10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission File No. 001-336180

ULURU Inc.

(Exact name of registrant as specified in its charter)

Nevada	41-2118656
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4452 Beltway Drive
Addison, Texas	75001
(Address of principal executive offices)	(Zip Code)

(214) 905-5145

(Registrant’s telephone number, including area code)

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Securities registered under Section 12(b) of the Exchange Act:

None

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Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

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(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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

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

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

As of June 28, 2013 (the last business day of the most recently completed second fiscal quarter), the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant (without admitting that any person whose shares are not included in the calculation is an affiliate) was approximately $6,377,738 based on the closing price of the registrant’s common stock as reported on the OTCQB™ marketplace on such date.

As of March 31, 2014, there were 23,588,110 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.

Documents Incorporated by Reference

The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Stockholders to be held in 2014, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

ULURU Inc.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2013
TABLE OF CONTENTS
Item		Page
Part I
1.	Business	3
1A.	Risk Factors	16
1B.	Unresolved Staff Comments	27
2.	Properties	27
3.	Legal Proceedings	27
4.	Mine Safety Disclosures	27
Part II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
6.	Selected Financial Data	29
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
7A.	Quantitative and Qualitative Disclosures about Market Risk	42
8.	Financial Statements and Supplementary Data	42
9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	42
9A.	Controls and Procedures	43
9B.	Other Information	44
Part III
10.	Directors, Executive Officers and Corporate Governance	44
11.	Executive Compensation	44
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
13.	Certain Relationships and Related Transactions and Director Independence	44
14.	Principal Accountant Fees and Services	44
Part IV
15.	Exhibits and Financial Statement Schedules	45
	Signatures	46
	Index to Exhibits	47
	Index to Financial Statements	48

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Part I

FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY

This Annual Report on Form 10-K (including documents incorporated by reference) (this “Report’) and other written and oral statements we make 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 that they use words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”, “project”, “guidance”, “will”, “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 are likely to relate to, among other things, the Company’s goals, plans and projections regarding its financial position, statements indicating that the Company has cash and cash equivalents sufficient to fund our operations in the future, 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, acquisitions, 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. We have included important factors in the cautionary statements included in this Report, particularly under “Risk Factors”, that we believe 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.  We undertake no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

Altrazeal®, Aphthasol®, Nanoflex®, OraDiscTM, the ULURU logo and other trademarks or service marks of ULURU Inc. appearing in this Report are the property of ULURU Inc.  This Report contains additional trade names, trademarks and service marks of other companies, which belong to such companies.

ITEM 1. BUSINESS

Company Mission and Strategy

ULURU Inc. (together with our subsidiaries, “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 mucoadhesive film products based on our patented Nanoflex® and OraDiscTM technologies, with the goal of improving outcomes for patients, health care professionals and health care payers.

Our strategy is twofold:

§	Establish 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 mucoadhesive film technology (OraDiscTM) and generate revenues through multiple licensing agreements.

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Core Technology Platforms

Nanoflex® Technology

The Nanoflex® technology platform provides the ability to formulate a variety of unique materials through the aggregation of hydrogel-like nanoparticles. This concept takes advantage of the inherent biocompatibility of hydrogels. Unlike bulk hydrogels, these particle aggregates are shape retentive, can be extruded or molded, and offer properties suitable for use in a variety of in-vivo medical devices, and in novel drug delivery systems. The polymers used in our Nanoflex® technology have been extensively researched and commercialized into several major medical products. They are generally accepted as safe, non-toxic and biocompatible.

Our Nanoflex® technology system has at its core a system of hydrogel-like nanoparticles composed of a polymer used in manufacturing contact lenses and other FDA-approved implants.  These nanoparticles aggregate immediately and irreversibly upon contact with physiological fluid, such as wound exudate or blood, forming a flexible, nano-porous, non-resorbable material termed an aggregate.

Utilizing our proprietary Nanoflex® technology, we have developed two separate development platforms from the system:

§	Nanoflex® Powder
§	Nanoflex® Injectable Liquid

Each of the systems is composed of nanoparticles which are stabilized to prevent aggregation prior to application to a physiological environment.  We can control the particle size and chemical composition to affect the rate of aggregation, the final material properties such as fluid content and strength of the resulting aggregate, and if desired, the drug delivery profile for actives trapped in the aggregate.

Nanoflex® Powder

Our Nanoflex® Powder is composed of hydrogel particles that aggregate immediately and irreversibly upon contact with physiological fluid such as wound exudate, forming a micro-porous flexible and non-resorbable skin-like barrier.  The transformation from a powder to a micro-porous skin-like barrier occurs without a chemical reaction and produces a non-resorbable material.  The skin-like barrier can be used to cover and protect a wound surface and can also be applied for the controlled delivery of drugs and other actives to a wound. The powder is applied as a dry material and immediately hydrates and forms a uniform, intact micro-porous film with adhesion to the moist wound.

A potential major advantage of our Nanoflex® technology is the ability to incorporate active drugs, and provide controlled release.  Drug molecules can be trapped within interstitial spaces between particles during aggregate formation. The spaces between particles can be tailored by varying the particle size which controls the diffusion rate.  Particle size directly affects the size of the holes and channels in the aggregate lattice, which slow down or speed up the movement of a compound as it is released.  By choosing specific particle sizes and compositions and formulating these with a given active, the drug delivery profile can be tailored for a specific application.

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We have developed and are developing a range of products utilizing our Nanoflex® powder in wound care.  Many actives can be combined with the base technology, which could lead to significant improvements versus the present standard of care, such as:

§	Antibiotic containing dressings for treatment of infection; and
§	Growth factor containing dressings for management of slow healing chronic wounds.

Nanoflex® Injectable Liquid

A suspension of hydrogel nanoparticles containing a small percentage of hyaluronic acid, when injected into tissue, immediately and irreversibly aggregates. With time, the hyaluronic acid portion of the aggregate resorbs, leaving behind a porous, Nanoflex® framework which provides the basis for cellular infiltration and acts as the anchor for collagen attachment.

This injectable system has been studied extensively for safety and for applications as a dermal filler to provide a family of soft tissue filler materials with different degrees of permanency.

Hyaluronic acid is a nonspecies-specific hydrophilic coiled polysaccharide that is present in all connective tissue.  In dermal and sub-dermal tissue, hyaluronic acid binds with water and provides volume and elasticity.  As a dermal filler, hyaluronic acid provides superb biocompatibility, but applications of this material can be limiting because the material is resorbed in a four to twelve month period requiring repeat injections.  Our potential dermal filler and sub-dermal filler can be composed of between 1% and 95% hyaluronic acid.  Materials for facial sculpting containing a lower amount of hyaluronic acid result in a higher degree of permanence.

Mucoadhesive OraDiscTM Technology

Treatment of oral conditions generally relies upon the use of medications formulated as gels and pastes, which are applied to lesions in the mouth. The duration of effectiveness of these medications is typically short because the applied dose is worn away through the mechanical actions of speaking, eating, and tongue movement, and is washed away by saliva flow. To address these problems, we developed a novel erodible mucoadhesive film product. This technology, known as OraDisc™, comprises a multi-layered film having an adhesive layer, a pre-formed film layer, and a coated backing layer. Depending upon the intended application, a pharmaceutically active compound can be formulated within any of these layers, providing a wide range of potential applications. The disc stays in place eroding over a period of time, so that subsequent removal is unnecessary. The drug delivery rate is pre-determined by the rate of erosion of the disc, which is in turn controlled by the composition of the backing layer.

Our adhesive film technology has multiple applications, including the localized delivery of drug to a mucosal site, use as a transmucosal delivery device for delivering drugs into the systemic circulation, and incorporating the drug in the outer layer for delivery into the oral cavity. The adhesive film will adhere to any wet mucosal surface, including the vagina, where this technology represents an opportunity to improve the delivery of drugs for female healthcare applications. Additionally, the adhesive film has been formulated to adhere to the surface of teeth and gums for the delivery of dental health and cosmetic dental actives.

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OraDisc™ was initially developed as a drug delivery system to treat canker sores with the same active ingredient (amlexanox) that is used in our Aphthasol® paste.  We have continued to develop the OraDisc™ technology and we have generated or are exploring additional prototype drug delivery products, including those for pain palliation in the oral cavity, gingivitis, cough and cold treatment, breath freshener, and other dental applications.

Marketed Products

We have used our drug delivery technology platforms to develop the following products and product candidates:

Altrazeal®

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 in June 2008, the product is indicated for exuding wounds such as partial thickness burns, donor sites, abrasions, non-healing surgical wounds, trauma and chronic wounds including diabetic foot ulcers, venous leg ulcers, and pressure ulcers. The powder fills and seals the wound to provide an optimal moist wound healing environment. The wound exudate is controlled through the high moisture vapor transpiration rate (MVTR) of the material generated by capillary forces that creates a low pressure environment at the wound bed which supports cellular function and tissue repair and holds the dressing in place. Other characteristics of Altrazeal® that promote healing are oxygen permeability and bacteria impermeability.  Patient comfort is enhanced with the easy application and removal of our wound dressing, where no granulating tissue is harmed during the removal procedure.  In a randomized clinical study Altrazeal® demonstrated a statistically significant improvement in patient pain and comfort compared to Aquacel® AG, a market leading product.  Also, in numerous clinical settings, including venous ulcers, arterial ulcers and second degree burns, significant pain reduction has been reported by patients, enabling increased compliance to therapy and improved clinical outcomes.  The dressing is flexible and adherent and is designed to allow greater range of motion. In addition, the ability of Altrazeal® to manage wound exudates extends the wear time between dressing changes, which offers a significant pharmaco-economic benefit.  This feature is considered an extremely important marketing advantage in countries where there are socialized medical programs.

The regulatory status of Altrazeal® is a 510(k) exempt product. The FDA was notified and the product was registered in June 2008.

Since the roll-out of Altrazeal® in June 2008, there have been many outstanding clinical results.  Positive clinical experiences have been documented through the completion of one randomized clinical trial, the publishing of more than 35 poster presentations, and two peer reviewed articles being published in an international indexed journal.

The extensive clinical data supporting the benefits of Altrazeal® has been further enhanced by the clinical experience in Europe and Australia.  To further improve the cost effectiveness of Altrazeal®, we now offer a 0.75 gram blister pack along with our original 2 gram and 5 gram pouches.  We believe the 0.75 gram blister pack contains a quantity of product more appropriate for treating smaller chronic wounds.

The focus of our commercial activities is introducing Altrazeal® in all major international markets through our network of distribution partners. Due to the efforts of two of our licensees, Altrazeal Trading GmbH and Altrazeal AG, Altrazeal® is now available in Australia, Austria, Croatia, Czech Republic, Portugal, Slovakia, Slovenia, and South Africa.  During 2014, we are expecting the launch and availability of Altrazeal® in twenty new international markets.  The clinical and economic benefits that can be derived using Altrazeal® are important marketing features in socialized medical programs throughout Europe and many global markets.  We believe that short-term revenue growth will be maximized by focusing on international markets.  Consequently, our limited resources are being allocated to international expansion rather than growth in the United States.

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Currently, we do not have sufficient human or financial resources to effectively compete in the U.S. market.  Utilizing predominately independent sales representatives over which we have no control has proven ineffective. Accordingly, our plan is to first attempt to develop a strong presence internationally. By adopting this strategy we believe we will improve our ability to engage a significant marketing partner with the necessary experience and financial resources to effectively compete in the U.S market. We continue to have successes with a limited number of healthcare institutions in the U.S., which indicates the potential in the U.S. market.

In June 2010, we entered into a licensing and supply agreement with Jiangxi Aiqilin Pharmaceuticals Group Company, a corporation in China (“Aiqilin”), for the development and commercialization of Altrazeal® in China, including Hong Kong, Macau, and Taiwan.  Under the terms of the agreement, we received an upfront licensing payment, will receive a royalty based on product sales and milestone payments based on certain regulatory approvals and on the achievement of certain cumulative product sales performance.  Aiqilin has also been granted certain manufacturing rights.  The agreement covers Altrazeal®, Altrazeal® Silver, and Altrazeal® Collagen.

In July 2010, we received notification that Altrazeal® Transforming Powder Dressing had been granted CE Mark Certification.  The issuance of a CE Mark for Altrazeal® represents a significant milestone for the commercial expansion as this enables us to market in all European Union member states and other countries that recognize the CE Mark.

In September 2010, we entered into a worldwide distribution agreement appointing Novartis Animal Health, Inc. as the exclusive distributor of a veterinary version of Altrazeal® for marketing to the animal health sector.  Under the terms of the agreement, we will supply Novartis Animal Health, Inc. with finished product for marketing in the global markets.  The agreement further states that other wound care products developed by us may also be covered by the agreement upon the mutual agreement of the parties.  In November 2012, we completed the initial shipment of the veterinary version of Altrazeal® to Novartis Animal Health, Inc.

In January 2012, we executed a License and Supply Agreement with Melmed Holding AG (the “Melmed Agreement”) for the marketing of Altrazeal® throughout the European Union, Australia, New Zealand, North Africa, and the Middle East.  Currently, such marketing efforts are being performed by Altrazeal Trading GmbH, an affiliate of Melmed Holding AG.  Under the terms of the Melmed Agreement, we received a licensing fee in 2012, will receive certain royalties on product sales within the territories, and will supply Altrazeal® at an agreed sales price.  Contemporaneous with the execution of the Melmed Agreement, we also 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.  We received a non-dilutable 25% ownership interest in Altrazeal Trading Ltd.  In 2012, we completed initial shipments of Altrazeal® for distribution in Australia and in 2013 we completed shipments of Altrazeal® for distribution in Austria, Czech Republic, and Slovakia.  In February 2014, we executed an amendment to the Melmed Agreement for the purpose of expanding the territories to include Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.

In September 2013, we executed an Exclusive License and Supply Agreement with Altrazeal AG (the “AG Agreement”) to market Altrazeal® in several territories, to include Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, and the Commonwealth of Independent States.  Under the terms of the AG Agreement, 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 also received a non-dilutable 25% ownership interest in Altrazeal AG.  In October 2013, we completed the initial shipment of Altrazeal® for distribution in South Africa.  In October 2013 and February 2014, we executed amendments to the AG Agreement for the purpose of expanding the territories to include Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand), Jordan, and Syria.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.

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Aphthasol®  (Amlexanox 5% Paste)

Aphthasol®, amlexanox 5% paste, is the first drug approved by the FDA for the treatment of canker sores.  Extensive clinical studies have shown that Aphthasol® accelerates the healing of canker sores which results in a significant statistically significant reduction in the level of pain a patient experiences over the duration of the ulcer episode.  Additionally, a Phase IV clinical study conducted in Northern Ireland was completed in November 2000 and results confirmed that amlexanox 5% paste was effective in preventing the formation of an ulcer when used at the first sign or symptom of the disease.

Marketing authorization for amlexanox 5% paste in the United Kingdom was received in September 2001.  Subsequently, approval to market was granted in Austria, Germany, Greece, Finland, Ireland, Luxembourg, The Netherlands, Norway, Portugal, and Sweden.  Due to the failure to launch amlexanox 5% in these markets prior to an established date, the marketing authorizations are no longer effective.  The therapeutic Products Programme, the Canadian equivalent of the FDA, has issued a notice of compliance permitting the sale of amlexanox 5% paste, called Apthera®, in Canada by Pharmascience Inc., our Canadian partner.

In 1998, we executed a Licensing Agreement with Meda AB, Sweden (“Meda”) for Aphthasol (5% amlexanox) paste in Scandinavia, the Baltic States, and Iceland.  In November 2008, Meda expanded their territorial rights to include the United Kingdom, Ireland, France, Germany, Italy, Belgium, Netherland, and Turkey. In addition to our license agreement with Meda, licensing agreements have been executed with Laboratories Esteve for Spain, Portugal and Greece; Pharmascience Inc. for Canada; EpiTan, Ltd. for Australia and New Zealand; and Orient Europharma, Co., Ltd for Taiwan, Hong-Kong, Philippines, Thailand and Singapore; and KunWha Pharmaceutical Co., LTD for South Korea. Currently, Contract Pharmaceuticals Ltd. Canada is our contract manufacturer for all markets including the United States.

As a result of the termination of the licensing agreement with Discus Dental LLC and the subsequent legal action, Aphthasol® is currently not being distributed in the United States.  We are currently looking to appoint an alternate marketing and distribution partner.

OraDisc™ A

Treatment of oral conditions generally relies upon the use of medications formulated as gels and pastes that are applied to lesions in the mouth. The duration of effectiveness of these medications is typically short because the applied dose is worn away through the mechanical actions of speaking, eating, and tongue movement, and is washed away by saliva flow. To address these problems, we have developed a novel, cost-effective, adhesive film product that is bioerodible. This technology, known as OraDisc™, comprises a multi-layered film having an adhesive layer, an optional pre-formed film layer, and a coated backing layer.

OraDisc™ A was developed as a drug delivery system to treat canker sores using 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.

This successful development was an important technology milestone which supports the development of an OraDisc™ range of products. To achieve OraDisc™ A approval, in addition to performing the necessary clinical studies to prove efficacy, an irritation study, a 28-day safety study and drug distribution studies were conducted which support the development of additional products.  Patients in a 700 patient clinical study and a 28-day safety study completed a survey which produced very positive results with regard to perceived effectiveness, ease of application, ability of the disc to remain in place and purchase intent. These data give strong support to our overall development program. The survey data confirms market research studies which indicate a strong patient acceptance of this delivery device.

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In June 2008, we executed a Licensing and Supply Agreement with KunWha Pharmaceutical Co., Ltd, for OraDisc™ A and Aphthasol (5% amlexanox) paste in South Korea.  KunWha Pharmaceutical Co., Ltd paid us an upfront licensing fee and further milestone payments are to be made on regulatory approval and achievement of certain commercial milestones.

In November 2008, we executed an expanded European Agreement with Meda, Sweden for OraDisc™ A and Aphthasol® (5% amlexanox) paste for distribution into most major European markets. Meda paid us an upfront licensing fee and additional milestone payments will be made upon regulatory approval and achievements of commercial milestones.  Prior to commercialization by Meda, regulatory approval is required throughout the territory.

OraDiscTM B

A second mucoadhesive disc product has also been successfully developed for the treatment and management of oral pain. This product contains 15 milligrams of benzocaine which is the maximum allowable strength that falls under the classification of an OTC monograph product in the United States. This classification allows for an easier regulatory pathway to market. The product has been optimized and is ready for commercial scale-up.

In October 2012, we executed a License and Supply Agreement (the “Ora-D Agreement”) with ORADISC GmbH (“Ora-D”) to market worldwide all applications of our OraDisc™ erodible film technology for dental applications including but not limited to benzocaine (OraDisc™ B).  Currently, negotiations are ongoing to appoint marketing partners forOraDiscTM B.

OraDiscTM – Other Applications

In October 2012, we executed a License and Supply Agreement with Ora-D to market worldwide all applications of our OraDisc™ erodible film technology for dental applications including benzocaine (OraDisc™ B), re-mineralization dental strips, fluoride dental strips, long-acting breath freshener, and amlexanox (OraDisc™ A).  The marketing rights for OraDisc™ A granted to Ora-D exclude territories held by Meda, EpiTan Pharmaceuticals, KunWha Pharmaceutical, Laboratories del Dr. Esteve SA, Orient Europharma, Co., Ltd., and Pharmascience Inc.  We have also granted to Ora-D a twenty-four month option to utilize the OraDisc™ erodible film technology for drug delivery for migraine, nausea and vomiting, cough and cold, and pain.  Under the terms of the Ora-D Agreement, we received a licensing fee in 2012, will receive certain royalties on product sales within the territories, and will supply OraDisc™ products.  Contemporaneous with the execution of the Ora-D Agreement, we also 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.

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Marketing Relationships

For our commercialized products, we currently rely upon the following relationships in the following marketing territories for sales, manufacturing and/or regulatory approval efforts:

Altrazeal®
	Altrazeal Trading GmbH	§	European Union, Australia, New Zealand, Middle East (excluding Jordan and Syria), North Africa, Albania, Bosnia, Kosovo, Macedonia, Montenegro, and Serbia
	Altrazeal AG	§	Africa (markets not already licensed), Latin America, Georgia, Ukraine, Turkmenistan, the Commonwealth of Independent States, Jordan, Syria, Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand)
	Jiangxi Aiqilin Pharmaceuticals Group	§	China, Hong Kong, Macau, and Taiwan

Altrazeal® - Veterinary
	Novartis Animal Health	§	Worldwide

Amlexanox 5% paste and OraDisc™ A
	ORADISC GmbH	§	Worldwide (excluding territories held by Meda AB, KunWha Pharmaceutical, Laboratories del Dr. Esteve SA, Orient Europharma, Co., Ltd., and Pharmascience Inc.)
	Meda AB	§	United Kingdom, Ireland, Scandinavia, the Baltic states, Iceland, Belgium, France, Germany, Italy, Luxembourg, Netherlands, Switzerland, Austria, Bulgaria, Cyprus, Czech Republic, Hungary, Malta, Poland, Romania, and Slovenia
	KunWha Pharmaceutical	§	South Korea
	Laboratories del Dr. Esteve SA	§	Spain, Portugal, Greece, and Andorra
	Orient Europharma, Co., Ltd.	§	Taiwan an Hong-Kong
	Pharmascience Inc.	§	Canada

OraDisc™ B
	ORADISC GmbH	§	Worldwide

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Patents

We believe that the value of technology both to us and to our potential corporate partners is established and enhanced by our broad intellectual property positions. Consequently, we have already been issued and seek to obtain additional U.S. and foreign patents for products under development and for new discoveries. Patent applications are filed for our inventions and prospective products with the U.S. Patent and Trademark Office and, when appropriate, with authorities in countries that are part of the Paris Convention’s Patent Cooperation Treaty (“PCT”) (most major countries in Western Europe and the Far East) and with other authorities in major markets not covered by the PCT.

With regards to our Nanoflex® technology, three U.S. patents have issued and two U.S. and four PCT patent applications have been filed. The granted patents and patent applications have a variety of potential applications, such as wound management, burn care, dermal fillers, artificial discs and tissue scaffold.

We have one U.S. patent and have filed one U.S. and two PCT patent applications for our OraDisc™ technology. This oral delivery vehicle potentially overcomes the difficulties encountered in using conventional paste and gel formulations for conditions in the mouth. Utilizing this technology, we anticipate that higher drug concentrations will be achieved at the disease site, increasing the effectiveness of the product.  Our patent applications cover the delivery of drugs through or into any mucosal surface and onto the surface of gums and teeth. The patent and patent applications cover our ability to control the erosion time of the adhesive film and the subsequent drug release by adjusting the ratio of hydrophobic to hydrophilic polymers in the outer layer of the composite film.

The United States patents for our technologies and products expire in the years indicated below:

Nanoflex® technology		Year of Expiration
§	Hydrogel – Shape retentive hydrogel particle aggregate	2022
§	Altrazeal® Injectable	2024
§	Altrazeal® wound dressing and biomaterials	2028
OraDisc™ technology
§	Mucoadhesive erodible drug delivery device	2021

Manufacturing and Supply

We currently rely on a limited number of contract manufacturers, monitored by our internal management, to manufacture, package, and finish our products in conformance with current good manufacturing practices (cGMP) and do not currently have relationships with alternate suppliers. We believe that there are other contract manufacturers that can satisfy our production requirements without significant delay or material additional costs.

Significant Customers

A significant portion of our revenues are derived from a few major customers.  Customers with greater than 10% of total revenues, along with their relative percentage of total revenues, for the year ended December 31 are represented on the following table:

Customers	Product	2013			2012
Customer A	Altrazeal®		67	%		32	%
Customer B	Altrazeal® Veterinary		---			14	%
Customer C	Aphthasol®		---			13	%
Total			67	%		59	%

Research and Development

We are continuously engaged in research and development activities.  During the years ended December 31, 2013, 2012, and 2011 approximately $788,000, $833,000 and $947,000, respectively, were expended for research and development.  The costs incurred for each of the three years are primarily attributable to the development and commercialization of Altrazeal®.  We continue to perform activities to develop new products and to improve existing products utilizing our proprietary technologies.

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Government Regulation

We are subject to extensive regulation by the federal government, principally by the United States Food and Drug Administration (“FDA”), and, to a lesser extent, by other federal and state agencies as well as comparable agencies in foreign countries where registration of products will be pursued. Although a number of our formulations incorporate extensively tested drug substances, because the resulting formulations make claims of enhanced efficacy and/or improved side effect profiles, they are expected to be classified as new drugs by the FDA.

The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statues and regulations govern the testing, manufacturing, safety, labeling, storage, shipping, and record keeping of our products. The FDA has the authority to approve or not approve new drug applications and/or new medical devices and inspect research, clinical and manufacturing records and facilities.

In Europe, the filing of a Technical File Dossier to a Notified Body allows the medical device to receive a CE mark which allows commercialization of the product in the European Union.

Among the requirements for drug and medical device approval and testing is that the prospective manufacturer’s facilities and methods conform to the Code of Good Manufacturing Practices (“cGMP”) regulations, which establish the manufacturing and quality requirements, and the facilities or controls to be used during, the production process. Such facilities and manufacturing process are subject to ongoing FDA inspection to insure compliance.

The steps required before a pharmaceutical product or medical device product may be produced and marketed in the U.S. can include preclinical tests, the filing of an Investigational New Drug application (“IND”) or an Investigational Device Exemption (“IDE”) with the FDA, which must become effective pursuant to FDA regulations before human clinical trials may commence.  Numerous phases of clinical testing and the FDA approval of a New Drug Application (“NDA”), a Product Marketing Authorization (“PMA”), or a 510(k) application (“510(k)”) is also required prior to commercial sale.

Preclinical tests are conducted in the laboratory, usually involving animals, to evaluate the safety and efficacy of the potential product. The results of preclinical tests are submitted as part of the IND and IDE application and are fully reviewed by the FDA prior to granting the sponsor permission to commence clinical trials in humans. All trials are conducted under International Conference on Harmonization, good clinical practice guidelines. All investigator sites and sponsor facilities are subject to FDA inspection to insure compliance. Clinical trials typically involve a three-phase process.  In the case of a pharmaceutical product, Phase I, the initial clinical evaluations, consists of administering the drug and testing for safety and tolerated dosages. Phase II involves a study to evaluate the effectiveness of the drug for a particular indication and to determine optimal dosage and dose interval and to identify possible adverse side effects and risks in a larger patient group. When a product is found safe, an initial efficacy is established in Phase II, the product is then evaluated in Phase III clinical trials. Phase III trials consist of expanded multi-location testing for efficacy and safety to evaluate the overall benefit to risk index of the investigational drug in relationship to the disease treated. The results of preclinical and human clinical testing are submitted to the FDA in the form of an NDA, PMA, or 510(k) for approval to commence commercial sales.

The process of performing the requisite testing, data collection, analysis and compilation of an IND, IDE, NDA, PMA, or 510(k) is labor intensive and costly and may take a protracted time period.  In some cases, tests may have to be redone or new tests instituted to comply with FDA requests.  Review by the FDA may also take considerable time and there is no guarantee that an NDA, PMA, or 510(k) will be approved.  Therefore, we cannot estimate with any certainty the length of the approval cycle.

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The regulatory status of our principal products is as follows:

§	Altrazeal® is a product approved for sale in the U.S., the European Union (together with countries that recognize the CE mark), Australia, and New Zealand;
§	Other Altrazeal® products are currently in development phases;
§	5% amlexanox paste is a product approved for sale in the U.S. (Aphthasol®); approved in Canada and a number of EU countries but not yet sold;
§	OraDisc™ A is a product approved for sale in the U.S. as of September 2004; we are completing steps for manufacturing and sale of the product in 2014; and
§	Our other OraDisc™ products are currently in the development phase.

We are also governed by other federal, state and local laws of general applicability, such as laws regulating working conditions, employment practices, as well as environmental protection.

Competition

The medical device and pharmaceutical industry is characterized by intense competition, rapid product development and technological change.  Competition is intense among manufacturers of prescription pharmaceuticals, medical devices, and other product areas where we may develop and market products in the future.  Most of our potential competitors in the wound care market such as Smith & Nephew plc, Kinetic Concepts, Inc., ConvaTec Inc., 3M Company, and Molnlycke Health Care are large, well established medical device or healthcare companies with considerably greater financial, marketing, sales and technical resources than are available to us. Additionally, many of our potential competitors have research and development capabilities that may allow such competitors to develop new or improved products that may compete with our product lines.  Our potential products could be rendered obsolete or made uneconomical by the development of new products to treat the conditions to be addressed by our developments, technological advances affecting the cost of production, or marketing or pricing actions by one or more of our potential competitors.  Our business, financial condition and results of operation could be materially adversely affected by any one or more of such developments.  We cannot assure you that we will be able to compete successfully against current or future competitors or that competition will not have a materially adverse effect on our business, financial condition and results of operations.  We are aware of certain developmental projects for products to treat or prevent certain disease targeted by us.  The existence of these potential products or other products or treatments of which we are not aware, or products or treatments that may be developed in the future, may adversely affect the marketability of products developed by us.

In the area of wound management and burn care, which are the focus of our development activities, a number of companies are developing or evaluating new technology approaches.  We expect that technological developments will occur at a rapid rate and that competition is likely to intensify as various alternative technologies achieve similar, if not identical, advantages.

Wound care products developed from our Nanoflex® technology, including Altrazeal®, will compete with numerous well established products including Aquacel® marketed by ConvaTec Inc., Silvercel and Promongran marketed by Kinetic Concepts, Inc., Acticoat and Allevyn marketed by Smith and Nephew plc, and Mepitel and Mepliex marketing by Molnlycke Health Care.

