk Factors.	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	39
Item 3.	Defaults Upon Senior Securities.	39
Item 4.	Mine Safety Disclosures.	39
Item 5.	Other Information.	39
Item 6.	Exhibits.	40
	Signatures.	40

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements.

ULURU Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	53,001		$	21,549
Accounts receivable, net		216,427			111,898
Notes receivable and accrued interest, current portion		488,043			260,444
Inventory		487,984			527,643
Prepaid expenses and deferred charges		130,996			194,448
Total Current Assets		1,376,451			1,115,982
Property, Equipment and Leasehold Improvements, net		690,718			845,535
Other Assets
Intangible assets, net		3,790,600			4,145,985
Notes receivable and accrued interest, net of current portion		275,611			1,041,776
Investment in unconsolidated subsidiary		---			---
Deferred financing costs, net		104,929			160,770
Deposits		18,069			18,069
Total Other Assets		4,189,209			5,366,600
TOTAL ASSETS	$	6,256,378		$	7,328,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	1,703,381		$	2,340,782
Accrued liabilities		343,327			372,965
Accrued interest		33,983			41,141
Convertible notes payable, net of unamortized debt discount, current portion		1,281,445			1,089,619
Deferred revenue, current portion		58,959			45,227
Total Current Liabilities		3,421,095			3,889,734
Long Term Liabilities
Convertible notes payable, net of unamortized debt discount and current portion		45,688			751,543
Deferred revenue, net of current portion		912,994			835,553
Total Long Term Liabilities		958,682			1,587,096
TOTAL LIABILITIES		4,379,777			5,476,830
COMMITMENTS AND CONTINGENCIES		---			---
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value; 20,000 shares authorized;
Preferred Stock Series A, 1,000 shares designated; nil and 65 shares issued and outstanding, aggregate liquidation value of nil and $701,843, at September 30, 2013 and December 31, 2012, respectively		---			---
Common Stock - $0.001 par value; 200,000,000 shares authorized;
16,693,883 and 10,074,448 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively		16,694			10,075
Additional paid-in capital		52,623,219			51,336,931
Promissory notes receivable and accrued interest for common stock issuance		---			(985,287	)
Accumulated  (deficit)		(50,763,312	)		(48,510,432	)
TOTAL STOCKHOLDERS’ EQUITY		1,876,601			1,851,287
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	6,256,378		$	7,328,117
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues
License fees	$	11,400		$	11,400		$	33,827		$	29,163
Royalty income		10,276			16,633			10,276			49,918
Product sales, net		88,904			60,889			197,405			126,057
Total Revenues		110,580			88,922			241,508			205,138
Costs and Expenses
Cost of goods sold		60,245			113,415			104,236			135,745
Research and development		201,244			152,985			577,712			517,196
Selling, general and administrative		302,093			375,767			914,509			1,365,836
Amortization of intangible assets		119,763			119,763			355,385			356,687
Depreciation		59,688			75,219			185,536			225,691
Total Costs and Expenses		743,033			837,149			2,137,378			2,601,155
Operating (Loss)		(632,453	)		(748,227	)		(1,895,870	)		(2,396,017	)
Other Income (Expense)
Interest and miscellaneous income		15,088			30,720			55,564			33,745
Interest expense		(125,904	)		(134,218	)		(385,965	)		(191,008	)
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---			---
Gain on sale of equipment		---			---			3,627			---
(Loss) Before Income Taxes		(743,269	)		(851,725	)		(2,222,644	)		(2,553,280	)
Income taxes		---			---			---			---
Net (Loss)	$	(743,269	)	$	(851,725	)	$	(2,222,644	)	$	(2,553,280	)
Less preferred stock dividends		(6,061	)		(12,288	)		(30,236	)		(35,168	)
Net (Loss) Allocable to Common Stockholders	$	(749,330	)	$	(864,013	)	$	(2,252,880	)	$	(2,588,448	)
Basic and diluted net (loss) per common share	$	(0.05	)	$	(0.10	)	$	(0.16	)	$	(0.32	)
Weighted average number of common shares outstanding		15,659,822			8,267,755			13,677,186			8,106,117
The accompanying notes are an integral part of these consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2013			2012
OPERATING ACTIVITIES :
Net loss	$	(2,222,644	)	$	(2,553,280	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets		355,385			356,687
Depreciation		185,536			225,691
Share-based compensation for stock and options issued to employees		10,933			16,494
Share-based compensation for options issued to non-employees		45,910			21,745
Equity in earnings (loss) of unconsolidated subsidiary		---			---
Amortization of debt discount on convertible note		134,052			53,029
Amortization of deferred financing costs		55,841			20,151
Cancellation of warrants issued for services		(48,776	)		---
Common stock issued for services		158,250			130,000
Common stock issued for wages		20,000			---
Common stock issued for interest due on convertible note		101,917			44,200
Gain on sale of equipment		(3,627	)		---
Change in operating assets and liabilities:
Accounts receivable		(104,529	)		(6,621	)
Other receivable		---			26,410
Inventory		39,659			152,243
Prepaid expenses and deferred charges		63,452			9,232
Notes receivable and accrued interest		538,566			(31,997	)
Accounts payable		(637,401	)		353,346
Accrued liabilities		(29,638	)		26,114
Accrued interest		(7,158	)		23,027
Deferred revenue		91,173			195,837
Total		969,545			1,615,588
Net Cash Used in Operating Activities		(1,253,099	)		(937,692	)
INVESTING ACTIVITIES :
Purchase of equipment		(32,030	)		(64,349	)
Proceeds from sale of equipment		4,937			---
Proceeds from sale of intangible asset		---			220,000
Net Cash  (Used in) Provided by Investing Activities		(27,093	)		155,651
FINANCING ACTIVITIES :
Proceeds from sale of common stock and warrants, net		1,391,446			---
Proceeds from sale of preferred stock, net		---			275,761
Proceeds from redemption of preferred stock, net		1,864			---
Proceeds from issuance of convertible note and warrants, net		---			467,290
Repayment of principle due on convertible note		(81,666	)		---
Offering cost adjustment – preferred stock sale in 2011		---			28,927
Net Cash Provided by Financing Activities		1,311,644			771,978
Net Increase (Decrease) in Cash		31,452			(10,063	)
Cash,  beginning of period		21,549			46,620
Cash,  end of period	$	53,001		$	36,557
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	$	33,544		$	3,747
Non-cash investing and financing activities:
Issuance of common stock for promissory note	$	---		$	245,818
Issuance of common stock for principle due on convertible note	$	566,414		$	39,133
Issuance of 469,094 shares of common stock pursuant to cashless exercise of warrants to purchase 479,459 shares of common stock	$	---
Redemption of 65 shares of Series A preferred stock by offset of promissory notes receivable ($969,000) and accrued interest thereon.	$	---
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ULURU Inc.

NOTES TO

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. COMPANY OVERVIEW AND BASIS OF PRESENTATION

Company Overview

ULURU Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada corporation.  We are a diversified specialty pharmaceutical company committed to developing and commercializing a broad range of innovative wound care and muco-adhesive film products based on our patented Nanoflex® and OraDiscTM drug delivery technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2013 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 and cash flows for the nine months ended September 30, 2013 and 2012 have been made.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.  Actual results may differ from those estimates and assumptions.  These differences are usually minor and are included in our consolidated financial statements as soon as they are known.  Our estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 29, 2013, including the risk factors set forth therein.

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NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2013 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 29, 2013.

NOTE 3. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (“ASU 2011-08”). ASU 2011-08 updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for fiscal years beginning after December 15, 2011; however, early adoption is permitted in certain circumstances.  We adopted the provisions of ASU 2011-08 in the first quarter of 2012.  The adoption of this update does not materially impact our financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 amended existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income. Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years beginning after December 15, 2011.  We adopted the provisions of ASU 2011-05 in the first quarter of 2012.  The adoption of this update does not materially impact our financial statements.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 generally provides a uniform framework for fair value measurements and related disclosures between U.S. generally accepted accounting principles and International Financial Reporting Standards. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 was effective for interim and annual periods beginning on or after December 15, 2011. We adopted the provisions of ASU 2011-04 in the first quarter of 2012.  The adoption of this update does not materially impact our financial statements.

There are no other new accounting pronouncements adopted or enacted during the nine months ended September 30, 2013 that had, or are expected to have, a material impact on our financial statements.

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NOTE 4. SEGMENT INFORMATION

We operate in one business segment: the research, development and commercialization of pharmaceutical products.  Our corporate headquarters in the United States collects product sales, licensing fees, royalties, and sponsored research revenues from our arrangements with external customers and licensees.  Our entire business is managed by a single management team, which reports to the Chief Executive Officer.

Our revenues are currently derived primarily from five licensees for international activities and our domestic sales activities of Altrazeal®.

Revenues per geographic area, along with relative percentages of total revenues, for the three and nine months ended September 30 are summarized as follows:

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2013		%			2012		%			2013		%			2012		%
Domestic	$	17,197		16	%	$	57,179		64	%	$	54,594		23	%	$	155,633		76	%
International		93,383		84	%		31,743		36	%		186,914		77	%		49,505		24	%
Total	$	110,580		100	%	$	88,922		100	%	$	241,508		100	%	$	205,138		100	%

A significant portion of our revenues are derived from a few major customers.  Customers with greater than 10% of total sales, along with their relative percentage of all sales, for the three and nine months ended September 30 are represented on the following table:

		Three Months Ended September 30,						Nine Months Ended September 30,
Customers	Product	2013			2012			2013			2012
Customer A	Altrazeal®		70	%		29	%		66	%		15	%
Customer B	Aphthasol®		---			19	%		---			24	%
Total			70	%		48	%		66	%		39	%

NOTE 5. NOTES RECEIVABLE

On June 27, 2012, we entered into a Securities Purchase Agreement related to our issuance of a $2,210,000 Secured Convertible Note (the “June 2012 Note”), with Inter-Mountain Capital Corp., a Delaware corporation (“Inter-Mountain”).  As part of the June 2012 Note transaction, we received $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the “Investor Notes”) and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  On October 5, 2012, we and Inter-Mountain entered into a First Amendment to Buyer Trust Deed Note #1 (the “Trust Deed Note Amendment”) for the purpose of revising certain terms and conditions contained in the Buyer Trust Deed Note #1, to include receiving payments of $100,000, $100,000, and $50,000 on October 5, 2012, November 30, 2012, and December 31, 2012, respectively, and any interest thereon.

As of September 30, 2013, we had $763,654 in notes receivable which is comprised of $687,500 for three Investor Notes and $76,154 for accrued interest thereon.

Please refer to Note 11 for a more detailed description of the June 2012 Note transaction.

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NOTE 6. INVENTORY

As of September 30, 2013, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials.  Inventories are stated at the lower of cost (first in, first out method) or market.  We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage.  In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements.  As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required.

The components of inventory, at the different stages of production, consisted of the following at September 30, 2013 and December 31, 2012:

Inventory	September 30, 2013		December 31, 2012
Finished goods	$	109,452	$	303,779
Work-in-progress		346,163		190,794
Raw materials		32,369		33,070
Total	$	487,984	$	527,643

NOTE 7. PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2013 and December 31, 2012:

Property, equipment and leasehold improvements	September 30, 2013			December 31, 2012
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,574,665			1,547,572
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,239,862			2,212,769
Less: accumulated depreciation and amortization		( 1,549,144	)		(1,367,234	)
Property, equipment and leasehold improvements, net	$	690,718		$	845,535

Depreciation expense on property, equipment and leasehold improvements was $59,688 and $75,219 for the three months ended September 30, 2013 and 2012, respectively, and was $185,536 and $225,691 for the nine months ended September 30, 2013 and 2012, respectively.

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NOTE 8. INTANGIBLE ASSETS

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2013 and December 31, 2012:

Intangible assets	September 30, 2013			December 31, 2012
Patent - Amlexanox (Aphthasol®)	$	2,090,000		$	2,090,000
Patent - Amlexanox (OraDisc™ A)		6,873,080			6,873,080
Patent - OraDisc™		73,000			73,000
Patent - Hydrogel nanoparticle aggregate		589,858			589,858
		9,625,938			9,625,938
Less: accumulated amortization		( 5,835,338	)		(5,479,953	)
Intangible assets, net	$	3,790,600		$	4,145,985

Amortization expense for intangible assets was $119,763 and $119,763 for the three months ended September 30, 2013 and 2012, respectively, and was $355,385 and $356,687 for the nine months ended September 30, 2013 and 2012, respectively.

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2013, is as follows:

Calendar Years	Future Amortization Expense
2013 (Three months)	$	119,763
2014		475,148
2015		475,148
2016		476,450
2017		475,148
2018 & Beyond		1,768,943
Total	$	3,790,600

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NOTE 9. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We use the equity method of accounting for investments in other companies that are not controlled by us and in which our interest is generally between 20% and 50% of the voting shares or we have significant influence over the entity, or both.

On January 11, 2012, we executed a shareholders’ agreement for the establishment of Altrazeal Trading Ltd., a single purpose entity to be used for the exclusive marketing of Altrazeal® throughout the European Union, Australia, New Zealand, North Africa, and the Middle East.  As a result of this transaction, we received a non-dilutable 25% ownership interest in Altrazeal Trading Ltd.

For the three and nine months ended September 30, 2013, the financial statements of Altrazeal Trading Ltd. were unavailable and our share of any gains or losses of Altrazeal Trading Ltd. for such periods have not been recorded in our financial statements.  The financial activity of Altrazeal Trading Ltd. for the three months and nine months ended September 30, 2013 would not have a material impact on our financial statements.

Based upon unaudited financial statements provided by Altrazeal Trading Ltd. for the year ended December 31, 2012, our share of Altrazeal Trading Ltd. losses exceeded the carrying value of our investment, therefore the equity method of accounting was suspended and no additional losses were charged to our operations.  Our unrecorded share of Altrazeal Trading Ltd. losses for the year ended December 31, 2012 totaled $82,740.

Summarized financial information for our investment in Altrazeal Trading Ltd. assuming 100% ownership is as follows:

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	415,248
Total liabilities	$	205,991
Total stockholders’ equity	$	209,257
Statement of operations
Revenues	$	131,869
Net (loss)	$	(330,961	)

On October 19, 2012, we executed a shareholders’ agreement for the establishment of ORADISC GmbH, a single purpose entity to be used for the exclusive development and marketing of OraDisc™ erodible film technology products.  We received a non-dilutable 25% ownership interest in ORADISC GmbH.

As of September 30, 2013, ORADISC GmbH had not begun operations and accordingly the net book value of the investee assets had not been determined and there were no equity method investee gains or losses for the three and nine months ended September 30, 2013.

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NOTE 10. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at September 30, 2013 and December 31, 2012:

Accrued Liabilities	September 30, 2013		December 31, 2012
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		192,556		213,005
Accrued insurance payable		43,894		52,629
Product rebates/returns		20		81
Other		558		951
Total accrued liabilities	$	343,327	$	372,965

NOTE 11. CONVERTIBLE DEBT

On June 27, 2012, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), related to our issuance of a $2,210,000 Secured Convertible Note, with Inter-Mountain Capital Corp., a Delaware corporation (“Inter-Mountain”).  The purchase price for the June 2012 Note was paid $500,000 at closing in cash and $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the “Investor Notes”), each of which bears interest at the rate of 8.0% per annum, and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  The purchase price of the June 2012 Note also reflected a $200,000 original issue discount and $10,000 in attorney’s fees. The Purchase Agreement also includes representations and warranties, restrictive covenants, and indemnification provisions standard for similar transactions.

The June 2012 Note bears interest at the rate of 8.0% per annum, with monthly installment payments of $83,333 commencing on the date that is the earlier of (i) thirty calendar days after the effective date of a registration statement registering the re-sale of the shares issuable upon conversion under the June 2012 Note or (ii) December 24, 2012, but in no event sooner than September 25, 2012.  At our option, subject to certain volume, price, and other conditions, the monthly installment payments on the June 2012 Note may be paid in whole, or in part, in cash or in our common stock.  If the monthly installment is paid in common stock, such shares being issued will be based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days.  The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days is less than $0.05.

At the option of Inter-Mountain, the outstanding principal balance of the June 2012 Note may be converted into shares of our common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.  The initial tranche was $710,000 and the six subsequent tranches are each $250,000, plus interest.  At our option, the outstanding principal balance of the June 2012 Note, or a portion thereof, may be prepaid in cash at 120% of the amount elected to be prepaid.  The June 2012 Note is secured by a Security Agreement pursuant to which we granted to Inter-Mountain a first-priority security interest in the assets held by the Company.

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Events of default under the June 2012 Note include failure to make required payments or to deliver shares upon conversion, the entry of a $100,000 judgment not stayed within 30 days, breach of representations or covenants under the transaction documents, various events associated with insolvency or failure to pay debts, delisting of our common stock, a restatement of financial statements, and a default under certain other agreements.  In the event of default, the interest rate under the June 2012 Note increases to 18% and the June 2012 Note becomes callable at a premium.  In addition, the holder has all remedies under law and equity, including foreclosing on our assets under a Security Agreement with Inter-Mountain.

As part of the convertible debt financing, Inter-Mountain also received a total of seven warrants (the “Warrants”) to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the Warrants.  The Warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively.  Each of the three remaining Warrants will vest upon the payment by the holder of each of the remaining three Investor Notes.  For the three months ended September 30, 2013, we issued 469,094 shares of common stock to Inter-Mountain for the cashless exercise of warrants to purchase 479,459 shares of common stock.

As part of the convertible debt financing, we entered into a Registration Rights Agreement whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein no later than July 27, 2012 and to cause such registration statement to be declared effective no later than ninety days after such filing with the SEC and to keep such registration statement effective for a period of no less than one hundred and eighty days.  The Registration Rights Agreement also grants Inter-Mountain piggy-back registration rights with respect to future offerings by the Company.  In accordance with our obligations under the Registration Rights Agreement, we filed with the SEC a registration statement that was declared effective on July 31, 2012.

On October 5, 2012, we and Inter-Mountain entered into a First Amendment to Buyer Trust Deed Note #1 for the purpose of revising certain terms and conditions contained in the Buyer Trust Deed Note #1, to include an updated schedule for the timing of certain payment obligations by Inter-Mountain contained therein.

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On July 28, 2011, we completed a convertible debt financing for $125,000 with Mr. Kerry P. Gray, the Company’s Chairman, President, and Chief Executive Officer (the “July 2011 Note”).  The July 2011 Note bears interest at the rate of 10.0% per annum, with annual payments of interest commencing on July 1, 2012.  The full amount of principal and any unpaid interest will be due on July 28, 2014.  The outstanding principal balance of the July 2011 Note may be converted into shares of the Company’s common stock, at the option of the note holder and at any time, at a conversion price of $1.08 per share or 115,741 shares of common stock.  We may force conversion of the July 2011 Note if our common stock trades for a defined period of time at a price greater than $2.16.  The July 2011 Note is collateralized by the grant of a security interest in the inventory, accounts receivables and capital equipment held by the Company.  The securities issuable on conversion have not been registered under the Securities Act of 1933 and may not be sold absent registration or an applicable exemption from the registration requirements.  As part of the convertible debt financing, Mr. Gray also received a warrant to purchase up to 34,722 shares of the Company’s common stock.  The warrant has an exercise price of $1.08 per share and is exercisable at any time until July 28, 2016.

On July 3, 2012, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2012 of $11,542 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date.  Moreover, the parties agreed that no Event of Default under the July 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2012.  Commencing on July 1, 2012, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $11,542 until the relevant payment date.  On September 5, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2012 of $11,542 and accrued interest thereon of $1,643.

On July 1, 2013, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2013 of $12,501 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date.  Moreover, the parties agreed that no Event of Default under the July 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2013.  Commencing on July 1, 2013, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $12,501 until the relevant payment date.  On October 28, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2013 of $12,501 and accrued interest thereon of $492.

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On June 13, 2011, we completed a $140,000 convertible debt financing with Mr. Gray (the “June 2011 Note”).  The June 2011 Note bears interest at the rate of 10% per annum, with annual payments of interest commencing on July 1, 2012.  The full amount of principal and any unpaid interest will be due on June 13, 2014.  The outstanding principal balance of the June 2011 Note may be converted into shares of the Company’s common stock, at the option of the note holder and at any time, at a conversion price of $1.20 per share or 116,667 shares of common stock.  We may force conversion of the convertible note if our common stock trades for a defined period of time at a price greater than $1.80.  The June 2011 Note is collateralized by the grant of a security interest in the inventory, accounts receivables, and capital equipment held by the Company.  The securities issuable on conversion have not been registered under the Securities Act of 1933 and may not be sold absent registration or an applicable exemption from the registration requirements.  As part of the convertible debt financing, Mr. Gray also received a warrant to purchase up to 35,000 shares of the Company’s common stock.  The warrant has an exercise price of $1.20 per share and is exercisable at any time until June 13, 2016.

On July 3, 2012, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2012 of $14,653 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date.  Moreover, the parties agreed that no Event of Default under the June 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2012.  Commencing on July 1, 2012, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $14,653 until the relevant payment date.  On September 5, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2012 of $14,653 and accrued interest thereon of $2,080.

On July 1, 2013, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2013 of $14,001 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date.  Moreover, the parties agreed that no Event of Default under the June 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2013.  Commencing on July 1, 2013, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $14,001 until the relevant payment date.  On October 28, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2013 of $14,001 and accrued interest thereon of $553.

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We account for convertible debt using specific guidelines in accordance with U.S. GAAP.  We allocated the value of the proceeds received to the convertible instrument and to the warrant on a relative fair value basis.  We calculated the fair value of the warrant issued with the convertible instrument using the Black-Scholes valuation method, using the same assumptions used for valuing employee stock options, except the contractual life of the warrant was used. Using the effective interest method, the allocated fair value was recorded as a debt discount and is being amortized over the expected term of the convertible debt to interest expense.

On the date of issuance of the June 2011 Note, the July 2011 Note, and the June 2012 Note, no portion of the proceeds were attributable to a beneficial conversion feature since the conversion price of the June 2011 Note, the July 2011 Note, and the June 2012 Note exceeded the market price of the Company’s common stock.

Information relating to our convertible notes payable is as follows:

									As of September 30, 2013
Transaction	Initial  Principal Amount		Interest Rate			Maturity Date	Conversion Price (1)(2)		Principal Balance		Unamortized Debt Discount		Carrying Value
June 2011 Note	$	140,000		10.0	%	06/13/2014	$	1.20	$	140,000	$	2,768	$	137,232
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		6,144		118,856
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,318,210		247,165		1,071,045
Total	$	2,475,000							$	1,583,210	$	256,077	$	1,327,133

(1)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.
(2)	The outstanding principal balance of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.

The amount of interest cost recognized from our convertible notes outstanding was $38,032 and $52,121 for the three months ended September 30, 2013 and 2012, respectively, and was $124,677 and $67,227 for the nine months ended September 30, 2013 and 2012, respectively.

The future minimum principle payments relating to our convertible notes payable, as of September 30, 2013, are as follows:

	Payments Due By Period
Transaction	Total		2013 (Three Months)		2014		2015		2016		2017
June 2011 Note	$	140,000	$	---	$	140,000	$	---	$	---	$	---
July 2011 Note		125,000		---		125,000		---		---		---
June 2012 Note		1,318,120		441,538		876,582		---		---		---
Total	$	1,583,120	$	441,538	$	1,141,852	$	---	$	---	$	---

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NOTE 12. EQUITY TRANSACTIONS

Common Stock Transactions

On March 14, 2013, we entered into a Securities Purchase Agreement (the “March SPA”) with Kerry P. Gray, the Company’s Chairman, President, and Chief Executive Officer and Terrance K. Wallberg, the Company’s Vice President and Chief Financial Officer (collectively, the “Investors”) relating to an equity investment of $440,000 by the Investors for 1,100,000 shares of our common stock, par value $0.001 per share (the “March Shares”) and warrants to purchase up to 660,000 shares of our common stock (the “March Warrants”) (the “March 2013 Offering”).  Under the March SPA, the purchase and sale of the March Shares and March Warrants will take place at four closings over the next twelve months, with $88,000 being funded at the initial closing under the March SPA, $110,000 being funded on the four-month anniversary of the initial closing, $132,000 being funded on the eight-month anniversary of the initial closing, and $110,000 being funded on the one-year anniversary of the initial closing.  The March Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the five-year anniversary of the initial closing.  On March 14, 2013, we closed the March 2013 Offering and received the initial funding tranche of $88,000 for the purchase of 220,000 shares of our common stock.  On July 15, 2013, we received the second funding tranche of $110,000 for the purchase of 275,000 shares of our common stock.  On November 14, 2013, we received the third funding tranche of $132,000 for the purchase of 330,000 shares of our common stock.

On December 21, 2012, we entered into a Securities Purchase Agreement (the “SPA”) with IPMD GmbH (“IPMD”) relating to an equity investment of $2,000,000 by IPMD for 5,000,000 shares of our common stock, par value $0.001 per share (the “Shares”) and warrants to purchase up to 3,000,000 shares of our common stock (the “Warrants”) (the “January 2013 Offering”).  Under the SPA, the purchase and sale of the Shares and Warrants will take place at four closings over the next twelve months, with $400,000 being funded at the initial closing under the SPA, $500,000 being funded on the four-month anniversary of the initial closing, $600,000 being funded on the eight-month anniversary of the initial closing, and $500,000 being funded on the one-year anniversary of the initial closing.  The Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the one-year anniversary of the initial closing.  On January 3, 2013, we closed the January 2013 Offering and received the initial funding tranche of $400,000 for the purchase of 1,000,000 shares of our common stock.  On May 7, 2013, September 6, 2013, and October 24, 2013, we received subsequent funding tranches of $500,000, $300,000, and $300,000 for the purchase of 1,250,000, 750,000, and 750,000 shares of our common stock, respectively.

In the SPA, we also agree to appoint up to two directors nominated by IPMD to serve on our Board of Directors.  On January 17, 2013, the Board of Directors of the Company appointed Helmut Kerschbaumer and Klaus Kuehne to each serve as a director of the Company.  Messrs. Kerschbaumer and Kuehne are the designees of IPMD to serve on the Company’s Board of Directors pursuant to covenants in the SPA with IPMD.

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NOTE 13. STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2013, we had 16,693,883 shares of common stock issued and outstanding.  We issued 2,236,227 shares of common stock for the three months ended September 30, 2013 comprised of 150,000 shares of common stock issued for consulting services, 750,000 shares of common stock issued to IPMD pursuant to the January 2013 Offering, 275,000 shares of common stock issued to Messrs. Gray and Wallberg pursuant to the March 2013 Offering, 592,133 shares of common stock issued for installment payments due on the June 2012 Note with Inter-Mountain, and 469,094 shares of common stock issued for the cashless exercise of warrants held by Inter-Mountain.

Preferred Stock

As of September 30, 2013, we had no shares of Series A preferred stock issued and outstanding.  For the three months ended September 30, 2013, we did not issue any shares of Series A preferred stock to Ironridge Global pursuant to our agreement related to the purchase of the Series A preferred stock.

On August 15, 2013, we provided notice to Ironridge Global III, LLC (“Ironridge”) for the redemption of all of our Series A Preferred Stock shares (the “Series A Shares”) held by Ironridge, a total of 65 Series A Shares.  An affiliate of Ironridge, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000 (the “Notes”), agreed to accept the cancellation of the Notes held by us as full and final payment for the redemption amounts of the Series A Shares.

Warrants

The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2012		2,041,165		$	0.98
Warrants issued		4,445,714		$	0.56
Warrants exercised		(479,459	)	$	0.35
Warrants cancelled		(250,000	)	$	0.35
Balance as of September 30, 2013 (1)		5,757,420		$	0.73

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants.  The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised.  For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.

For the nine months ended September 30, 2013, we issued warrants to purchase up to an aggregate of 4,445,714 shares of our common stock which consisted of (i) a warrant issued to IPMD pursuant to the January 2013 Offering to purchase up to an aggregate of 3,000,000 shares of our common stock at an exercise price of $0.60 per share, (ii) a warrant issued to Kerry P. Gray pursuant to the March 2013 Offering to purchase up to an aggregate of 600,000 shares of our common stock at an exercise price of $0.60 per share, (iii) a warrant issued to Terrance K. Wallberg pursuant to the March 2013 Offering to purchase up to an aggregate of 60,000 shares of our common stock at an exercise price of $0.60 per share, (iv) two warrants issued to Inter-Mountain to purchase up to an aggregate of 785,714 shares of our common stock at an exercise price of $0.35 per share.  Also occurring during the nine months ended September 30, 2013 was the exercise of warrants to purchase 479,459 shares of our common stock, at an exercise price of $0.35 per share, by Inter-Mountain and the cancellation of a warrant issued to NUWA Group LLC to purchase up to an aggregate of 250,000 shares of our common stock at an exercise price of $0.35 per share.