Our product, Aphthasol®, is the only product clinically proven to accelerate the healing of canker sores.  There are numerous products, including prescription steroids such as Kenalog in OraBase, and many over-the-counter pain relief formulations that incorporate a local anesthetic used for the treatment of this condition.

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Even if our products are fully developed and receive the required regulatory approval, of which there can be no assurance, we believe that our products that require extensive sales efforts directed both at the consumer and the medical professional can only compete successfully if marketed by a company having expertise and a strong presence in the therapeutic area or in direct to consumer marketing. Consequently, our business model is to form strategic alliances with major or regional pharmaceutical companies for products to compete in these markets.

Employees

As of December 31, 2013, we had 7 full-time employees, including 3 in research and development, 3 in general and administration and 1 in manufacturing and quality.  In addition, we use contract consultants for business development, quality control and quality assurance, clinical administration, and regulatory affairs.  Our employees are not represented by a labor union and are not covered by a collective bargaining agreement.  Management believes that we maintain good relations with our personnel.  At times, we may compliment our internal expertise with external scientific consultants, university research laboratories and contract manufacturing organizations that specialize in various aspects of drug development including clinical development, regulatory affairs, toxicology, preclinical testing and process scale-up.

Executive Officers

The following table sets forth the executive officers of the Company, as of the date hereof, along with their respective ages and positions.  Each of the officers listed below has been appointed to hold the office listed opposite his respective name until the earlier to occur of the death or resignation of such officer or until a successor has been duly appointed by the board of directors of the Company.

Name	Age	Position
Kerry P. Gray	61	President, Chief Executive Officer, Chairman
Terrance K. Wallberg	59	Vice President, Chief Financial Officer, Secretary, Treasurer

Set forth below is certain employment and biographical information with respect to each executive officer of the Company.

Kerry P. Gray has served as one of our directors since March 2006 and currently has served as our President and Chief Executive Officer from January 2006 to March 2009 and since June 2010.  Previously, Mr. Gray was the President and CEO and a director of Access Pharmaceuticals, Inc. from June 1993 until May 2005. Previously, Mr. Gray served as Chief Financial Officer of PharmaScience, Inc., a company he co-founded to acquire technologies in the drug delivery area. From May 1990 to August 1991, Mr. Gray was Senior Vice President, Americas, Australia and New Zealand for Rhone-Poulenc Rorer, Inc.  Prior to the Rhone-Poulenc Rorer merger, he had been Area Vice President Americas of Rorer International Pharmaceuticals. From 1986 to May 1988, he was Vice President, Finance of Rorer International Pharmaceuticals, having served in the same capacity at the Revlon Health Care Group of companies before the acquisition by Rorer Group. Between 1975 and 1985, he held various senior financial positions with the Revlon Health Care Group.

Terrance K. Wallberg has served as our Vice President and Chief Financial Officer since March 2006.  Mr. Wallberg is a Certified Public Accountant and possesses an extensive and diverse background with over 30 years of experience with entrepreneurial/start-up companies.  Prior to joining ULURU Inc., Mr. Wallberg was Chief Financial Officer with Alliance Hospitality Management from 2004 to 2005 and previous to that was Chief Financial Officer for DCB Investments, Inc., a Dallas, Texas based diversified real estate holding company from 2000 to 2004.  During his five year tenure at DCB Investments, Mr. Wallberg acquired valuable experience with several successful start-up businesses and dealing with the external financial community.  Prior to DCB Investments, Mr. Wallberg spent 22 years with Metro Hotels, Inc., serving in several finance/accounting capacities and culminating his tenure as Chief Financial Officer.  Mr. Wallberg is a member of the American Society of Certified Public Accountants and the Texas Society of Certified Public Accountants and is a graduate of the University of Arkansas, Little Rock.

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Organizational History

We were incorporated on September 17, 1987 under the laws of the State of Nevada, originally under the name Casinos of the World, Inc.  From April 1993 to January 2002, the Company changed its name on four separate occasions, with Oxford Ventures, Inc. being the Company’s name on January 30, 2002.

On March 29, 2006, we effected a 400:1 reverse stock split and, at the same time, authorized a decrease in authorized shares of common stock from 400,000,000 shares to 200,000,000 shares, and authorized up to 20,000 shares of Preferred Stock.

On March 31, 2006, a subsidiary of the Company, which had acquired, among other things, the net assets of the Nanoflex® and Mucoadhesive OraDisc™ technologies from Access Pharmaceuticals, Inc., merged with and into ULURU Inc., a Delaware corporation ("ULURU Delaware"), and ULURU Delaware become a became a wholly-owned subsidiary of the Company.  On March 31, 2006, we changed our name from "Oxford Ventures, Inc." to "ULURU Inc."  On the same date, we moved our executive offices to Addison, Texas.

On June 29, 2011, we effected a 15:1 reverse stock split.

On September 13, 2011, we filed a certificate of designation creating the Series A Preferred Stock, all of which has been redeemed.

Corporate Information

Our principal executive offices are located at 4452 Beltway Drive, Addison, Texas 75001, and our telephone number is (214) 905-5145.

Available Information

Our internet address is www.uluruinc.com.  We are not including the information contained in our website as part of, or incorporating it by reference into, this annual report on Form 10-K.  We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file such materials with the Securities and Exchange Commission.

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ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors before you decide to invest in our Company and our business because these risk factors may have a significant impact on our business, operating results, financial condition, and cash flows. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected.

Risks Related to Our Operations

We do not have significant operating revenue and we may never have sufficient revenue to be profitable.

Our ability to achieve significant revenue or profitability depends upon our ability to successfully commercialize existing products, particularly Altrazeal®.  Historically, none of our existing products have had significant sales and all of our products compete in a competitive marketplace.  We may not generate significant revenues or profits from the sale of Altrazeal® or other products in the future. If we are unable to generate significant revenues over the long term, we will not be profitable and may need to discontinue our operations.

A failure to obtain additional capital when and as needed could jeopardize our operations and the cost of capital may be high.

We believe existing and contemplated arrangements for additional capital or debt should provide us with adequate financial resources to continue to fund our business plan and meet our operating requirements through 2014.  If we have unanticipated costs, our revenues are less than expected, or existing commitments do not yield anticipated capital, we may need to obtain additional capital earlier than anticipated.  In any case, absence a significant increase in revenue, we will need to raise additional capital to fund our operations over the longer term.

As we go to market to raise capital, we may be unable to obtain the necessary financing on terms acceptable to us, or at all.  If we are unable to raise capital when needed, we would be unable to continue our operations.  Even if we are able to raise capital, we may raise capital by selling equity securities, which will be dilutive to existing shareholders.  If we incur additional indebtedness, costs of financing may be extremely high, and we will be subject to default risks associated with such indebtedness, which may harm our ability to continue our operations.

Our financial condition limits our ability to borrow funds as may be required to fund our future operations.

We rely on capital from loans and the sale of equity securities to fund our operations due to our limited revenue.  Our ability to borrow funds is limited by our financial condition.  If we do not experience a significant increase in revenue, and are unable to raise additional capital, we may be required to discontinue operations.  Any capital we are able to raise will generally be on terms that are disadvantageous to the company.

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Sales of our products are dependent upon the efforts of commercial partners and other third parties over which we have no or little control.

The right to market and sell our key products has been licensed to third parties and to entities in which we have minority equity stakes.  This presents certain risks, including the following:

§	our commercial partners and licensees may not place the same priority on sales of our products as we do, may fail to honor contractual commitments, may not have the expertise, market strength or other characteristics necessary to effectively market our products, may dedicate only limited resources to, and/or may abandon, marketing of a product for reasons, including reasons such as a shift in corporate focus, unrelated to its merits;
§	our commercial partners may be in the early stages of development and may not have sufficient liquidity to effectively obtain approvals for and market our products consistent with contractual commitments or our expectations;
§	we may have disputes with our commercial partners, which may inhibit development, lead to an abandonment of our arrangements or have other negative consequences; and
§	even if the commercialization and marketing of products is successful, our revenue share may be limited and may not exceed our associated development and operating costs.

If any of these risks are realized, our revenues are unlikely to be sufficient to support our operations over the long terms, and we may have to discontinue operations.

We may not successfully commercialize our product candidates.

Our product candidates are subject to the risks of failure inherent in the development of pharmaceuticals based on new technologies.  Our failure to develop safe, commercially viable products would severely limit our ability to become profitable or to achieve significant revenues.  We may be unable to successfully commercialize our product candidates because:

§	some or all of our product candidates may be found to be unsafe or ineffective or otherwise fail to meet applicable regulatory standards or receive necessary regulatory clearances;
§	our product candidates, if safe and effective, may be too difficult to develop into commercially viable products;
§	it may be difficult to manufacture or market our product candidates on a large scale;
§	given our limited market presence, we may be unable, directly or indirectly through licensees, to effectively market and distribute our products or establish a strong brand;
§	proprietary rights of third parties may preclude us from marketing our product candidates; and
§	third parties may market superior or equivalent products.

If we are unable to maintain effective sales, marketing and distribution capabilities, or to enter into agreements with third parties to do so, we will be unable to successfully commercialize Altrazeal®.

If we are unable to establish the capabilities to sell, market and distribute Altrazeal® by entering into agreements with others, or to maintain such capabilities in countries where we have already commenced commercial sales, we will not be able to successfully sell Altrazeal®. In that event, we will not be able to generate significant revenues. We may be unable to enter into and maintain any marketing or distribution agreements with third-parties on acceptable terms, if at all. Even if we enter into marketing and distribution agreements with third parties on acceptable terms, such agreements may contain terms that are disadvantageous to us, and licensees under such agreement may not expend sufficient resources to effectively market our products. We may not be successful in commercializing Altrazeal®.

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We may be unable to successfully develop, market, or commercialize our products or our product candidates without establishing new relationships and maintaining current relationships.

Our strategy for the development and commercialization of our potential pharmaceutical products requires us to enter into various arrangements with corporations, collaborators, licensees and others in order to develop, produce and market our products. Our business depends upon our ability to enter into agreements for the development, production and marketing of our products on reasonable terms, which we may be unable to do.  Even if we enter into such agreements, we are subject to the risk that the counterparty to the agreement will not fulfill their obligations under such agreements. Our ability to successfully commercialize, and market our products and product candidates will be harmed if our existing relationship are terminated, we are unable to enter into new relations or our partners fail to fulfill their obligations under the agreements.

We are dependent upon contract manufacturers to safely and timely manufacture our products.

We have limited experience in the manufacture of pharmaceutical products in commercial quantities. As a result, we have established, and in the future intend to establish, arrangements with contract manufacturers to manufacture, package, label, and deliver our pharmaceutical products.  Our business will suffer if there are delays or difficulties in establishing relationships with manufacturers to manufacture, package, label, and deliver our products or if the prices charged by such manufacturers are higher than anticipated.  Moreover, contract manufacturers that we may use must adhere to current Good Manufacturing Practices, as required by FDA.  If any such manufactures fail to comply with FDA requirements, they may be unable to manufacture our products.  If we are unable to obtain or retain third party manufacturing on commercially acceptable terms, we may not be able to commercialize our products as planned.  Our dependence upon third parties for the manufacture of our products may harm our ability to generate significant revenues or acceptable profit margins and our ability to develop and deliver such compliant products on a timely and competitive basis.

We may incur substantial product liability expenses due to the use or misuse of our products.

Our business exposes us to potential liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products. We may face substantial liability for damages if adverse side effects or product defects are identified with any of our products. We may be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we have developed, manufactured or sold.  Any such product liability could harm our operations, and a large judgment could force us to discontinue our operations.

We may incur significant liabilities if we fail to comply with stringent environmental regulations.

Our development processes involve the controlled use of hazardous materials.  We are subject to a variety of federal, state and local governmental laws and regulations related to the use, manufacture, storage, handling, and disposal of such material and certain waste products.  If we experience an accident with hazardous materials or otherwise mishandle them, we could be held liable for any damages.  Any such liability could exceed our resources and force us to discontinue operations.

Additional federal, state, foreign and local laws and regulations affecting our operations may be adopted in the future, including laws related to climate change.  We may incur substantial costs to comply with these laws or regulations.  Additionally, we may incur substantial fines or penalties if we violate any of these laws or regulations.

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Our ability to successfully commercialize our drug or device candidates could substantially depend upon the availability of reimbursement for the costs of the resulting drugs or devices and related treatments.

The successful commercialization of, and the interest of potential collaborative partners to invest in the commercialization of our drug or device candidates, may depend substantially upon the reimbursement prices paid being at acceptable levels by government authorities, private health insurers and other organizations, including health maintenance organizations, or HMOs.  To date, the costs of our marketed products generally have been reimbursed at acceptable levels; however, the amount of such reimbursement in the United States or elsewhere may be decreased in the future or may be unavailable for any drugs or devices that we may develop in the future.  Limited reimbursement for the cost of any drugs or devices that we develop may reduce the demand for, or price of such drugs or devices, which would hamper our ability to obtain collaborative partners to commercialize our drugs or devices, or to obtain a sufficient financial return on our own manufacture and commercialization of any future drugs or devices.

Intense competition may limit our ability to successfully develop and market commercial products.

The pharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Our competitors in the United States and elsewhere are numerous and include, among others, major multinational pharmaceutical, device, and chemical companies.

In the area of wound management and burn care, which is the primary focus of our commercialization and development activities, a number of companies are developing or evaluating new technology approaches.  Significantly larger companies compete in this marketplace including Smith & Nephew plc, Kinetic Concepts, Inc., ConvaTec Inc., 3M Company, Molnlycke Health Care, and numerous other companies.  We expect that technological developments will occur at a rapid rate and that competition is likely to intensify as various alternative technologies achieve similar if not identical advantages.

Prescription steroids such as Kenalog in OraBase, developed by Bristol-Myers Squibb, may compete with our Aphthasol® product. OTC products including Orajel (Church and Dwight) and Anbesol (Pfizer Consumer Healthcare) also compete in the aphthous ulcer market.

These competitors have and employ greater financial and other resources, including larger research and development, marketing and manufacturing organizations.  As a result, our competitors may successfully develop technologies and drugs that are more effective or less costly than any that we are developing or which would render our technology and future products obsolete and noncompetitive.

In addition, some of our competitors have greater experience than we do in conducting preclinical and clinical trials and may obtain FDA and other regulatory approvals for product candidates more rapidly than we do.  Companies that complete clinical trials obtain required regulatory agency approvals and commence commercial sale of their products before their competitors may achieve a significant competitive advantage.  Products resulting from our development efforts or from our joint efforts with collaborative partners therefore may not be commercially competitive with our competitors’ existing products or products under development.

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The market may not accept any medical device or pharmaceutical products that we successfully develop.

The drugs and devices that we are attempting to develop may compete with a number of well-established drugs and devices manufactured and marketed by major pharmaceutical companies.  The degree of market acceptance of any drugs or devices developed by us will depend on a number of factors, including the establishment and demonstration of the clinical efficacy and safety of our product candidates, the potential advantage of our product candidates over existing therapies and the reimbursement policies of government and third-party payers, and the effectiveness of our marketing efforts and those of our partners.  Physicians, patients or the medical community in general may not accept or use any drugs or devices that we may develop independently or with our collaborative partners and if they do not, our business could suffer.

Our future financial results could be adversely impacted by asset impairments or other charges.

Accounting Standards Codification (“ASC”) Topic 350-30, Intangibles Other than Goodwill requires that we test goodwill and other intangible assets determined to have indefinite lives for impairment on an annual, or on an interim basis if certain events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value or if the fair value of intangible assets with indefinite lives falls below their carrying value. In addition, under ASC Topic 350-30, long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. A significant decrease in the fair value of a long-lived asset, an adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition or an expectation that a long-lived asset will be sold or disposed of significantly before the end of its previously estimated life are among several of the factors that could result in an impairment charge.

We evaluate intangible assets determined to have indefinite lives for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sales or disposition of a significant portion of the business, or other factors such as a decline in our market value below our book value for an extended period of time.

We evaluate the estimated lives of all intangible assets on an annual basis, to determine if events and circumstances continue to support an indefinite useful life or the remaining useful life, as applicable, or if a revision in the remaining period of amortization is required. The amount of any such annual or interim impairment charge could be significant, and could have a material adverse effect on reported financial results for the period in which the charge is taken.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.

Effective internal controls are necessary for us to provide reliable financial reports.  If we cannot provide reliable financial reports, we may be subject to legal actions by shareholders, regulators or other parties. All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial preparation and presentation.

While we continue to evaluate and improve our internal controls, we cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future.  Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Failure to achieve and maintain an effective internal control environment could also  cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price and lead to disruptions, litigation and liabilities.

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Trends toward managed health care and downward price pressure on medical products and services may limit our ability to profitably sell any drugs or devices that we develop.

Lower prices for health care products may result from:

§	Third-party payers’ increasing challenges to the prices charged for medical products and services;
§	The trend toward managed health care in the Unites States and the concurrent growth of HMOs and similar organizations that can control or significantly influence the purchase of healthcare services and products; and
§	The Affordable Care Act (a/k/a Obama care) and other proposals to reform healthcare or reduce government insurance programs.

The cost containment measures that healthcare providers are instituting, including practice protocols and guidelines and clinical pathways, and the effect of any healthcare reform, could limit our ability to profitably sell any drugs or devices that we may successfully develop.  Moreover, any future legislation or regulation, if any, relating to the healthcare industry or third-party coverage and reimbursement, may cause our business to suffer.

Our business could suffer if we lose the services of, or fail to attract, key personnel.

We are highly dependent upon the efforts of our senior management and scientific team, all of which are employed on an at-will basis.  The loss of the services of one or more of these individuals could delay or prevent the achievement of our development or product commercialization objectives. We do not maintain any "key-man" insurance policies on any of our senior management and we do not intend to obtain such insurance.  In addition, due to the specialized scientific nature of our business, we are highly dependent upon our ability to attract and retain qualified scientific and technical personnel.  There is intense competition among major pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions for qualified personnel in the areas of our activities and we may be unsuccessful in attracting and retaining these personnel.

Significant disruptions of information technology systems or breaches of information security could adversely affect our business.

We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personally identifiable information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We have also outsourced elements of our information technology infrastructure, and as a result we are managing independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, make such systems potentially vulnerable both to service interruptions and to security breaches from inadvertent or intentional actions. We may be susceptible to third-party attacks on our information security systems, which attacks are of ever increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise. Service interruptions or security breaches could result in significant financial, legal, business or reputational harm.

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Our current strategy focuses on certain international markets, particularly those in Europe, which are experiencing a recession or slow financial growth.

In recent years, our strategy has been to focus on international markets where we believe our products may be better received.  This includes markets in Europe and other parts of the world that remain in, or have slid back into, recession and are harmed by the continuing European sovereign debt crisis.  Continuing worldwide economic instability, including challenges faced by the Eurozone and certain of the countries in Europe, may lead to slower than expected revenue growth and collection issues as potential customers, or payors, continue to be harmed by slow economic growth.

Risks Related to Development, Clinical Testing and Regulatory Approval

We are subject to extensive governmental regulation which increases our cost of doing business and may affect our ability to commercialize any new drug products that we may develop.

The FDA and comparable agencies in foreign countries impose substantial requirements upon the introduction of pharmaceutical products through lengthy and detailed laboratory, preclinical and clinical testing procedures and other costly and time-consuming procedures to establish their safety and efficacy. Some of our products and product candidates require receipt and maintenance of governmental approvals for commercialization. Preclinical and clinical trials and manufacturing of our product candidates will be subject to the rigorous testing and approval processes of the FDA and corresponding foreign regulatory authorities. Satisfaction of these requirements typically takes a significant number of years and can vary substantially based upon the type, complexity and novelty of the product.

We may be unable to obtain government approvals required to market our products and, even if we do, that approval may subsequently be withdrawn or limited.

Government regulation affects the manufacturing and marketing of pharmaceutical and medical device products. Government regulations may delay marketing of our potential drugs or potential medical devices for a considerable or indefinite period of time, impose costly procedural requirements upon our activities and furnish a competitive advantage to larger companies or companies more experienced in regulatory affairs. Delays in obtaining governmental regulatory approval could adversely affect our marketing as well as our ability to generate significant revenues from commercial sales. Our drug or device candidates may not receive FDA or other regulatory approvals on a timely basis or at all. Moreover, if regulatory approval of a drug or device candidate is granted, such approval may impose limitations on the indicated use for which such drug or device may be marketed. Even if we obtain initial regulatory approvals for our drug or device candidates, our drugs or devices and our manufacturing facilities would be subject to continual review and periodic inspection, and later discovery of previously unknown problems with a drug, or device, manufacturer or facility may result in restrictions on the marketing or manufacture of such drug or device, including withdrawal of the drug or device from the market. The FDA and other regulatory authorities stringently apply regulatory standards, and failure to comply with regulatory standards can, among other things, result in fines, denial or withdrawal of regulatory approvals, product recalls or seizures, operating restrictions and criminal prosecution.

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The uncertainty associated with preclinical and clinical testing may affect our ability to successfully commercialize new products.

Before we can obtain regulatory approvals for the commercial sale of our potential products, the product candidates may be subject to extensive preclinical and clinical trials to demonstrate their safety and efficacy in humans. In this regard, for example, adverse side effects can occur during the clinical testing of a new drug on humans which may delay ultimate FDA approval or even lead us to terminate our efforts to develop the product for commercial use. Companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after demonstrating promising results in earlier trials. The failure to adequately demonstrate the safety and efficacy of a product candidate under development could delay or prevent regulatory approval of the product candidate. A delay or failure to receive regulatory approval for any of our product candidates could prevent us from successfully commercializing such candidates, and we could incur substantial additional expenses in our attempts to further develop such candidates and obtain future regulatory approval.

Risks from the improper conduct of employees, agents or contractors or collaborators could adversely affect our business or reputation.

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including without limitation, healthcare, employment, foreign corrupt practices, environmental, competition, and privacy laws. Such improper actions could subject us to civil or criminal investigations, monetary and injunctive penalties and could adversely impact our ability to conduct business, results of operations, and reputation.

Our business is subject to increasingly complex corporate governance, public disclosure, and accounting requirements and regulations that could adversely affect our business and financial results and condition.

We are subject to changing rules and regulations of various federal and state governmental authorities. These entities, including the Public Company Accounting Oversight Board and the Securities and Exchange Commission, or SEC, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional requirements and regulations in response to laws enacted by Congress, including the Sarbanes-Oxley Act of 2002 and, most recently, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act.  There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that expressly authorized or required the SEC to adopt additional rules in these areas.  On January 25, 2011, the SEC adopted final rules concerning “say on pay”. Our efforts to comply with these requirements and regulations have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities.  We also may incur liability if we fail to comply with such laws.

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Risks Related to Our Intellectual Property

We may not be successful in protecting our intellectual property and proprietary rights.

Our success depends, in part, on our ability to obtain U.S. and foreign patent protection for our drug and device candidates and processes, preserve our trade secrets and operate our business without infringing the proprietary rights of third parties.  Legal standards relating to the validity of patents covering pharmaceutical inventions and the scope of claims made under such patents are still developing.  We cannot assure you that any existing or future patents issued to, or licensed by, us will not subsequently be challenged, infringed upon, invalidated or circumvented by others.  As a result, although we, together with our subsidiaries, are the owner of U.S. patents and U.S. patent applications now pending, and European patents and European patent applications, we cannot assure you that any additional patents will issue from any of the patent applications owned by us.  Furthermore, any rights that we may have under issued patents may not provide us with significant protection against competitive products or otherwise be commercially valuable.

In addition, patents may have been granted to third parties or may be granted covering products or processes that are necessary or useful to the development of our product candidates.  If our product candidates or processes are found to infringe upon the patents or otherwise impermissibly utilize the intellectual property of others, our development, manufacture and sale of such product candidates could be severely restricted or prohibited. In such event, we may be required to obtain licenses from third parties to utilize the patents or proprietary rights of others.  We cannot assure you that we will be able to obtain such licenses on acceptable terms, if at all.  If we become involved in litigation regarding our intellectual property rights or the intellectual property rights of others, the potential cost of such litigation, regardless of the strength of our legal position, and the potential damages that we could be required to pay could be substantial and harm our ability to continue as a going concern.

Risks Related to Our Common Stock

An investment in our common stock may be less attractive because it is not listed on a national stock exchange.

On April 2, 2012, we began quotation and trading on the OTCQB™ marketplace, operated by the OTC Markets Group.  The OTCQB is a market tier for over-the-counter-traded companies that are registered and reporting with the SEC.  The OTCQB is viewed by most investors as a less desirable, and less liquid, marketplace.  As a result, an investor may find it more difficult to purchase, dispose of or obtain accurate quotations as to the value of our common stock.

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Our common stock is a “low-priced stock” and subject to regulations that limits or restricts the potential market for our stock.

Shares of our common stock are “low-priced” or “penny stock,” resulting in increased risks to our investors and certain requirements being imposed on some brokers who execute transactions in our common stock.  In general, a low-priced stock is an equity security that:

§	Is priced under five dollars;
§	Is not traded on a national stock exchange, such as NASDAQ or the NYSE;
§	Is issued by a company that has less than $5 million in net tangible assets (if it has been in business less than three years) or has less than $2 million in net tangible assets (if it has been in business for at least three years); and
§	Is issued by a company that has average revenues of less than $6 million for the past three years.

We believe that our common stock is presently a “penny stock.” At any time the common stock qualifies as a penny stock, the following requirements, among others, will generally apply:

§	Certain broker-dealers who recommend penny stock to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.
§	Prior to executing any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers a disclosure schedule explaining the risks involved in owning penny stock, the broker-dealer’s duties to the customer, a toll-free telephone number for inquiries about the broker-dealer’s disciplinary history and the customer’s rights and remedies in case of fraud or abuse in the sale.
§	In connection with the execution of any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers the following:
	·bid and offer price quotes and volume information;
	·the broker-dealer’s compensation for the trade;
	·the compensation received by certain salespersons for the trade;
	·monthly accounts statements; and
	·a written statement of the customer’s financial situation and investment goals.

We do not expect to pay dividends in the foreseeable future.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any payment of cash dividends will depend on our financial condition, results of operations, capital requirements and other factors and will be at the discretion of our board of directors.  Accordingly, you will have to rely on appreciation in the price of our common stock, if any, to earn a return on your investment in our common stock. Furthermore, we may in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends.

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Provisions of our charter documents could discourage an acquisition of our Company that would benefit our stockholders and may have the effect of entrenching, and making it difficult to remove, management.

Provisions of our Articles of Incorporation and Bylaws may make it more difficult for a third party to acquire control of our Company, even if a change in control would benefit our stockholders.  In particular, shares of our preferred stock may be issued in the future without further stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as our Board of Directors may determine, including for example, rights to convert into our common stock.  The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any of our preferred stock that may be issued in the future.  The issuance of our preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire control of us.  This could limit the price that certain investors might be willing to pay in the future for shares of our common stock and the likelihood of an acquisition.

Our stockholders may experience substantial dilution in the value of their investment if we issue additional shares of our capital stock.

Our charter allows us to issue up to 200,000,000 shares of our common stock and to issue and designate the rights of, without stockholder approval, up to 20,000 shares of preferred stock. In the event we issue additional shares of our capital stock, dilution to our stockholders could result. In addition, if we issue and designate a new class of preferred stock, these securities may provide for rights, preferences or privileges senior to those of holders of our common stock.

Substantial sales of our common stock could lower our stock price.

Trading in our common stock is limited, and daily trading volumes are low.  As a result, the market price for our common stock could drop as a result of sales of a large number of our presently outstanding shares of common stock or shares that we may issue or be obligated to issue in the future.

Future sales of our common stock may depress the market price of our common stock and cause stockholders to experience dilution.

The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market, including shares issued upon conversion of our Secured Convertible Subordinated Notes.  We may issue additional shares of common stock through one or more equity transactions in the future to satisfy our capital and operating needs; however, such transactions will be subject to market conditions and will likely include sales at a discount from our market prices.  Sales of equity securities by a company at a discount from market price are often associated with a decrease in the market price of the common stock and will dilute the percentage interest owned by existing shareholders.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of December 31, 2013, we did not own any real property.  On January 31, 2006, we entered into a lease agreement for approximately 9,000 square feet of administrative offices and laboratories in Addison, Texas.  Additional space is available in the complex for future expansion which we believe would accommodate growth for the foreseeable future.  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 was inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which was 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 $9,193, which is inclusive of monthly operating expenses, until March 31, 2014 and at such time, will increase to $9,379, which is inclusive of monthly operating expenses.

We believe that our existing leased facilities are suitable for the conduct of our business and adequate to meet our growth requirements.

ITEM 3. 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 4. MINE SAFETY DISCLOSURES

Not applicable.

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Part II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Equity

Our common stock began quotation and trading on the OTCQB™ marketplace, operated by the OTC Markets Group, under the symbol “ULUR” on April 2, 2012.

From July 26, 2007 to April 1, 2012 our common stock was traded on the NYSE Amex, LLC exchange under the symbol “ULU”.  From March 31, 2006 to July 25, 2007 our common stock was quoted on the OTC Bulletin Board under the symbol “ULUR.OB”.

The following table sets forth, on a quarterly basis, the high and low per share closing prices of our common stock as reported on the NYSE Amex, LLC exchange and the OTCQB™ marketplace, as applicable, from January 1, 2012 through December 31, 2013.

Year Ended December 31, 2013	High		Low
First Quarter	$	0.38	$	0.28
Second Quarter	$	0.61	$	0.29
Third Quarter	$	0.65	$	0.42
Fourth Quarter	$	0.69	$	0.38
Year Ended December 31, 2012
First Quarter	$	0.56	$	0.18
Second Quarter	$	0.31	$	0.20
Third Quarter	$	0.35	$	0.17
Fourth Quarter	$	0.37	$	0.20

Holders of Common Stock

As of March 31, 2014, there were approximately 44 shareholders of record holding our common stock based upon the records of our transfer agent which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers, and registered clearing agencies.  We believe the number of actual shareholders of our common stock exceeds the number of registered shareholders and estimate such number at approximately 4,000 shareholders.  As of March 31, 2014, there were 200,000,000 shares of common stock authorized and 23,588,110 shares of common stock issued and outstanding.

The last sales price of our common stock on March 31, 2014 was $1.58 per share as quoted and traded on the OTCQB™ marketplace.

Dividend Policy

To date, we have not declared or paid any cash dividends on our preferred stock or common stock and we do not anticipate paying any cash dividends on them in the foreseeable future.  The payment of dividends, if any, in the future is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, and financial condition and other relevant facts.  We currently intend to retain all future earnings, if any, to finance the development and growth of our business.

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Securities Authorized for Issuance Under Equity Compensation Plans

In March 2006, our board of directors (the “Board”) adopted and our stockholders approved our 2006 Equity Incentive Plan (the “Incentive Plan”), which initially provided for the issuance of up to 133,333 shares of our common stock pursuant to stock options 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 December 31, 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 December 31, 2013, there were 715,647 shares that remained available for future grants under our Equity Incentive Plan.

The following table sets forth the outstanding stock options or rights that have been authorized under equity compensation plans as of December 31, 2013.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders
2006 Equity Incentive Plan		1,014,907	$	2.12		715,647
Equity compensation plans not approved by security holders		-0-		n/a		-0-
Total		1,014,907	$	2.12		715,647

ITEM 6. SELECTED FINANCIAL DATA

Smaller reporting companies are not required to provide the information required by this Item.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and other information in this Report contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements. We have sought to identify the most significant risks to our business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that we have identified all possible risks that might arise. Investors should carefully consider all of such risks before making an investment decision with respect to our stock.

The following contains certain statements that are forward-looking within the meaning of Section 27a of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, and that involve risks and uncertainties, including, but not limited to uncertainties regarding our ability to maintain costs, dependence on others to market our licensed products, the timing and receipt of licensing and milestone revenues, our ability to achieve licensing and milestone revenues, the future success of our marketed products and products in development, our ability to raise additional financing to sustain our operations, and other risks described below as well as those discussed elsewhere in this Report, documents incorporated by reference and other documents and reports that we file periodically with the Securities and Exchange Commission.

Business

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 mucoadhesive film products based on our patented Nanoflex® and OraDiscTM technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.

Our strategy is twofold:

§	Establish a market leadership position in wound management by developing and commercializing a customer focused portfolio of innovative wound care products based on our Nanoflex® technology to treat the various phases of wound healing; and
§	Develop our oral-mucoadhesive film 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 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 in September 2008, the product is indicated for both exuding acute wounds such as partial thickness burns, donor sites, non-healing surgical wounds, and trauma and for chronic wounds such as venous leg ulcers, diabetic foot ulcers, and pressure ulcers.

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

OraDisc™ A was developed as an improved drug delivery system for amlexanox, the same active ingredient used in Aphthasol® paste for the treatment of canker sores. 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 an Exclusive License and Supply Agreement with Altrazeal AG (the “AG Agreement”) to market Altrazeal® in several territories, including Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, and the Commonwealth of Independent States.  Under the terms of the AG Agreement, 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 also received a non-dilutable 25% ownership interest in Altrazeal AG.

In October 2013 and February 2014, we executed amendments to the AG Agreement for the purpose of expanding the territories to include Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand), Jordan, and Syria.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.

In February 2014, we executed an amendment to the Melmed Agreement for the purpose of expanding the territories to include Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.

Convertible Note – June 2012

On January 22, 2014, we provided notice to Inter-Mountain Capital Corp. (“Inter-Mountain”) of our election to exercise our rights under the $2,210,000 Secured Convertible Note issued to Inter-Mountain (the “June 2012 Note”) and to offset amounts we owed to Inter-Mountain against amounts it owed to us under certain buyer notes. Our notice provided that such deduction and offset occurred on January 22, 2014, that we will not incur the 120% prepayment premium with respect to the June 2012 Note as a result of the deduction and offset, that no warrants will become exercisable as a result of the offset, and that any warrants unvested as of January 22, 2014 shall immediately and automatically terminate.   As a result, the outstanding amount owed under the June 2012 Note was reduced to approximately $317,000 as of January 22, 2014.

On February 27, 2014 and on March 3, 2014, we received conversion notices from Inter-Mountain whereby we issued an aggregate of 435,502 shares of common stock for the final payment of approximately $152,000 due under the June 2012 Note.

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.

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Common Stock Transaction

January 2013 Offering

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 took place at four closings over 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.  We received subsequent funding tranches of $500,000, $300,000, $300,000, and $500,000 for the purchase of 1,250,000, 750,000, 750,000, and 1,250,000 shares of our common stock on May 7, 2013, September 6, 2013, October 24, 2013, and January 6, 2014 respectively.

On January 3, 2014, the Warrants vested with respect to 3,000,000 shares of our common stock and were exercised by an assignee of IPMD on that date pursuant to a Notice of Exercise, accepted by the Company, that provided for the issuance of 750,000 shares of common stock on each of January 31, 2014, February 28, 2014, March 31, 2014, and April 30, 2014 in exchange for the payment of $450,000 on each such date.

On January 31, 2014, IPMD documented the assignment by completing an Assignment Agreement (the “Assignment Agreement”) with The Punch Trust (“TPT”) and Michael I. Sacks (“Sacks”) pursuant to which IPMD completed the assignment to TPT and Sacks its rights and interests to purchase up to 3,000,000 shares of our common stock as detailed in the Warrants and the Notice of Exercise.  Neither TPT nor Sacks paid any monetary consideration to IPMD in connection with the assignments under the Assignment Agreement.

Concurrent with the assignment under the Assignment Agreement described above, ULURU, TPT, Sacks, and IPMD entered into an Implementation Agreement (the “Implementation Agreement”) pursuant to which we consented and agreed to the assignment of the Warrants to TPT and Sacks.  We also agreed to issue and facilitate the delivery of the shares of Common Stock under the Warrants to TPT and Sacks upon their payment of the corresponding purchase price due under the Warrants.  Under the terms of the Warrants, Sacks made payments of $450,000 on each of January 31, 2014 and February 28, 2014 and the Company issued 750,000 shares of Common Stock to him on each date, respectively.  Of the 3,000,000 shares of Common Stock issuable under the Warrants, the Implementation Agreement provides for Sacks to acquire 2,000,000 shares (750,000 on each of January 31 and February 28 and 250,000 on each of March 31 and April 30) and TPT to acquire 1,000,000 shares (500,000 on each of March 31 and April 30).

On January 31, 2014, we also entered into a Registration Rights Agreement with TPT and Sacks whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein within sixty days after request and to use commercially reasonable efforts to cause such registration statement to be declared effective with the SEC and to keep such registration statement effective for a period of eighty days and, if necessary, such eighty day period being extended for up to sixty additional days.

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LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the public and private sales of convertible notes and common stock.  Product sales, royalty payments, contract research, licensing fees and milestone payments from our corporate alliances have also provided, and are expected in the future to provide, funding for operations.  Our principal source of liquidity is cash and cash equivalents.  As of December 31, 2013 our cash and cash equivalents were approximately $5,000 which is a decrease of approximately $16,000 as compared to our cash and cash equivalents at December 31, 2012 of approximately $21,000.  Our working capital (current assets less current liabilities) was approximately $(1,783,000) at December 31, 2013 as compared to our working capital at December 31, 2012 of approximately $(2,774,000).

Consolidated Cash Flow Data

	Year Ended December 31,
Net Cash Provided by (Used in)	2013			2012
Operating activities	$	(1,734,000	)	$	(956,000	)
Investing activities		(34,000	)		156,000
Financing activities		1,752,000			775,000
Net decrease in cash and cash equivalents	$	(16,000	)	$	(25,000	)

Operating Activities

For the year ended December 31, 2013, net cash used in operating activities was approximately $1,734,000.  The principal components of net cash used for the year ended December 31, 2013 were, in approximate numbers, our net loss of $3,081,000, a decrease in accounts payable of $606,000 due to timing of vendor payments, an increase in accounts receivable of $73,000, a decrease in accrued liabilities of $57,000, a decrease in accrued interest of $28,000 due to annual interest payments on our convertible notes, and the cancellation of a warrant issued for services of $49,000.  Our net loss for the year ended December 31, 2013 included substantial non-cash charges of approximately $1,357,000 in the form of share-based compensation, amortization of patents, depreciation, amortization of debt discount, amortization of deferred financing costs, common stock issued for wages and services, and interest due on convertible notes settled with common stock.  The aforementioned net cash used for the year ended December 31, 2013 was partially offset by, in approximate numbers, a decrease in notes receivable of $524,000 due to remittance of Investor Notes by Inter-Mountain, a decrease in inventory of $132,000 due to product sales and the write-off of obsolete inventory, a net increase in deferred revenues of $76,000 due primarily to the receipt of a licensing milestone, and a decrease in prepaid expenses of $71,000 due to amortization of expenses.

For the year ended December 31, 2012, net cash used in operating activities was approximately $956,000.  The principal component of net cash used for the year ended December 31, 2012 was our net loss of approximately $3,531,000.  Our net loss for the year ended December 31, 2012 included substantial non-cash charges of approximately $1,219,000 in the form of share-based compensation, amortization of patents, depreciation, amortization of debt discount, amortization of deferred financing costs, and common stock issued for services and interest due on convertible notes.  Additional uses of our net cash include, in approximate numbers, an increase of $66,000 in accounts receivable due to product sales to our distributors and a decrease of $4,000 in accrued liabilities.  The aforementioned net cash used for the year ended December 31, 2012 was partially offset by, in approximate numbers, an increase in accounts payable of $701,000 due to timing of vendor payments, a decrease in inventory of $272,000 due to product sales and the write-off of out-of-date and obsolete inventory, a decrease in notes receivable of $198,000 due to remittance of Buyer Trust Deed Note#1 by Inter-Mountain, an increase in deferred revenues of $184,000 due to receipt of licensing milestone payments, an increase in accrued interest of $28,000 relating to our convertible debt, a decrease in other receivable of $26,000 due to final payment from Zindaclin Limited, and a decrease in prepaid expenses of $17,000 due to expense amortization.

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Investing Activities

Net cash used in investing activities for the year ended December 31, 2013 was approximately $34,000 and is comprised of our purchase of manufacturing equipment for approximately $39,000 which was partially offset by the proceeds from the sale of equipment for approximately $5,000.

Net cash provided by investing activities for the year ended December 31, 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 which was partially offset by our purchase of manufacturing equipment for approximately $64,000.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2013 was approximately $1,752,000 and was comprised of, in approximate numbers, net proceeds of $1,496,000 from the sale of common stock and warrants pursuant to the January 2013 Offering, net proceeds of $328,000 from the sale of common stock and warrants pursuant to the March 2013 Offering, $2,000 from the net proceeds of our redemption of Series A preferred stock, and $8,000 from a decrease in the actual offering costs associated with the sale of preferred stock that occurred in 2011.  These increases due to financing activities were partially offset by the repayment of approximately $82,000 of principle due on the convertible note with Inter-Mountain.

Net cash provided by financing activities for the year ended December 31, 2012 was approximately $775,000 and was comprised of, in approximate numbers, $276,000 from the net proceeds of our sale of preferred stock in January 2012, $467,000 from the net proceeds of our convertible debt transaction in June 2012, and $32,000 from a decrease in the actual offering costs associated with the sale of preferred stock that occurred in 2011.

Liquidity

As of December 31, 2013, we had cash and cash equivalents of approximately $5,000.  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 2014 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, the proceeds of $1,800,000 from the warrant assignment and exercise received in January 2014, and the proceeds of $500,000 from the final funding tranche of the January 2013 Offering received in January 2014, we believe these factors will provide us with adequate financial resources to continue to fund our business plan and meet our operating requirements through 2014 and beyond. We do not expect any material changes in our capital expenditure spending during 2014.  However, we cannot be sure that revenues or other liquidity sources 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 funding from other sources, including contribution by others to joint ventures, or collaborative arrangements or licensing 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 proceeds of $1,800,000 from the warrant assignment and exercise received in January 2014, 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 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 December 31, 2013, which consists of a lease agreement for office and laboratory space in Addison, Texas, 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	$	149,798	$	120,917	$	28,881	$	---	$	---
Separation agreement		87,485		87,485		---		---		---
Convertible notes		1,385,441		1,385,441		---		---		---
Total contractual cash obligations	$	1,622,724	$	1,593,843	$	28,881	$	---	$	---

Capital Expenditures

For the years ended December 31, 2013, 2012, and 2011, our expenditures for property, equipment, and leasehold improvements were, in approximate numbers, $39,000, $64,000, and nil, respectively.  Such expenditures in 2013 relate primarily to the purchase of equipment for the manufacture of Altrazeal®.  At this time, we believe that our capital expenditures for 2014 will be approximately $60,000 and consist of equipment related to the manufacture of our products and equipment for our computer systems.

Off-Balance Sheet Arrangements

As of December 31, 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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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 affected for the foreseeable future by several factors, including the timing and amount of payments received pursuant to our current and future collaborations, the timing of shipments to our international marketing partners, and the progress and timing of expenditures related to our development and commercialization 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 year ended December 31, 2013 and 2012

Total Revenues

Our revenues totaled approximately $371,000 for the year ended December 31, 2013, as compared to revenues of approximately $371,000 for the year ended December 31, 2012, and were comprised of, in approximate numbers, licensing fees of $49,000 from Altrazeal® and OraDisc™ licensing agreements, royalties of $30,000 from the sale of Altrazeal® by our international distributor, and Altrazeal® product sales of $292,000.

The year ended December 31, 2013 revenues were approximately the same as the comparative 2012 revenues.  Although the revenue totals were the same, there were changes in revenues from the prior year, in approximate numbers, comprised of an increase of $30,000 in royalties associated with Altrazeal®, an increase of $12,000 in Altrazeal® product sales, and an increase of $8,000 in Altrazeal® licensing fees.  These revenue increases were partially offset by, in approximate numbers, a decrease of $50,000 in royalties associated with Aphthasol®.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold totaled approximately $222,000 for the year ended December 31, 2013 and was comprised of, in approximate numbers, $162,000 from the sale of our Altrazeal® products and $60,000 from the write-off of obsolete finished goods and raw materials.

Cost of goods sold totaled approximately $244,000 for the year ended December 31, 2012 and was comprised of, in approximate numbers, $156,000 from the sale of our Altrazeal® products and $88,000 from the write-off of obsolete finished goods.

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Research and Development

Research and development expenses totaled approximately $788,000 for the year ended December 31, 2013, which included approximately $17,000 of share-based compensation, compared to approximately $833,000 for the year ended December 31, 2012, which included approximately $10,000 of share-based compensation.  The decrease of approximately $45,000 in research and development expenses was primarily due to, in approximate numbers, a $108,000 decrease in regulatory costs associated with Prescription Drug User Fee Act, a $58,000 decrease in scientific compensation costs related to share-based compensation and a lower head count, a $40,000 decrease in clinical study costs, and a $6,000 decrease in costs for regulatory consulting.  These expense decreases were partially offset by, in approximate numbers, a $167,000 increase in development costs primarily relating to commercialization of Altrazeal®.

The direct research and development expenses for the years ended December 31, 2013 and 2012 were, in approximate numbers, as follows:

	Year Ended December 31,
Technology	2013		2012
Wound care & Nanoflex®	$	321,000	$	152,000
OraDisc™		18,000		16,000
Aphthasol® & other technologies		2,000		6,000
Total	$	341,000	$	174,000

Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $1,288,000 for the year ended December 31, 2013, which included approximately $65,000 of share-based compensation, compared to approximately $1,791,000 for the year ended December 31, 2012, which included approximately $36,000 in share-based compensation.

The decrease of approximately $503,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $330,000 in sales & marketing costs due to a revised sales and marketing plan and a lower head count, a decrease of $104,000 in legal fees related to equity transactions, filings with the SEC and licensing matters, a decrease of $54,000 in investor relations consulting, a decrease of $46,000 in bad debt expense related to costs of $28,000 associated with the early remittance of the receivable from our March 2012 divestiture of the Zindaclin® technology and bad debt recoveries of $18,000, a decrease of $40,000 in insurance costs, a decrease of $18,000 in legal costs related to our patents, a decrease of $14,000 in consulting costs related to XBRL reporting, a decrease of $10,000 in occupancy costs, a decrease of $6,000 in accounting fees associated with our annual audit, a decrease of $5,000 in property taxes, and a decrease of $5,000 in fees associated with listing exchange fees.  These expense decreases were partially offset by, in approximate numbers, an increase of $86,000 in legal fees related to a licensing agreement dispute, an increase of $32,000 in costs for director fees, an increase of $8,000 in consulting fees related to licensing agreement procurement, and an increase of $3,000 in compensation costs related to share-based compensation,.

Amortization of Intangible Assets

Amortization expense of intangible assets totaled approximately $475,000 for the year ended December 31, 2013 as compared to approximately $476,000 for the year ended December 31, 2012.  The expense for each period consists of amortization associated with our acquired patents.  There were no purchases of patents during the years ended December 31, 2013 and 2012.

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Depreciation

Depreciation expense totaled approximately $245,000 for the year ended December 31, 2013 as compared to approximately $291,000 for the year ended December 31, 2012.  The decrease of approximately $46,000 is attributable to certain equipment being fully depreciated.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $70,000 for the year ended December 31, 2013 as compared to approximately $62,000 for the year ended December 31, 2012.  The increase of approximately $8,000 is primarily 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 $507,000 for the year ended December 31, 2013 as compared to approximately $328,000 for the year ended December 31, 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 of approximately $179,000 is primarily attributable to costs associated with our convertible debt and interest costs relating to regulatory fees.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth herein are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for 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.

We set forth below those material accounting policies that we believe are the most critical to an investor’s understanding of our financial results and condition and which require complex management judgment.

Revenue Recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the ASC Topic 605, Revenue Recognition (“ASC Topic 605”), which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered.  We recognize revenue as products are shipped based on FOB shipping point terms when title passes to customers.  We negotiate credit terms on a customer-by-customer basis and products are shipped at an agreed upon price.  All product returns must be pre-approved.

We also generate revenue from license agreements and research collaborations and recognize this revenue when earned. In accordance with ASC Topic 605-25, Revenue Recognition - Multiple Element Arrangements, for deliverables which contain multiple deliverables, we separate the deliverables into separate accounting units if they meet the following criteria: i) the delivered items have a stand-alone value to the customer; ii) the fair value of any undelivered items can be reliably determined; and iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit.  Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC Topic 605.

We analyze the rate of historical returns when evaluating the adequacy of the allowance for sales returns.  At December 31, 2013 and 2012, this reserve was nil as we have not experienced historically any product returns.  If the historical data we use to calculate these estimates does not properly reflect future returns, revenue could be overstated.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance is regularly evaluated by us for adequacy by taking into consideration factors such as past experience, credit quality of the customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may affect a customer’s ability to pay.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.  Actual write-off of receivables may differ from estimates due to changes in customer and economic circumstances.

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Inventory

We state our inventory at the lower of cost (first-in, first-out method) or market.  The estimated value of excess, obsolete and slow-moving inventory as well as inventory with a carrying value in excess of its net realizable value is established by us on a quarterly basis through review of inventory on hand and assessment of future demand, anticipated release of new products into the market, historical experience and product expiration.  Our stated value of inventory could be materially different if demand for our products decreased because of competitive conditions or market acceptance, or if products become obsolete because of advancements in the industry.

Accrued Expenses

As part of the process of preparing financial statements, we are required to estimate accrued expenses.  This process involves identifying services which have been performed on our behalf and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements.

In accruing service fees, we estimate the time period over which services will be provided and the level of effort in each period.  If the actual timing of the provision of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.  The majority of our service providers invoice us monthly in arrears for services performed.  In the event that we do not identify costs that have begun to be incurred or we underestimate or overestimate the level of services performed or the costs of such services, our actual expenses could differ from such estimates.  The date, on which some services commence, the level of services performed on or before a given date and the cost of such services are often subjective determinations. We make judgments based upon facts and circumstances known to us in accordance with GAAP.

Share based Compensation – Employee Share based Awards

We primarily grant qualified stock options for a fixed number of shares to employees with an exercise price equal to the market value of the shares at the date of grant.  Under the fair value recognition provisions of ASC Topic 718, Stock Compensation (“ASC Topic 718”), and ASC Topic 505, Equity (“ASC Topic 505”), share based compensation cost is based on the value of the portion of share based awards that is ultimately expected to vest during the period.

We selected the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value for share based awards.  The Black-Scholes model requires the use of assumptions which determine the fair value of the share based awards.  Determining the fair value of share based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. In accordance with ASC Topic 718 and ASC Topic 505, we are required to estimate forfeitures at the grant date and recognize compensation costs for only those awards that are expected to vest.  Judgment is required in estimating the amount of share based awards that are expected to be forfeited.

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If factors change and we employ different assumptions in the application of ASC Topic 718 and ASC Topic 505 in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.  Therefore, we believe it is important for investors to be aware of the high degree of subjectivity involved when using option pricing models to estimate share-based compensation under ASC Topic 718 and ASC Topic 505.  There is risk that our estimates of the fair values of our share-based compensation awards on the grant dates may differ from the actual values realized upon the exercise, expiration, early termination or forfeiture of those share-based payments in the future.  Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements.  Alternatively, value may be realized from these instruments that is significantly in excess of the fair values originally estimated on the grant date and reported in our financial statements.  Although the fair value of employee share-based awards is determined in accordance with ASC Topic 718 and ASC Topic 505 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Share based Compensation – Non-Employee Share based Awards

We occasionally grant stock option awards to our consultants and directors.  Such grants are accounted for pursuant to ASC Topic 505 and, accordingly, we recognize compensation expense equal to the fair value of such awards and amortize such expense over the performance period.  We estimate the fair value of each award using the Black-Scholes model.  The unvested equity instruments are revalued on each subsequent reporting date until performance is complete, with an adjustment recognized for any changes in their fair value.  We amortize expense related to non-employee stock options in accordance with ASC Topic 718.

Income Taxes

The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient taxable income in the United States based on estimates and assumptions. We record a valuation allowance to reduce the carrying value of our net deferred tax asset to the amount that is more likely than not to be realized.  In the event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase net income in the period such determination is made.  On a quarterly basis, we evaluate the realizability of our deferred tax assets and assess the requirement for a valuation allowance.

Asset Valuations and Review for Potential Impairment

We review our fixed assets and intangible assets at least annually or whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.  This review requires that we make assumptions regarding the value of these assets and the changes in circumstances that would affect the carrying value of these assets.  If such analysis indicates that a possible impairment may exist, we are then required to estimate the fair value of the asset and, as deemed appropriate, expense all or a portion of the asset.  The determination of fair value includes numerous uncertainties, such as the impact of competition on future value.  We believe that we have made reasonable estimates and judgments in determining whether our long-term assets have been impaired; however, if there is a material change in the assumptions used in our determination of fair value or if there is a material change in economic conditions or circumstances influencing fair value, we could be required to recognize certain impairment charges in the future.

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ITEM 7A. 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.  During 2013, we utilized Bank of America, N.A. and Bank of America Investment Services, Inc. as our banking institutions.  At December 31, 2013 and December 31, 2012 our cash and cash equivalents totaled approximately $5,000 and $21,000, 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 December 31, 2013 and at December 31, 2012.  As of December 31, 2013, two customers exceeded the 5% threshold, with 86% and 11%, 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 expect our revenues in international territories denominated in a foreign currency to increase in the future.  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 grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is included in our Financial Statements and Supplementary Data listed in Item 15 of Part IV of this annual report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of December 31, 2013, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are designed to ensure 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 SEC's rules and forms and is accumulated and communicated to the Company's management, as appropriate, to allow timely decisions regarding required disclosure, and are operating in an effective manner.

Changes in Internal Controls Over Financial Reporting

During the fiscal quarter ended December 31, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  The Company's internal control over financial reporting is designed 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 and includes those policies and procedures that:

§	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
§	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
§	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on this assessment, management believes that as of December 31, 2013 our internal control over financial reporting is effective.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit smaller reporting companies to provide only management's report in this annual report.

ITEM 9B. OTHER INFORMATION

None.

Part III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A, related to our 2014 Annual Meeting of Stockholders (our “2014 Proxy Statement”).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from our 2014 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference from our 2014 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference from our 2014 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference from our 2014 Proxy Statement.

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Part IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following documents are filed as part of this report:
	1.	Financial Statements
			Report of Independent Registered Public Accounting Firm		F - 1
			Consolidated Balance Sheets as of December 31, 2013 and 2012		F - 2
			Consolidated Statements of Operations for the years ended December 31, 2013 and 2012		F - 3
			Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012		F - 4
			Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012		F - 5
			Notes to Consolidated Financial Statements		F - 6
	2.	Financial Statement Schedules
			All other schedules are omitted because they are not applicable or because the required information is shown in the consolidated financial statements or the notes thereto.
	3.	List of Exhibits
			The exhibits which are filed with this report or which are incorporated herein by reference are set forth in the Exhibit Index hereto. In reviewing the agreements included as exhibits to this annual report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements.  The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
			§	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
			§	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
			§	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
			§	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
	ULURU Inc.
Date: March 31, 2014	By	/s/ Kerry P. Gray
		Kerry P. Gray
		Chief Executive Officer
		Principal Executive Officer
Date: March 31, 2014	By	/s/ Terrance K. Wallberg
		Terrance K. Wallberg
		Chief Financial Officer
		Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 31, 2014	/s/ Jeffrey B. Davis
	Jeffrey B. Davis, Director
Date: March 31, 2014	/s/ Kerry P. Gray
	Kerry P. Gray, Director
Date: March 31, 2014	/s/ Helmut Kerschbaumer
	Helmut Kerschbaumer, Director
Date: March 31, 2014	/s/ Klaus Kuehne
	Klaus Kuehne, Director