Of the warrant shares subject to exercise as of September 30, 2013, expiration of the right to exercise is as follows:

Date of Expiration	Number of Warrant Shares of Common Stock Subject to Expiration
January 3, 2014		3,000,000
July 23, 2014		69,050
May 15, 2015		357,155
June 13, 2016		35,000
July 16, 2016		116,667
July 28, 2016		34,722
June 27, 2017		1,484,826
March 14, 2018		660,000
Total		5,757,420

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NOTE 14. EARNINGS PER SHARE

Basic and Diluted Net Loss Per Share

In accordance with FASB Accounting Standards Codification (“ASC”) Topic 260, Earnings per Share, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, increased to include potential dilutive common shares.  The effect of outstanding stock options, restricted vesting common stock, convertible debt, convertible preferred stock, and warrants, when dilutive, is reflected in diluted earnings (loss) per common share by application of the treasury stock method.  We have excluded all outstanding stock options, restricted vesting common stock, convertible debt, convertible preferred stock, and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2013 and December 31, 2012:

	September 30, 2013		December 31, 2012
Warrants to purchase common stock (1)		5,757,420		2,041,165
Stock options to purchase common stock		1,014,907		158,409
Unvested restricted common stock		---		300
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (2)		3,766,316		5,617,974
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 (3)		309,818		368,637
Common stock issuable upon the assumed conversion of our Series A preferred stock (4)(5)		---		1,002,634
Total		10,848,461		9,189,119

(1)	As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants.  The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised.  For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.
(2)	The outstanding principal balance and the accrued and unpaid interest of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.  For the purposes of this Table, we have assumed a conversion price of $0.35 per share and no ownership limitations.
(3)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.  The accrued and unpaid interest for each convertible note payable may be converted, at the option of Mr. Gray, into shares of common stock at a conversion price based upon the average of the five trading days prior to the payment date, which for the purposes of this Table we have assumed to be September 30, 2013.
(4)	The outstanding Series A preferred stock and the accrued and unpaid dividends thereon are convertible into shares of the Company’s common stock at the Company’s option at any time after six-months from the date of issuance of the Series A preferred stock.  The conversion price for the holder is fixed at $0.70 per share with no adjustment mechanisms, resets, ratchets, or anti-dilution covenants other than the customary adjustments for stock splits.  For the purposes of this Table, we have assumed a conversion price of $0.70 per share.
(5)	On August 15, 2013, we provided notice to Ironridge for the redemption of all of our Series A Shares held by Ironridge, a total of 65 Series A Shares.  An affiliate of Ironridge, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000, agreed to accept the cancellation of the promissory notes held by us as full and final payment for the redemption amounts of the Series A Shares.

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NOTE 15. SHARE BASED COMPENSATION

The Company’s share-based compensation plan, the 2006 Equity Incentive Plan (“Equity Incentive Plan”), is administered by the compensation committee of the Board of Directors (“Board”), which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

Our Board granted the following incentive stock option awards to executives or employees and nonstatutory stock option awards to directors or non-employees for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2013		2012		2013		2012 (3)
Incentive Stock Options  (1)
Quantity		---		---		232,500		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	56,112		---
Nonstatutory Stock Options  (2)
Quantity		---		---		735,000		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	177,388		---

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013 and 2012, respectively.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013 and 2012, respectively.
(3)	The Company did not award any shared-based compensation for the nine months ended September 30, 2012.

We account for share-based compensation under FASB ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values of the award on the grant date.  We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions:

	Nine Months Ended September 30,
	2013			2012
Incentive Stock Options
Expected volatility  (1)		103.55	%		---
Risk-free interest rate %  (2)		0.81	%		---
Expected term (in years)		5.0			---
Dividend yield  (3)		---			---
Forfeiture rate		---			---
Nonstatutory Stock Options
Expected volatility  (1)		103.55	%		---
Risk-free interest rate %  (2)		0.81	%		---
Expected term (in years)		5.0			---
Dividend yield  (3)		---			---
Forfeiture rate		---			---

(1)	Expected volatility assumption was based upon a combination of historical stock price volatility measured on a daily basis and an estimate of expected future stock price volatility
(2)	Risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the stock options.
(3)	The Company does not currently intend to pay cash dividends, thus has assumed a 0% dividend yield.

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Stock Options (Incentive and Nonstatutory)

The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2013		2012		2013		2012
Research and development	$	5,425	$	---	$	11,438	$	6,280
Selling, general and administrative		19,662		6,760		44,414		25,753
Total share-based compensation expense	$	25,087	$	6,760	$	55,852	$	32,033

At September 30, 2013, the balance of unearned share-based compensation to be expensed in future periods related to unvested stock option awards, as adjusted for expected forfeitures, is approximately $177,530.  The period over which the unearned share-based compensation is expected to be recognized is approximately thirty months.

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Stock Options			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2012		158,409		$	12.32
Granted		967,500			0.33
Forfeited/cancelled		(111,002	)		1.03
Exercised		---			---
Outstanding as of September 30, 2013		1,014,907		$	2.12

The following table presents the stock option grants outstanding and exercisable as of September 30, 2013:

Options Outstanding						Options Exercisable
Stock Options Outstanding		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life in Years		Stock Options Exercisable		Weighted Average Exercise Price per Share
	892,500	$	0.33		9.5		197,500	$	0.33
	53,334		2.38		4.7		46,668		2.36
	30,002		14.40		3.5		30,002		14.40
	39,071		33.35		4.1		39,071		33.35
	1,014,907	$	2.12		8.8		313,241	$	6.10

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Restricted Stock Awards

Restricted stock awards, which typically vest over a period of two to five years, are issued to certain key employees and are subject to forfeiture until the end of an established restriction period.  We utilize the market price on the date of grant as the fair market value of restricted stock awards and expense the fair value on a straight-line basis over the vesting period.

The following table summarizes share-based compensation related to restricted stock awards for the three and nine months ended September 30:

	Three Months Ended  September 30,					Nine Months Ended  September 30,
	2013		2012			2013		2012
Research and development	$	---	$	( 391	)	$	444	$	2,814
Selling, general and administrative		---		1,143			547		3,392
Total share-based compensation expense	$	---	$	752		$	991	$	6,206

At September 30, 2013, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is nil.

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of common stock subject to potential issue as of September 30, 2013 and the changes therein during the nine months then ended:

	Restricted stock			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2012		300		$	34.59
Shares granted		---			---
Shares forfeited/cancelled		---			---
Shares exercised/issued		(300	)		34.59
Outstanding as of September 30, 2013		---		$	---

Summary of Plans

2006 Equity Incentive Plan

In March 2006, our Board adopted and our stockholders approved our Equity Incentive Plan, which initially provided for the issuance of up to 133,333 shares of our common stock pursuant to stock option and other equity awards.  At the annual meetings of the stockholders held on May 8, 2007, December 17, 2009, June 15, 2010, June 14, 2012, and on June 13, 2013, our stockholders approved amendments to the Equity Incentive Plan to increase the total number of shares of common stock issuable under the Equity Incentive Plan pursuant to stock options and other equity awards by 266,667 shares, 200,000 shares, 200,000 shares, 400,000 shares, and 600,000 shares, respectively, to a total of 1,800,000 shares.

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In December 2006, we began issuing stock options to employees, consultants, and directors.  The stock options issued generally vest over a period of one to four years and have a maximum contractual term of ten years.  In January 2007, we began issuing restricted stock awards to our employees.  Restricted stock awards generally vest over a period of six months to five years after the date of grant.  Prior to vesting, restricted stock awards do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock awards are not considered issued and outstanding.  Shares of common stock are issued on the date the restricted stock awards vest.

As of September 30, 2013, we had granted options to purchase 1,376,167 shares of common stock since the inception of the Equity Incentive Plan, of which 1,014,907 were outstanding at a weighted average exercise price of $2.12 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the Equity Incentive Plan, of which none were outstanding.  As of September 30, 2013, there were 715,647 shares that remained available for future grants under our Equity Incentive Plan.

NOTE 16. FAIR VALUE MEASUREMENTS

In accordance with ASC Topic 820, Fair Value Measurements, (“ASC Topic 820”) certain assets and liabilities of the Company are required to be recorded at fair value.  Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants.  The guidance in ASC Topic 820 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimized the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on our market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment.

The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Valuations based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

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Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements.  We review the fair value hierarchy classification on a quarterly basis.  Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

Our financial instruments, including cash, cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments.  We believe that the carrying value of our other receivable and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

The following table summarizes the fair value of our financial instruments at September 30, 2013 and December 31, 2012.

Description	September 30, 2013		December 31, 2012
Assets:
Notes receivable and accrued interest	$	763,654	$	1,302,220
Liabilities:
Convertible note – June 2011	$	137,232	$	134,154
Convertible note – July 2011	$	118,856	$	113,084
Convertible note – June 2012	$	1,071,045	$	1,593,924

NOTE 17. INCOME TAXES

There was no current federal tax provision or benefit recorded for any period since inception, nor were there any recorded deferred income tax assets, as such amounts were completely offset by valuation allowances.

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NOTE 18. COMMITMENTS AND CONTINGENCIES

Operating Leases

On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease commenced on April 1, 2006 and originally continued until April 1, 2013.  The lease required a minimum monthly lease obligation of $9,330, which is inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which is inclusive of monthly operating expenses.  On February 22, 2013, we executed an Amendment to Lease Agreement (the “Lease Amendment”) that renewed and extended our lease until March 31, 2015.  The Lease Amendment requires a minimum monthly lease obligation of $9,128, which is inclusive of monthly operating expenses, until March 31, 2014 and at such time, will increase to $9,314, which is inclusive of monthly operating expenses.  The Lease Amendment includes an option whereby we may convert the term of our lease renewal from a two year term to a five year term by providing written notice on or before October 1, 2013.  If so elected, the minimum monthly lease obligation for the remainder of the first year shall be reduced to $8,751, which is inclusive of monthly operating expenses, effective on the first day of the month following our election and the minimum monthly lease obligation shall increase annually every April 1st thereafter by $186 per month until March 31, 2018.

On December 10, 2010 we entered into a lease agreement for certain office equipment.  The lease, which commenced on February 1, 2011 and continues until February 1, 2015, requires a minimum lease obligation of $744 per month.

The future minimum lease payments under the 2013 office lease and the 2010 equipment lease are as follows as of September 30, 2013:

Calendar Years	Future Lease Expense
2013 (Three months)	$	29,811
2014		120,917
2015		28,881
2016		---
2017		---
Total	$	179,609

Rent expense for our operating leases amounted to $31,083 and $32,971 for the three months ended September 30, 2013 and 2012, respectively, and $86,125 and $98,111 for the nine months ended September 30, 2013 and 2012, respectively.

Employment Agreements

As of September 30, 2013, we are party to employment agreements with our Vice President and Chief Financial Officer, Terrance K. Wallberg, and Daniel G. Moro, Vice President – Polymer Drug Delivery.  The employment agreements with Messrs. Wallberg and Moro each have a term of one year and include an automatic one-year term renewal for each year thereafter.  Each employment agreement provides for a base salary, bonus, stock options, stock grants, and eligibility for Company provided benefit programs.  Under certain circumstances, the employment agreements provide for certain severance benefits in the event of termination or a change in control.  The employment agreements also contain non-solicitation, confidentiality and non-competition covenants, and a requirement for the assignment of certain invention and intellectual property rights to the Company.

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Separation Agreement

As of September 30, 2013, we continue to be a party to a separation agreement with Kerry P. Gray, dated March 9, 2009.  Mr. Gray currently serves as our Chairman of the Board, Chairman of the Board’s Executive Committee, Chief Executive Officer, and President.  Pursuant to the terms of the separation agreement, we provide or have provided, as applicable, certain benefits to Mr. Gray, including: (i) payments totaling $400,000 during the initial 12 month period following March 9, 2009; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, a payment of $12,500 per month; (iii) full acceleration of all vesting schedules for all outstanding Company stock options and shares of restricted stock of the Company held by Mr. Gray, with all such Company stock options exercisable by Mr. Gray having expired as of March 1, 2012; and (iv) for a period of twenty-four (24) months following March 9, 2009 we were required to maintain and provide coverage under Mr. Gray’s existing health coverage plan.  The separation agreement contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions.

Indemnification

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

In accordance with our restated articles of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in their respective capacities. There have been no claims to date and we have a director and officer insurance policy that enables us to recover a portion of any amounts paid for future potential claims. We have also entered into contractual indemnification agreements with each of our officers and directors.

Related Party Transactions

On January 17, 2013, the Board of Directors of the Company appointed Helmut Kerschbaumer and Klaus Kuehne to each serve as a director of the Company.  Messrs. Kerschbaumer and Kuehne currently serve as directors of IPMD, Altrazeal Trading, Ltd., and Melmed Holding AG and thereby have control of, and make investment and business decisions on behalf of IPMD, Altrazeal Trading Ltd., and Melmed Holding AG (collectively, the “Euro Distributors”).

For the nine months ended September 30, 2013 and 2012, respectively, the Company had product sales, in approximate numbers, of $143,000 and $22,000 with Euro Distributors, which represented 59% and 11% of our total revenues.  As of September 30, 2013 and December 31, 2012, respectively, Euro Distributors had an outstanding accounts receivable, in approximate numbers, of $82,000 and $101,000, which represented 35% and 77% of our total outstanding accounts receivables.

On December 21, 2012, we entered into a Securities Purchase Agreement with IPMD as described in more detail in Note 12.

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Related Party Obligations

Since 2011, our named executive officers and certain key executives have temporarily deferred portions of their compensation as part of a plan to conserve the Company’s cash and financial resources.

As of September 30, 2013, the following table summarizes the compensation temporarily deferred since 2011:

Name	2013			2012		2011		Total
Kerry P. Gray (1)	$	(23,500	)	$	220,673	$	140,313	$	337,486
Terrance K. Wallberg		(11,539	)	$	24,230	$	36,539	$	49,230
Key executives		(20,000	)	$	27,253	$	20,986	$	28,239
Total	$	(55,039	)	$	272,156	$	197,838	$	414,955

(1) During 2013, Mr. Gray temporarily deferred compensation of $169,000 which consisted of $11,500 earned pursuant to a Separation Agreement and $157,500 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors.  During 2013, Mr. Gray was also repaid $192,500 of temporarily deferred compensation, of which $180,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

The Company’s obligation for temporarily deferred compensation was $414,955, of which $275,000 was included in accounts payable and $139,955 was included in accrued liabilities, and $469,994 of which $310,000 was included in accounts payable and $159,994 was included in accrued liabilities, as of September 30, 2013 and December 31, 2012, respectively.

Contingent Milestone Obligations

We are subject to paying Access Pharmaceuticals, Inc. (“Access”) for certain milestones based on our achievement of certain annual net sales, cumulative net sales, and/or our having reached certain defined technology milestones including licensing agreements and advancing products to clinical development.  As of September 30, 2013, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.

On March 7, 2008, we terminated the license agreement with ProStrakan Ltd. for Amlexanox-related products in the United Kingdom and Ireland.  As part of the termination, we agreed to pay ProStrakan Ltd. a royalty of 30% on any future payments received by us from a new licensee in the United Kingdom and Ireland territories, up to a maximum of $1,400,000.  On November 17, 2008, we entered into a licensing agreement for Amlexanox-related product rights to the United Kingdom and Ireland territories with MEDA AB.

NOTE 19. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations or financial position. There are no material proceedings to which any director, officer or any of our affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, our affiliates, or security holder, is a party adverse to us or our consolidated subsidiary or has a material interest adverse thereto.

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

You should read the following discussion and analysis together with all financial and non-financial information appearing elsewhere in this report and with our consolidated financial statements and related notes included in our 2012 Annual Report on Form 10-K, referred to as our 2012 Form 10-K, which has been previously filed with the Securities and Exchange Commission on March 29, 2013, including the risk factors set forth therein.  In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involve risks and uncertainties, including the statement that our cash and cash equivalents are sufficient to fund our operations and capital expenditures through 2013 and beyond.  Our actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2012 Form 10-K under “Risks Associated with our Business”.

Business Overview

ULURU Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada corporation.  We are a diversified specialty pharmaceutical company committed to developing and commercializing a broad range of innovative wound care and muco-adhesive film products based on our patented Nanoflex® and OraDiscTM drug delivery technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.

Our strategy is twofold:

§	Establish the foundation for a market leadership position in wound management by developing and commercializing a customer focused portfolio of innovative wound care products based on the Nanoflex® technology to treat the various phases of wound healing; and
§	Develop our oral-transmucosal technology (OraDiscTM) and generate revenues through multiple licensing agreements.

Utilizing our technologies, three of our products have been approved for marketing in various global markets.  In addition, numerous additional products are under development utilizing our patented Nanoflex® and OraDiscTM drug delivery technologies.

Altrazeal® Transforming Powder Dressing, based on our Nanoflex® technology, has the potential to change the way health care providers approach their treatment of wounds.  Launched domestically in September 2008 and internationally in July 2012, the product is indicated for exuding wounds such as partial thickness burns, donor sites, abrasions, surgical, acute and chronic wounds.

Aphthasol®, our Amlexanox 5% paste product is the first drug approved by the FDA for the treatment of canker sores.

OraDisc™ A was initially developed as a drug delivery system to treat canker sores with the same active ingredient (amlexanox) that is used in Aphthasol® paste. We anticipate that higher amlexanox concentrations will be achieved at the disease site, increasing the effectiveness of the product.  OraDisc™ A was approved by the FDA in September 2004.

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Recent Developments

Altrazeal® marketing and licensing activities

On September 30, 2013, we executed a License and Supply Agreement with Altrazeal AG to market Altrazeal® in several territories, to include Africa (markets not already licensed), Latin America, the Commonwealth of Independent States, Georgia, Ukraine, and Turkmenistan.  Under the terms of the License and Supply Agreement with Altrazeal AG, we received an up-front licensing payment, will receive certain royalties on product sales within the territories, and will supply Altrazeal® at an agreed upon price.

We completed the initial shipment of Altrazeal® to our Czech Republic/Slovakia marketing partner in September 2013 and to our South African marketing partner in October 2013.

On October 9, 2013, we announced the further expansion of the Altrazeal® international marketing network with Altrazeal AG to include Croatia, Slovenia, Serbia, Montenegro, Macedonia, Bosnia, Kosovo, and Albania.  It is anticipated that Altrazeal® will be launched in a number of these markets in the fourth quarter 2013.

Preferred stock redemption

On August 15, 2013, we provided notice to Ironridge Global III, LLC for the redemption of all of our Series A Preferred Stock held by Ironridge Global, a total of 65 Series A Preferred shares.  An affiliate of Ironridge Global III, LLC, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000, agreed to accept the cancellation of the promissory notes held by us in exchange for the redemption of the Series A Preferred shares.

Common Stock Transactions

On March 14, 2013, we entered into a Securities Purchase Agreement (the “March SPA”) with Kerry P. Gray, the Company’s Chairman, President, and Chief Executive Officer and Terrance K. Wallberg, the Company’s Vice President and Chief Financial Officer (collectively, the “Investors”) relating to an equity investment of $440,000 by the Investors for 1,100,000 shares of our common stock, par value $0.001 per share (the “March Shares”) and warrants to purchase up to 660,000 shares of our common stock (the “March Warrants”) (the “March 2013 Offering”).  Under the March SPA, the purchase and sale of the March Shares and March Warrants will take place at four closings over the next twelve months, with $88,000 being funded at the initial closing under the March SPA, $110,000 being funded on the four-month anniversary of the initial closing, $132,000 being funded on the eight-month anniversary of the initial closing, and $110,000 being funded on the one-year anniversary of the initial closing.  The March Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the five-year anniversary of the initial closing.  On March 14, 2013, we closed the March 2013 Offering and received the initial funding tranche of $88,000 for the purchase of 220,000 shares of our common stock.  On July 15, 2013, we received the second funding tranche of $110,000 for the purchase of 275,000 shares of our common stock.  On November 14, 2013, we received the third funding tranche of $132,000 for the purchase of 330,000 shares of our common stock.

On December 21, 2012, we entered into a Securities Purchase Agreement (the “SPA”) with IPMD GmbH (“IPMD”) relating to an equity investment of $2,000,000 by IPMD for 5,000,000 shares of our common stock, par value $0.001 per share (the “Shares”) and warrants to purchase up to 3,000,000 shares of our common stock (the “Warrants”) (the “January 2013 Offering”).  Under the SPA, the purchase and sale of the Shares and Warrants will take place at four closings over the next twelve months, with $400,000 being funded at the initial closing under the SPA, $500,000 being funded on the four-month anniversary of the initial closing, $600,000 being funded on the eight-month anniversary of the initial closing, and $500,000 being funded on the one-year anniversary of the initial closing.  The Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the one-year anniversary of the initial closing.  On January 3, 2013, we closed the January 2013 Offering and received the initial funding tranche of $400,000 for the purchase of 1,000,000 shares of our common stock.  On May 7, 2013, September 6, 2013, and October 24, 2013, we received subsequent funding tranches of $500,000, $300,000, and $300,000 for the purchase of 1,250,000, 750,000, and 750,000 shares of our common stock, respectively.

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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 quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the timing and amount of payments received pursuant to our current and future collaborations, and the progress and timing of expenditures related to our development, commercialization, and sale efforts. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results may not be a good indication of our future performance.

Comparison of the three months ended September 30, 2013 and 2012

Total Revenues

Revenues were approximately $111,000 for the three months ended September 30, 2013, as compared to revenues of approximately $89,000 for the three months ended September 30, 2012, and were comprised of, in approximate numbers, licensing fees of $12,000 from Altrazeal® and OraDisc™ licensing agreements, royalty fees of $10,000 from the sale of Altrazeal®, and product sales of $89,000 for Altrazeal®.

The third quarter 2013 revenues represent an overall increase of approximately $22,000 versus the comparative third quarter 2012 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $28,000 in Altrazeal® product sales and an increase of $10,000 in Altrazeal® royalties.  These revenue increases were partially offset by a decrease of $16,000 in royalties related to the domestic sale of Aphthasol®.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2013 was approximately $60,000 and was comprised entirely of costs associated with Altrazeal®.  Cost of goods sold for the three months ended September 30, 2012 was approximately $113,000 and was comprised of $34,000 from the sale of our Altrazeal® products and $79,000 from the write-off of out-of-date and obsolete finished goods

Research and Development

Research and development expenses totaled approximately $201,000 for the three months ended September 30, 2013, including $5,000 in share-based compensation, as compared to approximately $153,000 for the three months ended September 30, 2012, which included nil in share-based compensation.  The increase of approximately $48,000 in research and development expenses was primarily due to, in approximate numbers, an increase of $34,000 in direct research costs related to Altrazeal® and an increase of $20,000 in scientific compensation due to higher headcount.  These expense increases were partially offset by a decrease of $3,000 in regulatory costs and a decrease of $3,000 in operating costs.

The direct research and development expenses for the three months ended September 30, 2013 and 2012 were, in approximate numbers, as follows:

	Three Months Ended September 30,
Technology	2013		2012
Wound care & nanoparticle	$	62,000	$	30,000
OraDisc™		7,000		4,000
Aphthasol® & other technologies		---		1,000
Total	$	69,000	$	35,000

Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $302,000 for the three months ended September 30, 2013, including $20,000 in share-based compensation, as compared to approximately $376,000 for the three months ended September 30, 2012, which included $8,000 in share-based compensation.

The decrease of approximately $74,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $109,000 in sales & marketing costs due to a revised sales and marketing plan and a lower head count, a decrease of $20,000 related to accruals for bad debt expense, and a decrease of $8,000 in legal costs associated with our patents.  These expense decreases were partially offset by, in approximate numbers, an increase of $35,000 in investor relations consulting, an increase of $11,000 in director fees, an increase of $11,000 related to property tax accruals, and an increase of $6,000 in legal costs.

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Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $120,000 for the three months ended September 30, 2013 as compared to approximately $120,000 for the three months ended September 30, 2012.  The expense for each period consists of amortization associated with our acquired patents.  There were no additional purchases of patents during the three months ended September 30, 2013 and 2012, respectively.

Depreciation

Depreciation expense totaled approximately $60,000 for the three months ended September 30, 2013 as compared to approximately $75,000 for the three months ended September 30, 2012.  The decrease of approximately $15,000 in depreciation expense is attributable to certain equipment being fully depreciated.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $15,000 for the three months ended September 30, 2013 as compared to approximately $31,000 for the three months ended September 30, 2012.  The decrease of approximately $16,000 is attributable to a decrease in interest income resulting from a decrease in the outstanding notes receivable from Inter-Mountain.

Interest Expense

Interest expense totaled approximately $126,000 for the three months ended September 30, 2013 as compared to approximately $134,000 for the three months ended September 30, 2012.  Interest expense is comprised of financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and financing costs related to our convertible debt.  The decrease of approximately $8,000 in interest expense is primarily attributable to a decrease in the outstanding principle balance of the convertible note payable with Inter-Mountain.

Comparison of the nine months ended September 30, 2013 and 2012

Total Revenues

Revenues were approximately $242,000 for the nine months ended September 30, 2013, as compared to revenues of approximately $205,000 for the nine months ended September 30, 2012, and were comprised of, in approximate numbers, licensing fees of $34,000 from Altrazeal® and OraDisc™ licensing agreement, royalty fees of $10,000 from the sale of Altrazeal®, and product sales of $198,000 for Altrazeal®.

The nine months ended September 30, 2013 revenues represent an overall increase of approximately $36,000 versus the comparative nine months ended September 30, 2012 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $71,000 in Altrazeal® product sales, an increase of $10,000 in Altrazeal® royalties, and an increase of $5,000 in Altrazeal® licensing fees.  These revenue increases were partially offset by a decrease of $50,000 in royalties related to the domestic sale of Aphthasol®.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2013 was approximately $104,000 and was comprised entirely of costs associated with Altrazeal®.  Cost of goods sold for the nine months ended September 30, 2012 was approximately $136,000 and was comprised of $48,000 from the sale of our Altrazeal® products and $88,000 from the write-off of out-of-date and obsolete finished goods.

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Research and Development

Research and development expenses totaled approximately $578,000 for the nine months ended September 30, 2013, including $12,000 in share-based compensation, as compared to approximately $517,000 for the nine months ended September 30, 2012, which included $9,000 in share-based compensation.  The increase of approximately $61,000 in research and development expenses was primarily due to, in approximate numbers, an increase of $171,000 in direct research costs related to Altrazeal®.  This expense increase was partially offset by a decrease of $86,000 in scientific compensation related to share-based compensation and a lower head count, a decrease of $20,000 in clinical study costs, and a decrease of $4,000 in regulatory costs.

The direct research and development expenses for the nine months ended September 30, 2013 and 2012 were, in approximate numbers, as follows:

	Nine months Ended September 30,
Technology	2013		2012
Wound care & nanoparticle	$	216,000	$	46,000
OraDisc™		14,000		12,000
Aphthasol® & other technologies		2,000		3,000
Total	$	232,000	$	61,000

Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $915,000 for the nine months ended September 30, 2013, including $45,000 in share-based compensation, as compared to approximately $1,366,000 for the nine months ended September 30, 2012, which included $29,000 in share-based compensation.

The decrease of approximately $451,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $323,000 in sales & marketing costs due to a revised sales and marketing plan and a lower head count, a decrease of $58,000 in investor relations consulting, a decrease of $43,000 in insurance costs, a decrease of $28,000 in bad debt expenses related to costs associated with the early remittance in March 2012 of the receivable from our divestiture of the Zindaclin® technology, a decrease of $14,000 in legal costs related to our patents, a decrease of $12,000 in consulting costs related to XBRL reporting, a decrease of $8,000 in occupancy costs, a decrease of $7,000 in accounting fees associated with our annual audit, a decrease of $6,000 in compensation costs related to share-based compensation, a decrease of $4,000 in fees associated with listing exchange fees, a decrease of $3,000 in costs associated with our annual meeting of stockholders, and a decrease of $3,000 due to reduced corporate travel.  These expense decreases were partially offset by, in approximate numbers, an increase of $21,000 in costs for director fees, an increase of $17,000 in legal fees related to a licensing agreement dispute, an increase of $12,000 related to property tax accruals, and an increase of $8,000 in consulting fees related to licensing agreement procurement.

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Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $355,000 for the nine months ended September 30, 2013 as compared to approximately $357,000 for the nine months ended September 30, 2012.  The expense for each period consists primarily of amortization associated with our acquired patents.  There were no additional purchases of patents during the nine months ended September 30, 2013 and 2012, respectively.

Depreciation

Depreciation expense totaled approximately $186,000 for the nine months ended September 30, 2013 as compared to approximately $226,000 for the nine months ended September 30, 2012.  The decrease in depreciation expense of approximately $40,000 is attributable to certain equipment being fully depreciated.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $56,000 for the nine months ended September 30, 2013 as compared to approximately $34,000 for the nine months ended September 30, 2012.  The increase of approximately $22,000 is attributable to an increase in interest income resulting from interest recognized from the outstanding notes receivable from Inter-Mountain.

Interest Expense

Interest expense totaled approximately $386,000 for the nine months ended September 30, 2013 as compared to approximately $191,000 for the nine months ended September 30, 2012.  Interest expense is comprised of financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and financing costs related to our convertible debt.  The increase in interest expense of approximately $195,000 is primarily attributable to costs associated with our convertible debt and interest costs relating to regulatory fees.

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LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the public and private sales of convertible debentures and common stock.  Product sales, royalty payments, contract research, licensing fees and milestone payments from our corporate alliances have provided, and are expected in the future to provide, funding for operations. Our principal source of liquidity is cash and cash equivalents.  As of September 30, 2013 our cash and cash equivalents were approximately $53,000 which is an increase of approximately $31,000 as compared to our cash and cash equivalents at December 31, 2012 of approximately $22,000.  Our working capital (current assets less current liabilities) was approximately $(2,045,000) at September 30, 2013 as compared to our working capital at December 31, 2012 of approximately $(2,774,000).