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INDEX TO EXHIBITS

Exhibit Number		Description of Document
2.1		Agreement and Plan of Merger and Reorganization dated October 12, 2005 by and among the Registrant, Uluru Acquisition Corp., and ULURU Delaware Inc. (1)
2.2.1		Asset Sale Agreement dated October 12, 2005 by and between ULURU Delaware Inc. and Access Pharmaceuticals, Inc. (3)
2.2.2		Amendment to Asset Sale Agreement dated December 8, 2006 by and between ULURU Delaware Inc. and Access Pharmaceuticals, Inc. (4)
3.1		Restated Articles of Incorporation dated November 5, 2007. (5)
3.2		Amended and Restated Bylaws dated December 5, 2008. (6)
3.3		Certificate of Designations of Series A Preferred Stock. (15)
4.1		Common Stock Purchase Warrants dated November 16, 2009 by and between ULURU Inc. and the purchasers’ party thereto. (11)
4.2		Common Stock Purchase Warrants dated January 3, 2011 by and between ULURU Inc. and the purchasers’ party thereto. (13)
4.3		Common Stock Purchase Warrant dated June 13, 2011 by and between ULURU Inc. and Kerry P. Gray. (14)
4.4		Common Stock Purchase Warrant dated July 28, 2011 by and between ULURU Inc. and Kerry P. Gray. (15)
4.5		Common Stock Purchase Warrant #4 dated June 27, 2012 by and between ULURU Inc. and Inter-Mountain Capital Corp. (17)
4.6		Common Stock Purchase Warrant dated December 21, 2012 by and between ULURU Inc. and IPMD GmbH (19)
4.7		Common Stock Purchase Warrant dated March 14, 2013 by and between ULURU Inc. and Kerry P. Gray. (20)
4.8		Common Stock Purchase Warrant dated March 14, 2013 by and between ULURU Inc. and Terrance K. Wallberg. (20)
10.1		Patent Assignment Agreement dated October 12, 2005 by and between ULURU Delaware Inc. and Access Pharmaceuticals, Inc. (3)
10.2		License Agreement dated October 12, 2005 by and between ULURU Delaware Inc. and Access Pharmaceuticals, Inc. (3)
10.3.1		Lease Agreement dated January 31, 2006 by and between ULURU Delaware Inc. and Addison Park Ltd. (3)
10.3.2		Amendment to Lease Agreement dated February 22, 2013 by and ULURU Delaware Inc. and Addison Park Ltd. (23)
10.4		License Agreement dated August 14, 1998 by and between ULURU Delaware Inc. and Strakan Ltd. (3)
10.5.1		License and Supply Agreement dated April 15, 2005 by and between ULURU Delaware Inc. and Discus Dental. (3)
10.5.2		Amendment to License and Supply Agreement dated November 18, 2005 by and between ULURU Delaware Inc. and Discus Dental. (3)
10.6	*	Uluru Inc. 2006 Equity Incentive Plan. (2)
10.7		License and Supply Agreement dated November 17, 2008 by and between ULURU Inc. and Meda AB. (7)
10.8	*	Separation Agreement dated March 9, 2009 by and between ULURU Inc. and Kerry P. Gray. (8)
10.9	*	Indemnification Agreements dated July 10, 2009 by and between ULURU Inc. and its current directors. (9)
10.10	*	Indemnification Agreement dated July 13, 2009 by and between ULURU Inc. and Terrance K. Wallberg. (10)
10.11		Acquisition and Licensing Agreement dated June 25, 2010 by and between ULURU Inc., Strakan International Limited and Zindaclin Limited. (12)
10.12		Securities and Purchase Agreement dated January 3, 2011 by and between ULURU Inc. and the purchasers’ party thereto.(13)
10.13		Secured Convertible Subordinated Note dated June 13, 2011 by and between ULURU Inc. and Kerry P. Gray. (14)
10.14		Security Agreement dated June 13, 2011 by and between ULURU Inc. and Kerry P. Gray. (14)
10.15		Secured Convertible Subordinated Note dated July 28, 2011 by and between ULURU Inc. and Kerry P. Gray. (15)
10.16		Security Agreement dated July 28, 2011 by and between ULURU Inc. and Kerry P. Gray. (15)
10.17.1		Shareholders’ Agreement dated January 11, 2012 by and between ULURU Inc. and Melmed Holding AG. (16)
10.17.2	**	Amendment to Shareholders’ Agreement dated February 1, 2014 by and between ULURU Inc. and Melmed Holding AG.
10.18.1		License and Supply Agreement dated January 11, 2012 by and between ULURU Inc. and Melmed Holding AG. (16)
10.18.2		Amendment No. 1 to License and Supply Agreement dated December 21, 2012 by and between ULURU Inc. and Melmed Holding AG. (21)
10.18.3	**	Amendment No. 2 to License and Supply Agreement dated December 21, 2012 by and between ULURU Inc. and Melmed Holding AG.
10.18.4	**	Amendment No. 3 to License and Supply Agreement dated February 2, 2014 by and between ULURU Inc. and Melmed Holding AG.
10.19		Secured Convertible Promissory Note dated June 27, 2012 by and between ULURU Inc. and Inter-Mountain Capital Corp. (17)
10.20		Securities Purchase Agreement dated June 27, 2012 by and between ULURU Inc. and Inter-Mountain Capital Corp. (17)
10.21		Security Agreement dated June 27, 2012 by and between ULURU Inc. and Inter-Mountain Capital Corp. (17)
10.22		Registration Rights Agreement dated June 27, 2012 by and between ULURU Inc. and Inter-Mountain Capital Corp. (17)
10.23		Binding Term Sheet dated September 20, 2012 by and between ULURU Inc. and Regenertec Invest GmbH. (18)
10.24		Shareholders’ Agreement dated October 19, 2012 by and between ULURU Inc. and ORADISC GmbH. (21)
10.25		License and Supply Agreement dated October 19, 2012 by and between ULURU Inc. and ORADISC GmbH. (21)
10.26		Securities Purchase Agreement dated December 21, 2012 by and between ULURU Inc. and IPMD GmbH. (19)
10.27		Securities Purchase Agreement dated March 14, 2013 by and between ULURU Inc. and the purchasers’ party thereto. (20)
10.28.1		Exclusive License and Supply Agreement dated September 30, 2013 by and between ULURU Inc. and Altrazeal AG. (22)
10.28.2	**	Amendment No. 1 to Exclusive License and Supply Agreement dated February 1, 2014 by and between ULURU Inc. and Altrazeal AG.
10.29	**	Registration Rights Agreement dated January 31, 2014 by and between ULURU Inc. and the investors’ party thereto.
10.30	**	Shareholders’ Agreement dated February 1, 2014 by and between ULURU Inc. and Altrazeal AG.
21.1	**	Subsidiaries of ULURU Inc.
23.1	**	Consent of Lane Gorman Trubitt, PLLC, Independent Registered Public Accounting Firm.
31.1	**	Certification Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Amended.
31.2	**	Certification Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Amended.
32.1	**	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	***	The following financial statements are from ULURU Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to Consolidated Financial Statements.
-----------------------------------------
(1)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 18, 2005.
(2)		Incorporated by reference to the Company’s Definitive Schedule 14C filed on March 1, 2006.
(3)		Incorporated by reference to the Company’s Form 8-K filed on March 31, 2006.
(4)		Incorporated by reference to the Company’s Form SB-2 Registration Statement filed on December 15, 2006.
(5)		Incorporated by reference to the Company’s Form 8-K filed on November 6, 2007.
(6)		Incorporated by reference to the Company’s Form 8-K filed on December 11, 2008.
(7)		Incorporated by reference to the Company’s Form 10-K filed on March 30, 2009.
(8)		Incorporated by reference to the Company’s Form 10-Q filed on May 15, 2009.
(9)		Incorporated by reference to the Company’s Form 8-K filed on July 10, 2009.
(10)		Incorporated by reference to the Company’s Form 8-K filed on July 14, 2009.
(11)		Incorporated by reference to the Company’s Form 8-K filed on November 12, 2009.
(12)		Incorporated by reference to the Company’s Form 10-Q filed on August 16, 2010.
(13)		Incorporated by reference to the Company’s Form 8-K filed on January 4, 2011.
(14)		Incorporated by reference to the Company’s Form 8-K filed on June 14, 2011.
(15)		Incorporated by reference to the Company’s Form 8-K filed on August 1, 2011.
(16)		Incorporated by reference to the Company’s Form 10-K filed on March 30, 2012.
(17)		Incorporated by reference to the Company’s Form 8-K filed on July 3, 2012.
(18)		Incorporated by reference to the Company’s Form 10-Q filed on November 14, 2012.
(19)		Incorporated by reference to the Company’s Form 8-K filed on December 27, 2012.
(20)		Incorporated by reference to the Company’s Form 8-K filed on March 15, 2013.
(21)		Incorporated by reference to the Company’s Form 10-K filed on March 29, 2013.
(22)		Incorporated by reference to the Company’s Form 10-Q filed on November 14, 2013.
	*	Management contract or compensation plan arrangements.
	**	Filed herewith.
	***	Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K 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.

- 47 -

INDEX TO FINANCIAL STATEMENTS
		Page
Financial Statements
	Report of Independent Registered Public Accounting Firm	F – 1
	Consolidated Balance Sheets as of December 31, 2013 and 2012	F – 2
	Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	F – 3
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012	F – 4
	Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F – 5
Notes to Consolidated Financial Statements		F – 6

- 48 -

REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

ULURU Inc.

Addison, Texas

We have audited the consolidated balance sheets of ULURU Inc. (a Nevada corporation) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2013.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ULURU Inc. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

/s/ Lane Gorman Trubitt, PLLC

Lane Gorman Trubitt, PLLC

Dallas, TX

March 31, 2014

F - 1

ULURU Inc.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2013			2012
ASSETS
Current Assets
Cash and cash equivalents	$	5,119		$	21,549
Accounts receivable, net		185,078			111,898
Notes receivable and accrued interest, current portion		777,710			260,444
Inventory		395,605			527,643
Prepaid expenses and deferred charges		123,812			194,448
Total Current Assets		1,487,324			1,115,982
Property, Equipment and Leasehold Improvements, net		638,614			845,535
Other Assets
Intangible assets, net		3,670,837			4,145,985
Notes receivable and accrued interest, net of current portion		---			1,041,776
Investment in unconsolidated subsidiary		---			---
Deferred financing costs, net		86,770			160,770
Deposits		18,069			18,069
Total Other Assets		3,775,676			5,366,600
TOTAL ASSETS	$	5,901,614		$	7,328,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	1,734,725		$	2,340,782
Accrued liabilities		315,963			372,965
Accrued interest		13,360			41,141
Convertible notes payable, net of unamortized debt discount, current portion		1,147,057			1,089,619
Deferred revenue, current portion		58,959			45,227
Total Current Liabilities		3,270,064			3,889,734
Long Term Liabilities
Convertible notes payable, net of unamortized debt discount and current portion		---			751,543
Deferred revenue, net of current portion		898,133			835,553
Total Long Term Liabilities		898,133			1,587,096
TOTAL LIABILITIES		4,168,197			5,476,830
COMMITMENTS AND CONTINGENCIES		---			---
STOCKHOLDERS' EQUITY
Preferred Stock – $0.001 par value; 20,000 shares authorized;
Series A Preferred Stock, 1,000 shares designated; nil and 65 shares issued and outstanding, aggregate liquidation value of nil and $701,843, at December 31, 2013 and December 31, 2012, respectively		---			---
Common Stock – $ 0.001 par value; 200,000,000 shares authorized;
18,871,420 and 10,074,448 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively		18,872			10,075
Additional paid-in capital		53,336,127			51,336,931
Promissory notes receivable and accrued interest for common stock issuance		---			(985,287	)
Accumulated  (deficit)		(51,621,582	)		(48,510,432	)
TOTAL STOCKHOLDERS’ EQUITY		1,733,417			1,851,287
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,901,614		$	7,328,117
The accompanying notes are an integral part of these consolidated financial statements.

F - 2

ULURU Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2013			2012
Revenues
License fees	$	48,688		$	40,563
Royalty income		30,016			49,918
Product sales, net		291,864			280,113
Total Revenues		370,568			370,594
Costs and Expenses
Cost of goods sold		222,122			243,538
Research and development		788,242			832,931
Selling, general and administrative		1,288,050			1,791,221
Amortization of intangible assets		475,148			476,450
Depreciation		244,704			291,274
Total Costs and Expenses		3,018,266			3,635,414
Operating (Loss)		(2,647,698	)		(3,264,820	)
Other Income (Expense)
Interest and miscellaneous income		69,686			61,719
Interest expense		(506,529	)		(328,248	)
Equity in earnings (loss) of unconsolidated subsidiary		---			---
Gain on sale of equipment		3,627			---
(Loss) Before Income Taxes		(3,080,914	)		(3,531,349	)
Income taxes		---			---
Net (Loss)	$	(3,080,914	)	$	(3,531,349	)
Less preferred stock dividends		(30,236	)		(47,456	)
Net (Loss) Allocable to Common Stockholders	$	(3,111,150	)	$	(3,578,805	)
Basic and diluted net (loss) per common share	$	(0.21	)	$	(0.42	)
Weighted average number of common shares outstanding		14,772,578			8,493,703
The accompanying notes are an integral part of these consolidated financial statements.

F - 3

ULURU Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
	Years Ended December 31, 2013 and 2012
	Preferred Stock					Common Stock				Additional Paid-in			Promissory Notes Receivable			Accumulated			Stockholders’
	Shares Issued			Amount		Shares Issued		Amount		Capital			and Accrued Interest			(Deficit)			Equity
Balance as of December 31, 2011		25			---		7,269,063		7,269		49,750,792			(725,045	)		(44,931,627	)		4,101,389
Issuance of common stock in a private placement		---			---		491,636		492		245,326			(245,818	)		---			---
Issuance of common stock for principle and interest due on convertible note		---			---		1,987,992		1,988		331,344			---			---			333,332
Issuance of common stock for services		---			---		325,000		325		129,675			---			---			130,000
Issuance of common stock – vesting of restricted stock		---			---		699		1		(1	)		---			---			---
Issuance of Series A preferred stock in a private placement, net of fund raising costs of $14,514		40			---		---		---		275,761			---			---			275,761
Issuance of warrants for services		---			---		---		---		48,776			---			---			48,776
Issuance of warrants in connection with convertible promissory note		---			---		---		---		457,912			---			---			457,912
Offering costs in connection with convertible promissory note		---			---		---		---		(42,710	)		---			---			(42,710	)
Offering costs adjustment – Series A preferred stock sale in 2011		---			---		---		---		31,961			---			---			31,961
Repurchase of common stock (fractional shares from reverse stock split)		---			---		58		---		21			---			---			21
Accrued interest on promissory notes for issuance of common stock		---			---		---		---		14,424			(14,424	)		---			---
Accrued dividends on Series A preferred stock		---			---		---		---		47,456			---			(47,456	)		---
Share-based compensation of employees		---			---		---		---		17,915			---			---			17,915
Share-based compensation of non-employees		---			---		---		---		28,279			---			---			28,279
Net (loss)		---			---		---		---		---			---			(3,531,349	)		(3,531,349	)
Balance as of December 31, 2012		65		$	---		10,074,448	$	10,075	$	51,336,931		$	(985,287	)	$	(48,510,432	)	$	1,851,287
Issuance of common stock and warrants in a private placement, net of offering costs of $4,379		---			---		3,750,000		3,750		1,491,871			---			---			1,495,621
Issuance of common stock and warrants in a private placement, net of offering costs of $2,175		---			---		825,000		825		327,000			---			---			327,825
Issuance of common stock for principle and interest due on convertible note		---			---		3,072,648		3,073		915,257			---			---			918,330
Issuance of common stock for services and wages		---			---		423,750		424		177,826			---			---			178,250
Issuance of common stock – 725,274 shares for cashless exercise of warrants to purchase 1,571,428 shares		---			---		725,274		725		(725	)		---			---			---
Issuance of common stock – vesting of restricted stock		---			---		300		---		---			---			---			---
Redemption of Series A preferred stock		(65	)		---		---		---		(992,430	)		994,294			---			1,864
Offering costs adjustment – Series A preferred stock sale in 2011		---			---		---		---		8,000			---			---			8,000
Cancellation of warrants issued for services		---			---		---		---		(48,776	)		---			---			(48,776	)
Accrued interest on promissory notes for issuance of common stock		---			---		---		---		9,007			(9,007	)		---			---
Accrued dividends on Series A preferred stock		---			---		---		---		30,236			---			(30,236	)		---
Share-based compensation of employees		---			---		---		---		15,648			---			---			15,648
Share-based compensation of non-employees		---			---		---		---		66,282			---			---			66,282
Net (loss)		---			---		---		---		---			---			(3,080,914	)		(3,080,914	)
Balance as of December 31, 2013		---		$	---		18,871,420	$	18,872	$	53,336,127		$	---		$	(51,621,582	)	$	1,733,417
The accompanying notes are an integral part of these consolidated financial statements.

F - 4

ULURU Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2013			2012
OPERATING ACTIVITIES :
Net (loss)	$	(3,080,914	)	$	(3,531,349	)
Adjustments to reconcile net (loss) to net cash used in operating activities:
Amortization of intangible assets		475,148			476,450
Depreciation		244,704			291,274
Share-based compensation for stock and options issued to employees		15,648			17,915
Share-based compensation for options issued to non-employees		66,282			28,279
Equity in earnings (loss) of unconsolidated subsidiary		---			---
Amortization of debt discount on convertible notes		178,548			97,901
Amortization of deferred financing costs		74,000			39,230
Warrants issued (cancelled) for services		(48,776	)		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		127,343			89,622
Gain on sale of equipment		(3,627	)		---
Change in operating assets and liabilities:
Accounts receivable		(73,180	)		(66,477	)
Other receivable		---			26,410
Inventory		132,038			271,841
Prepaid expenses and deferred charges		70,636			17,074
Notes receivable and accrued interest		524,510			197,780
Accounts payable		(606,057	)		700,571
Accrued liabilities		(57,002	)		(3,577	)
Accrued interest		(27,781	)		28,088
Deferred revenue		76,312			184,437
Total		1,346,996			2,575,594
Net Cash Used in Operating Activities		(1,733,918	)		(955,755	)
INVESTING ACTIVITIES :
Purchase of property and equipment		(39,093	)		(64,349	)
Proceeds from sale of equipment		4,937			---
Proceeds from sale of intangible asset		---			220,000
Net Cash Provided by (Used in) Investing Activities		(34,156	)		155,651
FINANCING ACTIVITIES :
Proceeds from sale of common stock and warrants, net		1,823,446			---
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		8,000			31,961
Cash paid in lieu of fractional shares		---			21
Net Cash Provided by Financing Activities		1,751,644			775,033
Net Decrease in Cash		(16,430	)		(25,071	)
Cash,  beginning of period		21,549			46,620
Cash,  end of period	$	5,119		$	21,549
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	$	35,467		$	5,532
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	$	790,987		$	243,710
Issuance of 725,274 shares of common stock pursuant to cashless exercise of warrants to purchase 1,571,428 shares of common stock	$	---		$	---
Redemption of 65 shares of Series A preferred stock by offset of notes receivable ($969,000) and accrued interest thereon	$	---		$	---
Issuance of notes receivable in connection with June 2012 Note (see Note 6.)	$	---		$	1,500,000
Deferred financing costs in connection with June 2012 Note	$	---		$	200,000
The accompanying notes are an integral part of these consolidated financial statements.

F - 5

ULURU Inc.

NOTES TO

CONSOLIDATED FINANCIAL STATEMENTS

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 mucoadhesive film products based on our patented Nanoflex® and OraDiscTM technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  Both companies have a December 31 fiscal year end.

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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.  The carrying value of these cash equivalents approximates fair value.

We 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 taking into consideration the need for liquidity and capital preservation.  These investments are not held for trading or other speculative purposes.

F - 6

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest.  We estimate the collectability of our accounts receivable. In order to assess the collectability of these receivables, we monitor the current creditworthiness of each customer and analyze the balances aged beyond the customer's credit terms. Theses evaluations may indicate a situation in which a certain customer cannot meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance requirements are based on current facts and are reevaluated and adjusted as additional information is received. Accounts receivable are subject to an allowance for collection when it is probable that the balance will not be collected. As of December 31, 2013 and 2012, the allowance for doubtful accounts was $907 and $18,932, respectively.  For the years ended December 31, 2013 and 2012, the accounts written off as uncollectible or previously written off and recovered were $(1,126) and $17,135, respectively.

Inventory

Inventories are stated at the lower of cost or market value. Raw material inventory cost is determined on the first-in, first-out method. Costs of finished goods are determined by an actual cost method. 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.

Prepaid Expenses and Deferred Charges

From time to time fees are payable to the United States Food and Drug Administration (“FDA”) in connection with new drug applications submitted by us and annual prescription drug user fees (“PDUFA”). Such fees are being amortized ratably over the FDA’s prescribed fiscal period of twelve months ending September 30th.  As of December 31, 2013 and 2012, the amount of prepaid PDUFA fees was nil and $73,582, respectively.

Additionally, we amortize our insurance costs ratably over the term of each policy.  Typically, our insurance policies are subject to renewal in July and October of each year.

Notes Receivable

Notes receivable are stated at unpaid principle balance.  Interest on notes receivable is recognized over the term of the note and is calculated by the simple interest method on principle amounts outstanding.  We estimate the collectability of our notes receivable.  This estimate is based on similar evaluation criteria as used in estimating the collectability of our trade accounts receivable.  Notes receivable are subject to an allowance for collection when it is probable that the balance, or a portion thereof, will not be collected.  As of December 31, 2013 and 2012, the allowance for collection for our notes receivable was nil.

Property, Equipment and Leasehold Improvements

Property, equipment, and leasehold improvements are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method.  Estimated useful lives for property, equipment, and leasehold improvements categories are as follows:

Furniture, fixtures, and laboratory equipment	7 years
Computer and office equipment	5 years
Computer software	3 years
Leasehold improvements	Lease term

F - 7

Intangible Assets

We expense internal patent and application costs as incurred because, even though we believe the patents and underlying processes have continuing value, the amount of future benefits to be derived from them are uncertain.  Purchased patents are capitalized and amortized over the life of the patent.

Impairment of Assets

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350-30, Intangibles Other than Goodwill, our policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets and certain identifiable intangibles when certain events have taken place that indicate the remaining unamortized balance may not be recoverable, or at least annually to determine the current value of the intangible asset. When factors indicate that the intangible assets should be evaluated for possible impairment, we use an estimate of undiscounted cash flows.  Considerable management judgment is necessary to estimate the undiscounted cash flows.  Accordingly, actual results could vary significantly from management’s estimates.

Deferred Financing Costs

We defer financing costs associated with the issuance of our convertible notes payable and amortize those costs over the period of the convertible notes using the effective interest method.  In 2012, we incurred $200,000 of financing costs related to our convertible note payable with Inter-Mountain Capital Corp.  During 2013 and 2012, we recorded amortization of approximately $74,000 and $39,000, respectively, of deferred financing costs. Other assets at December 31, 2013 and 2012 included net deferred financing costs of approximately of $87,000 and $161,000, respectively.

Accrual for Clinical Study Costs

We record accruals for estimated clinical study costs.  Clinical study costs represent costs incurred by clinical research organizations, or CROs, and clinical sites.  These costs are recorded as a component of research and development expenses.  We analyze the progress of the clinical trials, including levels of patient enrollment and/or patient visits, invoices received and contracted costs when evaluating the adequacy of the accrued liabilities.  Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period.  Actual costs incurred may or may not match the estimated costs for a given accounting period.  As of December 31, 2013 and 2012, the accrual for estimated clinical study costs was nil.

Shipping and Handling Costs

Shipping and handling costs incurred for product shipments are included in cost of goods sold.

Income Taxes

We use the liability method of accounting for income taxes pursuant to ASC Topic 740, Income Taxes.  Under this method, deferred income taxes are recorded to reflect the tax consequences in future periods of temporary differences between the tax basis of assets and liabilities and their financial statement amounts at year-end.

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Revenue Recognition and Deferred Revenue

License Fees

We recognize revenue from license payments not tied to achieving a specific performance milestone ratably during the period over which we are obligated to perform services. The period over which we are obligated to perform services is estimated based on available facts and circumstances. Determination of any alteration of the performance period normally indicated by the terms of such agreements involves judgment on management's part. License revenues with no specific performance criteria are recognized when received from our foreign licensee and their various foreign sub-licensees as there is no control by us over the various foreign sub-licensees and no performance criteria to which we are subject.

We recognize revenue from performance payments ratably, when such performance is substantially in our control and when we believe that completion of such performance is reasonably probable, over the period during which we estimate that we will complete such performance obligations.  In circumstances where the arrangement includes a refund provision, we defer revenue recognition until the refund condition is no longer applicable unless, in our judgment, the refund circumstances are within our operating control and are unlikely to occur.

Substantive at-risk milestone payments, which are based on achieving a specific performance milestone when performance of such milestone is contingent on performance by others or for which achievement cannot be reasonably estimated or assured, are recognized as revenue when the milestone is achieved and the related payment is due, provided that there is no substantial future service obligation associated with the milestone.

Royalty Income

We receive royalty revenues under license agreements with a number of third parties that sell products based on technology we have developed or to which we have rights. The license agreements provide for the payment of royalties to us based on sales of the licensed products. We record these revenues based on estimates of the sales that occurred during the relevant period. The relevant period estimates of sales are based on interim data provided by licensees and analysis of historical royalties we have been paid (adjusted for any changes in facts and circumstances, as appropriate).

We maintain regular communication with our licensees in order to gauge the reasonableness of our estimates. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, typically the following quarter. Historically, adjustments have not been material based on actual amounts paid by licensees. As it relates to royalty income, there are no future performance obligations on our part under these license agreements. To the extent we do not have sufficient ability to accurately estimate revenue; we record it on a cash basis.

Product Sales

We recognize revenue and related costs from the sale of our products at the time the products are shipped to the customer.  Provisions for returns, rebates, and discounts are established in the same period the related product sales are recorded.

We review the supply levels of our products sold to major wholesalers in the U.S., primarily by reviewing reports supplied by our major wholesalers and available volume information for our products, or alternative approaches.  When we believe wholesaler purchasing patterns have caused an unusual increase or decrease in the sales of a major product compared with underlying demand, we disclose this in our product sales discussion if we believe the amount is material to the product sales trend; however, we are not always able to accurately quantify the amount of stocking or destocking.  Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.

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We establish sales return accruals for anticipated product returns. We record the return amounts as a deduction to arrive at our net product sales.  Consistent with Revenue Recognition accounting guidance, we estimate a reserve when the sales occur for future product returns related to those sales. This estimate is primarily based on historical return rates as well as specifically identified anticipated returns due to known business conditions and product expiry dates. Actual product returns have been nil over the past two years.

We establish sales rebate and discount accruals in the same period as the related sales.  The rebate and discount amounts are recorded as a deduction to arrive at our net product sales.  We base these accruals primarily upon our historical rebate and discount payments made to our customer segment groups and the provisions of current rebate and discount contracts.

Sponsored Research Income

Sponsored research income has no significant associated costs since it is being paid only for information pertaining to a specific research and development project in which the sponsor may become interested in acquiring products developed thereby.  Payments received prior to our performance are deferred. Contract amounts are not recognized as revenue until the customer accepts or verifies the research has been completed.

Research and Development Expenses

Pursuant to ASC Topic 730, Research and Development, our research and development costs are expensed as incurred.

Research and development expenses include, but are not limited to, salaries and benefits, laboratory supplies, facilities expenses, preclinical development cost, clinical trial and related clinical manufacturing expenses, contract services, consulting fees and other outside expenses. The cost of materials and equipment or facilities that are acquired for research and development activities and that have alternative future uses are capitalized when acquired. There were no such capitalized materials, equipment or facilities for the years ended December 31, 2013 and 2012.

We may enter into certain research agreements in which we share expenses with a collaborator. We may also enter into other collaborations where we are reimbursed for work performed on behalf of our collaborative partners.  We record the expenses for such work as research and development expenses. If the arrangement is a cost-sharing arrangement and there is a period during which we receive payments from the collaborator, we record payments by the collaborator for their share of the development effort as a reduction of research and development expense. If the arrangement is a reimbursement of research and development expenses, we record the reimbursement as sponsored research income.

Basic and Diluted Net Loss Per Common Share

In accordance with 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 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 and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.

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Concentrations of Credit Risk

Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, that 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.  During 2013, we utilized Bank of America, N.A. as our banking institution.  At December 31, 2013 and December 31, 2012 our cash and cash equivalents totaled $5,119 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 high quality corporations.

Concentration of credit risk with respect to trade accounts receivable are customers with balances that exceed 5% of total consolidated trade accounts receivable at December 31, 2013 and at December 31, 2012.  As of December 31, 2013, two customers exceeded the 5% threshold, with 86% and 11%, 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

Substantially all of our revenue and expenses are denominated in U.S. dollars, although we expect our revenues in international territories to increase in the future.  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 grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.

Fair Value of Financial Instruments

In accordance with portions of ASC Topic 820, Fair Value Measurements, 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.

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, notes receivable and accrued interest, and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

Derivatives

We occasionally issue financial instruments that contain an embedded instrument. At inception, we assess whether the economic characteristics of the embedded derivative instrument are clearly and closely related to the economic characteristics of the financial instrument (host contract), whether the financial instrument that embodies both the embedded derivative instrument and the host contract is currently measured at fair value with changes in fair value reported in earnings, and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.

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If the embedded derivative instrument is determined not to be clearly and closely related to the host contract, is not currently measured at fair value with changes in fair value reported in earnings, and the embedded derivative instrument would qualify as a derivative instrument, the embedded derivative instrument is recorded apart from the host contract and carried at fair value with changes recorded in current-period earnings.

We determined that all embedded items associated with financial instruments during 2013 and 2012 which qualify for derivative treatment, were properly separated from their host.  As of December 31, 2013 and 2012, we did not have any derivative instruments.

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 year ended December 31, 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 seven licensees for international activities and our domestic sales activities for Altrazeal®.

Revenues per geographic area, along with relative percentages of total revenues, for the year ended December 31, are summarized as follows:

Revenues	2013		%			2012		%
Domestic	$	65,546		18	%	$	177,440		48	%
International		305,022		82	%		193,154		52	%
Total	$	370,568		100	%	$	370,594		100	%

A significant portion of our revenues are derived from a few major customers.  Customers with greater than 10% of total revenues, along with their relative percentage of total revenues, for the year ended December 31 are represented on the following table:

Customers	Product	2013			2012
Customer A	Altrazeal®		67	%		32	%
Customer B	Altrazeal® Veterinary		---			14	%
Customer C	Aphthasol®		---			13	%
Total			67	%		59	%

NOTE 5. OTHER RECEIVABLE

On June 25, 2010, we entered into an acquisition and license agreement with Strakan International Limited and Zindaclin Limited, a subsidiary of Crawford Healthcare Limited, a pharmaceutical company based in England.  Under the terms of the agreement, Zindaclin Limited will pay up to $5.1 million for the exclusive product rights to Zindaclin®, a zinc clindamycin product for the treatment of acne, which consideration will be shared equally by Strakan International Limited and us.  Guaranteed payments of $1,050,000 were scheduled to be received by us, of which $550,000 occurred in 2010, $250,000 occurred in 2011, and $250,000 was to occur in June 2012.  On March 22, 2012, we agreed to accept $220,000 for the early remittance of the final guaranteed payment, which was received prior to March 29, 2012.

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NOTE 6. 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 December 31, 2013, we had $777,710 in notes receivable which is comprised of $687,500 for three Investor Notes and $90,210 for accrued interest thereon.

Please refer to Note 12. for a more detailed description of the June 2012 Note transaction.

NOTE 7. INVENTORY

As of December 31, 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.  For the years ended December 31, 2013 and 2012, we wrote off approximately $60,000 and $88,000, respectively, in obsolete inventories.

The components of inventory, at the different stages of production, consisted of the following at December 31:

Inventory	2013		2012
Finished goods	$	85,993	$	303,779
Work-in-progress		299,464		190,794
Raw materials		10,148		33,070
Total	$	395,605	$	527,643

NOTE 8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at December 31:

Property, equipment and leasehold improvements	2013			2012
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,581,728			1,547,572
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,246,925			2,212,769
Less: accumulated depreciation and amortization		(1,608,311	)		(1,367,234	)
Property, equipment and leasehold improvements, net	$	638,614		$	845,535

Depreciation expense on property, equipment, and leasehold improvements was $244,704 and $291,274 for the years ended December 31, 2013 and 2012, respectively.

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NOTE 9. INTANGIBLE ASSETS

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

Intangible assets	2013			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		(5,955,101	)		(5,479,953	)
Intangible assets, net	$	3,670,837		$	4,145,985

We performed an evaluation of our intangible assets for purposes of determining possible impairment as of December 31, 2013.  Based upon recent market conditions and comparable market transactions for similar intangible assets, we determined that an income approach using a discounted cash flow model was an appropriate valuation methodology to determine each intangible asset’s fair value.  The income approach converts future amounts to a single present value amount (discounted cash flow model).  Our discounted cash flow models are highly reliant on various assumptions, including estimates of future cash flow (including long-term growth rates), discount rate, and expectations about variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, all of which we consider level 3 inputs for determination of fair value.  We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in determining the fair value of our intangible assets at the measurement date.  Upon completion of the evaluation, the fair value of our intangible assets exceeded the recorded remaining book value.

Amortization expense for intangible assets was $475,148 and $476,450 for the years ended December 31, 2013 and 2012, respectively.  The future aggregate amortization expense for intangible assets, remaining as of December 31, 2013, is as follows:

Calendar Years	Future Amortization Expense
2014	$	475,148
2015		475,148
2016		476,450
2017		475,148
2018		475,148
2019 & Beyond		1,293,795
Total	$	3,670,837

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NOTE 10. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

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.

Financial statements of Altrazeal Trading Ltd. for the years ended December 31, 2013 and 2012 have not been released to us and, therefore, we have not included the effect of the financial activities of Altrazeal Trading Ltd. in our financial statements for each year.  We believe that our share of the cumulative losses of Altrazeal Trading Ltd. for the years ended December 31, 2013 and 2012 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such years and no additional losses would be charged to operations.

Based upon the unaudited financial statements provided by Altrazeal Trading Ltd. for the year ended December 31, 2012, 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.	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 December 31, 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 year ended December 31, 2013.

NOTE 11. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at December 31:

Accrued Liabilities	2013		2012
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		148,683		213,005
Accrued insurance payable		60,113		52,629
Product rebates/returns		32		81
Other		836		951
Total accrued liabilities	$	315,963	$	372,965

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NOTE 12. CONVERTIBLE DEBT

Convertible Note – June 2012

On June 27, 2012, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), related to our issuance of the June 2012 Note, with 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 Intermountain.

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 have terminated, as described below.  For the year ended December 31, 2013, we issued 725,274 shares of common stock to Inter-Mountain for the cashless exercise of three warrants to purchase 1,571,428 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 January 22, 2014, we provided notice to Inter-Mountain of our election to exercise our rights under the June 2012 Note and to offset amounts we owed to Inter-Mountain against amounts it owed to us under the Investor Notes. Our notice provided that such deduction and offset occurred on January 22, 2014, that we will not incur the 120% prepayment premium with respect to amounts paid under the June 2012 Note as a result of the deduction and offset, that no warrants will become exercisable as a result of the offset, and that any warrants unvested as of January 22, 2014 shall immediately and automatically terminate.   As a result, the outstanding amount owed under the June 2012 Note was reduced to approximately $317,000 as of January 22, 2014.

On February 27, 2014 and on March 3, 2014, we received conversion notices from Inter-Mountain whereby we issued an aggregate of 435,502 shares of common stock for the final payment of approximately $152,000 due under the June 2012 Note.

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Convertible Note – July 2011

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.

Convertible Note – June 2011

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.

F - 18

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 December 31, 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	$	1,780	$	138,220
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		4,262		120,738
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,093,638		205,539		888,099
Total	$	2,475,000							$	1,358,638	$	211,581	$	1,147,057

(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 shares, 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 payable was $157,027 and $117,711 for years ended December 31, 2013 and 2012, respectively.

The amount of debt discount amortized from our convertible notes payable was $178,548 and $97,901 for years ended December 31, 2013 and 2012, respectively.

The future minimum payments relating to our convertible notes payable, as of December 31, 2013, are as follows:

	Payments Due By Period
Transaction	Total	2014	2015	2016	2017	2018
June 2011 Note	$    140,000	$    140,000	$   ---	$   ---	$    ---	$   ---
July 2011 Note	125,000	125,000	---	---	---	---
June 2012 Note	1,093,638	1,093,638	---	---	---	---
Total	$ 1,358,638	$ 1,358,638	$  ---	$  ---	$    ---	$   ---

F - 19

NOTE 13. EQUITY TRANSACTIONS

Common Stock Transactions

March 2013 Offering

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.  We received subsequent funding tranches of $110,000, $132,000, and $110,000 for the purchase of 275,000, 330,000, and 275,000 shares of our common stock on July 15, 2013, November 14, 2013, and March 14, 2014, respectively.

January 2013 Offering

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.  We received subsequent funding tranches of $500,000, $300,000, $300,000, and $500,000 for the purchase of 1,250,000, 750,000, 750,000, and 1,250,000 shares of our common stock on May 7, 2013, September 6, 2013, October 24, 2013, and January 6, 2014 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.

On January 3, 2014, the Warrants vested with respect to 3,000,000 shares of our common stock and were exercised by IPMD on that date pursuant to a Notice of Exercise, accepted by the Company, that provided for the issuance of 750,000 shares of common stock on each of January 31, 2014, February 28, 2014, March 31, 2014, and April 30, 2014 in exchange for the payment of $450,000 on each such date.

On January 31, 2014, IPMD entered into an Assignment Agreement (the “Assignment Agreement”) with The Punch Trust (“TPT”) and Michael I. Sacks (“Sacks”) pursuant to which IPMD assigned to TPT and Sacks its rights and interests to purchase up to 3,000,000 shares of our common stock as detailed in the Warrants and the Notice of Exercise.  Neither TPT nor Sacks paid any monetary consideration to IPMD in connection with the assignments under the Assignment Agreement.

Concurrent with the assignment under the Assignment Agreement described above, ULURU, TPT, Sacks, and IPMD entered into an Implementation Agreement (the “Implementation Agreement”) pursuant to which we consented and agreed to the assignment of the Warrants to TPT and Sacks.  We also agreed to issue and facilitate the delivery of the shares of Common Stock under the Warrants to TPT and Sacks upon their payment of the corresponding purchase price due under the Warrants.  Under the terms of the Warrants, Sacks made payments of $450,000 on each of January 31, 2014 and February 28, 2014 and the Company issued 750,000 shares of Common Stock to him on each date, respectively. Of the 3,000,000 shares of Common Stock issuable under the Warrants, the Implementation Agreement provides for Sacks to acquire 2,000,000 shares (750,000 on each of January 31 and February 28 and 250,000 on each of March 31 and April 30) and TPT to acquire 1,000,000 shares (500,000 on each of March 31 and April 30).

On January 31, 2014, we also entered into a Registration Rights Agreement with TPT and Sacks whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein within sixty days after request and to use commercially reasonable efforts to cause such registration statement to be declared effective with the SEC and to keep such registration statement effective for a period of eighty days and, if necessary, such eighty day period being extended for up to sixty additional days.

F - 20

NOTE 14. STOCKHOLDERS’ EQUITY

Common Stock

As of December 31, 2013, we had 18,871,420 shares of common stock issued and outstanding.  We issued 8,796,972 shares of common stock for the year ended December 31, 2013 comprised of 3,750,000 shares of common stock issued to IPMD pursuant to the January 2013 Offering, 825,000 shares of common stock issued to Messrs. Gray and Wallberg pursuant to the March 2013 Offering, 3,072,648 shares of common stock issued for installment payments due on the June 2012 Note with Inter-Mountain, 725,274 shares of common stock issued for the cashless exercise of warrants held by Inter-Mountain, 363,750 shares of common stock issued for consulting services, 60,000 shares of common stock issued in lieu of wages, and 300 shares of common stock issued for the vesting of certain restricted stock awards

Preferred Stock

As of December 31, 2013, we had no shares of Series A Preferred Stock (the “Series A Shares”).  For the year ended December 31, 2013, we did not issue any new Series A Shares.

On August 15, 2013, we provided notice to Ironridge Global III, LLC (“Ironridge”) for the redemption of all of the outstanding Series A Shares, 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 December 31, 2013 and the changes therein during the two years then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2011		612,594		$	2.45
Warrants issued		1,428,571			0.35
Warrants exercised		---			---
Warrants cancelled		---			---
Balance as of December 31, 2012		2,041,165		$	0.98
Warrants issued		4,445,714			0.56
Warrants exercised (1)		(1,571,428	)		0.35
Warrants cancelled		(250,000	)		0.35
Balance as of December 31, 2013 (1)		4,665,451		$	0.82

(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 three warrants for 1,571,428 shares of common stock have been exercised.  For the purposes of this Table, only such net vested shares of common stock from the fourth warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  On January 22, 2014, we elected to offset and deduct the three remaining Investor Notes from the principle amount due to Inter-Mountain under the June 2012 Note and as a result of the offset and deduction the three remaining warrants terminated.

F - 21

For the year ended December 31, 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, and (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 year ended December 31, 2013 was the cashless exercise of warrants to purchase 1,571,428 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 December 31, 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		392,857
March 14, 2018		660,000
Total		4,665,451

F - 22

NOTE 15. 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 December 31:

	December 31, 2013		December 31, 2012
Warrants to purchase common stock (1)		4,665,451		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)		3,124,680		5,617,974
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 (3)		253,315		368,637
Common stock issuable upon the assumed conversion of our Series A preferred stock (4)(5)		---		1,002,634
Total		9,058,353		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 three warrants for 1,571,428 shares of common stock have been exercised.  For the purposes of this Table, only such net vested shares of common stock from the fourth warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  On January 22, 2014, we elected to offset and deduct the three remaining Investor Notes from the principle amount due to Inter-Mountain under the June 2012 Note and as a result of the offset and deduction the three remaining warrants terminated.
(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 December 31, 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 16. SHARE BASED COMPENSATION

The Company’s share-based compensation plan, the 2006 Equity Incentive Plan (“Incentive Plan”), is administered by the compensation committee of the Board of Directors, 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 of Directors granted the following incentive stock option awards to executives or employees and nonstatutory stock option awards to directors or non-employees for the years ended December 31:

	2013		2012(1)
Incentive Stock Options
Quantity		232,500		---
Weighted average fair value per share	$	0.24		---
Fair value	$	56,112		---
Nonstatutory Stock Options
Quantity		735,000		---
Weighted average fair value per share	$	0.24		---
Fair value	$	177,388		---

(1)  The Company did not award any share-based compensation for the year ended December 31, 2012.

We account for share-based compensation under ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense in the financial statements for all share-based payment awards made to employees, consultants, and directors is measured based on the estimated fair value 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 for the years ended December 31:

	2013			2012 (4)
Incentive Stock Options
Expected volatility  (1)		103.55	%		---
Risk-fee interest rate %  (2)		0.81	%		---
Expected term (in years)		5.0			---
Dividend yield  (3)		---			---
Nonstatutory Stock Options
Expected volatility  (1)		103.55	%		---
Risk-fee interest rate %  (2)		0.81	%		---
Expected term (in years)		5.0			---
Dividend yield  (3)		---			---

(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.
(4)	The Company did not award any share-based compensation for the year ended December 31, 2012.

F - 24

Stock Options (Incentive and Nonstatutory)

The following table summarizes share-based compensation related to stock options for the years ended December 31:

	2013		2012
Research and development	$	16,863	$	6,280
Selling, general and administrative		64,076		31,617
Total share-based compensation expense	$	80,939	$	37,897

At December 31, 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 $152,443.  The period over which the unearned share-based compensation is expected to be recognized is approximately twenty seven months.

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of December 31, 2013 and the changes therein during the two years then ended:

	Stock Options			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2011		287,745		$	16.89
Granted		---			---
Forfeited/cancelled		(129,336	)		22.49
Exercised		---			---
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 December 31, 2013		1,014,907		$	2.12

The following table presents the stock option grants outstanding and exercisable as of December 31, 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		9.2		197,500	$	0.33
	53,334		2.38		4.5		46,668		2.36
	30,002		14.40		3.3		30,002		14.40
	39,071		33.35		3.8		39,071		33.35
	1,014,907	$	2.12		8.6		313,241	$	6.10

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Restricted Stock Awards

Restricted stock awards, which typically vest over a period of six months 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 years ended December 31:

	2013		2012
Research and development	$	444	$	3,762
Selling, general and administrative		547		4,535
Total share-based compensation expense	$	991	$	8,297

At December 31, 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 December 31, 2013 and the changes therein during the two years then ended:

	Restricted Stock			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2011		1,096		$	41.47
Granted		---			---
Forfeited/cancelled		(97	)		34.59
Exercised/issued		(699	)		45.39
Outstanding as of December 31, 2012		300		$	34.59
Granted		---			---
Forfeited/cancelled		---			---
Exercised/issued		(300	)		34.59
Outstanding as of December 31, 2013		---		$	---

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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 December 31, 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 December 31, 2013, there were 715,647 shares that remained available for future grants under our Equity Incentive Plan.

NOTE 17. EMPLOYMENT BENEFIT PLAN

We maintain a defined contribution or 401(k) Plan for our qualified employees.  Participants may contribute a percentage of their compensation on a pre-tax basis, subject to a maximum annual contribution imposed by the Internal Revenue Code.  We may make discretionary matching contributions as well as discretionary profit-sharing contributions to the 401(k) Plan.  Our contributions to the 401(k) Plan are made in cash and vest immediately.  The Company’s common stock is not an investment option available to participants in the 401(k) Plan.  We contributed $20,917 and $25,085 to the 401(k) Plan during the years ended December 31, 2013 and 2012, respectively.

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NOTE 18. 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 notes receivable and accrued interest and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

The fair value of our financial instruments consisted of the following at December 31:

Description	2013		2012
Assets:
Notes receivable and accrued interest	$	777,710	$	1,302,220
Liabilities:
Convertible note – June 2011	$	138,220	$	134,154
Convertible note – July 2011	$	120,738	$	113,084
Convertible note – June 2012	$	888,099	$	1,593,924

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NOTE 19. 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. Deferred tax assets as of December 31, 2013, of $18,344,933 were reduced to zero, after considering the valuation allowance of $18,344,933, since there is no assurance of future taxable income.  As of December 31, 2013 we have consolidated net operating loss carryforwards (“NOL”) and research credit carryforwards for income tax purposes of approximately $49,550,149 and $511,949, respectively.

The following are the consolidated operating loss carryforwards and research credit carryforwards that will begin expiring as follows:

Calendar Years	Consolidated Operating Loss Carryforwards		Research Activities  Carryforwards
2021	$	34,248	$	---
2023		95,666		---
2024		910,800		13,584
2025		1,687,528		21,563
2026		11,950,281		60,797
2027		3,431,365		85,052
2028		8,824,940		139,753
2029		6,889,761		81,940
2030		5,113,583		41,096
2031		3,728,626		43,592
2032		3,695,792		8,690
2033		3,187,559		15,882
Total	$	49,550,149	$	511,949

The Tax Reform Act of 1986 contains provisions, which limit the amount of NOL and tax credit carryforwards that companies may utilize in any one year in the event of cumulative changes in ownership over a three-year period in excess of 50%.  Since the effective date of the Tax Reform Act of 1986, the Company has completed significant share issuances in 2003 and 2006 which may significantly limit our ability to utilize our NOL and tax credit carryforwards against taxable earnings in future periods.  Ownership changes in future periods may place additional limits on our ability to utilize NOLs and tax credit carryforwards.

F - 29

An analysis of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012 are as follows:

	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	17,657,746		$	16,549,134
Intangible assets		247,248			305,552
Other		512,286			502,732
Total gross deferred tax assets		18,417,280			17,357,418
Deferred tax liabilities:
Property and equipment		72,347			77,839
Total gross deferred tax liabilities		72,347			77,839
Net total of deferred assets and liabilities		18,344,933			17,279,579
Valuation allowance		(18,344,933	)		(17,279,579	)
Net deferred tax assets	$	---		$	---

The valuation allowance increased by $1,065,354 and $1,225,683 in 2013 and 2012, respectively.

The following is a reconciliation of the expected statutory federal income tax rate to our actual income tax rate for the years ended December 31:

	2013			2012
Expected income tax (benefit) at federal statutory tax rate -35%	$	( 1,137,320	)	$	( 1,309,975	)
Permanent differences		21,754			16,500
Research tax credits		(15,882	)		(8,690	)
Amortization of deferred start up costs		---			---
Valuation allowance		1,131,448			1,302,165
Income tax expense	$	---		$	---

Effective January 1, 2007, we adopted ASC Topic 740, Accounting for Uncertainty in Income Taxes.  ASC Topic 740 is a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that we have taken or expects to take on a tax return.  If an income tax position exceeds a more likely than not (greater than 50%) probability of success upon tax audit, we will recognize an income tax benefit in its financial statements.  Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with jurisdictional tax laws.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations as a result of implementing ASC Topic 740.

Federal income tax returns for fiscal years 2010 through 2013 remain open and subject to examination by the Internal Revenue Service.  We file and remit state income taxes in various states where we have determined it is required to file state income taxes.  Our filings with those states remain open for audit for the fiscal years 2010 through 2013.

We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.  Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.  As of the date of adoption of ASC 740, we did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the period.  The liability for unrecognized tax benefits is zero at December 31, 2013 and 2012.

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NOTE 20. 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 was inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which was 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 $9,193, which is inclusive of monthly operating expenses, until March 31, 2014 and at such time, will increase to $9,379, which is inclusive of monthly operating expenses.

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 December 31, 2013:

Calendar Years	Future Lease Expense
2014	$	120,917
2015		28,881
2016		---
2017		---
2018		---
Total	$	149,798

Rent expense for our operating leases amounted to $116,488 and $130,065 for the years ended December 31, 2013 and 2012, respectively.

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.

F - 31

Separation Agreement

As of December 31, 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 on March 1, 2012, provided that Mr. Gray forfeited 20,000 stock options previously held by him; 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.

Related Party Transactions and Concentration

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.  Mr. Kerschbaumer currently serves as a director of IPMD, Altrazeal Trading GmbH, Altrazeal AG, and Melmed Holding AG (collectively, the Altrazeal Distributors”) and Mr. Kuehne currently serves as a director of Altrazeal AG.  In such capacities, Mr. Kerschbaumer may be considered, either singularly or collectively, to have control of, and make investment and business decisions on behalf of the Altrazeal Distributors and Mr. Kuehne may be considered, either singularly of collectively, to have control of, and make investment and business decisions on behalf of Altrazeal AG.

Currently, we are party to License and Supply Agreements with Altrazeal Trading GmbH, Altrazeal AG, and Melmed Holding AG for the marketing and distribution of Altrazeal in various international territories.  On December 21, 2012, we entered into a Securities Purchase Agreement with IPMD as described in more detail in Note 12.

For the years ended December 31, 2013 and 2012, the Company recorded revenues, in approximate numbers, of $281,000 and $117,000, respectively, with Altrazeal Distributors, which represented 76% and 32% of our total revenues.  As of December 31, 2013 and December 31, 2012, Altrazeal Distributors had an outstanding accounts receivable, in approximate numbers, of $174,000 and $101,000, respectively, which represented 97% and 77% of our total outstanding accounts receivables.

F - 32

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 December 31, 2013, the following table summarizes the compensation temporarily deferred since 2011:

Name	2013			2012		2011		Total
Kerry P. Gray (1)	$	(91,000	)	$	220,673	$	140,313	$	269,986
Terrance K. Wallberg		(35,769	)	$	24,230	$	36,539	$	25,000
Key executives		(20,000	)	$	27,253	$	20,986	$	28,239
Total	$	(146,739	)	$	272,156	$	197,838	$	323,225

(1)  During 2013, Mr. Gray temporarily deferred compensation of $221,500 which consisted of $11,500 earned pursuant to a Separation Agreement and $210,000 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors.  During 2013, Mr. Gray was also repaid $312,500 of temporarily deferred compensation, of which $300,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

For the years ended December 31, 2013 and 2012, the Company’s obligation for temporarily deferred compensation was $323,225, of which $207,500 was included in accounts payable and $115,725 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, 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 December 31, 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 21. 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.

F - 33

NOTE 22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table contains condensed information from the Company’s Consolidated Statements of Operations for each quarter of the years ended December 31, 2013 and 2012. We have derived this data from its unaudited quarterly financial statements. We believe that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2013
Revenues	$	102,044		$	28,884		$	110,580		$	129,060
Costs and expenses		649,413			744,932			743,033			880,888
Operating (loss)		(547,369	)		(716,048	)		(632,453	)		(751,828	)
Other income (expense)		(109,221	)		(106,737	)		(110,816	)		(106,442	)
Net (loss)	$	(656,590	)	$	(822,785	)	$	(743,269	)	$	(858,270	)
Less preferred stock dividends		(12,021	)		(12,154	)		(6,061	)		---
Net (loss) allocable to common stockholders	$	(668,611	)	$	(834,939	)	$	(749,330	)	$	(858,270	)
Basic and diluted net (loss) per common share	$	(0.06	)	$	(0.06	)	$	(0.05	)	$	(0.04	)
2012
Revenues	$	60,005		$	56,211		$	88,922		$	165,456
Costs and expenses		879,717			884,289			837,149			1,034,259
Operating (loss)		(819,712	)		(828,078	)		(748,227	)		(868,803	)
Other income (expense)		(23,697	)		(30,068	)		(103,498	)		(109,266	)
Net (loss)	$	(843,409	)	$	(858,146	)	$	(851,725	)	$	(978,069	)
Less preferred stock dividends		(10,726	)		(12,154	)		(12,288	)		(12,288	)
Net (loss) allocable to common stockholders	$	(854,135	)	$	(870,300	)	$	(864,013	)	$	(990,357	)
Basic and diluted net (loss) per common share	$	(0.11	)	$	(0.11	)	$	(0.10	)	$	(0.10	)

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NOTE 23. SUBSEQUENT EVENTS

Convertible Note – June 2012

On January 22, 2014, we provided notice to Inter-Mountain of our election to exercise our rights under the June 2012 Note and to offset amounts we owed to Inter-Mountain against amounts it owed to us under the Investor Notes. Our notice provided that such deduction and offset occurred on January 22, 2014, that we will not incur the 120% prepayment premium with respect to amounts paid under the June 2012 Note as a result of the deduction and offset, that no warrants will become exercisable as a result of the offset, and that any warrants unvested as of January 22, 2014 shall immediately and automatically terminate.   As a result, the outstanding amount owed under the June 2012 Note was reduced to $317,029 as of January 22, 2014.

On February 27, 2014 and on March 3, 2014, we received conversion notices from Inter-Mountain whereby we issued an aggregate of 435,502 shares of common stock for the final payment of $152,426 due under the June 2012 Note.

January 2013 Offering

On January 3, 2014, the Warrants vested with respect to 3,000,000 shares of our common stock and were exercised by IPMD on that date pursuant to a Notice of Exercise, accepted by the Company, that provided for the issuance of 750,000 shares of common stock on each of January 31, 2014, February 28, 2014, March 31, 2014, and April 30, 2014 in exchange for the payment of $450,000 on each such date.

On January 31, 2014, IPMD entered into an Assignment Agreement (the “Assignment Agreement”) with The Punch Trust (“TPT”) and Michael I. Sacks (“Sacks”) pursuant to which IPMD assigned to TPT and Sacks its rights and interests to purchase up to 3,000,000 shares of our common stock as detailed in the Warrants and the Notice of Exercise.  Neither TPT nor Sacks paid any monetary consideration to IPMD in connection with the assignments under the Assignment Agreement.

Concurrent with the assignment under the Assignment Agreement described above, ULURU, TPT, Sacks, and IPMD entered into an Implementation Agreement (the “Implementation Agreement”) pursuant to which we consented and agreed to the assignment of the Warrants to TPT and Sacks.  We also agreed to issue and facilitate the delivery of the shares of Common Stock under the Warrants to TPT and Sacks upon their payment of the corresponding purchase price due under the Warrants.  Under the terms of the Warrants, Sacks made payments of $450,000 on each of January 31, 2014 and February 28, 2014 and the Company issued 750,000 shares of Common Stock to him on each date, respectively. Of the 3,000,000 shares of Common Stock issuable under the Warrants, the Implementation Agreement provides for Sacks to acquire 2,000,000 shares (750,000 on each of January 31 and February 28 and 250,000 on each of March 31 and April 30) and TPT to acquire 1,000,000 shares (500,000 on each of March 31 and April 30).

On January 31, 2014, we also entered into a Registration Rights Agreement with TPT and Sacks whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein within sixty days after request and to use commercially reasonable efforts to cause such registration statement to be declared effective with the SEC and to keep such registration statement effective for a period of eighty days and, if necessary, such eighty day period being extended for up to sixty additional days.

F - 35

EX-10.17.2

Exhibit 10.17.2

 AMENDMENT

to the

SHAREHOLDERS‘AGREEMENT

ALTRAZEAL TRADING Ltd.

entered into by and between

Melmed Holding AG

Bahnhofstrasse 10

6301 Zug

(hereinafter referred to as ”Melmed Holding“)

einerseits

and                                              ULURU Delaware Inc.

4452 Beltway Drive

Addison TX 75001

(hereinafter referred to as ”ULURU“)

Preamble

Melmed Holding and ULURU entered into a shareholders‘agreement (hereinafter referred to as “Agreement”) with regard to Altrazeal Trading Ltd. on January 6, 2012. Melmed Holding and ULURU have agreed to amend the Agreement to the effect, that instead of  ALTRAZEAL Trading Ltd. being a company incorporated under the laws of Cyprus the Agreement shall be valid for  ALTRAZEAL Trading GmbH a company incorporated under the laws of Austria.

ALTRAZEAL Trading will have the objective and purpose outlined in the Agreement.

Melmed Holding has established a majority owned subsidiary IPMD GmbH a limited liability company established under the laws of Austria that is the major shareholder of ALTRAZEAL Trading GmbH.

All of the rights granted to Melmed Holding AG related to Altrazeal under the agreement between Uluru Delaware Inc and Melmed Holding AG dated January 11, 2012 will be transferred to ALTRAZEAL Trading GmbH.

The whole Agreement and its Schedules shall be deemed unchanged except as explicitly mentioned below

I.           

Title

The title of the Agreement shall be read as:

SHAREHOLDERS’AGREEMENT

ALTRAZEAL TRADING GmbH

II.

Recital A)

Recital A) of the Agreement shall be read as:

A)    IPMD – International Pharma and Medical Devices GmbH, a duly established and existing company with limited liability under Austrian law with its seat in Vienna and its business address at Schreyvogelgasse 3/5, 1010 Vienna, registered in the companies register to FN 385854 h, shareholder of Altrazeal Trading GmbH, a duly established and existing company with limited liability under Austrian law with its seat in Vienna and its business address at Schreyvogelgasse 3/5, 1010 Vienna, registered in the companies register to FN 314063 h (hereinafter referred to as “Company”). Melmed Holding intends to sell 25% of the share capital of the Company to ULURU for € 1.

- Page 2 of 4-

III.

4. CAPITAL STRUCTURE Equity

The equity structure of the Company shall be entirely comprised of € 35,000 (100 %), fully paid up to be held by the various shareholders in the ratio as stated under this Agreement.

IV.           

General

If any one or more clauses or sub-clauses of this agreement being prohibited pursuant to any applicable competition, unfair trading or anti-trust laws, then it or they shall be deemed omitted. The parties shall uphold the remainder of this agreement, and shall negotiate an amendment, which, as far as legally feasible, maintains the economic balance between the parties.

This agreement can only be modified in writing signed by all of the parties or their duly authorized agents. Such modifications may be effected only after giving a notice of a minimum of 30 (thirty) days to all the parties concerned. Failure to give such a notice would nullify the modification so made, unless specifically ratified by all the parties concerned.

Clause headings are inserted in this agreement for convenience only, and they shall not be taken into account in the interpretation of this agreement.

Any notice pursuant to this agreement shall be in writing signed by (or by some person duly authorized by) the party giving it; and may be served by leaving it or sending it by fax, prepaid recorded delivery, ordinary post confirmed by telephone or fax or registered post to the address of the other party or the parties (or their representative).

V.           

DISPUTES AND ARBITRATION

Both parties hereto agree to settle any dispute and or difference arising out of or in connection with this agreement through a good faith negotiation in an amicable manner.

In the event of any dispute or conflict of interest between the parties it is agreed by the parties that the overriding principle adopted when resolving the matter shall always be that the best interests of the Company and the products shall take precedence over any other interests.

In the event of any dispute or conflict of interest between ULURU or MELMED Holdings and any third party, including any affiliates or group concerns, it is agreed by the parties that the overriding principle is adopted when resolving the matter shall always be that the best interests if the Company and the Products shall take precedence over any other interests.

Should it be impossible to reach an amicable settlement on any dispute and differences, Frankfurt am Main shall be the sole and exclusive place for such Arbitration, and/or litigation, which shall be governed by German Law. The cost incurred in such proceedings shall be borne by the unsuccessful party or in such equitable manner as the arbitrator or the arbitration panel may decree.

- Page 3 of 4-

IN WITNESS WHEREOF, the parties have executed this agreement in the date written below.

SIGNED by                     /s/ Helmut Kerschbaumer

for and on behalf of      Helmut Kerschbaumer

Melmed Holding AG     Chairman

                                          February 1, 2014

SIGNED by                     /s/ Kerry P. Gray

for and on behalf of     Kerry P. Gray

ULURU Inc.                  President and Chief Executive Officer

                                        February 1, 2014

- Page 4 of 4-

EX-10.18.3

Exhibit 10.18.3

AMENDMENT NO. 2 TO LICENSE AND SUPPLY AGREEMENT

This Amendment No. 2 to the License and Supply Agreement (this “Amendment”) is entered into and effective as of December 21, 2012 (the “Amendment Date”), by and between ULURU Inc., a Nevada corporation having an address at 4452 Beltway Drive, Addison, TX 75001, USA (“ULURU”) and MELMED HOLDING AG, a corporation organized and existing under the Laws of Switzerland and having an address at Bahnhofstrasse 10, CH6301 Zug (“MELMED HOLDING”) (each of ULURU and MELMED HOLDING, a “Party” or together, the “Parties”).