Consolidated Cash Flow Data

	Nine months Ended September 30,
Net Cash Provided by (Used in)	2013			2012
Operating activities	$	(1,253,000	)	$	(938,000	)
Investing activities		(27,000	)		156,000
Financing activities		1,311,000			772,000
Net increase (decrease) in cash and cash equivalents	$	31,000		$	( 10,000	)

Operating Activities

For the nine months ended September 30, 2013, net cash used in operating activities was approximately $1,253,000.  The principal components of net cash used for the nine months ended September 30, 2013 were, in approximate numbers, our net loss of $2,223,000, a decrease in accounts payable of $637,000 due to timing of vendor payments, an increase in accounts receivable of $105,000, a decrease in accrued liabilities of $30,000 due primarily to the final installment payments on our insurance premium financing, a decrease in accrued interest of $7,000 due to annual interest payments on our convertible notes, and the cancellation of a warrant issued for service for $49,000.  Our net loss for the nine months ended September 30, 2013 included substantial non-cash charges of approximately $1,064,000 in the form of share-based compensation, amortization of patents, depreciation, amortization of debt discount, amortization of deferred financings costs, common stock issued for services, and interest due on convertible notes settled with common stock.  The aforementioned net cash used for the nine months ended September 30, 2013 was partially offset by, in approximate numbers, a decrease in notes receivable of $539,000 due to remittance of Investor Notes by Inter-Mountain, a net increase in deferred revenues of $91,000 due primarily to the receipt of a licensing milestone, a decrease in prepaid expenses of $64,000 due to amortization of expenses, and a decrease in inventory of $40,000 related to product sales.

For the nine months ended September 30, 2012, net cash used in operating activities was approximately $938,000.  The principal components of net cash used in operating activities for the nine months ended September 30, 2012 were, in approximate numbers, our net operating loss of $2,553,000 and an increase in notes receivable of $32,000 due to the accrual of interest income.  Our net loss for the nine months ended September 30, 2012 included substantial non-cash charges of approximately $868,000 in the form of share-based compensation, amortization of patents, depreciation, amortization of debt discount, amortization of deferred financings costs, and common stock issued for services.  The aforementioned net cash used for the nine months ended September 30, 2012 was partially offset by, in approximate numbers, an increase in accounts payable of $353,000 due to timing of vendor payments, an increase in deferred revenue of $196,000 due primarily to the receipt of licensing milestone payments, an increase in accrued liabilities of $26,000, an increase in accrued interest of $23,000 relating to our convertible debt, a decrease in inventory of $152,000 due primarily to the write-off of out-of-date and obsolete inventory and product sales, a decrease in receivables of $20,000, and a decrease in prepaid expenses of $9,000 due primarily to expense amortization.

- 34 -

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2013 was approximately $27,000 and is comprised of the purchase of manufacturing equipment for $32,000 and partially offset by the proceeds of $5,000 from the sale of manufacturing equipment.

Net cash provided by investing activities for the nine months ended September 30, 2012 was approximately $156,000 and is comprised of the fourth and final payment to us of $220,000 from the divestiture of our Zindaclin® intangible asset and a purchase of manufacturing equipment for approximately $64,000.

Financing Activities

Net cash provided by financing activities for the nine month ended September 30, 2013 was approximately $1,311,000 and was comprised of, in approximate numbers, net proceeds of $1,195,000 from the sale of common stock and warrants pursuant to the January 2013 Offering, net proceeds of $196,000 from the sale of common stock and warrants pursuant to the March 2013 Offering, net proceeds of $2,000 from the redemption of preferred stock, and payment of $82,000 for principle payments due on our convertible note with Inter-Mountain.

Net cash provided by financing activities for the nine months ended September 30, 2012 was approximately $772,000 and was comprised of, in approximate numbers, $276,000 from the net proceeds of our sale of preferred stock in January 2012, $467,000 of net proceeds from the convertible debt transaction in June 2012, and $29,000 from a decrease in the estimate of offering costs associated with the sale of preferred stock in 2011.

Liquidity

As of September 30, 2013, we had cash and cash equivalents of approximately $53,000.  We expect to use our cash, cash equivalents, and investments on working capital, general corporate purposes, property and equipment, and the payment of contractual obligations.  Our long-term liquidity will depend to a great extent on our ability to fully commercialize our Altrazeal® and OraDisc™ technologies; therefore we are continuing to look both domestically and internationally for opportunities that will enable us to expand our business.  At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth, if any, during 2013 and beyond, such as the speed and degree of market acceptance, patent protection and exclusivity of our products, the impact of competition, the effectiveness of our sales and marketing efforts, and the outcome of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.

Based on our existing liquidity, the expected level of operating expenses, projected sales of our existing products combined with other revenues, proceeds from the convertible debt transaction in June 2012, proceeds from the January 2013 Offering, and proceeds from the March 2013 Offering, we believe these factors will provide us with adequate financial resources to continue to fund our business plan and meet our operating requirements through 2013 and beyond.  We do not expect any material changes in our capital expenditure spending during 2013.  However, we cannot be sure that revenues or proceeds from capital transactions will reach anticipated levels.

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As we continue to expend funds to advance our business plan, there can be no assurance that changes in our development plans, capital expenditures or other events affecting our operations will not result in the earlier depletion of our funds.  In appropriate situations, we may seek financial assistance from other sources, including contribution by others to joint ventures and other collaborative or licensing arrangements for the development, testing, manufacturing and marketing of products under development.  Additionally, we may explore alternative financing sources for our business activities, including the possibility of loans and public and/or private offerings of debt and equity securities.  Other than outstanding Investor Notes from Inter-Mountain, proceeds from the January 2013 Offering, and proceeds from the March 2013 Offering, we have no agreements with respect to our potential receipt of additional capital.  We cannot be certain that necessary funding will be available on terms acceptable to us, or at all.

Our future capital requirements and adequacy of available funds will depend on many factors including:

§	our ability to successfully commercialize our wound management and burn care products and the market acceptance of these products;
§	our ability to establish and maintain collaborative arrangements with corporate partners for the development and commercialization of certain product opportunities;
§	continued scientific progress in our development programs;
§	the costs involved in filing, prosecuting and enforcing patent claims;
§	competing technological developments; and
§	the cost of manufacturing and production scale-up.

Contractual Obligations

The following table summarizes our outstanding contractual cash obligations as of September 30, 2013, which consists of a lease agreement for office and laboratory space in Addison, Texas which commenced on April 1, 2006, a lease agreement for office equipment, a separation agreement with our current chief executive officer, Kerry P. Gray, and the principal balance due for our three convertible note agreements.  These obligations and commitments assume non-termination of agreements and represent expected payments based on current operating forecasts, which are subject to change:

	Payments Due By Period
Contractual Obligations	Total		Less Than 1 Year		1-2 Years		3-5 Years		After 5 Years
Operating leases	$	179,609	$	120,359	$	59,250	$	---	$	---
Separation agreement		124,986		124,986		---		---		---
Convertible notes		1,637,316		1,510,641		126,675		---		---
Total contractual cash obligations	$	1,941,911	$	1,755,986	$	185,925	$	---	$	---

Capital Expenditures

Our expenditures for property, equipment, and leasehold improvements were, in approximate numbers, $32,000 and $64,000 for the nine months ended September 30, 2013 and 2012, respectively.  At this time, we believe that our capital expenditures for the remainder of 2013 will be approximately $10,000 and consist of equipment related to the manufacture of our products.

Off-Balance Sheet Arrangements

As of September 30, 2013, we did not have any off balance sheet arrangements.

Impact of Inflation

We have experienced only moderate price increases over the last three fiscal years under our agreements with third-party manufacturers as a result of raw material and labor price increases.  However, there can be no assurance that possible future inflation would not impact our operations.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  Our critical accounting policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 29, 2013.  We had no significant changes in our critical accounting policies since our last annual report.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should”, “expect”, “anticipate”, “estimate”, “will”, “target”, “may”, “project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.  Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements include, among other things, statements regarding the Company’s expected cash and cash equivalents and working capital being sufficient to fund our operations and capital expenditure requirements through 2013 and beyond, and other statements, including the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years.  The Company has included important factors in the cautionary statements included in its 2012 Annual Report on Form 10-K, particularly under “Risk Associated with our Business” that the Company believes could cause actual results to differ materially from any forward-looking statement.

Although the Company believes it has been prudent in its plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made.  The Company undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Concentrations of Credit Risk

Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, potentially expose us to concentrations of credit risk due to the use of a limited number of banking institutions and due to maintaining cash balances in banks, which, at times, may exceed the limits of amounts insured by the Federal Deposit Insurance Corporation.  Currently, we utilized Bank of America, N.A. and Bank of America Investment Services, Inc. as our banking institutions.  At September 30, 2013 and December 31, 2012 our cash and cash equivalents totaled $53,001 and $21,549, respectively.  We also invest cash in excess of immediate requirements in money market accounts, certificates of deposit, corporate commercial paper with high quality ratings, and U.S. government securities.  These investments are not held for trading or other speculative purposes.  We are exposed to credit risk in the event of default by these institutions.

Concentration of credit risk with respect to trade accounts receivable are customers with balances that exceed 5% of total consolidated trade accounts receivable at September 30, 2013 and at December 31, 2012.  As of September 30, 2013, three customers exceeded the 5% threshold, with 53%, 31%, and 7%, respectively.  Two customers exceeded the 5% threshold at December 31, 2012, with 77% and 13%, respectively.  To reduce risk, we routinely assess the financial strength of our most significant customers and monitor the amounts owed to us, taking appropriate action when necessary.  As a result, we believe that accounts receivable credit risk exposure is limited.  We maintain an allowance for doubtful accounts, but historically have not experienced any significant losses related to an individual customer or group of customers.

Concentrations of Foreign Currency Risk

Currently, a portion of our revenue and all of our expenses are denominated in U.S. dollars, although we are recently experiencing an increase in revenues in international territories denominated in a foreign currency.  Certain of our licensing and distribution agreements in international territories are denominated in Euros.  Currently, we do not employ forward contracts or other financial instruments to mitigate foreign currency risk.  As our international operations continue to grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and Rule 15d015(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report, concluded that our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within the Company, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls.

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to material affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.  We are not currently a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations or financial position.  There are no material proceedings to which any director, officer or any of our affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, our affiliates, or security holder, is a party adverse to us or our consolidated subsidiary or has a material interest adverse thereto.

ITEM 1A.  Risk Factors.

This item is not applicable to smaller reporting companies.  Information about certain risks associated with an investment in our common stock is found in Part I, Item 1A of our Annual Report on Form 10-K, as filed with the SEC on March 29, 2013.

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

As previously disclosed, on June 27, 2012, we issued the $2,210,000 million June 2012 Note to Inter-Mountain.  We also issued to Inter-Mountain the Warrants to purchase an aggregate of 3,142,857 shares of shares of common stock, which number of shares could increase based upon the terms and conditions of the Warrants.  During the three months ended September 30, 2013, we issued 592,133 shares of common stock to Inter-Mountain as monthly installment payments and we issued 469,094 shares of common stock to Inter-Mountain for the cashless exercise of warrants to purchase 479,459 shares of common stock. 

Such shares were issued in reliance upon the exemptions for sales of securities not involving a public offering, as set forth in Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation D promulgated under the Securities Act, based upon the following: (a) at the time of investment, the investor confirmed that the investor is an “accredited investor” under Rule 501 of Regulation D and that the investor had such background education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering of the June 2012 Note and Warrants; at the time of investment, the investor was provided with certain disclosure materials and all other information requested with respect to the Company; (c) at the time of investment, the investor acknowledged that the securities being purchased were “restricted securities” for purposes of the Securities Act and agreed to transfer the underlying securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; (d) except as otherwise permitted by Rule 144 under the Securities Act or an active re-sale registration statement, legends are placed on the certificates representing such shares; and (e) at the time of investment, the Company filed a Form D with respect to such shares.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information.

None.

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ITEM 6. Exhibits.

Exhibit Number		Description
10.1	*	Exclusive License and Supply Agreement dated September 30, 2013 by and between ULURU Inc. and Altrazeal AG.
31.1	*	Certification of Principal Executive Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
31.2	*	Certification of Principal Accounting Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
32.1	**	Certification of Chief Executive Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	**	Certification of Chief Financial Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	***	XBRL Instance Document
101.SCH	***	XBRL Taxonomy Extension Schema Document
101.CAL	***	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	***	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	***	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	***	XBRL Taxonomy Extension Presentation Linkbase Document
---------------------------------------------------
	*	Filed herewith.
	**	Filed herewith.  This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act of 1934.
	***	Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements 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.

	ULURU Inc.
Date:  November 14, 2013	By:	/s/ Kerry P. Gray
		Kerry P. Gray
		Chief Executive Officer and President
		(Principal Executive Officer)
Date:  November 14, 2013	By:	/s/ Terrance K. Wallberg
		Terrance K. Wallberg
		Chief Financial Officer and Vice President
		(Principal Financial and Accounting Officer)

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EX-10.1

EXHIBIT 10.1

EXCLUSIVE LICENSE AND SUPPLY AGREEMENT

dated as of September 30, 2013

between

ULURU INC.

And

ALTRAZEAL AG

THIS EXCLUSIVE LICENSE AND SUPPLY AGREEMENT (this "Agreement") is made and entered into as of this 30th day of September, 2013 (the "Effective Date"),

AMONG:

ULURU Inc., a corporation organized and existing under the laws of Nevada and having an address at 4452 Beltway Drive, Addison, TX 75001 ("ULURU")

and

ALTRAZEAL AG, a corporation organized and existing under the laws of Switzerland having an address at Bösch 71, CH 6331 Hünenberg ("ALTRAZEAL").

RECITALS

WHEREAS, ULURU has developed a proprietary wound dressing as more fully described in Exhibit A attached hereto (the "Product"), and has obtained United States Patent Nos. 7,351,430 and 7,910,135 in connection with the Product European Patent Application Nos. WO 2004/04343 8A1 and WO 2008/070270A2; Australia Patent No. 10/289,756 and New Zealand Patent No. NZ540571 (A); and

WHEREAS, ULURU desires to grant to ALTRAZEAL, and ALTRAZEAL desires to obtain from ULURU, an exclusive license to market the Product and an exclusive right to purchase from ULURU and distribute the Product, all under the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.   DEFINITIONS

1.1.   Definitions

As used in this Agreement, the following capitalized terms have the meanings indicated below:

1.1.1."ULURU" has the meaning set forth in the Preamble.

1.1.2."ULURU Confidential Information" means all information, specifications (including, without limitation, the Specifications), know-how and data pertaining to the Product and ULURU's business or its Manufacturing operations disclosed to ALTRAZEAL or its Affiliates, Third Party manufacturers or distributors hereunder, including, without limitation, all information, Specifications, know-how and data related to the design, implementation, performance and manufacture of the Product, and any correspondence with the FDA or any other Regulatory Authority, clinical study data, analytical data, or operating procedures.

1.1.3."ULURU Trademark" means any trademark, trade name, trade dress, slogan, logo, or similar item used by ULURU prior to or as of the Effective Date, or subsequent to the Effective Date in connection with any ULURU product other than the Product.

1.1.4."Affiliate" means, in the case of either Party, any corporation, joint venture, or other business entity which directly or indirectly controls, is controlled by, or is under common control with that Party. The term "control," as used in this definition, means having the power to direct, or cause the direction of, the management and policies of an entity, whether through ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, for purposes of this Agreement, the term "Affiliate" does not include entities in which a Party or its Affiliates owns a majority of the ordinary voting power to elect a majority of the board of directors but is restricted from electing such majority by contract or otherwise, until such time as such restrictions are no longer in effect.

1.1.5."Batch" means the volume of finished, packaged Product obtained from a validated Manufacturing run.

1.1.6."Certificate of Analysis" means the document identifying the results of the Methods of Analysis for a specific Batch of Product in a form agreed to by the Parties in writing but which shall include, without limitation, the applicable Product Batch's manufacturing date, expiration date, lot number and testing results and data.

1.1.7."Confidential Information" means either  ALTRAZEAL Confidential Information, ULURU Confidential Information, or both, as the context requires.

1.1.8."Contract Year" means each consecutive twelve (12) month period during the Term, the first of which shall commence on the first day of the calendar month following the date of Launch and end on the first anniversary thereof.

1.1.9."Control" means, with respect to any item of information or intellectual property right, the possession, whether by ownership or exclusive license, of the right to grant a license or other right with respect thereto.

1.1.10."Effective Date" has the meaning set forth in the Preamble.

1.1.11."Facility" means ULURU's initial Third Party Manufacturing facilities, and any subsequent or replacement Third Party Manufacturing facilities identified to and approved by ALTRAZEAL in accordance with Section 2.8.

1.1.12."FDA" means (a) the United States Food and Drug Administration, or (b) with respect to countries in the Territory other than the United States, any foreign regulatory agency or governmental entity which fulfills a role similar to the United States Food and Drug Administration, or any successor entities thereto.

1.1.13."FD&C Act" means (a) the Federal Food, Drug and Cosmetic Act, and all regulations promulgated thereunder, or (b) with respect to countries in the Territory other than the United States, any foreign laws, statutes, rules or regulations fulfilling a role similar to the Federal Food, Drug and Cosmetic Act (and all regulations promulgated thereunder), as the same may be amended or supplemented from time to time.

1.1.14."Field" means the human advanced wound management to include the treatment and control of both chronic and acute soft tissue injury.

1.1.15."Force Majeure Event" has the meaning set forth in Article 10.

1.1.16."Good Manufacturing Practice" or "GMP" means (a) the then current standards for the manufacture of pharmaceuticals, as set forth in the FD&C Act, (b) such standards of good manufacturing practice as are required by the applicable laws and regulations of countries in which the Product is intended to be sold, to the extent such standards are not inconsistent with the then current standards for the manufacture of pharmaceuticals as set forth in the FD&C Act, and (c) any quality requirements set forth in this Agreement or the QualityAgreement attached hereto as Exhibit B.

1.1.17."Intellectual Property Rights" means Patents, designs, formulae, trade secrets, know-how, industrial models, and technical information Controlled by ULURU and whether now existing or coming into existence during the Term and which are necessary for and/or related to the use or distribution of the Product.

1.1.18."Invention" means any new or useful method, process, manufacture, compound or composition of matter, whether or not patentable or copyrightable, or any improvement thereof arising during the Term with respect to the Product, its Manufacture and/or use.

1.1.19."Launch" means the date on which the Product is sold by ALTRAZEAL for the first time to a Third Party for commercial distribution in the Territory.

1.1.20."Manufacture," "Manufactured" or "Manufacturing" means all activities involved in the production of the Product, including, without limitation, the preparation, formulation, finishing, testing, packaging, storage and labeling of the Product and the handling, storage and disposal of any residues or wastes generated thereby.

1.1.21."Materials" means all materials, including, without limitation, all raw materials, ingredients, packaging supplies and labels, required for the Manufacture of Product.

1.1.22."Methods of Analysis" means the methods of analysis for the Product contained in the CE Mark filing.

1.1.23."Net Sales" means, with respect to the Product, the gross invoiced sales amount of the Product sold by ALTRAZEAL or its Affiliates to non-affiliate Third Parties, after deduction of the following items, to the extent that such deductions are reasonable and actually allowed, taken or incurred, and (provided that such items do not exceed reasonable and customary amounts in the country in which the sale occurred): (a) trade and quantity discounts, net of any give-backs received by ALTRAZEAL in return; (b) refunds, rebates, retroactive price adjustments, service allowances and broker's or agent's commissions; (c) credits or allowances given for rejection or return of previously sold Product or for wastage replacement actually taken or allowed; and (d) any tax, duties or government charge levied on the sale of Product and borne by ALTRAZEAL and/or its Affiliates (excluding national, state or local taxes based on income). Such amounts shall be determined from the books and records of ALTRAZEAL and its Affiliates maintained in accordance with generally accepted accounting principles, consistently applied. Sales of the Product by and between a Party and its Affiliates for further distribution to a Third Party are not sales to Third Parties and shall be excluded from Net Sales calculations for all purposes.

1.1.24."Party" or "Parties" means either ALTRAZEAL, ULURU or both, as the context requires.

1.1.25."Patents" shall mean (a) United States Patent Nos. 7,351,430 and 7,910,135 in connection with the Product European Patent Application Nos. WO 2004/043438A1 and WO 2008/070270A2.; Australia Patent No. 10/289,756 and New Zealand Patent No. NZ540571(A), and (b) any and all patents, patent applications, patent disclosures awaiting filing determination, patent divisionals, continuations, continuations-in-part, reissues, re-examinations, renewals and extensions thereof Controlled by ULURU during the Term, within the Territory, which are necessary for the Manufacture, use or distribution of the Product.

1.1.26."Person" means any natural person, corporation, general partnership, limited partnership, limited liability company, limited liability partnership proprietorship, other business organization, trust, union, association or governmental authority.

1.1.27."Product" has the meaning set forth in Exhibit A.

1.1.28."Recall" means any action by any Party to recover title to or possession of any Product sold or shipped to Third Parties or any action to prevent or interrupt the sale or shipment by a Party of the Product to Third Parties that would have been subject to recall if it had been sold or shipped.

1.1.29."Regulatory Approval" means all consents, permits, approvals, licenses, authorizations, qualifications, notices or orders that are issued or granted by Regulatory Authorities which are required for the manufacture, marketing, promotion, pricing and sale of the Product in a country within the Territory.

1.1.30."Regulatory Authority" means any domestic or foreign, federal, national, regional, state, county, city, municipal, local or other administrative, legislative regulatory or other governmental authority, agency, department, bureau, commission, or council involved in the granting of Regulatory Approval for the Product in the Territory.

1.1.31."Rolling Forecast" has the meaning set forth in Section 2.3.

1.1.32."Seizure" means any action by the FDA or any other Regulatory Authority to detain or destroy the Product or prevent the release of the Product.

1.1.33."Shortfall" has the. meaning set forth in Section 2.6.

1.1.34."Specifications" means the specifications for the Product contained in the CE Mark file.

1.1.35."Term" means, with respect to each country in the Territory, the period commencing on the Effective Date and ending upon the expiration of the last-to -expire patent within the Patents in such country, except as and if sooner terminated in accordance with Section 8.

1.1.36."Territory" means the countries outlined on Exhibit F.

1.1.37."Third Party" means any Person other than ALTRAZEAL, ULURU and their respective Affiliates.

1.1.38."Trademark" means any trademark, trade name, trade dress, slogan, logo, or similar item selected by ALTRAZEAL for use in connection with the Product.

1.1.39."ALTRAZEAL" has the meaning set forth in the Preamble.

1.1.40."ALTRAZEAL Confidential Information" means all information, specifications, know-how and data pertaining to ALTRAZEAL’s business disclosed to ULURU, its Affiliates or its Third Party manufacturer hereunder, including, without limitation, marketing and sales plans, artwork, formats, equipment, logos, drawings, customer lists, regulatory filings, correspondence with the FDA or any other Regulatory Authority, clinical study data, analytical data, operating procedures and all ordering and sales information.

1.2.   Construction of Certain Terms and Phrases

Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; and (v) Article and Section headings shall not affect the meaning or construction of any provision of this Agreement.

2.   SUPPLY

2.1.   Grant of License

2.1.1.Subject to the terms and conditions of this Agreement, ULURU hereby grants to ALTRAZEAL (a) the exclusive right and license in the Field under ULURU's Intellectual Property Rights to market, offer for sale, sell, distribute including sublicensing, and import products, including the Product, in the Territory, (b) the exclusive right and license in the Field under ULURU's Intellectual Property Rights to use the Product in the Territory, provided that such right and license is limited to such use as is necessary for ALTRAZEAL to market, offer for sale, sell, import and, subject to the terms and conditions set forth in Section 2.6, Manufacture the Product in the Territory, and (c) a non-exclusive right and license to use the Product and all information and Intellectual Property Rights with respect thereto (including, without limitation, data, studies and clinical trials) solely for the purpose of obtaining Regulatory Approvals for the Product. Except as expressly granted herein, ULURU retains all rights in the Intellectual Property Rights and the Product.

2.1.2.Except as specifically provided to the contrary in Section 2.1.1, the license granted in Section 2.1.1 shall not be construed (a) to effect any sale of ULURU's Intellectual Property Rights or any other proprietary ULURU technology; (b) subject to the terms and conditions set forth in Section 2.6, to grant any license relating to ULURU's methods of formulating, fabricating and Manufacturing the Product; (c) to grant ALTRAZEAL any rights in or to the use of the Intellectual Property Rights by implication or otherwise, ALTRAZEAL shall mark or have marked all containers or packages of the Product in accordance with the patent marking laws of the jurisdiction in which such units of Product are to be used or distributed.

2.2.   Manufacture, Marketing

Subject to Section 2.3, ULURU shall Manufacture and deliver the Product to ALTRAZEAL in such quantities and at such times as ordered by ALTRAZEAL in accordance with this Agreement. During the Term, ULURU shall maintain the resources necessary to manufacture the Product and shall provide, at its own expense, all Materials and labor necessary to do so. ALTRAZEAL shall market and sell the Product in each country in the Territory; provided that, nothing shall require ALTRAZEAL to continue to market or sell the Product in any country within the Territory during a period of time that ALTRAZEAL determines, in its sole judgment, that such Product is reasonably likely to be subject to adverse regulatory or legal action, or infringe any intellectual property right of any Third Party in such country.

2.3.   Forecasts

At least four (4) months prior to Launch, ALTRAZEAL shall submit to ULURU a forecast of the quantity of the Product that ALTRAZEAL anticipates ordering from ULURU prior to ALTRAZEAL’s anticipated Launch of Product ALTRAZEAL shall submit to ULURU a forecast of the quantity of the Product that ALTRAZEAL anticipates ordering from ULURU during the twelve (12) month period (broken down by quarters) following Launch and ALTRAZEAL shall update such forecast on a rolling twelve (12) months basis every month thereafter (each, a "Rolling Forecast"). ALTRAZEAL shall place purchase orders for at least the quantity of the Product specified in the first three (3) months of each such Rolling Forecast and the remaining nine (9) months shall be a non-binding good faith estimate.

2.4.   Orders and Delivery

2.4.1.ALTRAZEAL shall place its firm orders for the Product with ULURU by submitting a purchase order, at least ninety (90) days prior to the delivery date requested therein, which sets forth (a) the quantity of the Product ordered for delivery; and (b) the delivery date for that order. Any such purchase order which is in accordance with the terms and conditions of this Agreement shall be deemed to be accepted by ULURU. For all other purchase orders placed by ALTRAZEAL, unless ULURU notifies ALTRAZEAL in writing within seven (7) days of receipt of a purchase order that it is unable to deliver the Product in accordance with such purchase order, ULURU shall be deemed to have accepted such purchase order as a binding order. If ULURU notifies ALTRAZEAL that it is unable to fill a purchase order that is not in accordance with the terms and conditions of this Agreement, it shall indicate the portion of such purchase order ULURU cannot supply by the requested delivery date and specify alternate delivery dates; provided that in the event that ALTRAZEAL delivers a purchase order less than ninety (90) days prior to the requested delivery date, ULURU shall use commercially reasonable efforts to meet such requested delivery date despite the shortened lead time, and ULURU will not be in breach of its obligations hereunder if, despite such commercially reasonable efforts, ULURU is not able to meet such requested delivery date with respect to such order. All Product shall be delivered F.O.B. the Facility and in accordance with ALTRAZEAL’s instructions. Title, possession and risk of loss shall pass to ALTRAZEAL upon delivery of Product to ALTRAZEAL’s designated carrier at the Facility's loading dock. The provisions of this Agreement shall prevail over any inconsistent statement or provisions contained in any document related to this Agreement passing between the parties hereto including, but not limited to, any purchase order, acknowledgment, confirmation or notice.

2.4.2.Based on the yearly Forecast provided by ALTRAZEAL to ULURU according to Article 2.3 the following minimum order quantities will apply:

0.75 grams                      40,000

2 grams                7,500

The minimum order can be comprised of a number of orders for Product labeled in different languages. If possible, a smaller minimum order may be accepted if a contract manufacturer is willing to produce a smaller quantity. Any incremental costs will be paid by ALTRAZEAL.

2.5.   Shelf Life

ULURU shall schedule Manufacturing operations so that all of the Product delivered has the latest expiry date possible, and in no event shall any Product be delivered to ALTRAZEAL with an expiry date less than the maximum established expiry date (as set forth in the Specifications) less three (3) months. If Product is delivered to ALTRAZEAL whose expiry date does not conform with the requirements set forth in this Section 2.5, ULURU shall promptly, at its sole expense, replace the non-conforming Product.

2.6.   Alternative Supply

Notwithstanding any provision herein to the contrary, in the event that (1) ULURU is in default of its supply obligations under this Agreement with respect to two (2) accepted ALTRAZEAL purchase orders within any twelve month period (a "Shortfall"), or (2) if during Manufacture or supply of the Product to ALTRAZEAL there is a material violation of the requirements set forth m Sections 2.8, 3.1, 3.2, 3.4, 3.6. or the representations set forth in Sections 6.2.1, 6.2.4 or 6.2.5 (a "Regulatory Shortfall") that is not cured within thirty (30) days of the later to occur of the (i) date of the violation or (ii) notice to ULURU of such violation, then ALTRAZEAL, in addition to any other rights and remedies shall have the right to Manufacture the Product itself and/or qualify an alternative supplier of Product. ULURU shall, at its cost, (a) cooperate with ALTRAZEAL in the transfer of copies of the Confidential Information, technology and know-how necessary to Manufacture the Product to ALTRAZEAL and/or its designated alternative supplier, (b) deliver to ALTRAZEAL copies of such drawings, specifications, and other information in ULURU's possession as may be necessary to Manufacture the Product or cause the Product to be Manufactured and (c) grant to ALTRAZEAL a limited license in the Field under ULURU's Intellectual Property Rights during the Term of this Agreement to Manufacture, make, or have made for ALTRAZEAL’s distribution of the Product in the Territory, the Product; provided that to the extent that such technology and know-how constitutes ULURU Confidential Information (or any information constitutes Confidential Information of ULURU's Third Party manufacturer) it shall be subject to the provisions of Article 9 and ALTRAZEAL’s designated alternative supplier shall be required to enter into a confidentiality agreement with ULURU containing substantially the same terms as Article 9; and further provided that all items provided under clauses (a) and (b) above will be subject to the license granted pursuant to clause (c). In addition to ALTRAZEAL’s aforementioned right to Manufacture the Product itself and/or qualify an alternative supplier of the Product by reason of a Shortfall, ALTRAZEAL shall be relieved of its obligation to order its purchase requirements of the Product from ULURU if ULURU, for any reason, is unable, anticipates that it will be unable or is unwilling to supply Product meeting ALTRAZEAL’s forecasted requirements for a period of time of three (3) months until such ability or willingness to supply resumes; provided that ALTRAZEAL shall continue to be relieved of its obligation to order its purchase requirements of Product from ULURU to the extent necessary to fulfill any reasonable contractual commitment entered into during such period and to the extent that it has accumulated an inventory of Product during such period. In the case of a Regulatory Shortfall, ALTRAZEAL shall immediately be relieved of any obligation to order its purchase requirements of the Product from ULURU and shall not be required to purchase or accept any Product from ULURU until and unless the Regulatory Shortfall has been remedied. Within thirty (30) days of signing this agreement ULURU will provide ALTRAZEAL with a copy of the manufacturing batch records in sufficient details to enable ALTRAZEAL to produce the Product should ULURU be in violation of the provisions of this Article 2.6.