WHEREAS, ULURU and MELMED HOLDING are parties to that certain License and Supply Agreement, dated as of January 11, 2012 (the “Original Agreement”);

WHEREAS, ULURU AND MELMED HOLDING executed that certain Amendment No. 1 to the License and Supply Agreement, effective as of December 21, 2012 (the “Amendment”);

WHEREAS, the Original Agreement and the Amendment provides MELMED HOLDING with certain rights and licenses to patents and other intellectual property that cover ULURU’s product, Altrazeal®, including exclusive registration, marketing, promotion, sale and distribution rights in specified countries;

WHEREAS, pursuant to the Original Agreement and the Amendment, ULURU retains the right, and has an obligation, to manufacture and supply the Products to MELMED HOLDING; and

WHEREAS, ULURU and MELMED HOLDING now wish to cancel the Amendment, that MELMED HOLDING shall return to ULURU the grant of exclusive rights to additional territories, attached as Exhibit F herein, the reduction to the royalty payable on net sales, and the adjustment to the purchase price of Altrazeal® for the territory.

AGREEMENT

NOW, THEREFORE ULURU and MELMED HOLDING agree as follows:

1.   Definitions. Unless otherwise expressly defined herein, all capitalized terms used herein have the meaning ascribed to them in the Original Agreement. The term “Agreement” means the Original Agreement as amended by this Amendment No. 2.

2.   No other Changes; Consolidated Agreement. All other terms and conditions of the Original Agreement are hereby confirmed and shall remain in full force and effect. In the event of any conflict with the provisions of this Amendment and any provisions of the Original Agreement, the provisions of this Amendment shall control. Upon the request of either Party, the Parties shall prepare an Amended and Restated License and Supply Agreement that incorporates the terms of this Amendment into the Original Agreement and eliminates all terms in the Original Agreement that have been rendered obsolete or unnecessary due to this Amendment.

3.   Multiple Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. Facsimile or PDF signatures of this Amendment shall have the same force and effect as an original signature.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their respective duly authorized representatives as of the date first above written:

MELMED HOLDING AG		ULURU Inc.
By:	/s/ Helmut Kerschbaumer	By:	/s/ Kerry P. Gray
Name:	Helmut Kerschbaumer	Name:	Kerry P. Gray
Title:	Chairman	Title:	President & Chief Executive Officer

EXHIBIT F

Additional Territories

Asia and Pacific

·   Excluding China, Hong Kong, Macau, Taiwan, South Korea and Japan

·   Excluding Australia and New Zealand

Slovenia

EX-10.18.4

Exhibit 10.18.4

AMENDMENT NO. 3 TO LICENSE AND SUPPLY AGREEMENT

This Amendment No. 3 to License and Supply Agreement (this “Amendment”) is entered into and effective as of February 2, 2014, (the “Amendment Date”), by and between ULURU Inc., a Nevada corporation having an address at 4452 Beltway Drive, Addison, TX 75001, USA (“ULURU”), MELMED HOLDING AG, a corporation organized and existing under the Laws of Switzerland and having an address at Bösch 71, CH6331 Hünenberg (“MELMED HOLDING”), and ALTRAZEAL AG, a corporation organized and existing under the Law of Switzerland and have an address at Bösch 71, CH 6331 Hünenberg (“ALTRAZEAL AG”). (each of ULURU, MELMED HOLDING, and ALTRAZEAL AG, a “Party” or together, the “Parties”).

WHEREAS, ULURU and MELMED HOLDING are parties to that certain License and Supply Agreement, dated as of January 11, 2012 and  ULURU and ALTRAZEAL AG are parties to that certain Exclusive License and Supply Agreement, dated as of September 30, 2013 (the “Original Agreements”);

WHEREAS, ULURU AND MELMED HOLDING executed that certain Amendment No. 1 to the License and Supply Agreement, effective as of December 21, 2012 and that certain Amendment No. 2 to the License and Supply Agreement, effective as of December 21, 2012 (the “Melmed Amendments”);

WHEREAS, ULURU AND ALTRAZEAL AG executed that certain Amendment No. 1 to the Exclusive License and Supply Agreement, effective as of February 1, 2014 (the “AG Amendments”);

WHEREAS, the Original Agreements, the Melmed Amendments, and the AG Amendments provides each with certain rights and licenses to patents and other intellectual property that cover ULURU’s product, Altrazeal®, including exclusive registration, marketing, promotion, sale and distribution rights in specified countries;

WHEREAS, pursuant to the Original Agreements, the Melmed Amendments, and the AG Amendments, ULURU retains the right, and has an obligation, to manufacture and supply the Products to MELMED HOLDING and ALTRAZEAL AG; and

WHEREAS, the Parties now wish to revise and amend the grant of exclusive rights to certain territories, attached as Exhibit F herein, by and between MELMED HOLDING and ALTRAZEAL AG.

AGREEMENT

NOW, THEREFORE ULURU, MELMED HOLDING, and ALTRAZEAL AG agree as follows:

1.   Definitions. Unless otherwise expressly defined herein, all capitalized terms used herein have the meaning ascribed to them in the Original Agreements.

2.   No other Changes; Consolidated Agreement. All other terms and conditions of the Original Agreements are hereby confirmed and shall remain in full force and effect. In the event of any conflict with the provisions of this Amendment and any provisions of the Original Agreements, the provisions of this Amendment shall control. Upon the request of either Party, the Parties shall prepare an Amended and Restated License and Supply Agreement that incorporates the terms of this Amendment into the Original Agreements and eliminates all terms in the Original Agreements that have been rendered obsolete or unnecessary due to this Amendment.

3.   Multiple Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. Facsimile or PDF signatures of this Amendment shall have the same force and effect as an original signature.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their respective duly authorized representatives as of the date first above written:

MELMED HOLDING AG		ULURU Inc.
By:	/s/ Helmut Kerschbaumer	By:	/s/ Kerry P. Gray
Name:	Helmut Kerschbaumer	Name:	Kerry P. Gray
Title:	Chairman	Title:	President and Chief Executive Officer

ALTRAZEAL AG
By:	/s/ Helmut Kerschbaumer
Name:	Helmut Kerschbaumer
Title:	Chief Executive Officer
By:	/s/ Klaus Kuehne
Name:	Klaus Kuehne
Title:

EXHIBIT F

Exchange of Territories

Territories transferred from MELMED HOLDING AG to ALTRAZEAL AG

·   Jordan

·   Syria

Territories transferred from ALTRAZEAL AG to MELMED HOLDING AG

·   Albania

·   Bosnia

·   Croatia

·   Kosovo

·   Macedonia

·   Montenegro

·   Serbia

For illustration purposes, after such transfer of territories, the following is a listing of territories for each of the parties:

ALTRAZEAL AG

Africa

 ** Excluding North Africa and French Speaking Africa

Latin America

Georgia

Turkmenistan

Ukraine

Commonwealth of Independent States

Asia and Pacific

 ** Excluding China, Hong Kong, Macau, Taiwan, South Korea, and Japan

 ** Excluding Australia and New Zealand

Middle East:

Jordan

Syria

MELMED HOLDING AG

Europe:	Middle East:
Austria	Bahrain
Belgium	Egypt
Bulgaria	Kuwait
Cyprus	Oman
Czech Republic	Quatar
Denmark	Saudi Arabia
Estonia	UAE
Finland
France	North Africa / French Speaking Africa:
Germany	Algeria
Hungary	Angola
Ireland	Cote dİvorie
Italy	Equatorial Guinea
Latvia	Gaban
Lithuania	Lybia
Malta	Morocco
Netherlands	Namibia
Norway	Tunesia
Poland
Portugal	Ex-Jugoslavia
Romania	Albania
Spain	Bosnia
Sweden	Croatia
Switzerland	Kosovo
United Kingdom	Macedonia
	Montenegro
Asia and Pacific	Serbia
Australia	Slovakia
New Zealand	Slovenia

EX-10.28.2

Exhibit 10.28.2

AMENDMENT NO. 1 TO EXCLUSIVE LICENSE AND SUPPLY AGREEMENT

This Amendment No. 1 to the Exclusive License and Supply Agreement (this “Amendment”) is entered into and effective as of February 1, 2014 (the “Amendment Date”), by and between ULURU Inc., a Nevada corporation having an address at 4452 Beltway Drive, Addison, TX 75001, USA (“ULURU”) and ALTRAZEAL AG, a corporation organized and existing under the Laws of Switzerland and having an address at Bosch 71, CH 6331 Hunenberg (“ALTRAZEAL AG”) (each of ULURU and ALTRAZEAL AG, a “Party” or together, the “Parties”).

WHEREAS, ULURU and ALTRAZEAL AG are parties to that certain License and Supply Agreement, dated as of September 30, 2013 (the “Original Agreement”);

WHEREAS, ULURU and the investment vehicle of Melmed Holding AG, Regenertec GmbH, respectively, IPMD GmbH (“IPMD”) entered into an investment agreement executed on September 20, 2012, whereby IPMD was granted the Exclusive Licensing and Supply rights for certain territories;

WHEREAS, the Original Agreement provides ALTRAZEAL AG with certain rights and licenses to patents and other intellectual property that cover ULURU’s product, Altrazeal®, including exclusive registration, marketing, promotion, sale and distribution rights in specified countries;

WHEREAS, pursuant to the Original Agreement, ULURU retains the right, and has an obligation, to manufacture and supply the Products to ALTRAZEAL AG; and

WHEREAS, ULURU and ALTRAZEAL AG now wish to amend the Original Agreement to provide, among other things, that ALTRAZEAL AG shall be granted exclusive rights to additional territories.

AGREEMENT

NOW, THEREFORE ULURU and ALTRAZEAL AG agree as follows:

1.   Definitions. Unless otherwise expressly defined herein, all capitalized terms used herein have the meaning ascribed to them in the Original Agreement. The term “Agreement” means the Original Agreement as amended by this Amendment No. 1.

2.   Amendment of Territory. Exhibit F of the Original Agreement is hereby amended to include the additional territories on Exhibit F attached to this Amendment No. 1.

3.   No other Changes; Consolidated Agreement. All other terms and conditions of the Original Agreement are hereby confirmed and shall remain in full force and effect. In the event of any conflict with the provisions of this Amendment and any provisions of the Original Agreement, the provisions of this Amendment shall control. Upon the request of either Party, the Parties shall prepare an Amended and Restated License and Supply Agreement that incorporates the terms of this Amendment into the Original Agreement and eliminates all terms in the Original Agreement that have been rendered obsolete or unnecessary due to this Amendment.

4.   Multiple Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. Facsimile or PDF signatures of this Amendment shall have the same force and effect as an original signature.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their respective duly authorized representatives as of the date first above written:

ALTRAZEAL AG		ULURU Inc.
By:	/s/ Helmut Kerschbaumer	By:	/s/ Kerry P. Gray
Name:	Helmut Kerschbaumer	Name:	Kerry P. Gray
Title:	Chief Executive Officer	Title:	President & Chief Executive Officer

EXHIBIT F

Additional Territories

Asia and Pacific

 ·   Excluding China, Hong Kong, Macau, Taiwan, South Korea and Japan

·   Excluding Australia and New Zealand

Albania

Bosnia

Croatia

Kosovo

Macedonia

Montenegro

Serbia

EX-10.29

Exhibit 10.29

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of the 31st day of January, 2014, by and among ULURU Inc., a Nevada corporation (the “Company”), Michael Sacks (“Sacks”) and The Punch Trust (“TPT,” and together with Sacks and any party added to this Agreement pursuant to Section 3.13, the “Investors”).

RECITALS

WHEREAS, concurrently with the execution of this Agreement, the Investors and IPMD GmbH, an Austrian limited liability company (“IPMD”) are entering into an Assignment Agreement (the “Assignment Agreement”) pursuant to which IPMD has agreed to assign, and has assigned, the Warrants to purchase 3,000,000 shares of Common Stock (as defined below), the Notice of Exercise (“Warrants” and “Notice of Exercise” each as defined in the Implementation Agreement (defined below)) and all of its right, title and interest therein;

WHEREAS, concurrently with the execution of this Agreement, the Company, the Investors and IPMD are entering into an Implementation Agreement (the “Implementation Agreement”) pursuant to which the Investors have agreed to purchase an aggregate of 3,000,000 shares of Common Stock under the terms of the Warrants and Notice of Exercise; and

WHEREAS, in order to induce the Investors to enter into the Assignment Agreement and purchase the shares of Common Stock, the Investors and the Company are entering into this Agreement to govern the rights of the Investors to cause the Company to register their shares of Common Stock and certain other matters as set forth in this Agreement.

NOW, THEREFORE, the Parties hereby agree as follows:

1.           Definitions.For purposes of this Agreement:

1.1“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by or is under common control with such Person.

1.2“Common Stock” means shares of the Company’s common stock, par value $0.001 per share.

1.3“Damages” means any loss, damage or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such loss, damage or liability (or any action in respect thereof) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (b) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading in light of the circumstances in which they are made; or (c) any violation or alleged violation by the indemnifyingparty (or any of its agents or Affiliates)of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.

1.4“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.5“Excluded Registration” means (a) a registration relatingto the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

1.6   “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

1.7“Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

1.8“GAAP” means generally accepted accounting principles in the United States.

1.9“Holder” means any holder of Registrable Securities who is a party to this Agreement.

1.10“Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-laworsister-in-law, including adoptive relationships, of a natural person referred to herein.

1.11“Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

1.12“Person” means any individual, corporation, partnership, trust, limited liability company, association orother entity.

1.13              “Registrable Securities” means (a) any Common Stock of the Company acquired by an Investor upon exercise of the Warrants (as defined in the Purchase Agreement); (b) any Common Stockor other securitiesof the Company acquired by an Investor after the date hereof; (c) any Common Stockissued or issuable(directly or indirectly) upon conversion and/or exercise ofany othersecuritiesof the Company acquired by an Investor after the date hereof; and (d) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (a), (b) or (c) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 3.1, and excluding for purposes of Section 2any shares for which registration rights have terminated pursuant to Section 2.14of this Agreement.

1.14           “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares ofCommon Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

1.15“SEC” means the Securities and Exchange Commission.

1.16“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

1.17“SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.18“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

1.19“Selling Expenses” means all expenses of any Seller or Holder, including without limitation, underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder.

2.           Registration Rights.  The Company covenants and agrees as follows:

2.1           Demand Registration.

(a)Form S-1 Demand.  If at any time after the date of this Agreement, the Company receives a request from Holders that, in the aggregate, hold at least 5% of the Company’s then outstanding shares of Common Stock that the Company file a Form S-1 registration statementwith respect to at least 20% of the Registrable Securities then outstanding, then the Company shall (i) within ten days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within 60 days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requestedto be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 10 days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and (d) and Section 2.3.

(b)Form S-3 Demand.  If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders that, in the aggregate, hold at least 5% of the Company’s then outstanding shares of Common Stock that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $400,000, then the Company shall (i) within ten days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within 45 days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requestedto be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and (d) and Section 2.3.

(c)Company Right to Defer.  Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company; or (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than 90 days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such 90 day period.

(d)Exceptions to Company Obligation to Register.  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a):  (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b).  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b): (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective or (ii) after the Company has effected three registrations pursuant to Section 2.1(b). If the Company has already effected one registration pursuant to Section 2.1(a) or Section 2.1(b) within the twelve month period preceding the date of request, the Company shall not be obligated to effect, or to take any action to effect, any further registration pursuant to Section 2.1(a) or Section 2.1(b) during the balance of such twelve month period. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawal shall be counted as “effected” for purposes of this Section 2.1(d); provided that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration.

(e) Inclusion of Other Securities.  Any registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Section 2.3, include other securities of the Company being issued by the Company or which are held by officers or directors of the Company or other parties.

2.2           Company Registration.  If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration.  Upon the request of each Holder given within 20 days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration.  The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

2.3           Underwriting Requirements.

(a)           If, pursuant to Section2.1, the Initiating Holdersintend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice.  The underwriter(s) shall be selected by the Initiating Holders, subject only to the reasonable approval of the Company.  In such event, the right of any Holder, or any officer or director of the Company or other party, to include securities in such registration shall be conditioned upon such Person’s participation in such underwriting and the inclusion of such Person’s securities in the underwriting to the extent provided herein.  All Holders, and any officers or directors of the Company or other parties, proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this Section 2.3, if the managing underwriter in good faith advise(s) the Initiating Holders in writing that the proposed number of securities to be underwritten would adversely affect the marketing of such securities, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders affected by such change; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  If the managing underwriter has not limited the number of Registrable Securities or other securities to be underwritten, the Company may include its securities for its own account in such registration if the managing underwriterso agrees and if the number of Registrable Securities and other securities which would otherwise have been included in such registration and underwriting will not thereby be limited.

(b)           In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable) to the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders affected by such change. Notwithstanding the foregoing, in no event shall the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering.  For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company or corporation, the partners, members, retired partners, retired members, stockholders and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

(c)           If any Holder, or any officer or director of the Company or other party, disapproves of the terms of such underwriting, such Person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and any Initiating Holders.  The securities so withdrawn shall also be withdrawn from registration.

(d)           For purposes of Section2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

2.4Obligations of the Company.  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a)           prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 80 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such 80 day period shall be extended for a period of time equal to the period the Holders refrain, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-1 or Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 80 day period shall be extended for up to 60 days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

(b)prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act and keep such registration statement effective during the period such registration statement is required to remain effective pursuant to Section 2.4(a);

(c)furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d)use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a consent to service of process in any such states or jurisdictions (other than in the state of Texas), unless the Company is already, or was as of the date of this Agreement, subject to service in such jurisdiction and except as may be required by the Securities Act;

(e)in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f)use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g)provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(h)promptly make available for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such registration statement and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i)notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed;

(j) notify each selling Holder, at any time when a prospectus forming a part of such registration statement is being used to effect sales of such Registrable Securities, of the happening of any event as a result of which such prospectus includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and

(k)after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

2.5Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

2.6           Expenses of Registration.  All expenses (other than Selling Expenses) incurred in connection with registrations, filings or qualifications pursuant to Section 2, including all registration, filing and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company, shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.1(a); provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 2.1(a).  All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the selling Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

2.7           Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8           Indemnification.  If any Registrable Securities are included in a registration statement under this Section 2:

(a)           To the extent permitted by law, the Company shall indemnify and hold harmless each selling Holder, and the partners, members, officers, directors and stockholders of each such Holder, legal counsel and accountants for each such Holder, any underwriter (as defined in the Securities Act) for each such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act against any Damages, and the Company shall pay to each such Holder, underwriter, controlling Person or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person or other aforementioned Person expressly for use in connection with such registration.

(b)           To the extent permitted by law, each selling Holder, severally and not jointly, shall indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any) who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement and any controlling Person of any such underwriter or other Holder against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reasonable reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder shall pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld, conditioned or delayed; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

(c)           Promptly after receipt by an indemnified party under this Section2.8of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action.

 (d)           To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties shall contribute to the aggregate Damages or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions or other actions that resulted in such Damage or expense, as well as to reflect any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the gross proceeds from the offering received by such Holder, except in the case of willful misconduct or fraud by such Holder.

(e)           Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f)           Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

(g)           Successor Indemnification.  If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then, to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors of the Company as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Certificate of Incorporation or elsewhere.

2.9           Reports Under Exchange Act.  With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration statement, the Company shall:

(a)           make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;

(b)           use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 applicable to a sale of securities of the Company by such Holder or that it qualifies as a registrant whose securities may be resold pursuant to a registration statement (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration.

2.10Limitations on Subsequent Registration Rights.  From and after the date of this Agreement until such time as the registration rights of all Holders have expired pursuant to Section 2.11, the Company shall not, without the prior written consent of the Holders so long as they own at least 5% of the Company’s then outstanding shares of Common Stock, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included; provided that this limitation shall not apply to any additional Person who becomes a party to this Agreement in accordance with Section 3.13.

2.11           Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the date when all of such Holder’s Registrable Securities could be sold without restriction under SEC Rule 144 within any 90-day period.  The obligations of the Company pursuant to Section 2.9 of this Agreement shall expire on the earlier to occur of (a) the date no Holder own any securities of the Company that were once Registrable Securities, and (b) the fifth anniversary of the effective date of this Agreement.

3.           Miscellaneous.

3.1           Successors and Assigns.  The rights under this Agreement may beassigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (a) is an Affiliate of a Holder, (b) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members or a Person controlled by a Holder’s Immediate Family Member(s) or (c) after such transfer, holds at least 650,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations); provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder, (2) who is a Holder’s Immediate Family Member or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member or a Person controlled by a Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Agreement. The terms and conditions of this Agreement shall inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Any assignment in violation of this Section 3.1 shall be deemed null and void and of no force or effect.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

3.2           Governing Law, Jurisdiction.  This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of law principles that would result in the application of any law other than the law of the State of New York. In any action among or between any of the parties arising out of or relating to this Agreement, each of the parties (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of any New York state or the United States federal court sitting in The City and County of New York, (b) waives any objection to laying venue in any such action or proceeding in such courts, and (c) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any party.

3.3           Electronic Signature;Counterparts.  This Agreement may be executed and delivered by facsimile or other electronic signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

3.4           Titles and Subtitles.  The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

3.5           Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or:  (a) personal delivery to the party to be notified; (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on the execution page of this Agreement, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 3.5.  If notice is given to the Company, a copy, which shall not constitute notice, shall also be sent to Parr Brown Gee & Loveless, PC, 185 South State Street, Suite 800, Salt Lake City, UT  84138, Attn: Bryan Allen, email: ballen@parrbrown.com; fax (801) 532-7750 and, if notice is given to Investors, a copy, which shall not constitute notice, shall also be given to Wiggin and Dana LLP, 450 Lexington Avenue. 38th Floor, New York, NY 10017, Attention: Scott L. Kaufman; e-mail: skaufman@wiggin.com; fax: 212-490-0536.

3.6           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party.  Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination or waiver applies to all Investors in the same fashion. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver.  Any amendment, termination or waiver effected in accordance with this Section 3.6 shall be binding on each party hereto and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver.  No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition or provision.

3.7           Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision, each of which shall remain in full force and effect and in lieu of such invalid or unenforceable provisions there shall be automatically added as part of this Agreement a valid and enforceable provision as similar in terms to the invalid or unenforceable provision as possible considering the intent of the parties hereto and the bargained for consideration or benefits to be received by each party hereto.

3.8           Aggregation of Stock.  All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

3.9           Specific Performance.  In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, each party hereto shall be entitled to specific performance of the agreements and obligations of the other parties hereunder and to such other injunction or other equitable relief as may be granted by a court of competent jurisdiction. Any party hereto seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with such order or injunction.

3.10           Entire Agreement.  This Agreement and the other Transaction Agreements (as defined in the Assignment Agreement), constitute the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing among the parties is expressly canceled.

3.11           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

3.12           Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or of any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

3.13           Additional Investors.                                             Any Person that acquires Registrable Securities in accordance with Section 3.1 may become a party to this Agreement (if not already a party) by executing and delivering a joinder agreement so specifying or by executing and delivering an additional counterpart signature page to this Agreement, and thereafter such Person shall be deemed an “Investor” for all purposes hereunder.

3.14           Acknowledgment.  The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

IN WITNESS WHEREOF, the Company, by the duly authorized officer named below, has executed this Registration Rights Agreement as of the date first set forth above.

ULURU INC.

By:              /s/ Kerry P. Gray                                           

       Name:  Kerry P. Gray

       Title:    President & Chief Executive Officer

Address:                                            442 Beltway Drive

Addison, TX  75001

Fax:                                                     214-905-5130

E-Mail Address:                               kgray@uluruinc.com

IN WITNESS WHEREOF, the Investors have executed this Registration Rights Agreement as of the date first set forth above.

INVESTOR:

Sign here:                                                      /s/ Clermont Corporate Services Limited as Trustee of

The Punch Trust

Print full legal name here:                            Clermont Corporate Services Limited

 As Trustee of The Punch Trust

Address:                                                      Nerine Chambers

 P.O. Box 505

 Road Town, Tortola, British Virgin Islands

Fax:                                                                 tu 1 22 718 7819

E-Mail Address:                                           admin@clermonttrust.com

INVESTOR:

Sign here:                                                      /s/ Michael I. Sacks

Print full legal name here:       Michael I. Sacks

312 Park Manor, Corlett Drive,

Illovo, 2196, South Africa

With any copies to:

Bradley Sacks at 650 Park Avenue, Apartment 7F,

New York, NY  10065

Fax:                                                                        +1-646-807-4617

E-Mail Address:                                                   mottysacks@yahoo.com

With copies to bradsacks@centriccapital.com

EX-10.30

Exhibit 10.30

SHAREHOLDERS' AGREEMENT

Altrazeal AG

THE SHAREHOLDER'S AGREEMENT (hereinafter referred to as the "Agreement"), is made and entered into as of February 1, 2014 by and between

(1)   IPMD GmbH, a company duly incorporated under the laws of Austria having its principal place of business at Schreyvogelgasse 3 / 5, A – 1010 Vienna, hereinafter referred as “IPMD”

and

(2) ULURU Delaware Inc. a wholly owned subsidiary of ULURU Inc., a company duly incorporated under the laws of Delaware, the United States of America, having its principal place of business at4452 Beltway Drive, Addison TX 75001 hereinafter referred to as “ULURU”.

WHEREAS:

A)   IPMD has incorporate a new company under Swiss law which is named Altrazeal AG, herein referred to as “the Company”, and intends to sell  25% of the Share Capital to  ULURU  for € 1.

B)   Under the terms of this agreement, the parties hereby agree the basis on which the affairs of the Company shall be run, managed and equity distributed.

C)   It is intended that IPMD shall at all times be and remain under all circumstances the Majority Shareholder of the Company and as such it shall have the right to exercise its rights including the right to veto any decision relating to the business of the Company

D)   The Company will be setup with the objective and purpose of acting as an exclusive Distributor  for the import, distribution, sales and marketing of the Products as defined in Appendix 1

NOW, THEREFORE, in consideration of the foregoing and in consideration of the mutual promises set forth herein NOW IT IS AGREED as follows:-

1.   DEFINITIONS.

"Articles" means the Articles of Association in the Agreed Form;

“Associate” means any person who is directly or indirectly controlling, controlled by, or under the common control of a Party;

"Board" means the board of Directors of the Company from time to time;

"Business" means the intended business of the Company as described in recital D

"Parties" means IPMD and ULURU and "Party" means any one of them, including any other member of the Company to whom Shares are transferred or issued

“Products” means the range of products as defined in Appendix 1

“Majority Shareholder " means those persons or entities who hold between them more than 50 per cent of the total number of shares;

"Shares" means shares of any class in the capital of the Company;

2.   INTENDED BUSINESS OF THE COMPANY

The Company has been setup for the objective of acting as an exclusive agent for the import, distribution, sales and marketing of the Products in the Territory as defined in Appendix 2.  The Company shall not without consent of the Majority Shareholder make or permit any fundamental alteration to the nature of the Business; any fundamental alterations in the nature of the business must also be approved by ULURU.

3.   DETAILS OF SHAREHOLDING

3.1   Percentage of shareholding

From the date of this agreement the shares of the Company will be held by the following parties in the ratio as given in the table below

PARTY	PERCENTAGE OF HOLDING
IPMD incl. Investors	75%
ULURU	25%
TOTAL	100%

3.2   ULURU’s Entitlement to Shareholding

ULURU shall, for as long as and provided that it fulfills its responsibilities in accordance with Schedule 4 of the Agreement, hold 25% of the share capital of the Company, (Under no circumstance without ULURU ‘s prior written consent can any form of share capital or rights to acquire share capital be issued that will reduce ULURU’s ownership below 25%). The Company will not enter into any financial transactions of any kind that would result in ULURU’s ownership rights to be diminished. ULURU shall not dispose of any of their Shares except as permitted by this Agreement, and any such attempted disposition shall be void and shall not be recognized or registered upon the books of the Company. In pursuance of the above, it is hereby stipulated that such shares may be transferred or disposed of only under a specific written approval from IPMD.

For this purpose, the term "dispose" includes, but is not limited to, the acts of selling, assigning, transferring, pledging, encumbering, giving away, divesting, and any other form of conveying, including conveyances caused by marital separation, divorce, receivership, or bankruptcy, whether voluntary or involuntary or by operation of law. In connection with the sale of ULURU or its assets this does not constitute a transfer or disposal.

3.3   Matters requiring consent

Matters for which the consent of IPMD shall be required shall include, but are not limited to the approval of hiring plans, financial budgets, business plans and market plans, approval of audited accounts and changes in management. ULURU must approve any transactions, by prior written consent, that involve an affiliate of IPMDs.

3.4   Right of first Refusal

In case any shareholder intends to sell its shares of the Company in part or in whole, the other shareholder shall have the right of first refusal to buy the shares from the selling shareholder. The other shareholder will have 15 days to advise the selling shareholder if it intends to exercise this right of first refusal.

3.5   Right to Acquire the Company

ULURU is granted the right to purchase all of the outstanding share capital of the Company that it doesn´t own for the following consideration:

Year	Multiple of Net Sales	Expiration Date
2014	3.0	6-30-2015
2015	2.5	6-30-2016
2016	2.0	6-30-2017

Net sales being defined consistent with the Licensing Agreement with Altrazeal AG

3.6   Take Along Option

In case IPMD decides to sell its shares in part or in whole to a third party, and ULURU is not using its right of first refusal, IPMD shall be obliged to agree with the third party to acquire the shares of ULURU pro rata under the same conditions as the third party is willing to purchase the shares of IPMD if ULURU at its sole discretion decides to sell its shares. This take along option will also apply if ULURU decides to sell its shares in part or in whole to a third party, and IPMD is not using its right of first refusal, ULURU shall be obliged to agree with the third party to acquire the shares of IPMD pro rata under the same conditions as the third party is willing to purchase the shares of ULURU.