2.7.   Non-Compete

During the Term, neither ALTRAZEAL nor any Affiliate of ALTRAZEAL may directly or indirectly market, offer for sale, sell, import or distribute in the Territory any human, transforming powder dressing in the Field and in the form of the Product other than the Product. For the avoidance of doubt, this Agreement shall not preclude ALTRAZEAL from continued manufacture and sale of any product which was marketed, offered for sale, sold, imported or distributed by ALTRAZEAL as of the Effective Date.

2.8.   Third-Party Manufacturer

ULURU shall, in accordance with the terms of this Section 2.8, establish a Manufacturing Facility (operated by a Third Party manufacturer) in compliance with the FDA's requirements, including, without limitation, compliance with the written requirements of ALTRAZEAL as provided as of the Effective Date. As of the Effective Date, ULURU has identified to ALTRAZEAL the Third Party manufacturer it intends to use to Manufacture and supply to ALTRAZEAL the Product and the location of the Facility. ULURU shall promptly provide ALTRAZEAL with access to the Facility for inspection by ALTRAZEAL. In addition, ULURU shall promptly provide ALTRAZEAL  with information requested by ALTRAZEAL regarding the Third Party manufacturer (including, without limitation, any information requested by ALTRAZEAL in accordance with ALTRAZEAL’s due diligence, its GMP audit procedures and its "Level One Compliance Assessment"). During the Term and upon reasonable prior notice to ULURU, ALTRAZEAL shall have the right, from time to time, to audit the Facility and the performance of the Third Party manufacturer to ensure that the Facility and the Third Party manufacturer are in compliance with GMP and ALTRAZEAL’s other manufacturing standards. Any such audits or inspections shall be undertaken by ALTRAZEAL in accordance with the provisions of Section 3.5.

2.9.   Additional Responsibilities

2.9.1.ALTRAZEAL shall be responsible, at ALTRAZEAL’s cost and expense, for commercialization of the Product, including, without limitation, all sales and marketing activities related to the Product and the design of all Product packaging and related artwork, and the design of all labeling as well as the trademark registration in the Territory.

2.9.2.ALTRAZEAL shall retain, at its own expense a selling and service organization with adequate experience, ability and training for purposes of marketing and selling the Product in the Territory.

2.10.   ULURU Manufacturing and Supply Obligations

It is understood and agreed by the Parties that ULURU will be entering into an agreement with a Third Party manufacturer to perform the Manufacturing and supply obligations that ULURU has under this Agreement. In accordance with such understanding, ULURU acknowledges and agrees that with respect to ULURU's obligations to ALTRAZEAL  under this Agreement (a), ULURU shall be fully responsible for the performance of such as though it were performing such Manufacturing and supply obligations itself, (b) all of the provisions of this Agreement (including, without limitation, indemnification) shall be interpreted in such a way as to impute any actions or omissions by the Third Party manufacturer to ULURU, and (c) except with respect to any matters falling within the scope of Section 10, ULURU shall not be relieved or excused of any of its obligations hereunder due to any action or failure to act by the Third Party manufacturer. For avoidance of doubt, with respect to the obligations of ULURU regarding Manufacture and supply to ALTRAZEAL of the Product, reference to ULURU in this Agreement shall also mean ULURU's contractors, Third Party manufacturer and Affiliates.

3.   COMPLIANCE, QUALITY AND ENVIRONMENTAL

3.1.   Compliance with Law

ULURU shall conduct all Manufacturing hereunder in a safe and prudent manner, in compliance with all applicable laws and regulations (including, without limitation, those dealing with occupational safety and health, those dealing with public safety and health, those dealing with protecting the environment, and those dealing with disposal of wastes), and in compliance with all applicable provisions of this Agreement. ULURU shall obtain and maintain all necessary Regulatory Approvals with respect to the Manufacture and supply to ALTRAZEAL of the Product. To the extent necessary for the Regulatory Approval of the Product, ULURU, shall permit the inspection of its premises and the Facility by Regulatory Authorities and shall supply all documentation and information requested by ALTRAZEAL or such Regulatory Authority to obtain or maintain Regulatory Approval of the Product.

3.2.   Manufacturing Quality, Storage

All Product shall be Manufactured by ULURU at the Facility using Materials and processing aids free of animal derived materials. ULURU shall sample and analyze all Materials upon receipt to ensure that such Materials are unadulterated, free of defects and meet the applicable Specifications therefor, ULURU shall take all necessary steps to prevent contamination and cross contamination of Product. The Product shall be unadulterated and free from contamination, dilutents and foreign matter in any amount in accordance with the Product specifications and generally accepted pharmaceutical standards. ULURU shall perform the quality control tests (both when the Product is in-process and when it is finished) with respect to the Product in accordance with the Methods of Analysis. ULURU shall promptly, upon completion of such tests, deliver to ALTRAZEAL a copy of the record of such tests performed on, and a Certificate of Analysis for, each Batch of Product. Within thirty (30) days of the Effective Date, each of the Parties shall execute and deliver the Quality Agreement substantially in the form of Exhibit B and as mutually agreed to by the parties. Each Party agrees to perform its respective obligations under the Quality Agreement in accordance with such agreement. Prior to shipment, the Product shall be stored at all times in conditions at least as favorable as those set forth on the Product's label, or in accordance with conditions reasonably specified by ALTRAZEAL.

3.3.   Samples and Record Retention

ULURU shall retain records and retention samples of each Batch of the Product for at least twelve (12) months after the expiration date of that Batch and shall make the same available to ALTRAZEAL upon request. Retention samples shall only be destroyed after the required holding period; provided that in the event that ALTRAZEAL provides written notice to ULURU during such twelve (12) month period that it desires ULURU to retain such retention samples for a longer period of time, then ULURU shall comply with such request until notified by ALTRAZEAL that the sample need no longer be retained. During and after the Term of this Agreement ULURU shall reasonably assist ALTRAZEAL with respect to any complaint, issue or investigation relating to the Product.

3.4.   Inspection

ULURU shall give access to representatives of ALTRAZEAL, at all reasonable times during regular business hours, to the Facility and any other facility in which Product is Manufactured, tested, packaged and/or stored, and to all Manufacturing records with respect to the Product, for the purpose of inspection. ALTRAZEAL shall have the right while at any such Facility to inspect and copy (provided that to the extent that such copies constitute ULURU Confidential Information (or Confidential Information of ULURU's Third Party Manufacturer) they shall be subject to the provisions of Article 9) records and Regulatory Approvals solely to evaluate work practices and compliance with all applicable FDA and other Regulatory Authority laws and regulations, occupational health and safety, and environmental laws and regulations, GMP and warehousing practices and procedures. The conduct of (or right to conduct) any inspection under this Section 3.5 does not impose upon ALTRAZEAL responsibility or liability for the operation of the Facility. Such inspection shall be conducted after prior written notice to ULURU, will be conducted consistently with the ALTRAZEAL policies and procedures provide to ULURU as of the Effective Date (and as such policies and procedures are modified and provided in writing to ULURU from time to time, which modified policies and procedures shall not conflict with any of the provisions of this Agreement) and in a manner that is not disruptive to ULURU's operations, and shall not be more frequent than is reasonable.

3.5.   Adverse Drug Experience Reporting

Each Party shall fully, accurately and promptly provide the other Party with all data known to it at any time during the Term of this Agreement or thereafter, which data indicate that any Product is or may be unsafe, lacks utility, or otherwise does not meet the Specifications in accordance with the Adverse Event Reporting Procedures set forth in Exhibit C attached hereto (as the same may be amended from time to time by notice in writing from ALTRAZEAL to ULURU; provided that such amendment shall not conflict with any of the provisions of this Agreement). ULURU shall determine whether such information is required to be reported to the FDA and any other Regulatory Authority.

3.6.   Recalls and Seizure

3.6.1.Each Party shall keep the other Party promptly and fully informed of any notification or other information whether received directly or indirectly which might result in the Recall or Seizure of the Product. If either Party determines that it is necessary to Recall any Product, it shall immediately notify the other Party and, prior to commencing any Recall, the Parties shall consult with one another to determine whether or not a Recall is necessary. If it is mutually agreed that a Recall is necessary (or if ALTRAZEAL determines, in its sole discretion, that a Recall is necessary), then the parties shall meet and determine the manner in which the Recall is to be carried out and review any instructions or suggestions of the applicable Regulatory Authorities. ULURU and ALTRAZEAL shall effect the Recall in the manner agreed upon between the Parties in as expeditious a manner as possible and in such a way as to cause the least disruption to the sales of any Product and to preserve the goodwill and reputation associated with the Product. In any such situation, ALTRAZEAL shall have the right to make all final decisions regarding such Recall.

3.6.2.In the event that a Recall results from any cause or event arising from ULURU's breach of Sections 2.8, 3.1, 3.2, 3.4, 3.6. or the representations set forth in Sections 6.2.1, 6.2.4 or 6.2,5 and/or the defective Manufacture, storage or handling of the Product by ULURU (excluding defects relating to packaging or labeling supplied by or prepared at and in accordance with the direction of ALTRAZEAL), ULURU shall be responsible for all expenses of the Recall incurred by ALTRAZEAL and indemnify ALTRAZEAL  for all losses incurred by this Recall and ULURU shall promptly replace such Product at no additional cost to ALTRAZEAL consistent with directions received from the appropriate Regulatory Authority. In the event that a Recall results from any cause or event arising from defective Manufacture, storage, handling, or distribution of the Product by ALTRAZEAL or its Affiliates, distributors or contractors (including but not limited to defective Manufacture, storage, handling or distribution undertaken at the direction of ALTRAZEAL and consistently with ALTRAZEAL’S instructions), ALTRAZEAL  shall be responsible for the expenses of the Recall, including the cost of replacement Product. For the purposes of this Agreement, the expenses of a Recall shall include, without limitation, the expenses of notification and destruction or return of the recalled Product and all other costs incurred in connection with such Recall, including reasonable costs and attorneys' fees, but shall not include lost profits of either Party.

4.   MANUFACTURING CHANGES

4.1.   Voluntary Changes

ULURU shall not make, nor shall any other Person make, any changes to the Manufacturing process, the Manufacturing equipment, the Specifications, the Materials, the sources of Materials or the Methods of Analysis without the prior written consent of ALTRAZEAL. If either Party requests in writing a change in the Manufacturing process, the Manufacturing equipment, the Specifications, the Materials, the source of Materials or Methods of Analysis with respect to the Product that is not the result of a requirement of the FDA or any other Regulatory Authority, the other Party shall use commercially reasonable efforts to make or accept such change, as the case may be. The requesting Party shall provide the other Party with a detailed written report of all proposed changes to the Manufacturing process, the Manufacturing equipment, the Specifications, the Materials, the sources of Materials or the Methods of Analysis.

4.2.   Required Changes

If the FDA or any other Regulatory Authority requests or requires, or takes any action that requires, any change in the Manufacturing process, the Manufacturing equipment, the Specifications, the Materials, the source of Materials or Methods of Analysis with respect to the Product, the Parties shall meet and discuss an implementation plan for such change and use commercially reasonable efforts to accommodate as soon as practicable such change to meet the FDA's or such other Regulatory Authority's requirements. ULURU will bear its respective costs associated with, or incurred as a result of, such change. Each Party agrees to promptly forward to the other copies of any written communication received by such Party from the FDA or any other Regulatory Authority that may affect the Manufacture, supply, or distribution of the Product as contemplated herein.

5.   PRICE AND PAYMENT

5.1.   Price

ULURU shall invoice ALTRAZEAL for the Product supplied to ALTRAZEAL hereunder at the applicable price per Product set forth on Exhibit D.

5.2.   License Payments

During the Term, the license payments set forth in Exhibit E shall be due and payable from ALTRAZEAL to ULURU within ten (10) days of the occurrence of the applicable milestone set forth in Exhibit E.

5.3.   Royalty Payments

In addition to the payments set forth above, ALTRAZEAL shall pay to ULURU a royalty (the "Royalty"), on a country-by-country basis in the Territory, equal to ten percent (10%) of Net Sales of the Product in such country during each calendar quarter (or portion thereof) during the Term (each such period, a "Royalty Period"), commencing as of the date on which the Product is sold by ALTRAZEAL for the first time to a Third Party for commercial distribution in such country. Each Royalty will be payable not later than thirty (30) days following the expiration of each applicable Royalty Period. ALTRAZEAL shall pay the Royalty with respect to a country that accrues during the Term of this Agreement for so long as the license granted by ULURU under Section 2.1.1 remains in effect in such country. ALTRAZEAL will include with each such payment a written report detailing (i) the number of Product units, per country, and the sales price of such Product units by ALTRAZEAL and its Affiliates; and (ii) Net Sales of the Product during the applicable Royalty Period, all in a manner consistent with ALTRAZEAL’s internal sales reporting.

5.4.   Payment

MELMED HOLDING shall pay invoices for Product delivered hereunder not later than sixty (60) days after the date of the invoice which shall be dated on the date the Product is shipped to the freight forwarder.

5.5.   Taxes and Other Charges

All Product prices are exclusive of taxes, shipping costs to the point of delivery, customs duties and other charges, and ALTRAZEAL agrees to bear and be responsible for the payment of all such charges imposed, excluding taxes based upon ULURU's net income.

5.6.   Audit Rights

5.6.1.ALTRAZEAL shall maintain books of account with respect to its sales of the Product in each country in the Territory. ULURU shall have the right, not more than once during each calendar year, to have an independent accountant selected and retained by ULURU to inspect and examine such books of ALTRAZEAL during regular business hours for the purpose of verifying the statements of the aggregate Net Sales resulting from sales of Product and determining the correctness of the Royalties paid. Subject to Section 5.6.2, if such independent certified public accountant's report shows any underpayment by ALTRAZEAL, ALTRAZEAL shall pay to ULURU within thirty (30) days after ALTRAZEAL’s receipt of such report, (a) the amount of such underpayment, and (b) if such underpayment exceeds five percent (5%) of the total amount owed for the period then being audited, the reasonable fees and expenses of any independent accountant performing the audit on behalf of ULURU. Subject to Section 5.6.2, if such independent certified public accountant's report shows any overpayment by ALTRAZEAL, ULURU shall remit to ALTRAZEAL within thirty (30) days after ULURU's receipt of such report, the amount of such overpayment. Any audit or inspection conducted under this Agreement by ULURU or its agents or contractors will be subject to the confidentiality provisions of this Agreement, and ULURU will be responsible for compliance with such confidentiality provisions by such agents or contractors.

5.6.2.If any dispute arises under this Section 5.6 between the Parties relating to overpayments or underpayments, and the Parties cannot resolve such dispute within thirty (30) days of a written request by either Party to the other Party, the Parties shall hold a meeting, attended by the Chief Executive Officer or President of each party (or their respective designees), to attempt in good faith to negotiate a resolution of the dispute. If, within sixty (60) days after such meeting request, the Parties have not succeeded in negotiating a resolution of the dispute, either Party may pursue any other available remedy, including, upon prior written notice to the other Party, instituting legal action.

5.7.   Late Payments

If any payment due to ULURU under this Agreement is not received by ULURU within ten (10) days of the due date, then, commencing from the date on which such payment was due the amount of such payment shall accrue interest calculated at an annual rate equal to thejjrime rate plus two percent (2%) until such time as payment of the overdue amount is made in full; provided that no interest shall accrue on any amounts being disputed in good faith by ALTRAZEAL with respect to which ALTRAZEAL is making diligent and good faith efforts to resolve.

5.8.   Currency Exchange

All payments to be made for the supply of Products as well as for Royalties pursuant to this Agreement shall be made in EUROS. Amounts based on Net Sales in currencies other than EUROS shall be converted to EUROS at the exchange rate being the average of the prior month's rates as reported by a mutually agreed upon bank. All License payments to be made pursuant to this Agreement shall be made in United States dollars. In case of a significant change of the Currency Exchange rate the parties mutually agree to renegotiate the pricing conditions defined in EXHIBIT D.

6.   REPRESENTATIONS AND WARRANTIES

6.1.   Representation and Warranties of Each Party

Each of ALTRAZEAL and ULURU hereby represents, warrants and covenants to the other Party hereto as follows:

6.1.1.it is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of incorporation or formation;

6.1.2.the execution, delivery and performance of this Agreement by such Party has been duly authorized by all requisite corporate action and do not require any shareholder action or approval;

6.1.3.it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

6.1.4.the execution, delivery and performance by such Party of this Agreement and its compliance with the terms and provisions hereof does not and will not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (a) a loan agreement, guaranty, financing agreement, agreement affecting a product or other agreement or instrument binding or affecting it or its property; (b) the provisions of its charter or operative documents or by laws; or (c) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound; and

6.1.5.it shall comply with all applicable laws and regulations relating to its activities under this Agreement.

6.2.   Representations and Warranties of ULURU

ULURU hereby further represents and warrants to ALTRAZEAL that:

6.2.1.as of the date of each delivery of the Product by ULURU to a carrier, the Product (a) has been Manufactured, stored and shipped in strict accordance with GMPs, ail applicable laws, rules, regulations or requirements and all applicable Regulatory Approvals in effect at the time of Manufacture; (b) conforms to the Specifications and the Quality Agreement, and is free from defects and are merchantable; (c) is not adulterated or misbranded; and (d) has been shipped and stored in accordance with procedures requested by ALTRAZEAL;

6.2.2.as of the date of each delivery of the Product by ULURU to a carrier, ULURU has good and marketable title to the Product and the Product is free from all liens, charges, encumbrances and security interests;

6.2.3.to ULURU's actual knowledge as of the Effective Date, the Manufacture, use, importation, offer for sale and sale of the Product does not infringe any intellectual property rights of any Third Party within the Territory;

6.2.4.as of the date of each delivery of the Product by ULURU to a carrier, neither ULURU not any Affiliate, contractor or Third Party manufacturer of ULURU, used or uses in any capacity the services of any person debarred under the U.S. Generic Drug Enforcement Act, 21 USA §335a(k)(l) and further it did not use any person who has been convicted of a crime as defined under the Generic Drug Enforcement Act in connection with the Manufacture of Product;

6.2.5.as of the date of each delivery of the Product by ULURU to a carrier, ULURU possesses all necessary Regulatory Approvals relating to ULURU's Manufacture and supply to ALTRAZEAL of the Product;

6.2.6.as of the Effective Date, United States Patent Nos. 7,351,430 and 7,910,135 in connection with the Product European Patent Application Nos. WO 2004/043438A1 and WO 2008/070270A2.; Australia Patent No. 10/289,756 and New Zealand Patent No. NZ540571 (A); are existing and have not been held to be invalid or unenforceable, in whole or in part;

6.2.7.as of the Effective Date, ULURU is the sole and exclusive owner of the Intellectual Property Rights existing as of the Effective Date, all of which are free and clear of any liens, charges and encumbrances (other than any licenses granted by ULURU to Third Parties, which grants do not conflict with the license grants to ALTRAZEAL hereunder);

6.2.8.as of the Effective Date, and, except as disclosed to ALTRAZEAL in writing, as of the date of each delivery of the Product by ULURU to a carrier, ULURU has received no notice that the practice of the Intellectual Property Rights or the Mark are subject to an infringement claim of any issued patent or Mark owned or possessed by any Third Party within the Territory;

6.3.   No Presumption

Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions.

6.4.   Remedy

As ALTRAZEAL’s sole and exclusive remedy for any breach of Section 6.2,1 discovered prior to the distribution by ALTRAZEAL or its Affiliates of the applicable Product, ULURU shall promptly replace, at its sole cost and expense, any Product which fails to comply with the representations set forth in Section 6.2.1; provided that such non­conforming Product shall be returned to ULURU in accordance with ULURU's return procedures, and only if after ULURU's inspection, such Product is determined to have been non- confirming pursuant to the procedures set forth in Section 3.3. Except as otherwise provided expressly in this Agreement, each Party is free to seek legal and equitable recourse against the other in the event of any breach of this Agreement (including, without limitation, any breach of such other Party's obligations, representations, or warranties under this Agreement), subject to the limitations of liability set forth in Section 6.7 and, in such case, the breaching party shall be liable for all damages, losses, liabilities, expenses or penalties (excluding attorneys' fees and expenses) incurred, assessed or sustained by or against the non-breaching party, its Affiliates, directors, officers, employees or agents arising out of such breach.

6.5.   ALTRAZEAL Responsibility

ALTRAZEAL shall not be responsible for any loss or cost incurred by ULURU during Manufacture of the Product in compliance with the requirements of Section 6.2.1.

6.6.   Disclaimer

6.6.1.The foregoing warranties are the sole and exclusive warranties given by ULURU with respect to the Products and services provided hereunder, and ULURU gives and makes no representations or warranties of any kind, express or implied other than the foregoing.

6.6.2.Except for the warranties given by ALTRAZEAL as expressly provided in Section 6, ALTRAZEAL gives and makes no representations or warranties of any kind or nature, express or implied, with respect to the matters addressed in this Agreement.

6.6.3.The warranties set forth in this Section 6 do not apply to any non­conformity of the Product resulting from (a) repair, alteration, misuse,, negligence, abuse, accident, mishandling or storage in an improper environment by any party other than ULURU (or its contract manufacturer), or (b) use, handling, storage or maintenance other than in accordance with Product Specifications or Product label.

6.7.   Limitation of Liability

ULURU'S liability, and the exclusive remedy, in connection with the sale or use of the product (whether based on contract, negligence, breach of warranty, strict liability or any other legal theory), shall be strictly limited to ULURU'S obligations and ALTRAZEAL’s rights as specifically and expressly provided in this Agreement. Except for the given warranties in clause 6.2 in no event whatsoever shall either Party have any liability, obligation or responsibility to the other Party or such other Party's affiliates for any indirect, incidental, consequential, special, punitive or exemplary damages arising in any way in connection with the Product or its purchase, sale, use or inability to use.

7.   INDEMNIFICATION AND INSURANCE

7.1.   Indemnification

7.1.1.ULURU shall indemnify ALTRAZEAL for, defend ALTRAZEAL against, and hold ALTRAZEAL harmless from any and ail loss, liability, damage, claim, cost and expenses, including after prior written consent of ULURU reasonable attorney fees, incurred by ALTRAZEAL, arising from actions taken by third parties as a result of or in relation to the development and the manufacture of the Product by ULURU, according to provisions agreed between the Parties in this Agreement, and / or arising from actions taken by third parties as a result of alleged infringement of third party intellectual property rights by ALTRAZEAL by exercising its rights under this Agreement.

7.1.2.ALTRAZEAL shall indemnify ULURU for, defend ULURU against, and hold ULURU harmless from any and all loss, liability, damage, claim, cost and expenses, including after prior written consent of ALTRAZEAL reasonable attorney fees, incurred by ULURU, arising from actions taken by third parties as a result of or in relation to the development and the manufacture of the Product by ULURU, according to provisions agreed between the Parties in this Agreement, and/or arising from actions taken by third parties as a result of alleged infringement of third party intellectual property rights by ALTRAZEAL by exercising its rights under this Agreement.

7.1.3.Any Party seeking to be indemnified by virtue of the terms hereof shall notify the Party from which indemnification is sought in writing promptly of any claims, suits, charges or proceedings made or instituted against it in respect of which indemnification may be sought hereunder.

7.1.4.The indemnification provided by this Section 7 shall be the Parties' sole and exclusive remedy in connection with any third party claim.

7.2.   Insurance

At the time of Launch and continuing through the Term of this Agreement, ULURU shall maintain the following kinds of insurance with the minimum limits set forth below.

Kind of Insurance	Minimum Limits
Commercial General Liability, including Contractual, Completed Operations and Product Liability	$1,000,000 Per Occurrence $5,000,000 Aggregate
Workers Compensation	Statutory with Employer's Liability of not less than $1,000,000 Per Accident/Disease
Automobile Bodily Injury Liability (including hired automobile and non-ownership Liability)	$1,000,000 Each Accident Combined Single Limit

Upon request, ULURU shall furnish insurance certificates as directed by ALTRAZEAL, satisfactory in form and substance to ALTRAZEAL, showing the above coverages, and providing for at least thirty (30) days' prior written notice to ALTRAZEAL by the insurance company of cancellation or modification.

8.   TERM AND TERMINATION

8.1.   Term

This Agreement shall commence on the Effective Date and continue, unless sooner terminated as set forth below in this Article 8 or as otherwise specifically stated in this Agreement, for the duration of the Term.

8.2.   Termination Without Cause

ALTRAZEAL may terminate this Agreement at any time after Launch by giving twelve (12) months prior written notice to ULURU if ALTRAZEAL, in its sole discretion, determines to cease marketing the Product.

8.3.   Termination for Regulatory Action or Claim of Infringement

ALTRAZEAL may terminate this Agreement in its entirety immediately if the FDA or any other Regulatory Authority takes any action, the result of which is to prohibit or permanently or otherwise restrict the Manufacture, storage, importation, sale, offer for sale or use of the Product in any way that will have a material, adverse effect on the sale price or sales volumes of the Product, or if any claim is made that the Manufacture, storage, importation, sale, offer for sale or use of the Product infringes any patent or other proprietary or protected right of any Third Party.

8.4.   Termination for Breach

If either Party shall at any time fail to discharge any of its obligations hereunder and shall fail to correct such default within thirty (30) days after the other Party shall have given written notice to it thereof, the aggrieved Party shall be entitled to notify the other Party that it intends to terminate this Agreement unless such default is corrected and may so terminate ten (10) days after the end of such thirty (30) day period if such default is continuing; provided that if such default by the other Party shall be a recurring default and the other Party does not reasonably satisfy the aggrieved party that such defaults shall cease to occur, the aggrieved Party shall be entitled to terminate this Agreement upon the occurrence of such default and the other Party shall not be entitled to correct such default.

8.5.   Termination for Bankruptcy.

8.5.1.If either Party by voluntary or involuntary action goes into liquidation, dissolves or files a petition for bankruptcy or suspension of payments, is adjudicated bankrupt, has a receiver or trustee appointed for its property or estate, becomes insolvent or makes an assignment for the benefit of creditors, the other Party shall be entitled by notice in writing to such Party to terminate this Agreement forthwith.

8.5.2.All rights and licenses granted under or pursuant to this Agreement by each party to the other party are, and shall otherwise be deemed to be, for purposes of Section 365 (n) of the United States Bankruptcy Code, or replacement provision therefor (the Code), that each party as a licensee hereunder shall retain and may fully exercise ail of its rights and elections under the Code. The parties further agree that, in the event of the commencement of bankruptcy proceedings by or against either party as a licensor hereunder under the Code, the other party shall be entitled to retain all of its rights under the Agreement.

8.6.   Effect of Termination

Termination or expiration of this Agreement, in whole or in part, shall be without prejudice to the right of either Party to receive all payments accrued and unpaid at the effective date of such termination or expiration, without prejudice to the remedy of either Party in respect to any previous breach of any of the representations, warranties or covenants herein contained and without prejudice to any other provisions hereof which expressly or necessarily call for performance after such termination or expiration.

8.7.   ALTRAZEAL’s Rights on Termination

Upon termination or expiration of this Agreement for any reason, then (a) at ALTRAZEAL’s  request, ULURU shall supply ALTRAZEAL with its inventory of Materials, Product and/or works-in-progress for the Manufacture, packaging and labeling of Product and ALTRAZEAL shall pay ULURU the manufacturing fee for the Product, a prorated portion thereof for work-in-progress commenced against firm orders by ALTRAZEAL and the cost of materials; and (b) at ALTRAZEAL’s request, ULURU shall return to ALTRAZEAL all retention samples of the Product.

8.8.   Survival.

The following provisions shall survive the expiration or termination of this Agreement: Sections 3.4, 3.6,0^5.3, 5.4, 5.5, 5.6, 5.7,5.8, 7.1, 8.6, 8.7, and 8.8 and Articles 6, 9, 11,12 and 13.

9.   CONFIDENTIALITY

9.1.   Nondisclosure Obligation.

Each of ULURU and ALTRAZEAL shall use only in accordance with this Agreement and shall not disclose to any Third Party the Confidential Information received by it from the other Party pursuant to this Agreement, without the prior written consent of the other Party. The foregoing obligations shall survive for a period of five (5) years after the termination or expiration of this Agreement. These obligations shall not apply to Confidential Information that: (a) is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by business records; (b) is at the time of disclosure or thereafter becomes published or otherwise part of the public domain without breach of this Agreement by the receiving Party; (c) is subsequently disclosed to the receiving Party by a Third Party who has the right to make such disclosure; (d) is developed by the receiving Party independently of the Confidential Information received from the disclosing Party and such independent development can be documented by the receiving Party; or (e) is required by law, regulation, rule, act or order of any governmental authority or agency to be disclosed by a Party, provided that notice is promptly delivered to the other Party in order to provide an opportunity to seek a protective order or other similar order with respect to such Confidential Information and thereafter the disclosing Party discloses to the requesting entity only the minimum Confidential protective order  or other similar order is obtained by the other Party.

9.2.   Permitted Disclosures.

Each Party may disclose the other Party's Confidential Information to its employees and Affiliates on a need-to-know basis and to its agents or consultants to the extent required to accomplish the purposes of this Agreement; provided that the recipient Party obtains prior agreement from such agents and consultants to whom disclosure is to be made to hold in confidence and not make use of such Confidential Information for any purpose other than those permitted by tills Agreement. Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that such employees, agents, consultants, and Affiliates do not disclose or make any unauthorized use of the other Party's Confidential Information.

9.3.   Disclosure of Agreement.

Neither ULURU nor ALTRAZEAL shall release to any Third Party or publish in any way any non-public information with respect to the terms of this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed, provided that either Party may disclose the terms of this Agreement (a) to the extent required to comply with applicable laws, including, without limitation, the rules and regulations promulgated by the United States Securities and Exchange Commission; provided, further, that prior to making any such disclosure, the Party intending to so disclose the terms of this Agreement shall (i) provide the nondiscldsing Party with written notice of the proposed disclosure and an opportunity to review and comment on the intended disclosure which is reasonable under the circumstances and (ii) shall seek confidential treatment for as much of the disclosure as is reasonable under the circumstances, including, without limitation, seeking confidential treatment of any information as may be requested by the other Party; or (b) to one or more Third Parties and/or their advisors in connection with a proposed spin-off, joint venture, divestiture, merger or other similar transaction involving all, or substantially all, of the Product, assets or business of the disclosing Party to which this Agreement relates or to lenders, investment bankers and other financial institutions of its choice solely for purposes of financing the business operations of such Party; provided, further, that either (i) the other Party has consented to such disclosure or (ii) such Third Parties have signed confidentiality agreements with respect to such information on terms no less restrictive than those contained in this Article 9; or (c) to its legal counsel.

9.4.   Publicity

All publicity, press releases and other announcements relating to this Agreement or the transactions contemplated hereby shall be reviewed in advance by, and shall be subject to the approval of, both Parties.

10.   FORCE MAJEURE

If the Manufacture, production, delivery, acceptance or use of Product specified for delivery under this Agreement or if the performance of any other obligation hereunder is prevented, restricted or interfered with by reason of fires, accidents, explosions, earthquakes, floods, breakdown of plant, embargoes, government ordinances or requirements, civil or military authorities, acts of God or of the public enemy, or other similar causes beyond the reasonable control of the Party whose performance is affected (any of the foregoing a "Force Majeure Event"), then the Party affected, upon giving prompt written notice to the other Party, shall be excused from such performance on a day-for-day basis to the extent of such prevention, restriction, or interference (and the other Party shall likewise be excused from performance of its obligations on a day-for-day basis to the extent such Party's obligations relate to the performance so prevented, restricted or interfered with); provided that the Party so affected shall use commercially reasonable efforts to avoid or remove such causes of non-performance and both Parties shall proceed to perform their obligations with dispatch whenever such causes are removed or cease. If such Force Majeure Event continues for a period of ninety (90) consecutive days or more and as a result either party has been unable to perform its obligations under this Agreement for such ninety (90) day period, the other Party may terminate this Agreement effective immediately, upon delivery of a notice of termination in writing, provided that such event of Force Majeure Event is continuing. If as a result of any Force Majeure Event above, ULURU is unable to fully supply ALTRAZEAL’s orders hereunder, ULURU shall allocate all available quantities of Materials and Product to ALTRAZEAL in the ratio that the quantities ordered by ALTRAZEAL in the twelve (12) month period immediately preceding such force majeure event bears to ULURU's requirements for its own use and for supply to Third Parties for that same period; provided that if this Agreement has not been in effect for a full twelve (12) month period, then such shorter period shall be used in lieu of a twelve (12) month period.

11.   INTELLECTUAL PROPERTY

11.1.   Trademarks: ALTRAZEAL Intellectual Property

11.1.1.ALTRAZEAL may advertise, promote, market and sell the Product either separately or as part of other products under any of its Trademarks and/or trade dress, whether registered or unregistered, in its sole discretion; provided that except as otherwise expressly permitted with respect to the Mark, (see Article 11.6)

11.1.2.For the avoidance of doubt, ALTRAZEAL shall at all times retain sole and exclusive ownership of its intellectual property, including, without limitation, all marketing and sales plans, artwork, formats, equipment, logos, drawings, customer lists, regulatory filings, correspondence with the FDA or any other Regulatory Authority, clinical study data, analytical data, operating procedures and all ordering and sales information.

11.2.   Inventions

11.2.1.Except as otherwise provided for in this Section 11,2, each Party shall own all Inventions made solely by employees of such Party (or Third Parties acting on behalf of such Party) and shall jointly own with the other Party any Invention made jointly by employees of were made without violation of any term or condition of this Agreement. All determinations of inventorship under this Agreement shall be made in accordance with United States law.

11.2.2.If and to the extent applicable, Inventions Controlled by ULURU and know-how arising during the Term which relates to the Product and is Controlled by ULURU shall be automatically included in the Intellectual Property Rights under which ALTRAZEAL is licensed pursuant to Section 2.1.1 hereof. With respect to any Inventions or know- how Controlled by ALTRAZEAL specifically relating to the Product, ALTRAZEAL hereby grants to ULURU an exclusive (subject to retained rights in ALTRAZEAL), royalty-free license to use such Invention for the Manufacture of the Product for ALTRAZEAL in the Territory during the Term.

11.2.3.During the Term of this Agreement both Parties shall require their employees and personnel involved in the performance of its duties under this Agreement to deliver such assignments, confirmations of assignments or other written instruments as are necessary to vest in the respective Party clear and marketable title to the Inventions.

11.2.4.All rights, title and interest in and to the ULURU Intellectual Property Rights shall remain exclusively owned by ULURU. The Inventions owned by ULURU under this Section shall be referred to herein as "ULURU Inventions", (for clarity this is exclusive of Trademarks)

11.2.5.All rights, title, and interest in and to know-how, which is developed jointly by the Parties during the Term of this Agreement and related to the Product, its Manufacture and/or use shall be owned jointly by the Parties. All rights, title, and interest in and to any Regulatory Approval the primary responsibility for which is allocated to a particular Party hereunder that is developed or collected solely or jointly by the Parties in the Territory during the Term of this Agreement shall be owned exclusively by such Party.

11.3.   Confidentiality of Information related to Intellectual Property

Any and all information and material, including, without limitation, any and all intellectual property rights therein and thereto, assigned to a Party pursuant to the terms of this Agreement shall constitute Confidential Information of such Party which shall be deemed the Disclosing Party with respect to such Confidential Information.

11.4.   Patent Rights to New Inventions

11.4.1.ULURU, at its own expense, shall use commercially reasonable efforts to prepare, file, prosecute and maintain its Intellectual Property Rights in the agreed countries of the Territory.

11.4.2.With respect to any filings after the Effective Date, ULURU shall consult in good faith with ALTRAZEAL with respect to such applications in the Territory, and shall supply ALTRAZEAL with a copy of such applications in the Territory as filed, about the status of the prosecution of ail patent applications included within the ULURU Intellectual Property Rights and its Intellectual Property Rights to Inventions and the maintenance of any patents included within the ULURU Intellectual Property Rights and its Intellectual Property Rights to Inventions in a country in the Territory.

11.4.3.ULURU shall consider in good faith, but will not be bound by, ALTRAZEAL’s suggestions with respect to all submissions in the Territory made to any Regulatory Authority in the Territory with respect to any such patent application or patent.

11.4.4.If ULURU elects not to file a patent application with respect to its new Inventions or to cease the prosecution and/or maintenance of any Patent under the ULURU Intellectual Property Rights in a country in the Territory, ULURU shall provide ALTRAZEAL with written notice promptly after the decision to not file or continue the prosecution of such patent application or maintenance of such patent.

11.4.5.In such event, ULURU shall permit ALTRAZEAL, in ALTRAZEAL’s sole discretion, to file a patent application with respect to such Invention or continue prosecution or maintenance of any such Patent under the ULURU Intellectual Property Right in such country at ALTRAZEAL’s own expense. If ALTRAZEAL elects to continue such prosecution or maintenance, ULURU shall execute such documents and perform such acts, at ALTRAZEAL’s expense, as may be reasonably necessary to permit ALTRAZEAL to file, prosecute or maintain such application or Patent in such country. In such event, ALTRAZEAL shall own such patent application or Patent filed by ALTRAZEAL hereunder.

11.4.6.In the event that ALTRAZEAL continues the prosecution or maintenance of such patent application or Patent pursuant to this Section, ALTRAZEAL’s Royalty obligations hereunder, and this Agreement, shall expire if, and at such time, that such patent application or Patent becomes the only non-expired Patent rights within the Intellectual Property Rights.

11.4.7.(a) The Parties shall mutually agree in good faith on a case-by-case- basis on which of the Parties shall have the first right to prepare, file, prosecute and maintain any jointly owned Invention and patent rights thereon ("Joint Patent Rights") throughout the world as well as on the split of the applicable expenses and costs.

(b) The acting Party shall keep the other Party completely informed during the whole application procedure as well as during the whole patent duration. The acting Party shall provide the other Party advance copies of any official correspondence related to the filing, prosecution and maintenance of such patent filings, and shall provide the other Party a reasonable opportunity to comment on all correspondence received from and all submission to be made to any government patent office or authority with respect to any such patent application or patent, and shall consider in good faith the other Party's suggestions with respect to all submission made to any government office or authority.

(c) If either Party (the "Declining Party") at any time declines to share in the costs of filing, prosecuting and maintaining any such Joint Patent Right, on a country by country basis, the Declining Party shall provide the other Party (the "Continuing Party") with thirty (30) days prior written notice to such effect, in which event, the Declining Party shall (i) have no responsibility for any expenses incurred in connection with such Joint Patent Right and (ii) if the Continuing Party elects to continue prosecution or maintenance, the Declining Party,upon the Continuing Party's request, shall execute such documents and perform such acts, at the  Continuing Party's expense, as may be reasonably necessary (x) to assign to the Continuing Party all of the Declining Party's right, title and interest in and to such Joint Patent Rights and (y) to permit the Continuing Party to file, prosecute and/or maintain such Joint Patent Right.

(d) If ALTRAZEAL is (i) the sole owner of a Joint Patent Right or (ii) the Continuing Party, such Joint Patent Right shall no longer be considered to be part of the ULURU Intellectual Property Rights for puiposes of this Agreement and thereafter shall be part of ALTRAZEAL’s intellectual property.

(e) If ULURU is (i) the sole owner of a Joint Patent Right or (ii) is the Continuing Party, such Joint Patent Rights shall no longer be considered to be part of ALTRAZEAL’s intellectual property for purposes of this Agreement and thereafter shall be part of the ULURU Intellectual Property Rights.

11.4.8.Each Party shall, and shall cause its Affiliates, employees, attorneys and agents to, cooperate fully with the other Party and provide all information and data and execute any documents reasonably required or requested in order to allow the other Party to prosecute, file, and maintain patents and patent applications pursuant to this Section 11.4. Neither Party shall require the other Party to make any payment or reimburse for any expenses in connection with such cooperation, provision of information and data and execution of documents.

11.5.   Enforcement of Intellectual Property Rights

11.5.1.If either Party becomes aware of any infringement of any of theIntellectual Property Rights or the Mark, or the validity of any of the Intellectual Property Rights or the Mark is challenged by a Third Party in the Territory, such Party will notify the other Party in writing to that effect. Any such notice shall include, as applicable, evidence to support an allegation of infringement by such Third Party.

11.5.2.ULURU shall have the first right, but not the obligation, to take action to obtain a discontinuance of infringement or bring suit against a Third Party infringer of Intellectual Property Rights and/or the Mark in the Territory. Such right shall remain in effect until twenty (20) days after the date of notice given under Section 11.5.1. In the event that ULURU exercises such right, then: (a) ULURU shall not consent to the entry of any judgment or enter into any settlement with respect to such an action or suit without the prior written consent of ALTRAZEAL (not to be unreasonably withheld), and (b) ULURU shall bear all the expenses of any such suit brought by ULURU claiming infringement of any Intellectual Property Rights and/or the Mark. If, after the expiration of the twenty (20) day period, ULURU has not obtained, or is not diligently pursuing, a discontinuance of infringement of the Intellectual Property rights and/or the Mark, filed suit against any such Third Party infringer of the Intellectual Property Rights and/or the Mark, or provided ALTRAZEAL with information and arguments demonstrating to ALTRAZEAL’S reasonable satisfaction that there is insufficient basis for the allegation of such infringement of the Intellectual Property Rights and/or the Mark, then ALTRAZEAL shall have the right, but not the obligation, to bring suit against such Third Party infringer of the Intellectual Property Rights and/or the Mark and to join ULURU as a party plaintiff, provided that ALTRAZEAL shall bear all the expenses of such suit. In such event, ALTRAZEAL shall not consent to the entry of any judgment or enter into any settlement with respect to such an action or suit without the prior written consent of ULURU (which consent shall not unreasonably be withheld) if such judgment or settlement includes a finding or agreement that such Intellectual Property Right and/or the Mark is invalid or would enjoin or grant other equitable relief against ULURU.

11.5.3.Each Party shall cooperate (including, without limitation, by executing any documents reasonably required to enable the other Party to initiate such litigation, testifying when requested or providing relevant documents) with the other Party in any suit for infringement of Intellectual Property Rights and/or the Mark brought by the other Party against a Third Party in accordance with this Section and shall have the right to consult with the other Party and to participate in and be represented by independent counsel in such litigation at its own expense.

11.5.4.Neither Party shall be required pursuant to this Section 11.5 to undertake any activities, ncluding, without limitation, legal discovery at the request of a Third Party except as may be required by lawful process of a court of competent jurisdiction.

11.5.5.Neither Party shall incur any liability to the other Party as a consequence of any such litigation or any unfavorable decision resulting therefrom, including, without limitation, any decision holding any of the patents within the Intellectual Property Rights invalid or unenforceable.

11.5.6.Any recovery obtained by either Party as a result of any such proceeding against a Third Party infringer shall be allocated as follows: (a) such recovery shall first be used to reimburse each Party for all litigation costs in connection with such litigation paid by that Party; and (b) the Party bringing the action shall receive the remaining portion of such recovery after payment of the amounts specified in clause (a).

11.6.   Trademarks

Subject to the restrictions in Sections 11.1, ALTRAZEAL shall select and own all Trademarks in connection with the marketing, promotion and sale of the Product in the Territory. ALTRAZEAL hereby grants to ULURU a limited, non-exclusive, non- transferable, fully paid, royalty free, sublicensable license in and to all ALTRAZEAL Trademarks and copyrights to be contained in any such labeling for the sole purpose of manufacturing and applying such labels to the Product in the conduct of ULURU's obligations hereunder; provided, however, that ULURU agrees to cooperate with and offer reasonable assistance to ALTRAZEAL in facilitating ALTRAZEAL’s control of the quality of the Product branded with MELMED HOLDING's trademarks hereunder, but further provided that in no event is ULURU obligated to provide such cooperation or assistance in any way that will (i) lower the quality of the Product below that which ULURU deems acceptable for general commercial distribution, (ii) be contrary to or in violation of any regulatory or statutory obligations, or (iii) increase the cost of manufacturing and delivering the Product hereunder beyond that contemplated by the parties as of the Effective Date.

11.7.   Publications

11.7.1.The Parties recognize that limited rights of review and/or comment exist for certain Third Party publications, such as medical, academic and scientific publications. Each Party agrees to provide the other Party with any such proposed publication or presentation promptly upon its receipt. Each Party may advise the other of any comments that it may have relating to such proposed publication or presentation and do so within the applicable time frame.

11.7.2.During the Term of this Agreement, unless otherwise prohibited by law, each Party shall submit to the other Party for review and approval any proposed publication or public presentation, especially including, without limitation, academic, scientific and medical information, which contains the non-disclosing Party's Confidential Information or which disclose any non-public information contained within the Intellectual Property Rights or which makes any reference to the subject matter of this Agreement or the Product.

11.7.3.Written copies of each such proposed publication or presentation required to be submitted hereunder shall be submitted to the non-disclosing Party no later than fifteen (15) days before its intended submission for publication or presentation. The non-disclosing Party shall provide its comments with respect to such publications and presentations within ten (10) business days of its receipt of such written copy. The review period may be extended for an additional thirty (30) days in the event the non-disclosing Party can demonstrate reasonable need for such extension. By mutual agreement of the Parties in writing, this period may be further extended.

11.7.4.Regarding their publications under this Section 11.7, ULURU and ALTRAZEAL will each comply with standard academic practice regarding authorship of scientific publications and recognition of contribution of other parties in any publication.

12.   NOTICES

12.1.   Ordinary Notices

Correspondence, reports, documentation, and any other communication in writing between the Parties in the course of ordinary implementation of this Agreement shall be delivered by hand, sent by facsimile or by overnight courier to the employee or representative of the other Party who is designated by such other Party to receive such written communication at the address or facsimile numbers specified by such employee or representative,

12.2.   Extraordinary Notices

Extraordinary notices and communications (including, without limitation, notices of termination, Force Majeure Event, material breach, change of address, requests for disclosure of Confidential Information, claims or indemnification) shall be in writing and shall be delivered by hand, sent by facsimile or by overnight courier (and shall be deemed to have been properly served to the addressee upon receipt of such written communication) to the address set forth in Section 12.3 or such other address as notified in writing by such Party to the other Party.

12.3.   Addresses

If to ULURU:

ULURU Inc.

4452 Beltway Drive

Addison, TX 75001

Attention: Kerry P. Gray, President & CEO

Facsimile No.: (214)905-5145

With a copy to:

John J. Concannon, Esq.

Bingham McCutchen LLP

150 Federal Street

Boston, MA 02110

Facsimile No.: (617)951-8736

If to ALTRAZEAL:

ALTRAZEAL AG

Bösch 71

CH – 6331 Hünenberg

Attention: Helmut Kerschbaumer, Chairman

With a copy to:

Dr. Gregor Famira

CMS Reich Rohrwig Hainz


Rechtsanwälte GmbH


Gauermanngasse 2

A - 1010 Vienna

Facsimile No.: +43.1.40443.92650

13.   GENERAL

13.1.   Governing Law

This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without giving effect to its conflict of laws provisions, and to the exclusion of the provisions of the United Nations Convention on Contracts for the International Sale of Goods.

13.2.   Assignment

This Agreement shall not be assignable or transferable by either Party without the prior written consent of the other Party(which consent shall not be unreasonably withheld); provided that either Party may assign this Agreement and its rights and obligations hereunder without the other Party's consent in connection with the transfer or sale of all or substantially allof the business of such party to which this Agreement relates (or, if applicable, the business unit or division of such Party primarily responsible for performance under this Agreement) to another party, whether by merger, sale of stock, sale of assets or otherwise. In the event that ALTRAZEAL sublicenses the entire Agreement, with ULURU's consent which shall not be unreasonably withheld, or any rights or obligations hereunder in accordance with the previous sentence, then ALTRAZEAL shall guaranty the performance of the sublicensee. In the event that either ALTRAZEAL or ULURU assigns this Agreement in accordance with this Section 13.2, then the assigning Party shall be released from its obligations hereunder and shall have no further obligations to the other Party pursuant to this Agreement. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties. Any attempted assignment in violation of this Section 13.2 shall be null and void, without any force or effect.

13.3.   Entire Agreement

This Agreement and all Exhibits attached hereto (as the same may be amended from time to time by the written agreement of the Parties) constitute the entire,agreement between the Parties with respect to the subject matter hereof and supersedes all other documents, agreements, verbal consents, arrangements and understandings between the Parties with respect to the subject matter hereof. This Agreement shall not be amended orally, but only by an agreement in writing, signed by both Parties that states that it is an amendment to this Agreement.

13.4.   Severability

If any term of this Agreement shall be found to be invalid, illegal or unenforceable, it is the intention of the parties that the remainder of this Agreement shall not be affected thereby; provided that neither Party's rights under this Agreement are materially adversely affected. It is further the intention of the parties that in lieu of each such provision which is invalid, illegal or unenforceable, there be substituted or added as part of this Agreement a provision which shall be as similar as possible in the economic and business objectives intended by the Parties to such invalid, illegal or unenforceable provision, but which shall be valid, legal and enforceable. In the event that either Party's rights are materially adversely affected as a result of a change in this Agreement as contemplated by this Section, such Party may terminate this Agreement by notice in writing to the other Party given no later than sixty (60) days after such change.

13.5.   Independent Contractor

Each Party shall act as an independent contractor and neither Party shall have any authority to represent or bind the other Party in any way.

13.6.   No Waiver

Any waiver by one Party of any right of such Party or obligation of the other Party must be in writing and shall not operate as a waiver of any subsequent right or obligation.

13.7.   Counterparts

This Agreement may be executed in two or more counterparts (including, without limitation, by facsimile transmission), each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

ULURU Inc.

By:  /s/ Kerry P. Gray

Name:  Kerry P. Gray

Title: President & CEO

ALTRAZEAL AG

By:  /s/ Helmut Kerschbaumer

Name: Helmut Kerschbaumer

Title: Chairman

EXHIBIT A

Product

Means Altrazeal® medical device, in bulk or in finished form.

All applications of Altrazeal® and the NanoFlex®

Technology in wound care including:

-Altrazeal® Base Product

-Altrazeal® Silver

-Altrazeal® Collagen

But excluding:

-Altrazeal® containing pharmaceutical actives subject to the drug approval process

-Altrazeal® containing Biologics

EXHIBIT B

Quality Agreement

TO BE AGREED WITHIN 60 DAYS OF SIGNING THE LICENSE AGREEMENT.

EXHIBIT C

Procedures for Reporting Adverse Events TO BE AGREED WITHIN 90 DAYS OF SIGNING THE LICENSE AGREEMENT.

EXHIBIT D

Price

ALTRAZEAL will pay ULURU to manufacture and supply ALTRAZEAL® an amount of Euros 3 for the 0.75 gram blister pack for the first three (3) years of the Agreement. ALTRAZEAL will payto ULURU a royalty of 10% of the net sales in the Territory.

EXHIBIT E

License Payments

ALTRAZEAL will pay ULURU

•$125,000 within 2 weeks after signing the Term Sheet

EXHIBT F

Territory

Africa (excluding North Africa and French Speaking Africa); Latin America; Georgia, Ukraine, Turkmenistan and the Commonwealth of Independant States

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer of ULURU Inc.

Pursuant to Rule 13a-14(a) and 15d-14(a) under

the Securities Exchange Act of 1934, as Amended

I, Kerry P. Gray, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of ULURU 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 the 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;
4.	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:
	(a)	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;
	(b)	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;
	(c)	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
	(d)	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: November 14, 2013	/s/ Kerry P. Gray
	Kerry P. Gray
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Accounting Officer of ULURU Inc.

Pursuant to Rule 13a-14(a) and 15d-14(a) under

the Securities Exchange Act of 1934, as Amended

I, Terrance K. Wallberg, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of ULURU 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 the 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;
4.	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:
	(a)	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;
	(b)	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;
	(c)	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
	(d)	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: November 14, 2013	/s/ Terrance K. Wallberg
	Terrance K. Wallberg
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer of ULURU Inc.

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2013, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:

(1.)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2.)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 14, 2013	/s/ Kerry P. Gray
	Kerry P. Gray
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer of ULURU Inc.

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2013, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:

(1.)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2.)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 14, 2013	/s/ Terrance K. Wallberg
	Terrance K. Wallberg
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

CONVERTIBLE DEBT

9 Months Ended

Sep. 30, 2013

CONVERTIBLE DEBT [Abstract]

CONVERTIBLE DEBT

NOTE 11. CONVERTIBLE DEBT

On June 27, 2012, we entered into a Securities Purchase Agreement (the "Purchase Agreement"), related to our issuance of a $2,210,000 Secured Convertible Note, with Inter-Mountain Capital Corp., a Delaware corporation ("Inter-Mountain"). The purchase price for the June 2012 Note was paid $500,000 at closing in cash and $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the "Investor Notes"), each of which bears interest at the rate of 8.0% per annum, and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  The purchase price of the June 2012 Note also reflected a $200,000 original issue discount and $10,000 in attorney's fees. The Purchase Agreement also includes representations and warranties, restrictive covenants, and indemnification provisions standard for similar transactions.

The June 2012 Note bears interest at the rate of 8.0% per annum, with monthly installment payments of $83,333 commencing on the date that is the earlier of (i) thirty calendar days after the effective date of a registration statement registering the re-sale of the shares issuable upon conversion under the June 2012 Note or (ii) December 24, 2012, but in no event sooner than September 25, 2012.  At our option, subject to certain volume, price, and other conditions, the monthly installment payments on the June 2012 Note may be paid in whole, or in part, in cash or in our common stock.  If the monthly installment is paid in common stock, such shares being issued will be based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days.  The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days is less than $0.05.

At the option of Inter-Mountain, the outstanding principal balance of the June 2012 Note may be converted into shares of our common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.  The initial tranche was $710,000 and the six subsequent tranches are each $250,000, plus interest.  At our option, the outstanding principal balance of the June 2012 Note, or a portion thereof, may be prepaid in cash at 120% of the amount elected to be prepaid.  The June 2012 Note is secured by a Security Agreement pursuant to which we granted to Inter-Mountain a first-priority security interest in the assets held by the Company.

Events of default under the June 2012 Note include failure to make required payments or to deliver shares upon conversion, the entry of a $100,000 judgment not stayed within 30 days, breach of representations or covenants under the transaction documents, various events associated with insolvency or failure to pay debts, delisting of our common stock, a restatement of financial statements, and a default under certain other agreements.  In the event of default, the interest rate under the June 2012 Note increases to 18% and the June 2012 Note becomes callable at a premium.  In addition, the holder has all remedies under law and equity, including foreclosing on our assets under a Security Agreement with Inter-Mountain.

As part of the convertible debt financing, Inter-Mountain also received a total of seven warrants (the "Warrants") to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the Warrants.  The Warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively.  Each of the three remaining Warrants will vest upon the payment by the holder of each of the remaining three Investor Notes.  For the three months ended September 30, 2013, we issued 469,094 shares of common stock to Inter-Mountain for the cashless exercise of warrants to purchase 479,459 shares of common stock.

As part of the convertible debt financing, we entered into a Registration Rights Agreement whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein no later than July 27, 2012 and to cause such registration statement to be declared effective no later than ninety days after such filing with the SEC and to keep such registration statement effective for a period of no less than one hundred and eighty days. The Registration Rights Agreement also grants Inter-Mountain piggy-back registration rights with respect to future offerings by the Company.  In accordance with our obligations under the Registration Rights Agreement, we filed with the SEC a registration statement that was declared effective on July 31, 2012.

On October 5, 2012, we and Inter-Mountain entered into a First Amendment to Buyer Trust Deed Note #1 for the purpose of revising certain terms and conditions contained in the Buyer Trust Deed Note #1, to include an updated schedule for the timing of certain payment obligations by Inter-Mountain contained therein.

On July 28, 2011, we completed a convertible debt financing for $125,000 with Mr. Kerry P. Gray, the Company's Chairman, President, and Chief Executive Officer (the "July 2011 Note"). The July 2011 Note bears interest at the rate of 10.0% per annum, with annual payments of interest commencing on July 1, 2012. The full amount of principal and any unpaid interest will be due on July 28, 2014. The outstanding principal balance of the July 2011 Note may be converted into shares of the Company's common stock, at the option of the note holder and at any time, at a conversion price of $1.08 per share or 115,741 shares of common stock. We may force conversion of the July 2011 Note if our common stock trades for a defined period of time at a price greater than $2.16. The July 2011 Note is collateralized by the grant of a security interest in the inventory, accounts receivables and capital equipment held by the Company. The securities issuable on conversion have not been registered under the Securities Act of 1933 and may not be sold absent registration or an applicable exemption from the registration requirements.  As part of the convertible debt financing, Mr. Gray also received a warrant to purchase up to 34,722 shares of the Company's common stock.  The warrant has an exercise price of $1.08 per share and is exercisable at any time until July 28, 2016.

On July 3, 2012, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2012 of $11,542 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date.  Moreover, the parties agreed that no Event of Default under the July 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2012. Commencing on July 1, 2012, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $11,542 until the relevant payment date.  On September 5, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2012 of $11,542 and accrued interest thereon of $1,643.

On July 1, 2013, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2013 of $12,501 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date. Moreover, the parties agreed that no Event of Default under the July 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2013. Commencing on July 1, 2013, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $12,501 until the relevant payment date.  On October 28, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2013 of $12,501 and accrued interest thereon of $492.