3.7   Minimum Requirements for the Rights of the Minority Equity

The Parties mutually agree that to effect any transaction as outlined on Appendix 3 all shareholders must be in agreement with the proposed transaction.

4.   CAPITAL STRUCTURE EQUITY

The equity structure of the Company shall be entirely comprised of 100 ( 100%        ) shares of CHF 100.000 , fully paid up to be held by the various shareholders in the ratio as stated under this Agreement.

5.   ACCESS TO RECORDS

The Company shall permit ULURU or its accountant, solicitor/attorney or agent at all reasonable times to inspect and take copies of or extracts from any books of account, receipts, papers and any and all other documents relating to or connected with the production stock and sales of the Product, which may be in the possession of or under the control of the Company or its accountants, solicitors/attorneys or agent.

6.   ACCOUNTS AND FINANCIAL AND OTHER INFORMATION

6.1   Appointment of Statutory Auditors

IPMD shall have the sole authority to appoint the statutory auditors of the Company and the auditors so appointed shall not be removed from office except by IPMD.

6.2   Time Limit

The audit shall be completed within 120 (One Hundred and Twenty) Days from the end of the financial year ended 31st December. The auditor responsible for this shall at all times be appointed by IPMD.

6.3   Internal Audit

IPMD shall have unrestricted authority to appoint any Internal Auditors of the Company and the scope of and the time limit within which the internal audit shall be completed, will be as decided by IPMD.

6.4   Management Accounts

The Company shall for each month prepare management accounts with comparisons to budgets and containing trading and profit and loss accounts, balance sheets, cash flow statements and monthly rolling forecasts, and such other information as may be desired by the shareholders.

6.5   Business and Financial Plans

The Company shall, not later than 30 days before the end of each financial year, consult with and obtain the approval of IPMD to adopt a detailed operating and capital budget and cash flow forecast and a Business Plan in respect of the next financial year.

7.   TAXES APPLICABLE

Any Corporate Tax payable on the profits of the Company shall be paid according to local applicable law after prior approval of IPMD.

8.   DISTRIBUTION OF PROFITS

The distribution of the profits of the Company shall be made in the manner provided for by IPMD. Any payment of Dividends passed by Board resolution shall be made in accordance with the pro-rata shareholding. For the avoidance of doubt, no dividends or profit can be distributed prior to the agreement of IPMD.

9.   BOARD OF DIRECTORS

9.1   Number of Directors

The Board of the Company shall consist of a maximum of 3 (three) Directors and shall be appointed by IPMD. The CEO of the Company shall take operational direction and satisfy the requirements of the Board, at all times acting in the spirit of such requirements, and shall carry out the policy matters approved by a majority of the Board to the fullest extent possible. ULURU will have observation rights at all Board Meetings and will be provided all notices and agendas and Board materials.

9.2   Frequency of Meetings

The Board shall meet 2 (two) times per year (or at such other intervals as the Board may agree).  At least fourteen (14) days' prior written notice of each board meeting shall be given to all directors, specifying the time and place of the meeting and the matters to be discussed, as required by the law governing the Company. The meeting shall normally be held in Zurich or, if required by a majority of the Board the meeting shall be held in Austria.

9.3   Attendance and Quorum

No meeting of the Board may proceed to business unless a quorum is present. The Board shall be defined as quorate when all Directors are present. If any Director is not able to attend for any reason, an approved alternate may attend and vote on his behalf.

9.4   Powers of the Board

The Board of the Company shall exercise powers in relation to all major policy matters of the Company. The powers so delegated to the Board are vested in them collectively and therefore, as a general rule, must be exercised by them collectively at a Board Meeting duly convened and constituted and only when Quorate.

All resolutions of the Board shall be passed by a simple majority vote.

A resolution of the Board shall be validly passed if the text of the resolution has been approved in writing by a majority of members of the Board. ULURU will receive a copy of all Board Minutes.

9.5   Agenda

The Company shall prior to convening the Board Meeting, issue an Agenda along with the notice of meeting to each Director and observer, at least 14 (fourteen) days prior to the Meeting. The Agenda shall list the matters, for discussion and consideration at the meeting, including but not limited to:

i)   Review of the financial accounts of the Company

ii)   Analysis of the market conditions within which the Company operates

9.6   Remuneration to Directors

No remuneration shall be paid to the Directors by the Company unless it is agreed in writing by the Majority Shareholder.

10.   CONFIDENTIALITY

10.1   Each of the Parties undertakes to the others to use all reasonable endeavors to keep secret and confidential all matters of a confidential nature in relation to the business and affairs of the Company, and not to disclose any such confidential information to any third party.  This obligation shall not apply to information which:

10.1.1   is known to the disclosing Party before it became a shareholder in the Company, and was not already under any obligation of confidentiality to any of the other Parties; or

10.1.2   is or becomes publicly known without the fault of the disclosing Party; or

10.1.3   is obtained by the disclosing Party from a third party in circumstances where the disclosing Party has no reason to believe that there has been any breach of an obligation of confidentiality owed to any of the other Parties; or

10.1.4   is independently developed by the disclosing Party; or

10.1.5   is approved for release in writing by authorized representatives of all the other Parties; or

10.1.6   the disclosing Party is obliged to disclose by virtue of a regulatory, or legal requirement including any court of competent jurisdiction.

11.   GENERAL

Nothing in this Agreement is intended to nor shall create any additional partnership, joint venture or agency between the Parties, other than that expressly contained in this agreement..

11.1   Should there be any inconsistency between any provision of this Agreement and the Articles, this Agreement shall prevail as between the Parties.

11.2   The invalidity or unenforceability of any term of this Agreement, or of any right arising pursuant to this Agreement, shall not affect the remaining terms or rights in any way.

11.3   Clause headings are inserted in this Agreement for convenience only, and they shall not be taken into account in the interpretation of this Agreement.

11.4   Nothing in this Agreement shall create, imply or evidence any partnership between all or any of the Parties or the relationship of principal and agent between any of them.

11.5   This Agreement and its Schedules (which are incorporated into and made part of this Agreement) constitute the entire agreement between the Parties with respect to the subject matter of this Agreement.

11.6   Any notice pursuant to this Agreement shall be in writing signed by (or by some person duly authorized by) the Party giving it; and may be served by leaving it or sending it by fax, prepaid recorded delivery, ordinary post confirmed by telephone or fax or registered post to the address of the other Party or Parties (or their representative).

11.7   If any one or more clauses or sub-clauses of this Agreement would result in this Agreement being prohibited pursuant to any applicable competition, unfair trading or anti-trust laws, then it or they shall be deemed to be omitted. The Parties shall uphold the remainder of this Agreement, and shall negotiate an amendment, which, as far as legally feasible, maintains the economic balance between the Parties.

11.8   This Agreement is not transferable, and no Party may purport to assign it (in whole or in part) without the prior written consent of the others. The Parties to this Agreement do not intend that any of the terms of this Agreement should be enforceable by a person who is not a Party to it. Except that this Agreement can be assigned in connection with the sale of ULURU or its assets.

12.   11.           VALIDITY OF THE AGREEMENT

12.1   Modification

No prior course of dealings between the parties and no usage of trade shall be relevant or admissible to supplement, explain or vary any of the terms of this Agreement.  Acceptance of or acquiescence in, a course of performance rendered under this or any prior agreement shall not be relevant or admissible to determine the meaning of this Agreement even though the accepting or acquiescing party has knowledge of the nature of the performance and an opportunity to make objection. No representations, understandings, or agreements have been made or relied upon in the making of this Agreement other than those specifically set forth herein.

12.2   Procedure for modification

This Agreement can only be modified in writing signed by all of the Parties or their duly authorized agents.  Such modification may be effected only after giving a notice of a minimum of 30 (thirty) days to all the parties concerned. Failure to give such a notice would nullify the modification so made, unless specifically ratified by all the parties concerned.

13.   DISPUTES AND ARBITRATION

13.1   Dispute

Both Parties hereto agree to settle any dispute and or difference arising out of or in connection with this Agreement through a good faith negotiation in an amicable manner.

13.2   Conflicts of interest and principles of resolution

In the event of any dispute or conflict of interest between the Parties it is agreed by the Parties that the overriding principle adopted when resolving the matter shall always be that the best interests of the Company and the Products shall take precedence over any other interests.

In the event of any dispute or conflict of interest between ULURU or IPMD and any third party, including any affiliates or group concerns, it is agreed by the Parties that the overriding principle adopted when resolving the matter shall always be that the best interests of the Company and the Products shall take precedence over any other interests.

13.3   Arbitration

Should it be impossible to reach an amicable settlement on any dispute and differences, Frankfurt am Main shall be the sole and exclusive place for any such Arbitration, and/or litigation, which shall be governed by German Law. The cost incurred in such proceedings shall be borne by the unsuccessful party or in such equitable manner as the arbitrator or the arbitration panel may decree.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.

SIGNED by                                         /s/ Helmut Kerschbaumer

for and on behalf of    Helmut Kerschbaumer

IPMD GmbH                                       Chief Executive Officer

SIGNED by                                         /s/ Kerry P. Gray

for and on behalf of                           Kerry P. Gray

ULURU Delaware Inc.                       President and Chief Executive Officer

Appendix 1

The 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

Appendix 2

Africa (excluding North Africa and French Speaking Africa);

Latin America

Georgia

Ukraine

Turkmenistan

Commonwealth of Independent States

Asia (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan)

Pacific (excluding Australia and New Zealand)

Appendix 3

Payment of Dividends

Alteration of the nature of the Business

Sale of the Company or Company Assets

Investments of the Company > € 1.5 Mio

Acquisition of other companies or other companies assets

EX-21.1

Exhibit 21.1

Subsidiaries of ULURU Inc.

 

Subsidiary	Jurisdiction of Incorporation
Cardinia Acquisition Corp.	Delaware
ULURU Delaware Inc.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-1 (File Nos. 333-179517-12976479 and 333-179517-12610583), Forms SB-2 (File Nos. 333-139417-07798666, 333-139417-07596705, and 333-139417-061281180), Forms S-3 (File Nos. 333-160568-09957502 and 333-160568-09944086) and Form S-8 (File Nos. 333-189683-13940607, 333-182402-12932310, 333-168138-10955374, 333-164560-10552094, 333-143373-07887708 and 333-141576-07718413) of ULURU Inc. of our report dated March 31, 2014 relating to the consolidated financial statements for the two years ended December 31, 2013 which appear in the Annual Report on Form 10-K of ULURU Inc. filed with the Securities and Exchange Commission on March 31, 2014.

/s/ Lane Gorman Trubitt, PLLC

Lane Gorman Trubitt, PLLC

Dallas, Texas

March 31, 2014

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 Annual Report on Form 10-K 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: March 31, 2014	/s/ Kerry P. Gray
	Kerry P. Gray
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

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, Terrance K. Wallberg, certify that:

1.	I have reviewed this Annual Report on Form 10-K 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: March 31, 2014	/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 PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification set forth below is hereby made solely for the purposes of satisfying the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be relied upon or used for any other purposes. A signed original of this written statement required by Section 906 has been provided to ULURU Inc. and will be retained by ULURU Inc. and furnished to the SEC or its staff upon its request. Pursuant to Section 906 of the Public Company Accounting Reform and Investor Act of 2002 (18 U.S.C. 1350, as adopted, the “Sarbanes-Oxley Act”), Kerry P. Gray, President and Chief Executive Officer of ULURU Inc. (the “Company”), hereby certifies that to his knowledge the Annual Report on Form 10-K for the period ended December 31, 2013 of the Company filed with the Securities and Exchange Commission on the date hereof
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 result of operations of the Company for the period specified

Date: March 31, 2014	By:	/s/ Kerry P. Gray
	Name:	Kerry P. Gray
	Title:	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification set forth below is hereby made solely for the purposes of satisfying the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be relied upon or used for any other purposes. A signed original of this written statement required by Section 906 has been provided to ULURU Inc. and will be retained by ULURU Inc. and furnished to the SEC or its staff upon its request. Pursuant to Section 906 of the Public Company Accounting Reform and Investor Act of 2002 (18 U.S.C. 1350, as adopted, the “Sarbanes-Oxley Act”),Terrance K. Wallberg, Vice President and Chief Financial Officer of ULURU Inc. (the “Company”), hereby certifies that to his knowledge the Annual Report on Form 10-K for the period ended December 31, 2013 of the Company filed with the Securities and Exchange Commission on the date hereof
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 result of operations of the Company for the period specified

Date: March 31, 2014	By:	/s/ Terrance K. Wallberg
	Name:	Terrance K. Wallberg
	Title:	Vice President and Chief Financial Officer

XML

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Tables)

12 Months Ended

Dec. 31, 2013

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY [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.	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	)

XML

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 2,246,925	$ 2,212,769
Less: accumulated depreciation and amortization	(1,608,311)	(1,367,234)
Property, equipment and leasehold improvements, net	638,614	845,535
Depreciation expense	244,704	291,274
Laboratory Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	424,888	424,888
Manufacturing Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	1,581,728	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
Computer Software [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	4,108	4,108
Leasehold Improvements [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 95,841	$ 95,841

XML

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2013

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) [Abstract]

Quarterly financial information

The following table contains condensed information from the Company’s Consolidated Statements of Operations for each quarter of the years ended December 31, 2013 and 2012. We have derived this data from its unaudited quarterly financial statements. We believe that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2013
Revenues	$	102,044		$	28,884		$	110,580		$	129,060
Costs and expenses		649,413			744,932			743,033			880,888
Operating (loss)		(547,369	)		(716,048	)		(632,453	)		(751,828	)
Other income (expense)		(109,221	)		(106,737	)		(110,816	)		(106,442	)
Net (loss)	$	(656,590	)	$	(822,785	)	$	(743,269	)	$	(858,270	)
Less preferred stock dividends		(12,021	)		(12,154	)		(6,061	)		---
Net (loss) allocable to common stockholders	$	(668,611	)	$	(834,939	)	$	(749,330	)	$	(858,270	)
Basic and diluted net (loss) per common share	$	(0.06	)	$	(0.06	)	$	(0.05	)	$	(0.04	)
2012
Revenues	$	60,005		$	56,211		$	88,922		$	165,456
Costs and expenses		879,717			884,289			837,149			1,034,259
Operating (loss)		(819,712	)		(828,078	)		(748,227	)		(868,803	)
Other income (expense)		(23,697	)		(30,068	)		(103,498	)		(109,266	)
Net (loss)	$	(843,409	)	$	(858,146	)	$	(851,725	)	$	(978,069	)
Less preferred stock dividends		(10,726	)		(12,154	)		(12,288	)		(12,288	)
Net (loss) allocable to common stockholders	$	(854,135	)	$	(870,300	)	$	(864,013	)	$	(990,357	)
Basic and diluted net (loss) per common share	$	(0.11	)	$	(0.11	)	$	(0.10	)	$	(0.10	)

XML

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

12 Months Ended

Dec. 31, 2013

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY [Abstract]

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

NOTE 10. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

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.

Financial statements of Altrazeal Trading Ltd. for the years ended December 31, 2013 and 2012 have not been released to us, therefore, we have not included the effect of the financial activities of Altrazeal Trading Ltd in our financial statements for each year.  We believe that our share of the cumulative losses of Altrazeal Trading Ltd for the years ended December 31, 2013 and 2012 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such years and no additional losses would be charged to operations.

Based upon the unaudited financial statements provided by Altrazeal Trading Ltd. for the year ended December 31, 2012, 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.	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 December 31, 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 year ended December 31, 2013.

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Revenues
License fees	$ 48,688	$ 40,563
Royalty income	30,016	49,918
Product sales, net	291,864	280,113
Total Revenues	370,568	370,594
Costs and Expenses
Cost of goods sold	222,122	243,538
Research and development	788,242	832,931
Selling, general and administrative	1,288,050	1,791,221
Amortization of intangible assets	475,148	476,450
Depreciation	244,704	291,274
Total Costs and Expenses	3,018,266	3,635,414
Operating (loss)	(2,647,698)	(3,264,820)
Other Income (Expense)
Interest and miscellaneous income	69,686	61,719
Interest expense	(506,529)	(328,248)
Equity in earnings (loss) of unconsolidated subsidiary	0	0
Gain on sale of equipment	3,627	0
(Loss) Before Income Taxes	(3,080,914)	(3,531,349)
Income taxes	0	0
Net (loss)	(3,080,914)	(3,531,349)
Less preferred stock dividends	(30,236)	(47,456)
Net (loss) allocable to common stockholders	$ (3,111,150)	$ (3,578,805)
Basic and diluted net (loss) per common share (in dollars per share)	$ (0.21)	$ (0.42)
Weighted average number of common shares outstanding (in shares)	14,772,578	8,493,703

XML

SEGMENT INFORMATION

12 Months Ended

Dec. 31, 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 seven licensees for international activities and our domestic sales activities for Altrazeal®.

Revenues per geographic area, along with relative percentages of total revenues, for the year ended December 31, are summarized as follows:

Revenues	2013		%			2012		%
Domestic	$	65,546		18	%	$	177,440		48	%
International		305,022		82	%		193,154		52	%
Total	$	370,568		100	%	$	370,594		100	%

A significant portion of our revenues are derived from a few major customers.  Customers with greater than 10% of total revenues, along with their relative percentage of total revenues, for the year ended December 31 are represented on the following table:

Customers	Product	2013			2012
Customer A	Altrazeal®		67	%		32	%
Customer B	Altrazeal® Veterinary		-			14	%
Customer C	Aphthasol®		-			13	%
Total			67	%		59	%

XML

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

12 Months Ended

Dec. 31, 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 year ended December 31, 2013 that had, or are expected to have, a material impact on our financial statements.

XML

EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2013

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 15. 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 December 31:

	December 31, 2013		December 31, 2012
Warrants to purchase common stock (1)		4,665,451		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)		3,124,680		5,617,974
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 and July 2011 (3)		253,315		368,637
Common stock issuable upon the assumed conversion of our Series A preferred stock (4)(5)		-		1,002,634
Total		9,058,353		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 three warrants for 1,571,428 shares of common stock have been exercised.  For the purposes of this Table, only such net vested shares of common stock from the fourth warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of common stock.  On January 22, 2014, we elected to offset and deduct the three remaining Investor Notes from the principle amount due to Inter-Mountain under the June 2012 Note and as a result of the offset and deduction the three remaining warrants terminated.

(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 December 31, 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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ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2013

ACCRUED LIABILITIES [Abstract]

ACCRUED LIABILITIES

NOTE 11. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at December 31:

Accrued Liabilities	2013		2012
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		148,683		213,005
Accrued insurance payable		60,113		52,629
Product rebates/returns		32		81
Other		836		951
Total accrued liabilities	$	315,963	$	372,965

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INVENTORY

12 Months Ended

Dec. 31, 2013

INVENTORY [Abstract]

INVENTORY

NOTE 7. INVENTORY

As of December 31, 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.  For the years ended December 31, 2013 and 2012, we wrote off approximately $60,000 and $88,000, respectively, in obsolete inventories.

The components of inventory, at the different stages of production, consisted of the following at December 31:

Inventory	2013		2012
Finished goods	$	85,993	$	303,779
Work-in-progress		299,464		190,794
Raw materials		10,148		33,070
Total	$	395,605	$	527,643

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STOCKHOLDERS' EQUITY (Details) (USD $)	12 Months Ended										12 Months Ended				0 Months Ended									12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2013 Kerry P. Gray [Member]	Dec. 31, 2013 Terrace K. Wallberg [Member]	Dec. 31, 2013 Inter-Mountain [Member]	Dec. 31, 2012 Inter-Mountain [Member]	Dec. 31, 2013 Warrant - June 2012 Debt Offering [Member]	Dec. 31, 2012 Warrant - June 2012 Debt Offering [Member]	Dec. 31, 2013 Warrant - June 2012 Debt Offering [Member] Private Placement [Member]	Jul. 15, 2013 Warrant - June 2012 Debt Offering [Member] Private Placement [Member]	Feb. 26, 2013 Warrant - June 2012 Debt Offering [Member] Private Placement [Member]	Jun. 27, 2012 Warrant - June 2012 Debt Offering [Member] Private Placement [Member]	Jan. 22, 2014 Warrant - June 2012 Debt Offering [Member] Inter-Mountain [Member]	Dec. 31, 2013 January 3, 2014 [Member]	Dec. 31, 2013 July 23, 2014 [Member]	Dec. 31, 2013 May 15, 2015 [Member]	Dec. 31, 2013 June 13, 2016 [Member]	Dec. 31, 2013 July 16, 2016 [Member]	Dec. 31, 2013 July 28, 2016 [Member]	Dec. 31, 2013 June 27, 2017 [Member]	Dec. 31, 2013 March 14, 2018 [Member]	Dec. 31, 2013 Series A Preferred Stock [Member]
Common Stock [Abstract]
Common Stock, shares issued (in shares)	18,871,420		10,074,448
Common Stock, shares outstanding (in shares)	18,871,420		10,074,448
Common stock issued during period (in shares)	8,796,972
Number of shares of common stock issued for IPMD pursuant (in shares)	3,750,000
Stock issued in lieu of offering agreement (in shares)	825,000
Number shares of common stock issued for installment payments (in shares)	3,072,648
Shares issued on exercise of warrants (in shares)	725,274
Common stock issued for consulting services (in shares)	363,750
Common stock issued in lieu of wages (in shares)	60,000
Number of shares of common stock issued for vesting of restricted stock awards (in shares)	300
Preferred Stock [Abstract]
Preferred stock, shares issued (in shares)																								0
Preferred stock, shares outstanding (in shares)																								0
Preference shares redeemed by offset of promissory note receivable (in shares)	(65)																							(65)
Promissorry note offset on preference share redemption	$ (969,000)																							$ (969,000)
Term of note																								7 years 6 months
Warrants and number of shares of common stock subject to exercise [Roll Forward]
Balance (in shares)	2,041,165		612,594								392,857	392,857	392,857	785,714		3,000,000	69,050	357,155	35,000	116,667	34,722	392,857	660,000
Warrants issued (in shares)	4,445,714		1,428,571
Warrants exercised (in shares)	(1,571,428)	[1]	0
Warrants cancelled (in shares)	(250,000)		0
Balance (in shares)	4,665,451	[1]	2,041,165								392,857	392,857	392,857	785,714		3,000,000	69,050	357,155	35,000	116,667	34,722	392,857	660,000
Warrants, weighted-average exercise price [Abstract]
Balance (in dollars per share)	$ 0.98		$ 2.45
Warrants issued (in dollars per share)	$ 0.56		$ 0.35
Warrants exercised (in dollars per share)	$ 0.35	[1]	$ 0
Warrants cancelled (in dollars per share)	$ 0.35		$ 0
Balance (in dollars per share)	$ 0.82	[1]	$ 0.98
Warrant shares subject to expiration [Abstract]
Number of warrant shares of common stock subject to expiration (in shares)	4,665,451	[1]	2,041,165								392,857	392,857	392,857	785,714		3,000,000	69,050	357,155	35,000	116,667	34,722	392,857	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		1,571,428		600,000	60,000	785,714	3,142,857	3,142,857	3,142,857						3,000,000
Number of warrants exercised (in shares)											3
Aggregate shares of common stock issued upon exercise of warrants (in shares)	4,445,714		1,571,428		600,000	60,000	785,714	3,142,857	3,142,857	3,142,857						3,000,000
Number of warrants terminated (in shares)															3
Common stock vested upon initial warrant (in shares)	4,665,451	[1]	2,041,165								392,857	392,857	392,857	785,714		3,000,000	69,050	357,155	35,000	116,667	34,722	392,857	660,000
Exercise price of warrants (in dollars per share)	$ 0.35			$ 0.35	$ 0.60	$ 0.60	$ 0.35			$ 0.35						$ 0.60

[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 three warrants for 1,571,428 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock from the fourth warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of common stock. On January 22, 2014, we elected to offset and deduct the three remaining Investor Notes from the principle amount due to Inter-Mountain under the June 2012 Note and as a result of the offset and deduction the three remaining warrants terminated.

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OTHER RECEIVABLE

12 Months Ended

Dec. 31, 2013

OTHER RECEIVABLE [Abstract]

OTHER RECEIVABLE

NOTE 5. OTHER RECEIVABLE

On June 25, 2010, we entered into an acquisition and license agreement with Strakan International Limited and Zindaclin Limited, a subsidiary of Crawford Healthcare Limited, a pharmaceutical company based in England.  Under the terms of the agreement, Zindaclin Limited will pay up to $5.1 million for the exclusive product rights to Zindaclin®, a zinc clindamycin product for the treatment of acne, which consideration will be shared equally by Strakan International Limited and us.  Guaranteed payments of $1,050,000 were scheduled to be received by us, of which $550,000 occurred in 2010, $250,000 occurred in 2011, and $250,000 was to occur in June 2012.  On March 22, 2012, we agreed to accept $220,000 for the early remittance of the final guaranteed payment, which was received prior to March 29, 2012.

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NOTES RECEIVABLE

12 Months Ended

Dec. 31, 2013

NOTES RECEIVABLE [Abstract]

NOTES RECEIVABLE

NOTE 6. 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 December 31, 2013, we had $777,710 in notes receivable which is comprised of $687,500 for three Investor Notes and $90,210 for accrued interest thereon.

Please refer to Note 12. for a more detailed description of the June 2012 Note transaction.

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

12 Months Ended

Dec. 31, 2013

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract]

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

NOTE 8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at December 31:

Property, equipment and leasehold improvements	2013			2012
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,581,728			1,547,572
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,246,925			2,212,769
Less: accumulated depreciation and amortization		(1,608,311	)		(1,367,234	)
Property, equipment and leasehold improvements, net	$	638,614		$	845,535

Depreciation expense on property, equipment, and leasehold improvements was $244,704 and $291,274 for the years ended December 31, 2013 and 2012, respectively.

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SHARE BASED COMPENSATION, Stock options grant outstanding and excercisable (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Stock option grants outstanding and exercisable [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 7 months 6 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]
Stock option grants outstanding and exercisable [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 2 months 12 days
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]
Stock option grants outstanding and exercisable [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 6 months
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]
Stock option grants outstanding and exercisable [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 3 months 18 days
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]
Stock option grants outstanding and exercisable [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	3 years 9 months 18 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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FAIR VALUE MEASUREMENTS (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Assets [Abstract]
Notes receivable and accrued interest	$ 777,710	$ 1,302,220
Convertible note - June 2011 [Member]
Liabilities [Abstract]
Convertible note payable	138,220	134,154
Convertible note - July 2011 [Member]
Liabilities [Abstract]
Convertible note payable	120,738	113,084
Convertible note - June 2012 [Member]
Liabilities [Abstract]
Convertible note payable	$ 888,099	$ 1,593,924

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SHARE BASED COMPENSATION, Allocated Compensation expense (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Stock Options [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 80,939	$ 37,897
Stock Options [Member] | Research and Development [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	16,863	6,280
Stock Options [Member] | Selling, General and Administrative [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	64,076	31,617
Restricted Stock [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	991	8,297
Restricted Stock [Member] | Research and Development [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	444	3,762
Restricted Stock [Member] | Selling, General and Administrative [Member]
Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 547	$ 4,535

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Estimated useful lives for property and equipment

Property, equipment, and leasehold improvements are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method.  Estimated useful lives for property, equipment, and leasehold improvements categories are as follows:

Furniture, fixtures, and laboratory equipment	7 years
Computer and office equipment	5 years
Computer software	3 years
Leasehold improvements	Lease term

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OTHER RECEIVABLE (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2013
OTHER RECEIVABLE [Abstract]
License receivable, maximum				$ 5,100,000
Guaranteed license receivable	1,050,000
Guaranteed payments received	250,000	250,000	550,000
Early remittance of final guaranteed payment	$ 220,000

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EQUITY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

EQUITY TRANSACTIONS [Abstract]

EQUITY TRANSACTIONS

NOTE 13. EQUITY TRANSACTIONS

Common Stock Transactions

March 2013 Offering

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.  We received subsequent funding tranches of $110,000, $132,000, and $110,000 for the purchase of 275,000, 330,000, and 275,000 shares of our common stock on July 15, 2013, November 14, 2013, and March 14, 2014, respectively.

January 2013 Offering

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.  We received subsequent funding tranches of $500,000, $300,000, $300,000, and $500,000 for the purchase of 1,250,000, 750,000, 750,000, and 1,250,000 shares of our common stock on May 7, 2013, September 6, 2013, October 24, 2013, and January 6, 2014 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.

On January 3, 2014, the Warrants vested with respect to 3,000,000 shares of our common stock and were exercised by IPMD on that date pursuant to a Notice of Exercise, accepted by the Company, that provided for the issuance of 750,000 shares of common stock on each of January 31, 2014, February 28, 2014, March 31, 2014, and April 30, 2014 in exchange for the payment of $450,000 on each such date.

On January 31, 2014, IPMD entered into an Assignment Agreement (the “Assignment Agreement”) with The Punch Trust (“TPT”) and Michael I. Sacks (“Sacks”) pursuant to which IPMD assigned to TPT and Sacks its rights and interests to purchase up to 3,000,000 shares of our common stock as detailed in the Warrants and the Notice of Exercise.  Neither TPT nor Sacks paid any monetary consideration to IPMD in connection with the assignments under the Assignment Agreement.