On June 13, 2011, we completed a $140,000 convertible debt financing with Mr. Gray (the "June 2011 Note").  The June 2011 Note bears interest at the rate of 10% per annum, with annual payments of interest commencing on July 1, 2012.  The full amount of principal and any unpaid interest will be due on June 13, 2014.  The outstanding principal balance of the June 2011 Note may be converted into shares of the Company's common stock, at the option of the note holder and at any time, at a conversion price of $1.20 per share or 116,667 shares of common stock.  We may force conversion of the convertible note if our common stock trades for a defined period of time at a price greater than $1.80.  The June 2011 Note is collateralized by the grant of a security interest in the inventory, accounts receivables, and capital equipment held by the Company.  The securities issuable on conversion have not been registered under the Securities Act of 1933 and may not be sold absent registration or an applicable exemption from the registration requirements.  As part of the convertible debt financing, Mr. Gray also received a warrant to purchase up to 35,000 shares of the Company's common stock.  The warrant has an exercise price of $1.20 per share and is exercisable at any time until June 13, 2016.

On July 3, 2012, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2012 of $14,653 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date. Moreover, the parties agreed that no Event of Default under the June 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2012. Commencing on July 1, 2012, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $14,653 until the relevant payment date.  On September 5, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2012 of $14,653 and accrued interest thereon of $2,080.

On July 1, 2013, the Company and Mr. Gray entered into a Modification Agreement for the purpose of deferring the annual payment of interest due on July 1, 2013 of $14,001 until such time as Mr. Gray provides written notice to us with such notice being no less than 15 days prior to the relevant payment date. Moreover, the parties agreed that no Event of Default under the June 2011 Note occurred as a result of any failure by us to make the annual payment of interest due on July 1, 2013. Commencing on July 1, 2013, interest at the rate of 12.0% per annum accrued on the deferred interest payment of $14,001 until the relevant payment date.  On October 28, 2013, we remitted to Mr. Gray the annual interest due on July 1, 2013 of $14,001 and accrued interest thereon of $553.

We account for convertible debt using specific guidelines in accordance with U.S. GAAP.  We allocated the value of the proceeds received to the convertible instrument and to the warrant on a relative fair value basis. We calculated the fair value of the warrant issued with the convertible instrument using the Black-Scholes valuation method, using the same assumptions used for valuing employee stock options, except the contractual life of the warrant was used. Using the effective interest method, the allocated fair value was recorded as a debt discount and is being amortized over the expected term of the convertible debt to interest expense.

On the date of issuance of the June 2011 Note, the July 2011 Note, and the June 2012 Note, no portion of the proceeds were attributable to a beneficial conversion feature since the conversion price of the June 2011 Note, the July 2011 Note, and the June 2012 Note exceeded the market price of the Company's common stock.

Information relating to our convertible notes payable is as follows:

									As of September 30, 2013
Transaction	Initial Principal Amount		Interest Rate			Maturity Date	Conversion Price (1)(2)		Principal Balance		Unamortized Debt Discount		Carrying Value
June 2011 Note	$	140,000		10.0	%	06/13/2014	$	1.20	$	140,000	$	2,768	$	137,232
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		6,144		118,856
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,318,210		247,165		1,071,045
Total	$	2,475,000							$	1,583,210	$	256,077	$	1,327,133

(1)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.
(2)	The outstanding principal balance of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.

The amount of interest cost recognized from our convertible notes outstanding was $38,032 and $52,121 for the three months ended September 30, 2013 and 2012, respectively, and was $124,677 and $67,227 for the nine months ended September 30, 2013 and 2012, respectively.

The future minimum principle payments relating to our convertible notes payable, as of September 30, 2013, are as follows:

	Payments Due By Period
Transaction	Total		2013 (Three Months)		2014		2015		2016		2017
June 2011 Note	$	140,000	$	---	$	140,000	$	---	$	---	$	---
July 2011 Note		125,000		---		125,000		---		---		---
June 2012 Note		1,318,120		441,538		876,582		---		---		---
Total	$	1,583,120	$	441,538	$	1,141,852	$	---	$	---	$	---

XML

FAIR VALUE MEASUREMENTS (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Assets [Abstract]
Notes receivable and accrued interest	$ 763,654	$ 1,302,220
Convertible note - June 2011 [Member]
Liabilities [Abstract]
Convertible note payable	137,232	134,154
Convertible note - July 2011 [Member]
Liabilities [Abstract]
Convertible note payable	118,856	113,084
Convertible note - June 2012 [Member]
Liabilities [Abstract]
Convertible note payable	$ 1,071,045	$ 1,593,924

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues
License fees	$ 11,400	$ 11,400	$ 33,827	$ 29,163
Royalty income	10,276	16,633	10,276	49,918
Product sales, net	88,904	60,889	197,405	126,057
Total Revenues	110,580	88,922	241,508	205,138
Costs and Expenses
Cost of goods sold	60,245	113,415	104,236	135,745
Research and development	201,244	152,985	577,712	517,196
Selling, general and administrative	302,093	375,767	914,509	1,365,836
Amortization of intangible assets	119,763	119,763	355,385	356,687
Depreciation	59,688	75,219	185,536	225,691
Total Costs and Expenses	743,033	837,149	2,137,378	2,601,155
Operating (Loss)	(632,453)	(748,227)	(1,895,870)	(2,396,017)
Other Income (Expense)
Interest and miscellaneous income	15,088	30,720	55,564	33,745
Interest expense	(125,904)	(134,218)	(385,965)	(191,008)
Equity in earnings (loss) of unconsolidated subsidiary	0	0	0	0
Gain on sale of equipment	0	0	3,627	0
(Loss) Before Income Taxes	(743,269)	(851,725)	(2,222,644)	(2,553,280)
Income taxes	0	0	0	0
Net (Loss)	(743,269)	(851,725)	(2,222,644)	(2,553,280)
Less preferred stock dividends	(6,061)	(12,288)	(30,236)	(35,168)
Net (Loss) Allocable to Common Stockholders	$ (749,330)	$ (864,013)	$ (2,252,880)	$ (2,588,448)
Basic and diluted net (loss) per common share (in dollars per share)	$ (0.05)	$ (0.10)	$ (0.16)	$ (0.32)
Weighted average number of common shares outstanding (in shares)	15,659,822	8,267,755	13,677,186	8,106,117

XML

SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2013

SEGMENT INFORMATION [Abstract]

SEGMENT INFORMATION

NOTE 4. SEGMENT INFORMATION

We operate in one business segment: the research, development and commercialization of pharmaceutical products.  Our corporate headquarters in the United States collects product sales, licensing fees, royalties, and sponsored research revenues from our arrangements with external customers and licensees.  Our entire business is managed by a single management team, which reports to the Chief Executive Officer.

Our revenues are currently derived primarily from five licensees for international activities and our domestic sales activities of Altrazeal®.

Revenues per geographic area, along with relative percentages of total revenues, for the three and nine months ended September 30 are summarized as follows:

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2013		%			2012		%			2013		%			2012		%
Domestic	$	17,197		16	%	$	57,179		64	%	$	54,594		23	%	$	155,633		76	%
International		93,383		84	%		31,743		36	%		186,914		77	%		49,505		24	%
Total	$	110,580		100	%	$	88,922		100	%	$	241,508		100	%	$	205,138		100	%

A significant portion of our revenues are derived from a few major customers. Customers with greater than 10% of total sales, along with their relative percentage of all sales, for the three and nine months ended September 30 are represented on the following table:

			Three Months Ended September 30,		Nine Months Ended September 30,
Customers		Product	2013	2012	2013	2012
	Customer A	Altrazeal®	70%	29%	66%	15%
	Customer B	Aphthasol®	---	19%	---	24%
	Total		70%	48%	66%	39%

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18. COMMITMENTS AND CONTINGENCIES

Operating Leases

On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease commenced on April 1, 2006 and originally continued until April 1, 2013.  The lease required a minimum monthly lease obligation of $9,330, which is inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which is inclusive of monthly operating expenses.  On February 22, 2013, we executed an Amendment to Lease Agreement (the "Lease Amendment") that renewed and extended our lease until March 31, 2015. The Lease Amendment requires a minimum monthly lease obligation of $9,128, which is inclusive of monthly operating expenses, until March 31, 2014 and at such time, will increase to $9,314, which is inclusive of monthly operating expenses. The Lease Amendment includes an option whereby we may convert the term of our lease renewal from a two year term to a five year term by providing written notice on or before October 1, 2013. If so elected, the minimum monthly lease obligation for the remainder of the first year shall be reduced to $8,751, which is inclusive of monthly operating expenses, effective on the first day of the month following our election and the minimum monthly lease obligation shall increase annually every April 1^st thereafter by $186 per month until March 31, 2018.

On December 10, 2010 we entered into a lease agreement for certain office equipment. The lease, which commenced on February 1, 2011 and continues until February 1, 2015, requires a minimum lease obligation of $744 per month.

The future minimum lease payments under the 2013 office lease and the 2010 equipment lease are as follows as of September 30, 2013:

Calendar Years	Future Lease Expense
2013 (Three months)	$	29,811
2014		120,917
2015		28,881
2016		---
2017		---
Total	$	179,609

Rent expense for our operating leases amounted to $31,083 and $32,971 for the three months ended September 30, 2013 and 2012, respectively, and $86,125 and $98,111 for the nine months ended September 30, 2013 and 2012, respectively.

Employment Agreements

As of September 30, 2013, we are party to employment agreements with our Vice President and Chief Financial Officer, Terrance K. Wallberg, and Daniel G. Moro, Vice President – Polymer Drug Delivery.  The employment agreements with Messrs. Wallberg and Moro each have a term of one year and include an automatic one-year term renewal for each year thereafter.  Each employment agreement provides for a base salary, bonus, stock options, stock grants, and eligibility for Company provided benefit programs.  Under certain circumstances, the employment agreements provide for certain severance benefits in the event of termination or a change in control.  The employment agreements also contain non-solicitation, confidentiality and non-competition covenants, and a requirement for the assignment of certain invention and intellectual property rights to the Company.

Separation Agreement

As of September 30, 2013, we continue to be a party to a separation agreement with Kerry P. Gray, dated March 9, 2009.  Mr. Gray currently serves as our Chairman of the Board, Chairman of the Board's Executive Committee, Chief Executive Officer, and President.  Pursuant to the terms of the separation agreement, we provide or have provided, as applicable, certain benefits to Mr. Gray, including: (i) payments totaling $400,000 during the initial 12 month period following March 9, 2009; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, a payment of $12,500 per month; (iii) full acceleration of all vesting schedules for all outstanding Company stock options and shares of restricted stock of the Company held by Mr. Gray, with all such Company stock options exercisable by Mr. Gray having expired as of March 1, 2012; and (iv) for a period of twenty-four (24) months following March 9, 2009 we were required to maintain and provide coverage under Mr. Gray's existing health coverage plan.  The separation agreement contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions.

Indemnification

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

In accordance with our restated articles of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in their respective capacities. There have been no claims to date and we have a director and officer insurance policy that enables us to recover a portion of any amounts paid for future potential claims. We have also entered into contractual indemnification agreements with each of our officers and directors.

Related Party Transactions

On January 17, 2013, the Board of Directors of the Company appointed Helmut Kerschbaumer and Klaus Kuehne to each serve as a director of the Company. Messrs. Kerschbaumer and Kuehne currently serve as directors of IPMD, Altrazeal Trading, Ltd and Melmed Holding AG and thereby have control of, and make investment and business decisions on behalf of IPMD, Altrazeal Trading Ltd. and Melmed Holding AG (collectively, the "Euro Distributors").

For the nine months ended September 30, 2013 and 2012, respectively, the Company had product sales, in approximate numbers, of $143,000 and $22,000 with Euro Distributors, which represented 59% and 11% of our total revenues.  As of September 30, 2013 and December 31, 2012, respectively, Euro Distributors had an outstanding accounts receivable, in approximate numbers, of $82,000 and $101,000, which represented 35% and 77% of our total outstanding accounts receivables.

On December 21, 2012, we entered into a Securities Purchase Agreement with IPMD as described in more detail in Note 12.

Related Party Obligations

Since 2011, our named executive officers and certain key executives have temporarily deferred portions of their compensation as part of a plan to conserve the Company's cash and financial resources.

As of September 30, 2013, the following table summarizes the compensation temporarily deferred since 2011:

Name	2013			2012		2011		Total
Kerry P. Gray (1)	$	(23,500	)	$	220,673	$	140,313	$	337,486
Terrance K. Wallberg		(11,539	)	$	24,230	$	36,539	$	49,230
Key executives		(20,000	)	$	27,253	$	20,986	$	28,239
Total	$	(55,039	)	$	272,156	$	197,838	$	414,955

(1) During 2013, Mr. Gray temporarily deferred compensation of $169,000 which consisted of $11,500 earned pursuant to a Separation Agreement and $157,500 for his duties as Chairman of the Executive Committee of the Company's Board of Directors.  During 2013, Mr. Gray was also repaid $192,500 of temporarily deferred compensation, of which $180,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

The Company's obligation for temporarily deferred compensation was $414,955, of which $275,000 was included in accounts payable and $139,955 was included in accrued liabilities, and $469,994 of which $310,000 was included in accounts payable and $159,994 was included in accrued liabilities, as of September 30, 2013 and December 31, 2012, respectively.

Contingent Milestone Obligations

We are subject to paying Access Pharmaceuticals, Inc. ("Access") for certain milestones based on our achievement of certain annual net sales, cumulative net sales, and/or our having reached certain defined technology milestones including licensing agreements and advancing products to clinical development.  As of September 30, 2013, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.

On March 7, 2008, we terminated the license agreement with ProStrakan Ltd. for Amlexanox-related products in the United Kingdom and Ireland.  As part of the termination, we agreed to pay ProStrakan Ltd. a royalty of 30% on any future payments received by us from a new licensee in the United Kingdom and Ireland territories, up to a maximum of $1,400,000.  On November 17, 2008, we entered into a licensing agreement for Amlexanox-related product rights to the United Kingdom and Ireland territories with MEDA AB.

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EQUITY TRANSACTIONS

9 Months Ended

Sep. 30, 2013

EQUITY TRANSACTIONS [Abstract]

EQUITY TRANSACTIONS

NOTE 12. EQUITY TRANSACTIONS

Common Stock Transactions

On March 14, 2013, we entered into a Securities Purchase Agreement (the "March SPA") with Kerry P. Gray, the Company's Chairman, President, and Chief Executive Officer and Terrance K. Wallberg, the Company's Vice President and Chief Financial Officer (collectively, the "Investors") relating to an equity investment of $440,000 by the Investors for 1,100,000 shares of our common stock, par value $0.001 per share (the "March Shares") and warrants to purchase up to 660,000 shares of our common stock (the "March Warrants") (the "March 2013 Offering"). Under the March SPA, the purchase and sale of the March Shares and March Warrants will take place at four closings over the next twelve months, with $88,000 being funded at the initial closing under the March SPA, $110,000 being funded on the four-month anniversary of the initial closing, $132,000 being funded on the eight-month anniversary of the initial closing, and $110,000 being funded on the one-year anniversary of the initial closing. The March Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the five-year anniversary of the initial closing.  On March 14, 2013, we closed the March 2013 Offering and received the initial funding tranche of $88,000 for the purchase of 220,000 shares of our common stock.  On July 15, 2013, we received the second funding tranche of $110,000 for the purchase of 275,000 shares of our common stock.  On November 14, 2013, we received the third funding tranche of $132,000 for the purchase of 330,000 shares of our common stock.

On December 21, 2012, we entered into a Securities Purchase Agreement (the "SPA") with IPMD GmbH ("IPMD") relating to an equity investment of $2,000,000 by IPMD for 5,000,000 shares of our common stock, par value $0.001 per share (the "Shares") and warrants to purchase up to 3,000,000 shares of our common stock (the "Warrants") (the "January 2013 Offering"). Under the SPA, the purchase and sale of the Shares and Warrants will take place at four closings over the next twelve months, with $400,000 being funded at the initial closing under the SPA, $500,000 being funded on the four-month anniversary of the initial closing, $600,000 being funded on the eight-month anniversary of the initial closing, and $500,000 being funded on the one-year anniversary of the initial closing. The Warrants have a fixed exercise price of $0.60 per share, become exercisable in tranches on each of the four funding dates, and expire on the one-year anniversary of the initial closing.  On January 3, 2013, we closed the January 2013 Offering and received the initial funding tranche of $400,000 for the purchase of 1,000,000 shares of our common stock.  On May 7, 2013, September 6, 2013, and October 24, 2013, we received subsequent funding tranches of $500,000, $300,000, and $300,000 for the purchase of 1,250,000, 750,000, and 750,000 shares of our common stock, respectively.

In the SPA, we also agree to appoint up to two directors nominated by IPMD to serve on our Board of Directors.  On January 17, 2013, the Board of Directors of the Company appointed Helmut Kerschbaumer and Klaus Kuehne to each serve as a director of the Company. Messrs. Kerschbaumer and Kuehne are the designees of IPMD to serve on the Company's Board of Directors pursuant to covenants in the SPA with IPMD.

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STOCKHOLDERS' EQUITY (Details) (USD $)	3 Months Ended		7 Months Ended	9 Months Ended																				7 Months Ended
	Sep. 30, 2013		Aug. 15, 2013	Sep. 30, 2013		Dec. 31, 2012	Sep. 30, 2012	Sep. 30, 2013 Private Placement [Member]	Feb. 26, 2013 Private Placement [Member]	Dec. 31, 2012 Private Placement [Member]	Jun. 27, 2012 Private Placement [Member]	Sep. 30, 2013 Kerry P. Gray [Member]	Sep. 30, 2013 Terrace K. Wallberg [Member]	Sep. 30, 2013 Inter-Mountain [Member]	Sep. 30, 2013 Warrant - June 2012 Debt Offering [Member]	Sep. 30, 2013 January 3, 2014 [Member]	Sep. 30, 2013 July 23, 2014 [Member]	Sep. 30, 2013 May 15, 2015 [Member]	Sep. 30, 2013 June 13, 2016 [Member]	Sep. 30, 2013 July 16, 2016 [Member]	Sep. 30, 2013 July 28, 2016 [Member]	Sep. 30, 2013 June 27, 2017 [Member]	Sep. 30, 2013 March 14, 2018 [Member]	Aug. 15, 2013 Series A Preferred Stock [Member]
Common Stock [Abstract]
Common Stock, shares issued (in shares)	16,693,883			16,693,883		10,074,448
Common Stock, shares outstanding (in shares)	16,693,883			16,693,883		10,074,448
Common stock issued during period (in shares)	2,239,334
Stock Issued During Period, Shares, Issued for Consulting Services	150,000
Stock issued in lieu of offering agreement (in shares)	275,000
Number of shares of common stock issued for IPMD pursuant (in shares)	750,000
Number shares of common stock issued for installment payments (in shares)	592,133
Shares issued on exercise of warrants	469,094			469,094
Preferred Stock [Abstract]
Preferred stock, shares issued (in shares)	0			0
Preferred stock, shares outstanding (in shares)	0			0
Preference shares redeemed by offset of promissory note receivable (in shares)			(65)	(65)																				(65)
Promissory note offset on preference share redemption			$ (969,000)	$ (969,000)																				$ (969,000)
Promissory note term			7 years 6 months																					7 years 6 months
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)			2,041,165	2,041,165				1,484,826	392,857	392,857	785,714					3,000,000	69,050	357,155	35,000	116,667	34,722	1,484,826	660,000
Warrants issued (in shares)				4,445,714
Warrants exercised (in shares)	(479,459)			(479,459)
Warrants cancelled (in shares)				(250,000)
Balance (in shares)	5,757,420	[1]		5,757,420	[1]			1,484,826	392,857	392,857	785,714					3,000,000	69,050	357,155	35,000	116,667	34,722	1,484,826	660,000
Warrants, Weighted-Average Exercise Price [Abstract]
Balance (in dollars per share)			$ 0.98	$ 0.98
Warrants issued (in dollars per share)				$ 0.56
Warrants exercised (in dollars per share)				$ 0
Warrants cancelled (in dollars per share)				$ 0.35
Balance (in dollars per share)	$ 0.73	[1]		$ 0.73	[1]
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	5,757,420	[1]		5,757,420	[1]			1,484,826	392,857	392,857	785,714					3,000,000	69,050	357,155	35,000	116,667	34,722	1,484,826	660,000
Number of warrants to purchase common stock (in shares)							7							2
Aggregate shares of common stock issued upon exercise of warrants (in shares)	4,445,714			4,445,714								600,000	60,000	785,714	3,142,857	3,000,000
Common stock vested upon initial warrant (in shares)	5,757,420	[1]		5,757,420	[1]			1,484,826	392,857	392,857	785,714					3,000,000	69,050	357,155	35,000	116,667	34,722	1,484,826	660,000
Exercise price of warrants (in dollars per share)							$ 0.35					$ 0.60	$ 0.60	$ 0.35	$ 0.35	$ 0.60
Number of warrants that vest upon payment of notes (in shares)	3			3			3

[1] As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants. The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock. Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes. provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, and February 26, 2013, respectively, and only such shares of common stock (1,571,428 shares) have been included in this Table, based upon an exercise price of $0.35 per share of common stock. Each of the other four warrants vest upon the payment by Inter-Mountain of each of the four remaining Investor Notes.

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

Future minimum lease payments

The future minimum lease payments under the 2013 office lease and the 2010 equipment lease are as follows as of September 30, 2013:

Calendar Years	Future Lease Expense
2013 (Three months)	$	29,811
2014		120,917
2015		28,881
2016		---
2017		---
Total	$	179,609

Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred

As of September 30, 2013, the following table summarizes the compensation temporarily deferred since 2011:

Name	2013			2012		2011		Total
Kerry P. Gray (1)	$	(23,500	)	$	220,673	$	140,313	$	337,486
Terrance K. Wallberg		(11,539	)	$	24,230	$	36,539	$	49,230
Key executives		(20,000	)	$	27,253	$	20,986	$	28,239
Total	$	(55,039	)	$	272,156	$	197,838	$	414,955

(1) During 2013, Mr. Gray temporarily deferred compensation of $169,000 which consisted of $11,500 earned pursuant to a Separation Agreement and $157,500 for his duties as Chairman of the Executive Committee of the Company's Board of Directors.  During 2013, Mr. Gray was also repaid $192,500 of temporarily deferred compensation, of which $180,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2013

SEGMENT INFORMATION [Abstract]

Revenues per geographic area

Revenues per geographic area, along with relative percentages of total revenues, for the three and nine months ended September 30 are summarized as follows:

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2013		%			2012		%			2013		%			2012		%
Domestic	$	17,197		16	%	$	57,179		64	%	$	54,594		23	%	$	155,633		76	%
International		93,383		84	%		31,743		36	%		186,914		77	%		49,505		24	%
Total	$	110,580		100	%	$	88,922		100	%	$	241,508		100	%	$	205,138		100	%

Customers with greater than 10% of total sales

Customers with greater than 10% of total sales, along with their relative percentage of all sales, for the three and nine months ended September 30 are represented on the following table:

			Three Months Ended September 30,		Nine Months Ended September 30,
Customers		Product	2013	2012	2013	2012
	Customer A	Altrazeal®	70%	29%	66%	15%
	Customer B	Aphthasol®	---	19%	---	24%
	Total		70%	48%	66%	39%

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COMPANY OVERVIEW AND BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2013

COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]

Basis of Presentation

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position as of September 30, 2013 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 and cash flows for the nine months ended September 30, 2013 and 2012 have been made.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and assumptions. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 29, 2013, including the risk factors set forth therein.

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CONVERTIBLE DEBT (Details) (USD $)	3 Months Ended	9 Months Ended						9 Months Ended						9 Months Ended			3 Months Ended		9 Months Ended			9 Months Ended				9 Months Ended				9 Months Ended	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2012	Jul. 31, 2011	Jun. 30, 2011	Jun. 30, 2011 Warrant - June 2011 Debt Offering [Member]	Jul. 31, 2011 Warrant - July 2011 Debt Offering [Member]	Sep. 30, 2013 Warrant - June 2012 Debt Offering [Member] Warrant	Jun. 27, 2012 Warrant - June 2012 Debt Offering [Member]	Feb. 26, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Sep. 30, 2013 June 2011 Note [Member]	Sep. 30, 2013 July 2011 Note [Member]	Sep. 30, 2013 June 2012 Note [Member]		Dec. 31, 2012 June 2012 Note [Member]	Sep. 30, 2013 Secured convertible note [Member]	Sep. 30, 2012 Secured convertible note [Member]	Sep. 30, 2013 Secured convertible note [Member]	Sep. 30, 2012 Secured convertible note [Member]	Jun. 30, 2011 Secured convertible note [Member]	Sep. 30, 2013 Secured convertible note [Member] June 2011 Note [Member]		Sep. 30, 2013 Secured convertible note [Member] June 2011 Note [Member] Agreement Modification 1 [Member]	Sep. 30, 2013 Secured convertible note [Member] June 2011 Note [Member] Agreement Modification 2 [Member]	Sep. 30, 2013 Secured convertible note [Member] July 2011 Note [Member]		Sep. 30, 2013 Secured convertible note [Member] July 2011 Note [Member] Agreement Modification 1 [Member]	Sep. 30, 2013 Secured convertible note [Member] July 2011 Note [Member] Agreement Modification 2 [Member]	Sep. 30, 2012 Secured convertible note [Member] June 2012 Note [Member] Tranche PromissoryNote	Dec. 31, 2012 Secured convertible note [Member] June 2012 Note [Member] PromissoryNote	Sep. 30, 2013 Secured convertible note [Member] June 2012 Note [Member]	Jul. 31, 2011 Secured convertible note [Member] June 2012 Note [Member]	Sep. 30, 2013 Secured convertible note [Member] July 2013 Note [Member]	Jul. 31, 2011 Secured convertible note [Member] July 2013 Note [Member]
Debt Instrument [Line Items]
Purchase price paid in cash																															$ 500,000
Purchase price paid in the form of promissory notes																														1,500,000	1,500,000
Number of promissory notes issued under purchase agreement																														6	6
Principal amount of promissory notes																														250,000	250,000
Original issue discount reflected in purchase price																														200,000
Attorney's fees reflected in purchase price																														10,000
Amount of monthly installment																														83,333
Number of calendar days after the date of registration to commence monthly installment																														30 days
Monthly installment payment terms																														If the monthly installment is paid in common stock, such shares being issued will be based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days. The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days is less than $0.05.
Percentage of weighted average prices of shares of common stock (in hundredths)																														80.00%
Declined percentage of weighted average prices of shares of common stock (in hundredths)																														70.00%
Preceding number of trading days to calculate weighted average common stock price																														20 days
Weighted average price of shares of common stock, Maximum (in dollars per share)																														$ 0.05
Amount convertible under initial tranche																														710,000
Number of subsequent tranches																														6
Amount of each subsequent tranche plus interest																														250,000
Percentage of outstanding principal balance prepaid in cash (in hundredths)																														120.00%
Entry amount of judgment not stayed																														100,000
Period within which judgment not stayed																														30 days
Increased interest rate in the event of default (in hundredths)																														18.00%
Conversion number of equity instruments (in shares)																						116,667				115,741
Stock price trigger (in dollars per share)																										$ 2.16
Annual principal payment																					14,653												11,542		12,501
Interest Payable																								2,080	553			1,643	492
Deferred interest payable																						14,001				12,501
Information relating to convertible notes payable [Abstract]
Initial principal amount	2,475,000	2,475,000												2,210,000		2,210,000						140,000				125,000
Interest Rate (in hundredths)														8.00%								10.00%				10.00%						12.00%		12.00%
Maturity Date														Mar. 27, 2015								Jun. 13, 2014				Jul. 28, 2014
Conversion Price (in dollars per share)	$ 0.70	$ 0.70		$ 1.08	$ 1.20									$ 0.35	[1],[2]							$ 1.20	[1],[2]			$ 1.08	[1],[2]
Principal Balance	1,583,210	1,583,210										140,000	125,000	1,318,210
Unamortized Debt Discount	256,077	256,077										2,768	6,144	247,165
Carrying Value	1,327,133	1,327,133										137,232	118,856	1,071,045
Interest cost recognized																	38,032	52,121	124,677	67,227
Future Minimum payments due, convertible notes [Abstract]
2013 (Nine Months)	441,538	441,538										0	0	441,538
2014	1,141,852	1,141,852										140,000	125,000	876,582
2015	0	0										0	0	0
2016	0	0										0	0	0
2017	0	0										0	0	0
Total	$ 1,583,120	$ 1,583,120										$ 140,000	$ 125,000	$ 1,318,120
Class of Warrant or Right [Line Items]
Number of warrants								7
Number of securities called by warrants (in shares)	4,445,714	4,445,714				35,000	34,722	3,142,857
Exercise price of warrants (in dollars per share)			$ 0.35			$ 1.20	$ 1.08	$ 0.35
Number of warrants that vest upon payment of notes (in shares)	3	3	3
Number of securities vested (in shares)									785,714	392,857	392,857
Shares issued on exercise of warrants	469,094	469,094
Warrants exercised (in shares)	479,459	479,459
Minimum period during which registration statement is to be declared effective after filing with SEC		90 days
Maximum period during which registration statement is to be declared effective after filing with SEC		180 days

[1] The outstanding principal balance of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.

[2] The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2013

STOCKHOLDERS' EQUITY [Abstract]

Warrants outstanding and number of shares of common stock subject to exercise

The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2012		2,041,165		$	0.98
Warrants issued		4,445,714		$	0.56
Warrants exercised		(479,459	)	$	0.35
Warrants cancelled		(250,000	)	$	0.35
Balance as of September 30, 2013 (1)		5,757,420		$	0.73

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants.  The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.

Expiration dates for warrants subject to exercise

Of the warrant shares subject to exercise as of September 30, 2013, expiration of the right to exercise is as follows:

Date of Expiration		Number of Warrant Shares of Common Stock Subject to Expiration
	January 3, 2014	3,000,000
	July 23, 2014	69,050
	May 15, 2015	357,155
	June 13, 2016	35,000
	July 16, 2016	116,667
	July 28, 2016	34,722
	June 27, 2017	1,484,826
	March 14, 2018	660,000
	Total	5,757,420

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NOTES RECEIVABLE (Details) (USD $)	0 Months Ended			9 Months Ended	12 Months Ended
	Dec. 31, 2012	Nov. 30, 2012	Oct. 05, 2012	Sep. 30, 2012 PromissoryNote	Dec. 31, 2012 PromissoryNote	Sep. 30, 2013
Information relating to convertible notes payable [Abstract]
Initial principal amount						$ 2,475,000
June 2012 Note [Member]
Information relating to convertible notes payable [Abstract]
Initial principal amount	2,210,000				2,210,000	2,210,000
Secured convertible note [Member] | June 2012 Note [Member]
Information relating to convertible notes payable [Abstract]
Purchase price paid in the form of promissory notes				1,500,000	1,500,000
Number of promissory notes issued under purchase agreement				6	6
Principal amount of promissory notes	250,000			250,000	250,000
Payment received	50,000	100,000	100,000
Notes receivable and accrued interest						763,654
Notes receivable						687,500
Accrued interest						$ 76,154

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended		7 Months Ended	9 Months Ended		12 Months Ended								9 Months Ended		12 Months Ended							9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended		12 Months Ended		9 Months Ended			12 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013		Aug. 15, 2013	Sep. 30, 2013		Dec. 31, 2012	Sep. 30, 2012	Jul. 31, 2011	Jun. 30, 2011	Sep. 30, 2013 Private Placement [Member]	Feb. 26, 2013 Private Placement [Member]	Dec. 31, 2012 Private Placement [Member]	Jun. 27, 2012 Private Placement [Member]	Sep. 30, 2013 Warrants to purchase common stock [Member]		Dec. 31, 2012 Warrants to purchase common stock [Member]		Jul. 15, 2013 Warrants to purchase common stock [Member]	Jun. 27, 2013 Warrants to purchase common stock [Member]	Feb. 26, 2013 Warrants to purchase common stock [Member]	Sep. 30, 2013 Warrants to purchase common stock [Member] Private Placement [Member]	Jun. 27, 2012 Warrants to purchase common stock [Member] Private Placement [Member]	Sep. 30, 2013 Stock options to purchase common stock [Member]	Dec. 31, 2012 Stock options to purchase common stock [Member]	Sep. 30, 2013 Unvested restricted common stock [Member]	Dec. 31, 2012 Unvested restricted common stock [Member]	Sep. 30, 2013 Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 [Member]		Dec. 31, 2012 Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 [Member]		Sep. 30, 2013 Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 [Member] Private Placement [Member]	Sep. 30, 2013 Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 [Member]		Dec. 31, 2012 Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 [Member]		Sep. 30, 2013 Common stock issuable upon the assumed conversion of our Series A preferred stock [Member]		Dec. 31, 2012 Common stock issuable upon the assumed conversion of our Series A preferred stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)				10,848,461		9,189,119								5,757,420	[1]	2,041,165	[1]						1,014,907	158,409	0	300	3,766,316	[2]	5,617,974	[2]		309,818	[3]	368,637	[3]	0	[4]	1,002,634	[4]
Number of warrants to purchase common stock (in shares)							7							7
Number of warrants that vest upon payment of notes	3			3			3							3
Aggregate shares of common stock issued upon exercise of warrants (in shares)	4,445,714			4,445,714										3,142,857							785,714
Common stock vested upon initial warrant (in shares)	5,757,420	[1]		5,757,420	[1]	2,041,165				1,484,826	392,857	392,857	785,714			392,857		392,857	785,714	392,857		1,484,826
Exercise price of warrants (in dollars per share)							$ 0.35							$ 0.35
Warrants exercised (in shares)	479,459			479,459																											(479,459)
Average number of trading days prior to the payment of note taken to calculate the conversion price				5 days
Conversion price (in dollars per share)	$ 0.70			$ 0.70				$ 1.08	$ 1.20
Number of months from date of issuance of Series A preferred stock taken for conversion of accrued dividends				6 months
Preference shares redeemed by offset of promissory note receivable (in shares)			(65)	(65)
Promissory note offset on preference share redemption			$ (969,000)	$ (969,000)
Promissory note term			7 years 6 months

[1] As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants. The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock. Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes. provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, and February 26, 2013, respectively, and only such shares of common stock (1,571,428 shares) have been included in this Table, based upon an exercise price of $0.35 per share of common stock. Each of the other four warrants vest upon the payment by Inter-Mountain of each of the four remaining Investor Notes.

[2] The outstanding principal balance and the accrued and unpaid interest of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations. For the purposes of this Table, we have assumed a conversion price of $0.35 per share and no ownership limitations.

[3] The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively. The accrued and unpaid interest for each convertible note payable may be converted, at the option of Mr. Gray, into shares of common stock at a conversion price based upon the average of the five trading days prior to the payment date, which for the purposes of this Table we have assumed to be June 30, 2013.

[4] The outstanding Series A preferred stock and the accrued and unpaid dividends thereon are convertible into shares of the Company's common stock at the Company's option at any time after six-months from the date of issuance of the Series A preferred stock. The conversion price for the holder is fixed at $0.70 per share with no adjustment mechanisms, resets, ratchets, or anti-dilution covenants other than the customary adjustments for stock splits. For the purposes of this Table, we have assumed a conversion price of $0.70 per share.

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INVESTMENTS IN UNCONSOLIDATED ENTITIES (Tables)

9 Months Ended

Sep. 30, 2013

INVESTMENTS IN UNCONSOLIDATED ENTITIES [Abstract]

Summarized financial information for investment

Summarized financial information for our investment in Altrazeal Trading Ltd. assuming 100% ownership is as follows:

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	415,248
Total liabilities	$	205,991
Total stockholders' equity	$	209,257
Statement of operations
Revenues	$	131,869
Net (loss)	$	(330,961	)

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INTANGIBLE ASSETS (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 9,625,938		$ 9,625,938		$ 9,625,938
Less: accumulated amortization	(5,835,338)		(5,835,338)		(5,479,953)
Intangible assets, net	3,790,600		3,790,600		4,145,985
Amortization expense	119,763	119,763	355,385	356,687
Future aggregate amortization expense for intangible assets [Abstract]
2013 (Three months)	119,763		119,763
2014	475,148		475,148
2015	475,148		475,148
2016	476,450		476,450
2017	475,148		475,148
2018 & Beyond	1,768,943		1,768,943
Total	3,790,600		3,790,600
Patents [Member] | Amlexanox (Aphthasol) [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	2,090,000		2,090,000		2,090,000
Patents [Member] | Amlexanox (OraDiscA) [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	6,873,080		6,873,080		6,873,080
Patents [Member] | OraDisc [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	73,000		73,000		73,000
Patents [Member] | Hydrogel Nanoparticle Aggregate [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 589,858		$ 589,858		$ 589,858

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LEGAL PROCEEDINGS

9 Months Ended

Sep. 30, 2013

LEGAL PROCEEDINGS [Abstract]

LEGAL PROCEEDINGS

NOTE 19. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to any legal proceedings, the adverse outcome of which, in management's opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations or financial position. There are no material proceedings to which any director, officer or any of our affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, our affiliates, or security holder, is a party adverse to us or our consolidated subsidiary or has a material interest adverse thereto.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) (USD $)	3 Months Ended	7 Months Ended	9 Months Ended
	Sep. 30, 2013	Aug. 15, 2013	Sep. 30, 2013
Non-cash investing and financing activities:
Shares issued on exercise of warrants (in shares)	469,094		469,094
Warrants exercised (in shares)	479,459		479,459
Preferred shares redeemed by offset of promissory note receivable (in shares)		(65)	(65)
Promissory note offset against preferred share redemption		$ (969,000)	$ (969,000)

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2013

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2013 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 29, 2013.

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NOTES RECEIVABLE

9 Months Ended

Sep. 30, 2013

NOTES RECEIVABLE [Abstract]

NOTES RECEIVABLE

NOTE 5. NOTES RECEIVABLE

On June 27, 2012, we entered into a Securities Purchase Agreement related to our issuance of a $2,210,000 Secured Convertible Note (the "June 2012 Note"), with Inter-Mountain Capital Corp., a Delaware corporation ("Inter-Mountain").  As part of the June 2012 Note transaction, we received $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the "Investor Notes") and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  On October 5, 2012, we and Inter-Mountain entered into a First Amendment to Buyer Trust Deed Note #1 (the "Trust Deed Note Amendment") for the purpose of revising certain terms and conditions contained in the Buyer Trust Deed Note #1, to include receiving payments of $100,000, $100,000, and $50,000 on October 5, 2012, November 30, 2012, and December 31, 2012, respectively, and any interest thereon.

As of September 30, 2013, we had $763,654 in notes receivable which is comprised of $687,500 for three Investor Notes and $76,154 for accrued interest thereon.

Please refer to Note 11 for a more detailed description of the June 2012 Note transaction.

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THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2013

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS [Abstract]

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

NOTE 3. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08, "Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment" ("ASU 2011-08"). ASU 2011-08 updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for fiscal years beginning after December 15, 2011; however, early adoption is permitted in certain circumstances.  We adopted the provisions of ASU 2011-08 in the first quarter of 2012. The adoption of this update does not materially impact our financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income" ("ASU 2011-05"). ASU 2011-05 amended existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income. Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years beginning after December 15, 2011.  We adopted the provisions of ASU 2011-05 in the first quarter of 2012. The adoption of this update does not materially impact our financial statements.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" ("ASU 2011-04"). ASU 2011-04 generally provides a uniform framework for fair value measurements and related disclosures between U.S. generally accepted accounting principles and International Financial Reporting Standards. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity's use of a nonfinancial asset that is different from the asset's highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 was effective for interim and annual periods beginning on or after December 15, 2011. We adopted the provisions of ASU 2011-04 in the first quarter of 2012.  The adoption of this update does not materially impact our financial statements.

There are no other new accounting pronouncements adopted or enacted during the nine months ended September 30, 2013 that had, or are expected to have, a material impact on our financial statements.

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INVENTORY (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Components of inventory [Abstract]
Finished goods	$ 109,452	$ 303,779
Work-in-progress	346,163	190,794
Raw materials	32,369	33,070
Total	$ 487,984	$ 527,643

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INVENTORY (Tables)

9 Months Ended

Sep. 30, 2013

INVENTORY [Abstract]

Components of inventory

The components of inventory, at the different stages of production, consisted of the following at September 30, 2013 and December 31, 2012:

Inventory	September 30, 2013		December 31, 2012
Finished goods	$	109,452	$	303,779
Work-in-progress		346,163		190,794
Raw materials		32,369		33,070
Total	$	487,984	$	527,643

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ACCRUED LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2013

ACCRUED LIABILITIES [Abstract]

Accrued liabilities

Accrued liabilities consisted of the following at September 30, 2013 and December 31, 2012:

Accrued Liabilities	September 30, 2013		December 31, 2012
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		192,556		213,005
Accrued insurance payable		43,894		52,629
Product rebates/returns		20		81
Other		558		951
Total accrued liabilities	$	343,327	$	372,965

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

Fair value of financial instruments

The following table summarizes the fair value of our financial instruments at September 30, 2013 and December 31, 2012.

Description	September 30, 2013		December 31, 2012
Assets:
Notes receivable and accrued interest	$	763,654	$	1,302,220
Liabilities:
Convertible note – June 2011	$	137,232	$	134,154
Convertible note – July 2011	$	118,856	$	113,084
Convertible note – June 2012	$	1,071,045	$	1,593,924

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LEGAL PROCEEDINGS (Details)	9 Months Ended
	Sep. 30, 2013
LEGAL PROCEEDINGS [Abstract]
Percentage of voting securities (in hundredths)	5.00%

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SHARE BASED COMPENSATION (Details) (USD $)	0 Months Ended						3 Months Ended				9 Months Ended				3 Months Ended				9 Months Ended											9 Months Ended			9 Months Ended
	Jun. 13, 2013	Jun. 14, 2012	Jun. 15, 2010	Dec. 17, 2009	May 08, 2007	Sep. 30, 2013	Sep. 30, 2013 Incentive Stock Options [Member]		Sep. 30, 2012 Incentive Stock Options [Member]		Sep. 30, 2013 Incentive Stock Options [Member]		Sep. 30, 2012 Incentive Stock Options [Member]		Sep. 30, 2013 Nonstatutory Stock Options [Member]		Sep. 30, 2012 Nonstatutory Stock Options [Member]		Sep. 30, 2013 Nonstatutory Stock Options [Member]		Sep. 30, 2012 Nonstatutory Stock Options [Member]		Sep. 30, 2013 Stock Options [Member]	Sep. 30, 2013 Restricted Stock [Member]	Sep. 30, 2013 Restricted Stock [Member] Minimum [Member]	Sep. 30, 2013 Restricted Stock [Member] Maximum [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member]	Mar. 31, 2006 2006 Equity Incentive Plan [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Stock Options [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Stock Options [Member] Minimum [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Stock Options [Member] Maximum [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Restricted Stock [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Restricted Stock [Member] Minimum [Member]	Sep. 30, 2013 2006 Equity Incentive Plan [Member] Restricted Stock [Member] Maximum [Member]
Options Granted [Abstract]
Quantity (in shares)							0	[1]	0	[1]	232,500	[1]	0	[1],[2]	0	[3]	0	[3]	735,000	[3]	0	[2],[3]	967,500
Weighted average fair value per share (in dollars per share)							$ 0	[1]	$ 0	[1]	$ 0.24	[1]	$ 0	[1],[2]	$ 0	[3]	$ 0	[3]	$ 0.24	[3]	$ 0	[2],[3]
Fair value							$ 0	[1]	$ 0	[1]	$ 56,112	[1]	$ 0	[1],[2]	$ 0	[3]	$ 0	[3]	$ 177,388	[3]	$ 0	[2],[3]
Weighted average assumptions to estimate the fair value of share-based awards [Abstract]
Expected volatility (in hundredths)											103.55%	[4]	0.00%	[4]					103.55%	[4]	0.00%	[4]
Risk-fee interest rate % (in hundredths)											0.81%	[5]	0.00%	[5]					0.81%	[5]	0.00%	[5]
Expected term (in years)											5 years								5 years
Dividend yield (in hundredths)											0.00%	[6]	0.00%	[6]					0.00%	[6]	0.00%	[6]
Forfeiture rate (in hundredths)											0.00%		0.00%						0.00%		0.00%
Options, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)																							158,409
Granted (in shares)							0	[1]	0	[1]	232,500	[1]	0	[1],[2]	0	[3]	0	[3]	735,000	[3]	0	[2],[3]	967,500
Forfeited/cancelled (in shares)																							(111,002)
Exercised (in shares)																							0
Outstanding, end of period (in shares)																							1,014,907
Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding, beginning of period (in dollars per share)																							$ 12.32
Granted (in dollars per share)																							$ 0.33
Forfeited/cancelled (in dollars per share)																							$ 1.03
Exercised (in dollars per share)																							$ 0
Outstanding, end of period (in dollars per share)																							$ 2.12
Nonvested restricted stock awards, Number of Shares [Roll Forward]
Outstanding, beginning of period (in shares)																								300
Granted (in shares)																								0
Forfeited/cancelled (in shares)																								0
Exercised/issued (in shares)																								(300)
Outstanding, end of period (in shares)																								0
Nonvested restricted stock awards, Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)																								$ 34.59
Granted (in dollars per share)																								$ 0
Forfeited/cancelled (in dollars per share)																								$ 0
Exercised/issued (in dollars per share)																								$ 34.59
Outstanding, end of period (in dollars per share)																								$ 0
Additional disclosures [Abstract]
Vesting period																									2 years	5 years				1 year	4 years		6 months	5 years
Number of shares authorized (in shares)						1,800,000																						133,333
Number of additional shares authorized (in shares)	600,000	400,000	200,000	200,000	266,667
Contractual term																										10 years
Number of options granted to date (in shares)																													1,376,167
Number of restricted shares granted to date (in shares)																																68,616
Number of shares available for grant (in shares)																											715,647
Nonvested Awards, unearned share-based compensation [Abstract]
Unearned share-based compensation expense																							$ 177,530
Unearned share-based compensation, recognition period																							30 months

[1] (1) The Company did not award any incentive stock options for the three months ended September 30, 2013 and 2012, respectively.

[2] (3) The Company did not award any shared-based compensation for the nine months ended September 30, 2012.

[3] (2) The Company did not award any nonstatutory stock options for the three months ended September 30, 2013 and 2012, respectively.

[4] Expected volatility assumption was based upon a combination of historical stock price volatility measured on a daily basis and an estimate of expected future stock price volatility

[5] Risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the stock options.

[6] The Company does not currently intend to pay cash dividends, thus has assumed a 0% dividend yield.

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ACCRUED LIABILITIES (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Accrued liabilities [Abstract]
Accrued taxes - payroll	$ 106,299	$ 106,299
Accrued compensation/benefits	192,556	213,005
Accrued insurance payable	43,894	52,629
Product rebates/returns	20	81
Other	558	951
Total accrued liabilities	$ 343,327	$ 372,965

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	20,000	20,000
Preferred stock, shares issued (in shares)	0
Preferred stock, shares outstanding (in shares)	0
Common Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized (in shares)	200,000,000	200,000,000
Common Stock, shares issued (in shares)	16,693,883	10,074,448
Common Stock, shares outstanding (in shares)	16,693,883	10,074,448
Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY
Shares designated to Series A (in shares)	1,000	1,000
Preferred stock, shares issued (in shares)	0	65
Preferred stock, shares outstanding (in shares)	0	65
Preferred stock, aggregate liquidation value	$ 0	$ 701,843

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INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2013

INTANGIBLE ASSETS [Abstract]

INTANGIBLE ASSETS

NOTE 8. INTANGIBLE ASSETS

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2013 and December 31, 2012:

Intangible assets	September 30, 2013			December 31, 2012
Patent - Amlexanox (Aphthasol®)	$	2,090,000		$	2,090,000
Patent - Amlexanox (OraDisc™ A)		6,873,080			6,873,080
Patent - OraDisc™		73,000			73,000
Patent - Hydrogel nanoparticle aggregate		589,858			589,858
		9,625,938			9,625,938
Less: accumulated amortization		( 5,835,338	)		(5,479,953	)
Intangible assets, net	$	3,790,600		$	4,145,985

Amortization expense for intangible assets was $119,763 and $119,763 for the three months ended September 30, 2013 and 2012, respectively, and was $355,385 and $356,687 for the nine months ended September 30, 2013 and 2012, respectively.

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2013, is as follows:

Calendar Years	Future Amortization Expense
2013 (Three months)	$	119,763
2014		475,148
2015		475,148
2016		476,450
2017		475,148
2018 & Beyond		1,768,943
Total	$	3,790,600

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
OPERATING ACTIVITIES :
Net loss	$ (2,222,644)	$ (2,553,280)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets	355,385	356,687
Depreciation	185,536	225,691
Share-based compensation for stock and options issued to employees	10,933	16,494
Share-based compensation for options issued to non-employees	45,910	21,745
Equity in earnings (loss) of unconsolidated subsidiary	0	0
Amortization of debt discount on convertible note	134,052	53,029
Amortization of deferred financing costs	55,841	20,151
Cancellation of warrants issued for services	(48,776)	0
Common stock issued for services	158,250	130,000
Common stock issued for wages	20,000	0
Common stock issued for interest due on convertible note	101,917	44,200
Gain on sale of equipment	(3,627)	0
Change in operating assets and liabilities:
Accounts receivable	(104,529)	(6,621)
Other receivable	0	26,410
Inventory	39,659	152,243
Prepaid expenses and deferred charges	63,452	9,232
Notes receivable and accrued interest	538,566	(31,997)
Accounts payable	(637,401)	353,346
Accrued liabilities	(29,638)	26,114
Accrued interest	(7,158)	23,027
Deferred revenue	91,173	195,837
Total	969,545	1,615,588
Net Cash Used in Operating Activities	(1,253,099)	(937,692)
INVESTING ACTIVITIES :
Purchase of equipment	(32,030)	(64,349)
Proceeds from sale of equipment	4,937	0
Proceeds from sale of intangible asset	0	220,000
Net Cash (Used in) Provided by Investing Activities	(27,093)	155,651
FINANCING ACTIVITIES :
Proceeds from sale of common stock and warrants, net	1,391,446	0
Proceeds from sale of preferred stock, net	0	275,761
Proceeds from redemption of preferred stock, net	1,864	0
Proceeds from issuance of convertible notes and warrants, net	0	467,290
Repayment of principle due on convertible note	(81,666)	0
Offering cost adjustment - preferred stock sale in 2011	0	28,927
Net Cash Provided by Financing Activities	1,311,644	771,978
Net Increase (Decrease) in Cash	31,452	(10,063)
Cash, beginning of period	21,549	46,620
Cash, end of period	53,001	36,557
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	33,544	3,747
Non-cash investing and financing activities:
Issuance of common stock for promissory note	0	245,818
Issuance of common stock for principle due on convertible note	566,414	39,133
Issuance of 469,094 shares of common stock pursuant to cashless exercise of warrants to purchase 479,459 shares of common stock	0
Redemption of 65 shares of Series A preferred stock by offset of promissory notes receivable ($969,000) and accrued interest thereon.	$ 0

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current Assets
Cash and cash equivalents	$ 53,001	$ 21,549
Accounts receivable, net	216,427	111,898
Notes receivable and accrued interest, current portion	488,043	260,444
Inventory	487,984	527,643
Prepaid expenses and deferred charges	130,996	194,448
Total Current Assets	1,376,451	1,115,982
Property, Equipment and Leasehold Improvements, net	690,718	845,535
Other Assets
Intangible assets, net	3,790,600	4,145,985
Notes receivable and accrued interest, net of current portion	275,611	1,041,776
Investment in unconsolidated subsidiary	0	0
Deferred financing costs, net	104,929	160,770
Deposits	18,069	18,069
Total Other Assets	4,189,209	5,366,600
TOTAL ASSETS	6,256,378	7,328,117
Current Liabilities
Accounts payable	1,703,381	2,340,782
Accrued liabilities	343,327	372,965
Accrued interest	33,983	41,141
Convertible notes payable, net of unamortized debt discount, current portion	1,281,445	1,089,619
Deferred revenue, current portion	58,959	45,227
Total Current Liabilities	3,421,095	3,889,734
Long Term Liabilities
Convertible notes payable, net of unamortized debt discount and current portion	45,688	751,543
Deferred revenue, net of current portion	912,994	835,553
Total Long Term Liabilities	958,682	1,587,096
TOTAL LIABILITIES	4,379,777	5,476,830
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value; 20,000 shares authorized; Preferred Stock Series A, 1,000 shares designated; nil and 65 shares issued and outstanding, aggregate liquidation value of nil and $701,843, at September 30, 2013 and December 31, 2012, respectively	0	0
Common Stock - $0.001 par value; 200,000,000 shares authorized; 16,693,883 and 10,074,448 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	16,694	10,075
Additional paid-in capital	52,623,219	51,336,931
Promissory notes receivable and accrued interest for common stock issuance	0	(985,287)
Accumulated (deficit)	(50,763,312)	(48,510,432)
TOTAL STOCKHOLDERS' EQUITY	1,876,601	1,851,287
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 6,256,378	$ 7,328,117

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SHARE BASED COMPENSATION, Allocated Compensation expense (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Stock Options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 25,087	$ 6,760	$ 55,852	$ 32,033
Stock Options [Member] | Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	5,425	0	11,438	6,280
Stock Options [Member] | Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	19,662	6,760	44,414	25,753
Restricted Stock [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	0	752	991	6,206
Restricted Stock [Member] | Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	0	(391)	444	2,814
Restricted Stock [Member] | Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 0	$ 1,143	$ 547	$ 3,392

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Tables)

9 Months Ended

Sep. 30, 2013

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract]

Property, equipment and leasehold improvements

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2013 and December 31, 2012:

Property, equipment and leasehold improvements	September 30, 2013			December 31, 2012
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,574,665			1,547,572
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,239,862			2,212,769
Less: accumulated depreciation and amortization		( 1,549,144	)		(1,367,234	)
Property, equipment and leasehold improvements, net	$	690,718		$	845,535

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INCOME TAXES

9 Months Ended

Sep. 30, 2013

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 17. INCOME TAXES

There was no current federal tax provision or benefit recorded for any period since inception, nor were there any recorded deferred income tax assets, as such amounts were completely offset by valuation allowances.

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INVESTMENTS IN UNCONSOLIDATED ENTITIES (Details) (USD $)	3 Months Ended		9 Months Ended				12 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Minimum [Member]	Sep. 30, 2013 Maximum [Member]	Dec. 31, 2012 Altrazeal Trading Ltd. [Member]	Sep. 30, 2013 OraDisc [Member]	Sep. 30, 2013 OraDisc [Member]	Dec. 31, 2012 OraDisc [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of noncontrolling interest (in hundredths)					20.00%	50.00%
Non-dilutable ownership interest (in hundredths)							25.00%			25.00%
Unrecorded profit (loss)							$ 82,740
Balance sheet [Abstract]
Total assets							415,248
Total liabilities							205,991
Total stockholders' equity							209,257
Statement of operations [Abstract]
Revenues							131,869
Net (loss)							(330,961)
Gains losses on equity method investments	$ 0	$ 0	$ 0	$ 0				$ 0	$ 0

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	3 Months Ended		6 Months Ended	9 Months Ended			9 Months Ended						6 Months Ended		9 Months Ended					6 Months Ended	9 Months Ended		6 Months Ended	9 Months Ended					9 Months Ended			12 Months Ended			1 Months Ended	9 Months Ended	23 Months Ended	84 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013 Access Pharmaceuticals [Member] Annual Sales, Certain Products [Member] Minimum [Member]	Sep. 30, 2013 Access Pharmaceuticals [Member] Annual Sales, Certain Products [Member] Maximum [Member]	Sep. 30, 2013 Access Pharmaceuticals [Member] Annual Sales, Any One Certain Product [Member]	Sep. 30, 2013 Access Pharmaceuticals [Member] Cumulative Sales, Certain Products [Member] Minimum [Member]	Sep. 30, 2013 Access Pharmaceuticals [Member] Cumulative Sales, Certain Products [Member] Maximum [Member]	Mar. 07, 2008 ProStrakan Ltd [Member]	Jun. 30, 2013 Kerry P. Gray [Member]		Sep. 30, 2013 Kerry P. Gray [Member]		Sep. 30, 2012 Kerry P. Gray [Member]		Dec. 31, 2012 Kerry P. Gray [Member]	Jun. 30, 2013 Terrance K. Wallberg [Member]	Sep. 30, 2013 Terrance K. Wallberg [Member]	Sep. 30, 2012 Terrance K. Wallberg [Member]	Jun. 30, 2013 Key Executives [Member]	Sep. 30, 2013 Key Executives [Member]	Sep. 30, 2012 Key Executives [Member]	Sep. 30, 2013 Altrazeal Trading Ltd. [Member]	Sep. 30, 2012 Altrazeal Trading Ltd. [Member]	Dec. 31, 2012 Altrazeal Trading Ltd. [Member]	Sep. 30, 2013 Altrazeal Trading Ltd. [Member] Sales Revenue, Goods, Net [Member]	Sep. 30, 2012 Altrazeal Trading Ltd. [Member] Sales Revenue, Goods, Net [Member]	Sep. 30, 2013 Altrazeal Trading Ltd. [Member] Accounts Receivable [Member]	Dec. 31, 2012 Altrazeal Trading Ltd. [Member] Accounts Receivable [Member]	Sep. 30, 2013 Chairman, CEO and President [Member]	Mar. 09, 2009 Chairman, CEO and President [Member]	Mar. 31, 2013 Office and Laboratory Space [Member]	Sep. 30, 2013 Office and Laboratory Space [Member]	Feb. 22, 2013 Office and Laboratory Space [Member]	Mar. 31, 2013 Office and Laboratory Space [Member]	Sep. 30, 2013 Office Equipment [Member]
Operating Leased Assets [Line Items]
Minimum monthly lease obligation																																			$ 9,128		$ 9,776	$ 9,330	$ 744
Future minimum monthly lease obligation after specified period																																				9,314
Minimum monthly lease obligation on exercise of option																																				8,751
Lease term																																				2 years
Amended lease term on exercise of option																																				5 years
Increase in minimum monthly lease obligation																																				186
Future minimum lease payments [Abstract]
2013 (Three months)	29,811			29,811
2014	120,917			120,917
2015	28,881			28,881
2016	0			0
2017	0			0
Total	179,609			179,609
Rent expense for operating lease	31,083	32,971		86,125	98,111
Employment Agreements [Abstract]
Term of employment				1 year
Renewal term				1 year
Separation Agreements [Line Items]
Total separation benefit payments																																		400,000
Period for separation benefit payments																																	48 months	12 months
Monthly separation benefits payments																																	12,500
Period for separation health coverage																																		24 months
Related Party Obligations [Abstract]
Related party sales																										143,000	22,000
Outstanding accounts receivable																										82,000		101,000
Concentration risk, percentage (in hundredths)	70.00%	48.00%		66.00%	39.00%																								59.00%	11.00%	35.00%	77.00%
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract]
Deferred compensation liability			197,838	(55,039)	272,156								140,313	[1]	(23,500)	[1]	220,673	[1]		36,539	(11,539)	24,230	20,986	(20,000)	27,253
Deferred compensation	414,955			414,955		469,994									337,486	[1]			169,000		49,230			28,239
Deferred compensation liability pursuant to separation agreement															11,500
Deferred compensation liability pursuant to duties as chairman															157,500
Repayment of temporarily deferred compensation															192,500
Proceeds from issuance of common stock under March 2013 offering															180,000
Compensation accounts payable	275,000			275,000		310,000
Compensation accrued liabilities	139,955			139,955		159,994
Milestone payments [Line Items]
Future milestone obligations	4,750,000			4,750,000								1,400,000
Milestone for payment							$ 20,000,000	$ 40,000,000	$ 20,000,000	$ 50,000,000	$ 100,000,000
Royalty percentage (in hundredths)												30.00%

[1] During 2013, Mr. Gray temporarily deferred compensation of $169,000 which consisted of $11,500 earned pursuant to a Separation Agreement and $157,500 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors. During 2013, Mr. Gray was also repaid $192,500 of temporarily deferred compensation, of which $180,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

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SEGMENT INFORMATION (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Licensee Segment	Sep. 30, 2012
SEGMENT INFORMATION [Abstract]
Number of business segments			1
Number of international licensees			5
Revenues per geographic area [Abstract]
Total Revenues	$ 110,580	$ 88,922	$ 241,508	$ 205,138
Total revenue, percentage (in hundredths)	100.00%	100.00%	100.00%	100.00%
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	70.00%	48.00%	66.00%	39.00%
Customer A [Member] | Altrazeal [Member]
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	70.00%	29.00%	66.00%	15.00%
Customer B [Member] | Aphthasol [Member]
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	0.00%	19.00%	0.00%	24.00%
Domestic [Member]
Revenues per geographic area [Abstract]
Total Revenues	17,197	57,179	54,594	155,633
Total revenue, percentage (in hundredths)	16.00%	64.00%	23.00%	76.00%
International [Member]
Revenues per geographic area [Abstract]
Total Revenues	$ 93,383	$ 31,743	$ 186,914	$ 49,505
Total revenue, percentage (in hundredths)	84.00%	36.00%	77.00%	24.00%

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2013

EARNINGS PER SHARE [Abstract]

Common shares excluded from calculating basic and diluted net loss per common share

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2013 and December 31, 2012:

	September 30, 2013	December 31, 2012
Warrants to purchase common stock (1)	5,757,420	2,041,165
Stock options to purchase common stock	1,014,907	158,409
Unvested restricted common stock	---	300
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (2)	3,766,316	5,617,974
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 (3)	309,818	368,637
Common stock issuable upon the assumed conversion of our Series A preferred stock (4)(5)	---	1,002,634
Total	10,848,461	9,189,119

(1)	As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants. The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock. Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.
(2)	The outstanding principal balance and the accrued and unpaid interest of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.  For the purposes of this Table, we have assumed a conversion price of $0.35 per share and no ownership limitations.
(3)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.  The accrued and unpaid interest for each convertible note payable may be converted, at the option of Mr. Gray, into shares of common stock at a conversion price based upon the average of the five trading days prior to the payment date, which for the purposes of this Table we have assumed to be September 30, 2013.
(4)	The outstanding Series A preferred stock and the accrued and unpaid dividends thereon are convertible into shares of the Company's common stock at the Company's option at any time after six-months from the date of issuance of the Series A preferred stock.  The conversion price for the holder is fixed at $0.70 per share with no adjustment mechanisms, resets, ratchets, or anti-dilution covenants other than the customary adjustments for stock splits.  For the purposes of this Table, we have assumed a conversion price of $0.70 per share.
(5)	On August 15, 2013, we provided notice to Ironridge for the redemption of all of our Series A Shares held by Ironridge, a total of 65 Series A Shares. An affiliate of Ironridge, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000, agreed to accept the cancellation of the promissory notes held by us as full and final payment for the redemption amounts of the Series A Shares.