Concurrent with the assignment under the Assignment Agreement described above, ULURU, TPT, Sacks, and IPMD entered into an Implementation Agreement (the “Implementation Agreement”) pursuant to which we consented and agreed to the assignment of the Warrants to TPT and Sacks.  We also agreed to issue and facilitate the delivery of the shares of Common Stock under the Warrants to TPT and Sacks upon their payment of the corresponding purchase price due under the Warrants.  Under the terms of the Warrants, Sacks made payments of $450,000 on each of January 31, 2014 and February 28, 2014 and the Company issued 750,000 shares of Common Stock to him on each date, respectively. Of the 3,000,000 shares of Common Stock issuable under the Warrants, the Implementation Agreement provides for Sacks to acquire 2,000,000 shares (750,000 on each of January 31 and February 28 and 250,000 on each of March 31 and April 30) and TPT to acquire 1,000,000 shares (500,000 on each of March 31 and April 30).

On January 31, 2014, we also entered into a Registration Rights Agreement with TPT and Sacks whereby we agreed to prepare and file with the SEC a registration statement for the number of shares referred to therein within sixty days after request and to use commercially reasonable efforts to cause such registration statement to be declared effective with the SEC and to keep such registration statement effective for a period of eighty days and, if necessary, such eighty day period being extended for up to sixty additional days.

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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 18. 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 notes receivable and accrued interest and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

The fair value of our financial instruments consisted of the following at December 31:

Description	2013		2012
Assets:
Notes receivable and accrued interest	$	777,710	$	1,302,220
Liabilities:
Convertible note – June 2011	$	138,220	$	134,154
Convertible note – July 2011	$	120,738	$	113,084
Convertible note – June 2012	$	888,099	$	1,593,924

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013 Customer	Dec. 31, 2012 Customer	Dec. 31, 2011
Trade Accounts Receivable and Allowance for Doubtful Accounts [Abstract]
Allowance for doubtful accounts	$ 907	$ 18,932
Accounts written off as uncollectible	(1,126)	17,135
Prepaid Expenses and Deferred Charges [Abstract]
Prepaid PDUFA fees	0	73,582
Deferred Financing Costs [Abstract]
Financing costs related to convertible notes payable		200,000
Amortization costs	74,000	39,230
Deferred financing cost included in other assets	87,000	161,000
Product Sales [Abstract]
Period over which no actual product returns occurred	2 years
Concentrations of Credit Risk [Abstract]
Cash and cash equivalents	$ 5,119	$ 21,549	$ 46,620
Concentration Risk [Line Items]
Minimum threshold limit of trade accounts receivable (in hundredths)	5.00%	5.00%
Number of customers exceeds threshold limit of 5%	2	2
Concentration risk percentage (in hundredths)	67.00%	59.00%
Accounts Receivable [Member] | Customer One [Member] | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk percentage (in hundredths)	86.00%	77.00%
Accounts Receivable [Member] | Customer Two [Member] | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk percentage (in hundredths)	11.00%	13.00%
Furniture, Fixtures, and Laboratory Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment	7 years
Computer and Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment	5 years
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment	3 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment, description	Lease term

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CONVERTIBLE DEBT (Tables)

12 Months Ended

Dec. 31, 2013

CONVERTIBLE DEBT [Abstract]

Information relating to convertible notes payable

Information relating to our convertible notes payable is as follows:

									As of December 31, 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	$	1,780	$	138,220
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		4,262		120,738
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,093,638		205,539		888,099
Total	$	2,475,000							$	1,358,638	$	211,581	$	1,147,057

(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 shares, 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 payments relating to our convertible notes payable, as of December 31, 2013, are as follows:

	Payments Due By Period
Transaction	Total		2014		2015		2016		2017		2018
June 2011 Note	$	140,000	$	140,000	$	-	$	-	$	-	$	-
July 2011 Note		125,000		125,000		-		-		-		-
June 2012 Note		1,093,638		1,093,638		-		-		-		-
Total	$	1,358,638	$	1,358,638	$	-	$	-	$	-	$	-

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Series A Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Promissory Note Receivable and Accrued Interest [Member]	Accumulated (Deficit) [Member]	Total
Balance at Dec. 31, 2011	$ 0	$ 7,269	$ 49,750,792	$ (725,045)	$ (44,931,627)	$ 4,101,389
Balance (in shares) at Dec. 31, 2011	25	7,269,063
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in a private placement (in shares)	0	491,636
Issuance of common stock in a private placement	0	492	245,326	(245,818)	0	0
Issuance of common stock for principle and interest due on convertible note (in shares)	0	1,987,992
Issuance of common stock for principle and interest due on convertible note	0	1,988	331,344	0	0	333,332
Issuance of common stock for services and wages (in shares)	0	325,000
Issuance of common stock for services and wages	0	325	129,675	0	0	130,000
Issuance of common stock - vesting of restricted stock (in shares)	0	699
Issuance of common stock - vesting of restricted stock	0	1	(1)	0	0	0
Issuance of Series A preferred stock in a private placement, net of fund raising costs (in shares)	40	0
Issuance of Series A preferred stock in a private placement, net of fund raising costs	0	0	275,761	0	0	275,761
Issuance of warrants for services	0	0	48,776	0	0	48,776
Issuance of warrants in connection with convertible promissory note	0	0	457,912	0	0	457,912
Offering costs in connection with convertible promissory note	0	0	(42,710)	0	0	(42,710)
Offering costs adjustment - Series A preferred stock sale in 2011	0	0	31,961	0	0	31,961
Repurchase of common stock (fractional shares from reverse stock split) (in shares)	0	58
Repurchase of common stock (fractional shares from reverse stock split)	0	0	21	0	0	21
Accrued interest on promissory notes for issuance of common stock	0	0	14,424	(14,424)	0	0
Accrued dividends on Series A preferred stock	0	0	47,456	0	(47,456)	0
Share-based compensation of employees	0	0	17,915	0	0	17,915
Share-based compensation of non-employees	0	0	28,279	0	0	28,279
Net (loss)	0	0	0	0	(3,531,349)	(3,531,349)
Balance at Dec. 31, 2012	0	10,075	51,336,931	(985,287)	(48,510,432)	1,851,287
Balance (in shares) at Dec. 31, 2012	65	10,074,448
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and warrants in a private placement, net of offering costs of $4,379 (in shares)	0	3,750,000
Issuance of common stock and warrants in a private placement, net of offering costs of $4,379	0	3,750	1,491,871	0	0	1,495,621
Issuance of common stock and warrants in a private placement, net of offering costs of $2,175 (in shares)	0	825,000
Issuance of common stock and warrants in a private placement, net of offering costs of $2,175	0	825	327,000	0	0	327,825
Issuance of common stock for principle and interest due on convertible note (in shares)	0	3,072,648				725,274
Issuance of common stock for principle and interest due on convertible note	0	3,073	915,257	0	0	918,330
Issuance of common stock for services and wages (in shares)	0	423,750
Issuance of common stock for services and wages	0	424	177,826	0	0	178,250
Issuance of common stock - 725,274 shares for cashless exercise of warrants to purchase 1,571,428 shares (in shares)	0	725,274				725,274
Issuance of common stock - 725,274 shares for cashless exercise of warrants to purchase 1,571,428 shares	0	725	(725)	0	0	0
Issuance of common stock - vesting of restricted stock (in shares)	0	300
Issuance of common stock - vesting of restricted stock	0	0	0	0	0	0
Redemption of Series A preferred stock (in shares)	(65)	0
Redemption of Series A preferred stock	0	0	(992,430)	994,294	0	1,864
Offering costs adjustment - Series A preferred stock sale in 2011	0	0	8,000	0	0	8,000
Cancellation of warrants issued for services	0	0	(48,776)	0	0	(48,776)
Accrued interest on promissory notes for issuance of common stock	0	0	9,007	(9,007)	0	0
Accrued dividends on Series A preferred stock	0	0	30,236	0	(30,236)	0
Share-based compensation of employees	0	0	15,648	0	0	15,648
Share-based compensation of non-employees	0	0	66,282	0	0	66,282
Net (loss)	0	0	0	0	(3,080,914)	(3,080,914)
Balance at Dec. 31, 2013	$ 0	$ 18,872	$ 53,336,127	$ 0	$ (51,621,582)	$ 1,733,417
Balance (in shares) at Dec. 31, 2013	0	18,871,420

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.  The carrying value of these cash equivalents approximates fair value.

We 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 taking into consideration the need for liquidity and capital preservation.  These investments are not held for trading or other speculative purposes.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest.  We estimate the collectability of our accounts receivable. In order to assess the collectability of these receivables, we monitor the current creditworthiness of each customer and analyze the balances aged beyond the customer's credit terms. Theses evaluations may indicate a situation in which a certain customer cannot meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance requirements are based on current facts and are reevaluated and adjusted as additional information is received. Accounts receivable are subject to an allowance for collection when it is probable that the balance will not be collected. As of December 31, 2013 and 2012, the allowance for doubtful accounts was $907 and $18,932, respectively.  For the years ended December 31, 2013 and 2012, the accounts written off as uncollectible or previously written off and recovered were $(1,126) and $17,135, respectively.

Inventory

Inventories are stated at the lower of cost or market value. Raw material inventory cost is determined on the first-in, first-out method. Costs of finished goods are determined by an actual cost method. 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.

Prepaid Expenses and Deferred Charges

From time to time fees are payable to the United States Food and Drug Administration (“FDA”) in connection with new drug applications submitted by us and annual prescription drug user fees (“PDUFA”). Such fees are being amortized ratably over the FDA’s prescribed fiscal period of twelve months ending September 30th.  As of December 31, 2013 and 2012, the amount of prepaid PDUFA fees was nil and $73,582, respectively.

Additionally, we amortize our insurance costs ratably over the term of each policy.  Typically, our insurance policies are subject to renewal in July and October of each year.

Notes Receivable

Notes receivable are stated at unpaid principle balance.  Interest on notes receivable is recognized over the term of the note and is calculated by the simple interest method on principle amounts outstanding.  We estimate the collectability of our notes receivable.  This estimate is based on similar evaluation criteria as used in estimating the collectability of our trade accounts receivable.  Notes receivable are subject to an allowance for collection when it is probable that the balance, or a portion thereof, will not be collected.  As of December 31, 2013 and 2012, the allowance for collection for our notes receivable was nil.

Property, Equipment and Leasehold Improvements

Property, equipment, and leasehold improvements are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method.  Estimated useful lives for property, equipment, and leasehold improvements categories are as follows:

Furniture, fixtures, and laboratory equipment	7 years
Computer and office equipment	5 years
Computer software	3 years
Leasehold improvements	Lease term

Intangible Assets

We expense internal patent and application costs as incurred because, even though we believe the patents and underlying processes have continuing value, the amount of future benefits to be derived from them are uncertain.  Purchased patents are capitalized and amortized over the life of the patent.

Impairment of Assets

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350-30, Intangibles Other than Goodwill, our policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets and certain identifiable intangibles when certain events have taken place that indicate the remaining unamortized balance may not be recoverable, or at least annually to determine the current value of the intangible asset. When factors indicate that the intangible assets should be evaluated for possible impairment, we use an estimate of undiscounted cash flows.  Considerable management judgment is necessary to estimate the undiscounted cash flows.  Accordingly, actual results could vary significantly from management’s estimates.

Deferred Financing Costs

We defer financing costs associated with the issuance of our convertible notes payable and amortize those costs over the period of the convertible notes using the effective interest method.  In 2012, we incurred $200,000 of financing costs related to our convertible note payable with Inter-Mountain Capital Corp.

During 2013 and 2012, we recorded amortization of approximately $74,000 and $39,000, respectively, of deferred financing costs. Other assets at December 31, 2013 and 2012 included net deferred financing costs of approximately of $87,000 and $161,000, respectively.

Accrual for Clinical Study Costs

We record accruals for estimated clinical study costs.  Clinical study costs represent costs incurred by clinical research organizations, or CROs, and clinical sites.  These costs are recorded as a component of research and development expenses.  We analyze the progress of the clinical trials, including levels of patient enrollment and/or patient visits, invoices received and contracted costs when evaluating the adequacy of the accrued liabilities.  Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period.  Actual costs incurred may or may not match the estimated costs for a given accounting period.  As of December 31, 2013 and 2012, the accrual for estimated clinical study costs was nil.

Shipping and Handling Costs

Shipping and handling costs incurred for product shipments are included in cost of goods sold.

Income Taxes

We use the liability method of accounting for income taxes pursuant to ASC Topic 740, Income Taxes.  Under this method, deferred income taxes are recorded to reflect the tax consequences in future periods of temporary differences between the tax basis of assets and liabilities and their financial statement amounts at year-end.

Revenue Recognition and Deferred Revenue

License Fees

We recognize revenue from license payments not tied to achieving a specific performance milestone ratably during the period over which we are obligated to perform services. The period over which we are obligated to perform services is estimated based on available facts and circumstances. Determination of any alteration of the performance period normally indicated by the terms of such agreements involves judgment on management's part. License revenues with no specific performance criteria are recognized when received from our foreign licensee and their various foreign sub-licensees as there is no control by us over the various foreign sub-licensees and no performance criteria to which we are subject.

We recognize revenue from performance payments ratably, when such performance is substantially in our control and when we believe that completion of such performance is reasonably probable, over the period during which we estimate that we will complete such performance obligations.  In circumstances where the arrangement includes a refund provision, we defer revenue recognition until the refund condition is no longer applicable unless, in our judgment, the refund circumstances are within our operating control and are unlikely to occur.

Substantive at-risk milestone payments, which are based on achieving a specific performance milestone when performance of such milestone is contingent on performance by others or for which achievement cannot be reasonably estimated or assured, are recognized as revenue when the milestone is achieved and the related payment is due, provided that there is no substantial future service obligation associated with the milestone.

Royalty Income

We receive royalty revenues under license agreements with a number of third parties that sell products based on technology we have developed or to which we have rights. The license agreements provide for the payment of royalties to us based on sales of the licensed products. We record these revenues based on estimates of the sales that occurred during the relevant period. The relevant period estimates of sales are based on interim data provided by licensees and analysis of historical royalties we have been paid (adjusted for any changes in facts and circumstances, as appropriate).

We maintain regular communication with our licensees in order to gauge the reasonableness of our estimates. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, typically the following quarter. Historically, adjustments have not been material based on actual amounts paid by licensees. As it relates to royalty income, there are no future performance obligations on our part under these license agreements. To the extent we do not have sufficient ability to accurately estimate revenue; we record it on a cash basis.

Product Sales

We recognize revenue and related costs from the sale of our products at the time the products are shipped to the customer.  Provisions for returns, rebates, and discounts are established in the same period the related product sales are recorded.

We review the supply levels of our products sold to major wholesalers in the U.S., primarily by reviewing reports supplied by our major wholesalers and available volume information for our products, or alternative approaches.  When we believe wholesaler purchasing patterns have caused an unusual increase or decrease in the sales of a major product compared with underlying demand, we disclose this in our product sales discussion if we believe the amount is material to the product sales trend; however, we are not always able to accurately quantify the amount of stocking or destocking.  Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.

We establish sales return accruals for anticipated product returns. We record the return amounts as a deduction to arrive at our net product sales.  Consistent with Revenue Recognition accounting guidance, we estimate a reserve when the sales occur for future product returns related to those sales. This estimate is primarily based on historical return rates as well as specifically identified anticipated returns due to known business conditions and product expiry dates. Actual product returns have been nil over the past two years.

We establish sales rebate and discount accruals in the same period as the related sales.  The rebate and discount amounts are recorded as a deduction to arrive at our net product sales.  We base these accruals primarily upon our historical rebate and discount payments made to our customer segment groups and the provisions of current rebate and discount contracts.

Sponsored Research Income

Sponsored research income has no significant associated costs since it is being paid only for information pertaining to a specific research and development project in which the sponsor may become interested in acquiring products developed thereby.  Payments received prior to our performance are deferred. Contract amounts are not recognized as revenue until the customer accepts or verifies the research has been completed.

Research and Development Expenses

Pursuant to ASC Topic 730, Research and Development, our research and development costs are expensed as incurred.

Research and development expenses include, but are not limited to, salaries and benefits, laboratory supplies, facilities expenses, preclinical development cost, clinical trial and related clinical manufacturing expenses, contract services, consulting fees and other outside expenses. The cost of materials and equipment or facilities that are acquired for research and development activities and that have alternative future uses are capitalized when acquired. There were no such capitalized materials, equipment or facilities for the years ended December 31, 2013 and 2012.

We may enter into certain research agreements in which we share expenses with a collaborator. We may also enter into other collaborations where we are reimbursed for work performed on behalf of our collaborative partners.  We record the expenses for such work as research and development expenses. If the arrangement is a cost-sharing arrangement and there is a period during which we receive payments from the collaborator, we record payments by the collaborator for their share of the development effort as a reduction of research and development expense. If the arrangement is a reimbursement of research and development expenses, we record the reimbursement as sponsored research income.

Basic and Diluted Net Loss Per Common Share

In accordance with 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 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 and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.

Concentrations of Credit Risk

Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, that 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.  During 2013, we utilized Bank of America, N.A. as our banking institution.  At December 31, 2013 and December 31, 2012 our cash and cash equivalents totaled $5,119 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 high quality corporations.

Concentration of credit risk with respect to trade accounts receivable are customers with balances that exceed 5% of total consolidated trade accounts receivable at December 31, 2013 and at December 31, 2012.  As of December 31, 2013, two customers exceeded the 5% threshold, with 86% and 11%, 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

Substantially all of our revenue and expenses are denominated in U.S. dollars, although we expect our revenues in international territories to increase in the future.  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 grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.

Fair Value of Financial Instruments

In accordance with portions of ASC Topic 820, Fair Value Measurements, 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.

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, notes receivable and accrued interest, and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.

Derivatives

We occasionally issue financial instruments that contain an embedded instrument. At inception, we assess whether the economic characteristics of the embedded derivative instrument are clearly and closely related to the economic characteristics of the financial instrument (host contract), whether the financial instrument that embodies both the embedded derivative instrument and the host contract is currently measured at fair value with changes in fair value reported in earnings, and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.

If the embedded derivative instrument is determined not to be clearly and closely related to the host contract, is not currently measured at fair value with changes in fair value reported in earnings, and the embedded derivative instrument would qualify as a derivative instrument, the embedded derivative instrument is recorded apart from the host contract and carried at fair value with changes recorded in current-period earnings.

We determined that all embedded items associated with financial instruments during 2013 and 2012 which qualify for derivative treatment, were properly separated from their host.  As of December 31, 2013 and 2012, we did not have any derivative instruments.

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CONVERTIBLE DEBT (Details) (USD $)	12 Months Ended										12 Months Ended							12 Months Ended				12 Months Ended				12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011	Jul. 31, 2011	Jun. 30, 2011	Dec. 31, 2011 Warrant - June 2011 Debt Offering [Member]	Dec. 31, 2012 Warrant - July 2011 Debt Offering [Member]	Dec. 31, 2011 Warrant - July 2011 Debt Offering [Member]	Dec. 31, 2013 Warrant - June 2012 Debt Offering [Member] Warrant	Dec. 31, 2012 Warrant - June 2012 Debt Offering [Member]	Jun. 27, 2012 Warrant - June 2012 Debt Offering [Member]	Dec. 31, 2013 Common Stock [Member]	Jun. 27, 2012 Common Stock [Member]	Dec. 31, 2013 June 2011 Note [Member]	Dec. 31, 2013 July 2011 Note [Member]	Dec. 31, 2013 June 2012 Note [Member]		Dec. 31, 2012 June 2012 Note [Member]	Dec. 31, 2011 Secured convertible note [Member]	Dec. 31, 2013 Secured convertible note [Member] June 2011 Note [Member]	Dec. 31, 2011 Secured convertible note [Member] June 2011 Note [Member]		Dec. 31, 2012 Secured convertible note [Member] June 2011 Note [Member]	Dec. 31, 2013 Secured convertible note [Member] July 2011 Note [Member]		Dec. 31, 2012 Secured convertible note [Member] July 2011 Note [Member]	Dec. 31, 2013 Secured convertible note [Member] June 2012 Note [Member] PromissoryNote	Dec. 31, 2012 Secured convertible note [Member] June 2012 Note [Member] Tranche PromissoryNote	Dec. 31, 2011 Secured convertible note [Member] Maximum [Member] June 2011 Note [Member]
Debt Instrument [Line Items]
Purchase price paid in cash																														$ 500,000
Purchase price paid in the form of promissory notes	0		1,500,000																										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 with in which judgment not stayed																														30 days
Increased interest rate in the event of default (in hundredths)																														18.00%
Annual principal payment																					14,653	14,001								11,542
Conversion number of equity instruments (in shares)																						116,667						115,741
Amortization of debt discount on convertible notes	178,548		97,901
Stock price trigger (in dollars per share)																												$ 2.16
Information relating to convertible notes payable [Abstract]
Initial Principal Amount	2,475,000																	2,210,000					140,000			125,000
Interest Rate (in hundredths)																		8.00%					10.00%			10.00%			12.00%
Maturity Date																		Mar. 27, 2015					Jun. 13, 2014			Jul. 28, 2014
Conversion Price (in dollars per share)	$ 0.70			$ 0.35		$ 1.08	$ 1.20											$ 0.35	[1],[2]				$ 1.20	[1],[2]		$ 1.08	[1],[2]				$ 1.80
Principal Balance	1,358,638															140,000	125,000	1,093,638
Unamortized Debt Discount	211,581															1,780	4,262	205,539
Carrying Value	1,147,057															138,220	120,738	888,099
Interest cost recognized	157,027		117,711
Interest payable																						553			2,080				492	1,643
Deferred Interest Payable																														12,501
Reduction of notes payable																				317,000
Shares issued (in shares)	725,274																												435,502
Current maturity of long-term debt																													152,000
Notice prior to the relevant payment date																						15 days				15 days
Number of warrant shares of common stock (in shares)	4,665,451	[3]	2,041,165		612,594																	116,667	35,000
Future Minimum payments due, convertible notes [Abstract]
2014	1,358,638															140,000	125,000	1,093,638
2015	0															0	0	0
2016	0															0	0	0
2017	0															0	0	0
2018	0															0	0	0
Total	$ 1,358,638															$ 140,000	$ 125,000	$ 1,093,638
Class of Warrant or Right [Line Items]
Number of warrants											7
Number of securities called by warrants (in shares)	4,445,714		1,571,428					35,000	34,722		3,142,857	3,142,857
Exercise price of warrants (in dollars per share)	$ 0.35			$ 0.35						$ 1.08		$ 0.35
Number of warrants that vest upon payment of notes (in shares)	3
Number of securities vested (in shares)												392,857	785,714	392,857	392,857
Shares issued on exercise of warrants (in shares)	725,274																												435,502
Warrants exercised (in shares)	1,571,428
Minimum period during which registration statement is to be declared effective after filing with the 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 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 shares, 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.

[3] 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 three warrants for 1,571,428 shares of common stock have been exercised. For the purposes of this Table, only such net vested shares of common stock from the fourth warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of common stock. On January 22, 2014, we elected to offset and deduct the three remaining Investor Notes from the principle amount due to Inter-Mountain under the June 2012 Note and as a result of the offset and deduction the three remaining warrants terminated.

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LEGAL PROCEEDINGS (Details)	12 Months Ended
	Dec. 31, 2013
LEGAL PROCEEDINGS [Abstract]
Percentage of voting securities (in hundredths)	5.00%

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 19. 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. Deferred tax assets as of December 31, 2013, of $18,344,933 were reduced to zero, after considering the valuation allowance of $18,344,933, since there is no assurance of future taxable income.  As of December 31, 2013 we have consolidated net operating loss carryforwards (“NOL”) and research credit carryforwards for income tax purposes of approximately $49,550,149 and $511,949, respectively.

The following are the consolidated operating loss carryforwards and research credit carryforwards that will begin expiring as follows:

Calendar Years	Consolidated Operating Loss Carryforwards		Research Activities Carryforwards
2021	$	34,248	$	-
2023		95,666		-
2024		910,800		13,584
2025		1,687,528		21,563
2026		11,950,281		60,797
2027		3,431,365		85,052
2028		8,824,940		139,753
2029		6,889,761		81,940
2030		5,113,583		41,096
2031		3,728,626		43,592
2032		3,695,792		8,690
2033		3,187,559		15,882
Total	$	49,550,149	$	511,949

The Tax Reform Act of 1986 contains provisions, which limit the amount of NOL and tax credit carryforwards that companies may utilize in any one year in the event of cumulative changes in ownership over a three-year period in excess of 50%.  Since the effective date of the Tax Reform Act of 1986, the Company has completed significant share issuances in 2003 and 2006 which may significantly limit our ability to utilize our NOL and tax credit carryforwards against taxable earnings in future periods.  Ownership changes in future periods may place additional limits on our ability to utilize NOLs and tax credit carryforwards.

An analysis of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012 are as follows:

	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	17,657,746		$	16,549,134
Intangible assets		247,248			305,552
Other		512,286			502,732
Total gross deferred tax assets		18,417,280			17,357,418
Deferred tax liabilities:
Property and equipment		72,347			77,839
Total gross deferred tax liabilities		72,347			77,839
Net total of deferred assets and liabilities		18,344,933			17,279,579
Valuation allowance		(18,344,933	)		(17,279,579	)
Net deferred tax assets	$	---		$	---

The valuation allowance increased by $1,065,354 and $1,225,683 in 2013 and 2012, respectively.

The following is a reconciliation of the expected statutory federal income tax rate to our actual income tax rate for the years ended December 31:

	2013			2012
Expected income tax (benefit) at federal statutory tax rate -35%	$	( 1,137,320	)	$	( 1,309,975	)
Permanent differences		21,754			16,500
Research tax credits		(15,882	)		(8,690	)
Amortization of deferred start up costs		-			-
Valuation allowance		1,131,448			1,302,165
Income tax expense	$	-		$	-

Effective January 1, 2007, we adopted ASC Topic 740, Accounting for Uncertainty in Income Taxes.  ASC Topic 740 is a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that we have taken or expects to take on a tax return.  If an income tax position exceeds a more likely than not (greater than 50%) probability of success upon tax audit, we will recognize an income tax benefit in its financial statements.  Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with jurisdictional tax laws.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations as a result of implementing ASC Topic 740.

Federal income tax returns for fiscal years 2010 through 2013 remain open and subject to examination by the Internal Revenue Service.  We file and remit state income taxes in various states where we have determined it is required to file state income taxes.  Our filings with those states remain open for audit for the fiscal years 2010 through 2013.

We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.  Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.  As of the date of adoption of ASC 740, we did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the period.  The liability for unrecognized tax benefits is zero at December 31, 2013 and 2012.

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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

INTANGIBLE ASSETS [Abstract]

Intangible assets

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

Intangible assets	2013			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		(5,955,101	)		(5,479,953	)
Intangible assets, net	$	3,670,837		$	4,145,985

Future aggregate amortization expense for intangible assets

Amortization expense for intangible assets was $475,148 and $476,450 for the years ended December 31, 2013 and 2012, respectively.  The future aggregate amortization expense for intangible assets, remaining as of December 31, 2013, is as follows:

Calendar Years	Future Amortization Expense
2014	$	475,148
2015		475,148
2016		476,450
2017		475,148
2018		475,148
2019 & Beyond		1,293,795
Total	$	3,670,837

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CONVERTIBLE DEBT

12 Months Ended

Dec. 31, 2013

CONVERTIBLE DEBT [Abstract]

CONVERTIBLE DEBT

NOTE 12. CONVERTIBLE DEBT

Convertible Note – June 2012

On June 27, 2012, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), related to our issuance of the June 2012 Note with 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 Intermountain.

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  have terminated, as described below.  For the year ended December 31, 2013, we issued 725,274 shares of common stock to Inter-Mountain for the cashless exercise of three warrants to purchase 1,571,428 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 January 22, 2014, we provided notice to Inter-Mountain of our election to exercise our rights under the June 2012 Note and to offset amounts we owed to Inter-Mountain against amounts it owed to us under the Investor Notes. Our notice provided that such deduction and offset occurred on January 22, 2014, that we will not incur the 120% prepayment premium with respect to amounts paid under the June 2012 Note as a result of the deduction and offset, that no warrants will become exercisable as a result of the offset, and that any warrants unvested as of January 22, 2014 shall immediately and automatically terminate.   As a result, the outstanding amount owed under the June 2012 Note was reduced to approximately $317,000 as of January 22, 2014.

On February 27, 2014 and on March 3, 2014, we received conversion notices from Inter-Mountain whereby we issued an aggregate of 435,502 shares of common stock for the final payment of approximately $152,000 due under the June 2012 Note.

Convertible Note – July 2011

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.

Convertible Note – June 2011

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 December 31, 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	$	1,780	$	138,220
July 2011 Note		125,000		10.0	%	07/28/2014	$	1.08		125,000		4,262		120,738
June 2012 Note		2,210,000		8.0	%	03/27/2015	$	0.35		1,093,638		205,539		888,099
Total	$	2,475,000							$	1,358,638	$	211,581	$	1,147,057

(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 shares, 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 payable was $157,027 and $117,711 for years ended December 31, 2013 and 2012, respectively.

The amount of debt discount amortized from our convertible notes payable was $178,548 and $97,901 for years ended December 31, 2013 and 2012, respectively.

The future minimum payments relating to our convertible notes payable, as of December 31, 2013, are as follows:

	Payments Due By Period
Transaction	Total		2014		2015		2016		2017		2018
June 2011 Note	$	140,000	$	140,000	$	-	$	-	$	-	$	-
July 2011 Note		125,000		125,000		-		-		-		-
June 2012 Note		1,093,638		1,093,638		-		-		-		-
Total	$	1,358,638	$	1,358,638	$	-	$	-	$	-	$	-