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SHARE BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2013

SHARE BASED COMPENSATION [Abstract]

Stock option awards granted

Our Board granted the following incentive stock option awards to executives or employees and nonstatutory stock option awards to directors or non-employees for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012 (3)
Incentive Stock Options  (1)
Quantity		---		---		232,500		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	56,112		---
Nonstatutory Stock Options  (2)
Quantity		---		---		735,000		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	177,388		---

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013 and 2012, respectively.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013 and 2012, respectively.
(3)	The Company did not award any shared-based compensation for the nine months ended September 30, 2012.

Weighted average assumptions to estimate the fair value of share based awards

We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions:

		Nine Months Ended September 30,
		2013	2012
Incentive Stock Options
	Expected volatility (1)	103.55%	---
	Risk-free interest rate % (2)	0.81%	---
	Expected term (in years)	5.0	---
	Dividend yield (3)	---	---
	Forfeiture rate	---	---
Nonstatutory Stock Options
	Expected volatility (1)	103.55%	---
	Risk-free interest rate % (2)	0.81%	---
	Expected term (in years)	5.0	---
	Dividend yield (3)	---	---
	Forfeiture rate	---	---

(1)	Expected volatility assumption was based upon a combination of historical stock price volatility measured on a daily basis and an estimate of expected future stock price volatility
(2)	Risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the stock options.
(3)	The Company does not currently intend to pay cash dividends, thus has assumed a 0% dividend yield.

Allocated share-based compensation expense

The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Research and development	$	5,425	$	---	$	11,438	$	6,280
Selling, general and administrative		19,662		6,760		44,414		25,753
Total share-based compensation expense	$	25,087	$	6,760	$	55,852	$	32,033

The following table summarizes share-based compensation related to restricted stock awards for the three and nine months ended September 30:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013		2012
Research and development	$	---	$	( 391	)	$	444	$	2,814
Selling, general and administrative		---		1,143			547		3,392
Total share-based compensation expense	$	---	$	752		$	991	$	6,206

Stock option activity

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Stock Options			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2012		158,409		$	12.32
Granted		967,500			0.33
Forfeited/cancelled		(111,002	)		1.03
Exercised		---			---
Outstanding as of September 30, 2013		1,014,907		$	2.12

Stock option grants outstanding and exercisable

The following table presents the stock option grants outstanding and exercisable as of September 30, 2013:

Options Outstanding						Options Exercisable
Stock Options Outstanding		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life in Years		Stock Options Exercisable		Weighted Average Exercise Price per Share
	892,500	$	0.33		9.5		197,500	$	0.33
	53,334		2.38		4.7		46,668		2.36
	30,002		14.40		3.5		30,002		14.40
	39,071		33.35		4.1		39,071		33.35
	1,014,907	$	2.12		8.8		313,241	$	6.10

Nonvested restricted stock awards

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of common stock subject to potential issue as of September 30, 2013 and the changes therein during the nine months then ended:

	Restricted stock			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2012		300		$	34.59
Shares granted		---			---
Shares forfeited/cancelled		---			---
Shares exercised/issued		(300	)		34.59
Outstanding as of September 30, 2013		---		$	---

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

9 Months Ended

Sep. 30, 2013

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract]

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

NOTE 7. PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2013 and December 31, 2012:

Property, equipment and leasehold improvements	September 30, 2013			December 31, 2012
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,574,665			1,547,572
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,239,862			2,212,769
Less: accumulated depreciation and amortization		( 1,549,144	)		(1,367,234	)
Property, equipment and leasehold improvements, net	$	690,718		$	845,535

Depreciation expense on property, equipment and leasehold improvements was $59,688 and $75,219 for the three months ended September 30, 2013 and 2012, respectively, and was $185,536 and $225,691 for the nine months ended September 30, 2013 and 2012, respectively.

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INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2013

INTANGIBLE ASSETS [Abstract]

Intangible assets

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2013 and December 31, 2012:

Intangible assets	September 30, 2013			December 31, 2012
Patent - Amlexanox (Aphthasol®)	$	2,090,000		$	2,090,000
Patent - Amlexanox (OraDisc™ A)		6,873,080			6,873,080
Patent - OraDisc™		73,000			73,000
Patent - Hydrogel nanoparticle aggregate		589,858			589,858
		9,625,938			9,625,938
Less: accumulated amortization		( 5,835,338	)		(5,479,953	)
Intangible assets, net	$	3,790,600		$	4,145,985

Future aggregate amortization expense for intangible assets

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2013, is as follows:

Calendar Years	Future Amortization Expense
2013 (Three months)	$	119,763
2014		475,148
2015		475,148
2016		476,450
2017		475,148
2018 & Beyond		1,768,943
Total	$	3,790,600

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 2,239,862		$ 2,239,862		$ 2,212,769
Less: accumulated depreciation and amortization	(1,549,144)		(1,549,144)		(1,367,234)
Property, equipment and leasehold improvements, net	690,718		690,718		845,535
Depreciation expense	59,688	75,219	185,536	225,691
Laboratory Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	424,888		424,888		424,888
Manufacturing Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	1,574,665		1,574,665		1,547,572
Computers, Office Equipment, and Furniture [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	140,360		140,360		140,360
Computer Software [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	4,108		4,108		4,108
Leasehold Improvements [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 95,841		$ 95,841		$ 95,841

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ACCRUED LIABILITIES

9 Months Ended

Sep. 30, 2013

ACCRUED LIABILITIES [Abstract]

ACCRUED LIABILITIES

NOTE 10. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at September 30, 2013 and December 31, 2012:

Accrued Liabilities	September 30, 2013		December 31, 2012
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		192,556		213,005
Accrued insurance payable		43,894		52,629
Product rebates/returns		20		81
Other		558		951
Total accrued liabilities	$	343,327	$	372,965

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INVENTORY

9 Months Ended

Sep. 30, 2013

INVENTORY [Abstract]

INVENTORY

NOTE 6. INVENTORY

As of September 30, 2013, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials.  Inventories are stated at the lower of cost (first in, first out method) or market.  We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage.  In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements.  As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required.

The components of inventory, at the different stages of production, consisted of the following at September 30, 2013 and December 31, 2012:

Inventory	September 30, 2013		December 31, 2012
Finished goods	$	109,452	$	303,779
Work-in-progress		346,163		190,794
Raw materials		32,369		33,070
Total	$	487,984	$	527,643

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COMPANY OVERVIEW AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2013

COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]

COMPANY OVERVIEW AND BASIS OF PRESENTATION

NOTE 1. COMPANY OVERVIEW AND BASIS OF PRESENTATION

Company Overview

ULURU Inc. (hereinafter "we", "our", "us", "ULURU", or the "Company") is a Nevada corporation.  We are a diversified specialty pharmaceutical company committed to developing and commercializing a broad range of innovative wound care and muco-adhesive film products based on our patented Nanoflex® and OraDisc^TM drug delivery technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position as of September 30, 2013 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 and cash flows for the nine months ended September 30, 2013 and 2012 have been made.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and assumptions. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 29, 2013, including the risk factors set forth therein.

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SHARE BASED COMPENSATION, Stock options grant outstanding and exercisable (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	1,014,907
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.12
Options Outstanding, Weighted Average Remaining Contractual Life in Years	8 years 9 months 18 days
Stock Options Exercisable (in shares)	313,241
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 6.10
Exercise Price Range 1 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	892,500
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 0.33
Options Outstanding, Weighted Average Remaining Contractual Life in Years	9 years 6 months
Stock Options Exercisable (in shares)	197,500
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 0.33
Exercise Price Range 2 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	53,334
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.38
Options Outstanding, Weighted Average Remaining Contractual Life in Years	4 years 8 months 12 days
Stock Options Exercisable (in shares)	46,668
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.36
Exercise Price Range 3 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	30,002
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 14.40
Options Outstanding, Weighted Average Remaining Contractual Life in Years	3 years 6 months
Stock Options Exercisable (in shares)	30,002
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 14.40
Exercise Price Range 4 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	39,071
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 33.35
Options Outstanding, Weighted Average Remaining Contractual Life in Years	4 years 1 month 6 days
Stock Options Exercisable (in shares)	39,071
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 33.35

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EQUITY TRANSACTIONS (Details) (USD $)			9 Months Ended	0 Months Ended							0 Months Ended	9 Months Ended					12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 SPA [Member] Director	Nov. 14, 2013 Common Stock [Member]	Sep. 06, 2013 Common Stock [Member]	Jul. 15, 2013 Common Stock [Member]	May 07, 2013 Common Stock [Member]	Mar. 14, 2013 Common Stock [Member]	Jan. 03, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Oct. 24, 2013 Common Stock [Member] Subsequent Event [Member]	Sep. 30, 2013 Common Stock [Member] March SPA [Member]	Mar. 14, 2013 Common Stock [Member] March SPA [Member]	Mar. 14, 2013 Common Stock [Member] March SPA [Member] Four-month anniversary [Member]	Mar. 14, 2013 Common Stock [Member] March SPA [Member] Eight-month anniversary [Member]	Mar. 14, 2013 Common Stock [Member] March SPA [Member] One-year anniversary [Member]	Dec. 31, 2012 Common Stock [Member] SPA [Member]	Dec. 21, 2012 Common Stock [Member] SPA [Member]	Dec. 21, 2012 Common Stock [Member] SPA [Member] Four-month anniversary [Member]	Dec. 21, 2012 Common Stock [Member] SPA [Member] Eight-month anniversary [Member]
Common Stock Transactions [Abstract]
Equity investment												$ 440,000					$ 2,000,000
Common Stock, par value (in dollars per share)		$ 0.35										$ 0.001					$ 0.001
Share price (in dollars per share)													$ 0.60					$ 0.60
Issuance of shares of common stock under securities purchase agreement (in shares)												1,100,000					5,000,000
Promissory notes issued for common stock								88,000
Number of securities called by warrants (in shares)	4,445,714											660,000					3,000,000
Maximum amount of common stock purchased under common stock purchase agreement										500,000			88,000	110,000	132,000	110,000		400,000	500,000	600,000
Proceeds from offering				$ 132,000	$ 300,000	$ 110,000	$ 500,000	$ 88,000	$ 400,000		$ 300,000
Shares purchased under stock purchased agreement				330,000	750,000	275,000	1,250,000	220,000	1,000,000		750,000
Number of maximum directors that could be appointed			2

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CONVERTIBLE DEBT (Tables)

9 Months Ended

Sep. 30, 2013

CONVERTIBLE DEBT [Abstract]

Information relating to convertible notes payable

Information relating to our convertible notes payable is as follows:

									As of September 30, 2013
Transaction	Initial Principal Amount		Interest Rate			Maturity Date	Conversion Price (1)(2)		Principal Balance		Unamortized Debt Discount		Carrying Value
June 2011 Note	$	140,000		10.0	%	06/13/2014	$	1.20	$	140,000	$	2,768	$	137,232
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		6,144		118,856
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,318,210		247,165		1,071,045
Total	$	2,475,000							$	1,583,210	$	256,077	$	1,327,133

(1)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.
(2)	The outstanding principal balance of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.

Schedule of future minimum payments relating to our convertible notes payable

The future minimum principle payments relating to our convertible notes payable, as of September 30, 2013, are as follows:

	Payments Due By Period
Transaction	Total		2013 (Three Months)		2014		2015		2016		2017
June 2011 Note	$	140,000	$	---	$	140,000	$	---	$	---	$	---
July 2011 Note		125,000		---		125,000		---		---		---
June 2012 Note		1,318,120		441,538		876,582		---		---		---
Total	$	1,583,120	$	441,538	$	1,141,852	$	---	$	---	$	---

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2013

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

NOTE 13. STOCKHOLDERS' EQUITY

Common Stock

As of September 30, 2013, we had 16,693,883 shares of common stock issued and outstanding.  We issued 2,236,227 shares of common stock for the three months ended September 30, 2013 comprised of 150,000 shares of common stock issued for consulting services, 750,000 shares of common stock issued to IPMD pursuant to the January 2013 Offering, 275,000 shares of common stock issued to Messrs. Gray and Wallberg pursuant to the March 2013 Offering, 592,133 shares of common stock issued for installment payments due on the June 2012 Note with Inter-Mountain, and 469,094 shares of common stock issued for the cashless exercise of warrants held by Inter-Mountain.

Preferred Stock

As of September 30, 2013, we had no shares of Series A preferred stock issued and outstanding.  For the three months ended September 30, 2013, we did not issue any shares of Series A preferred stock to Ironridge Global pursuant to our agreement related to the purchase of the Series A preferred stock.

On August 15, 2013, we provided notice to Ironridge Global III, LLC ("Ironridge") for the redemption of all of our Series A Preferred Stock shares (the "Series A Shares") held by Ironridge, a total of 65 Series A Shares.  An affiliate of Ironridge, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000 (the "Notes"), agreed to accept the cancellation of the Notes held by us as full and final payment for the redemption amounts of the Series A Shares.

Warrants

The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2012		2,041,165		$	0.98
Warrants issued		4,445,714		$	0.56
Warrants exercised		(479,459	)	$	0.35
Warrants cancelled		(250,000	)	$	0.35
Balance as of September 30, 2013 (1)		5,757,420		$	0.73

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants.  The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.

For the nine months ended September 30, 2013, we issued warrants to purchase up to an aggregate of 4,445,714 shares of our common stock which consisted of (i) a warrant issued to IPMD pursuant to the January 2013 Offering to purchase up to an aggregate of 3,000,000 shares of our common stock at an exercise price of $0.60 per share, (ii) a warrant issued to Kerry P. Gray pursuant to the March 2013 Offering to purchase up to an aggregate of 600,000 shares of our common stock at an exercise price of $0.60 per share, (iii) a warrant issued to Terrance K. Wallberg pursuant to the March 2013 Offering to purchase up to an aggregate of 60,000 shares of our common stock at an exercise price of $0.60 per share, (iv) two warrants issued to Inter-Mountain to purchase up to an aggregate of 785,714 shares of our common stock at an exercise price of $0.35 per share.  Also occurring during the nine months ended September 30, 2013 was the exercise of warrants to purchase 479,459 shares of our common stock, at an exercise price of $0.35 per share, by Inter-Mountain and the cancellation of a warrant issued to NUWA Group LLC to purchase up to an aggregate of 250,000 shares of our common stock at an exercise price of $0.35 per share.

Of the warrant shares subject to exercise as of September 30, 2013, expiration of the right to exercise is as follows:

Date of Expiration		Number of Warrant Shares of Common Stock Subject to Expiration
	January 3, 2014	3,000,000
	July 23, 2014	69,050
	May 15, 2015	357,155
	June 13, 2016	35,000
	July 16, 2016	116,667
	July 28, 2016	34,722
	June 27, 2017	1,484,826
	March 14, 2018	660,000
	Total	5,757,420

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INVESTMENTS IN UNCONSOLIDATED ENTITIES

9 Months Ended

Sep. 30, 2013

INVESTMENTS IN UNCONSOLIDATED ENTITIES [Abstract]

INVESTMENTS IN UNCONSOLIDATED ENTITIES

NOTE 9. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We use the equity method of accounting for investments in other companies that are not controlled by us and in which our interest is generally between 20% and 50% of the voting shares or we have significant influence over the entity, or both.

On January 11, 2012, we executed a shareholders' agreement for the establishment of Altrazeal Trading Ltd., a single purpose entity to be used for the exclusive marketing of Altrazeal® throughout the European Union, Australia, New Zealand, North Africa, and the Middle East. As a result of this transaction, we received a non-dilutable 25% ownership interest in Altrazeal Trading Ltd.

For the three and nine months ended September 30, 2013, the financial statements of Altrazeal Trading Ltd. were unavailable and our share of any gains or losses of Altrazeal Trading Ltd. for such periods have not been recorded in our financial statements.  The financial activity of Altrazeal Trading Ltd. for the three months and nine months ended September 30, 2013 would not have a material impact on our financial statements.

Based upon unaudited financial statements provided by Altrazeal Trading Ltd. for the year ended December 31, 2012, our share of Altrazeal Trading Ltd. losses exceeded the carrying value of our investment, therefore the equity method of accounting was suspended and no additional losses were charged to our operations. Our unrecorded share of Altrazeal Trading Ltd. losses for the year ended December 31, 2012 totaled $82,740.

Summarized financial information for our investment in Altrazeal Trading Ltd. assuming 100% ownership is as follows:

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	415,248
Total liabilities	$	205,991
Total stockholders' equity	$	209,257
Statement of operations
Revenues	$	131,869
Net (loss)	$	(330,961	)

On October 19, 2012, we executed a shareholders' agreement for the establishment of ORADISC GmbH, a single purpose entity to be used for the exclusive development and marketing of OraDisc™ erodible film technology products.  We received a non-dilutable 25% ownership interest in ORADISC GmbH.

As of September 30, 2013, ORADISC GmbH had not begun operations and accordingly the net book value of the investee assets had not been determined and there were no equity method investee gains or losses for the three and nine months ended September 30, 2013.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 16. FAIR VALUE MEASUREMENTS

In accordance with ASC Topic 820, Fair Value Measurements, ("ASC Topic 820") certain assets and liabilities of the Company are required to be recorded at fair value.  Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants.  The guidance in ASC Topic 820 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimized the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on our market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment.

The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Valuations based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements.  We review the fair value hierarchy classification on a quarterly basis.  Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

Our financial instruments, including cash, cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. We believe that the carrying value of our other receivable and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

The following table summarizes the fair value of our financial instruments at September 30, 2013 and December 31, 2012.

Description	September 30, 2013		December 31, 2012
Assets:
Notes receivable and accrued interest	$	763,654	$	1,302,220
Liabilities:
Convertible note – June 2011	$	137,232	$	134,154
Convertible note – July 2011	$	118,856	$	113,084
Convertible note – June 2012	$	1,071,045	$	1,593,924

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2013

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 14.                        EARNINGS PER SHARE

Basic and Diluted Net Loss Per Share

In accordance with FASB Accounting Standards Codification ("ASC") Topic 260, Earnings per Share, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, increased to include potential dilutive common shares. The effect of outstanding stock options, restricted vesting common stock, convertible debt, convertible preferred stock, and warrants, when dilutive, is reflected in diluted earnings (loss) per common share by application of the treasury stock method.  We have excluded all outstanding stock options, restricted vesting common stock, convertible debt, convertible preferred stock, and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2013 and December 31, 2012:

	September 30, 2013	December 31, 2012
Warrants to purchase common stock (1)	5,757,420	2,041,165
Stock options to purchase common stock	1,014,907	158,409
Unvested restricted common stock	---	300
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (2)	3,766,316	5,617,974
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 (3)	309,818	368,637
Common stock issuable upon the assumed conversion of our Series A preferred stock (4)(5)	---	1,002,634
Total	10,848,461	9,189,119

(1)	As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of common stock, which number of shares could increase based upon the terms and conditions of the warrants. The warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017. Warrants for 785,714, 392,857, 392,857, and 392,857 shares of common stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively, and warrants for 479,459 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock (1,484,826 shares) have been included, based upon an exercise price of $0.35 per share of common stock. Each of the other three warrants vest upon the payment by Inter-Mountain of each of the three remaining Investor Notes.
(2)	The outstanding principal balance and the accrued and unpaid interest of the June 2012 Note may be converted, at the option of Inter-Mountain, into shares of common stock at a conversion price of $0.35 per share, subject to certain pricing adjustments and ownership limitations.  For the purposes of this Table, we have assumed a conversion price of $0.35 per share and no ownership limitations.
(3)	The outstanding principal balance of the June 2011 Note and the July 2011 Note may be converted, at the option of Mr. Gray, into shares of common stock at a fixed conversion price of $1.20 per share and $1.08 per share, respectively.  The accrued and unpaid interest for each convertible note payable may be converted, at the option of Mr. Gray, into shares of common stock at a conversion price based upon the average of the five trading days prior to the payment date, which for the purposes of this Table we have assumed to be September 30, 2013.
(4)	The outstanding Series A preferred stock and the accrued and unpaid dividends thereon are convertible into shares of the Company's common stock at the Company's option at any time after six-months from the date of issuance of the Series A preferred stock.  The conversion price for the holder is fixed at $0.70 per share with no adjustment mechanisms, resets, ratchets, or anti-dilution covenants other than the customary adjustments for stock splits.  For the purposes of this Table, we have assumed a conversion price of $0.70 per share.
(5)	On August 15, 2013, we provided notice to Ironridge for the redemption of all of our Series A Shares held by Ironridge, a total of 65 Series A Shares. An affiliate of Ironridge, the issuer of promissory notes held by us, due 7.5 years from the issue date, in the principal amount of $969,000, agreed to accept the cancellation of the promissory notes held by us as full and final payment for the redemption amounts of the Series A Shares.

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 14, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ULURU INC.
Entity Central Index Key	0001168220
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,444,893
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013

XML

SHARE BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

SHARE BASED COMPENSATION [Abstract]

SHARE BASED COMPENSATION

NOTE 15. SHARE BASED COMPENSATION

The Company's share-based compensation plan, the 2006 Equity Incentive Plan ("Equity Incentive Plan"), is administered by the compensation committee of the Board of Directors ("Board"), which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

Our Board granted the following incentive stock option awards to executives or employees and nonstatutory stock option awards to directors or non-employees for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012 (3)
Incentive Stock Options  (1)
Quantity		---		---		232,500		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	56,112		---
Nonstatutory Stock Options  (2)
Quantity		---		---		735,000		---
Weighted average fair value per share		---		---	$	0.24		---
Fair value		---		---	$	177,388		---

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013 and 2012, respectively.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013 and 2012, respectively.
(3)	The Company did not award any shared-based compensation for the nine months ended September 30, 2012.

We account for share-based compensation under FASB ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values of the award on the grant date. We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions:

		Nine Months Ended September 30,
		2013	2012
Incentive Stock Options
	Expected volatility (1)	103.55%	---
	Risk-free interest rate % (2)	0.81%	---
	Expected term (in years)	5.0	---
	Dividend yield (3)	---	---
	Forfeiture rate	---	---
Nonstatutory Stock Options
	Expected volatility (1)	103.55%	---
	Risk-free interest rate % (2)	0.81%	---
	Expected term (in years)	5.0	---
	Dividend yield (3)	---	---
	Forfeiture rate	---	---

(1)	Expected volatility assumption was based upon a combination of historical stock price volatility measured on a daily basis and an estimate of expected future stock price volatility
(2)	Risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the stock options.
(3)	The Company does not currently intend to pay cash dividends, thus has assumed a 0% dividend yield.

Stock Options (Incentive and Nonstatutory)

The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Research and development	$	5,425	$	---	$	11,438	$	6,280
Selling, general and administrative		19,662		6,760		44,414		25,753
Total share-based compensation expense	$	25,087	$	6,760	$	55,852	$	32,033

At September 30, 2013, the balance of unearned share-based compensation to be expensed in future periods related to unvested stock option awards, as adjusted for expected forfeitures, is approximately $177,530. The period over which the unearned share-based compensation is expected to be recognized is approximately thirty months.

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of September 30, 2013 and the changes therein during the nine months then ended:

	Stock Options			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2012		158,409		$	12.32
Granted		967,500			0.33
Forfeited/cancelled		(111,002	)		1.03
Exercised		---			---
Outstanding as of September 30, 2013		1,014,907		$	2.12

The following table presents the stock option grants outstanding and exercisable as of September 30, 2013:

Options Outstanding						Options Exercisable
Stock Options Outstanding		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life in Years		Stock Options Exercisable		Weighted Average Exercise Price per Share
	892,500	$	0.33		9.5		197,500	$	0.33
	53,334		2.38		4.7		46,668		2.36
	30,002		14.40		3.5		30,002		14.40
	39,071		33.35		4.1		39,071		33.35
	1,014,907	$	2.12		8.8		313,241	$	6.10

Restricted Stock Awards

Restricted stock awards, which typically vest over a period of two to five years, are issued to certain key employees and are subject to forfeiture until the end of an established restriction period. We utilize the market price on the date of grant as the fair market value of restricted stock awards and expense the fair value on a straight-line basis over the vesting period.

The following table summarizes share-based compensation related to restricted stock awards for the three and nine months ended September 30:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013		2012
Research and development	$	---	$	( 391	)	$	444	$	2,814
Selling, general and administrative		---		1,143			547		3,392
Total share-based compensation expense	$	---	$	752		$	991	$	6,206

At September 30, 2013, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is nil.

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of common stock subject to potential issue as of September 30, 2013 and the changes therein during the nine months then ended:

	Restricted stock			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2012		300		$	34.59
Shares granted		---			---
Shares forfeited/cancelled		---			---
Shares exercised/issued		(300	)		34.59
Outstanding as of September 30, 2013		---		$	---

Summary of Plans

2006 Equity Incentive Plan

In March 2006, our Board adopted and our stockholders approved our Equity Incentive Plan, which initially provided for the issuance of up to 133,333 shares of our common stock pursuant to stock option and other equity awards.  At the annual meetings of the stockholders held on May 8, 2007, December 17, 2009, June 15, 2010, June 14, 2012, and on June 13, 2013, our stockholders approved amendments to the Equity Incentive Plan to increase the total number of shares of common stock issuable under the Equity Incentive Plan pursuant to stock options and other equity awards by 266,667 shares, 200,000 shares, 200,000 shares, 400,000 shares, and 600,000 shares, respectively, to a total of 1,800,000 shares.

In December 2006, we began issuing stock options to employees, consultants, and directors.  The stock options issued generally vest over a period of one to four years and have a maximum contractual term of ten years.  In January 2007, we began issuing restricted stock awards to our employees.  Restricted stock awards generally vest over a period of six months to five years after the date of grant.  Prior to vesting, restricted stock awards do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock awards are not considered issued and outstanding.  Shares of common stock are issued on the date the restricted stock awards vest.

As of September 30, 2013, we had granted options to purchase 1,376,167 shares of common stock since the inception of the Equity Incentive Plan, of which 1,014,907 were outstanding at a weighted average exercise price of $2.12 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the Equity Incentive Plan, of which none were outstanding.  As of September 30, 2013, there were 715,647 shares that remained available for future grants under our Equity Incentive Plan.