10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

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

For the quarterly period ended: September 30, 2014

OR

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

For the transition period from: ___ to ___.

Commission File Number: 001-336180

ULURU Inc.

(Exact Name of Registrant as Specified in its Charter)

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

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

(214) 905-5145

Registrant's Telephone Number, including Area Code

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

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

    Yes  þ    No  o

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

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

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

As of November 14, 2014, there were 24,458,018 shares of the registrant’s Common Stock, $0.001 par value per share, and no shares of Series A Preferred Stock, $0.001 par value per share, issued and outstanding.

Explanatory Note

We are filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to our Quarterly Report on Form 10-Q for the period ended September 30, 2014 (the “Original Report”) as filed with the U.S. Securities and Exchange Commission on November 14, 2014 (a) to correct the Condensed Consolidated Financial Statements that were included in the Original Report, and (b) to modify other Items affected by the correction to the Condensed Consolidated Financial Statements.

Background for the Restatement

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 became due as the outstanding balance under the June 2012 Note is reduced to certain levels. On January 22, 2014, we provided notice to Inter-Mountain of our election to exercise our rights under the June 2012 Note to offset amounts we owed to Inter-Mountain against amounts Inter-Mountain owed to us under the Investor Notes.  As a result of this offset, the amount owed by Inter-Mountain to the Company under the Investor Notes was reduced to zero.  As a result of this offset and a subsequent conversion by Inter-Mountain of the remaining balance of the June 2012 Note, the outstanding balance owed by the Company under the June 2012 Note was reduced to zero.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined that entries recorded in the Original Report reflecting a gain of $142,703 on the early extinguishment of the June 2012 Note on January 22, 2014 (as reflected in the Condensed Consolidated Statements of Operations), a loss of $410,873 relating to the issuance of common stock for the final conversion of the June 2012 Note that occurred on March 7, 2014 (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $970 (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”) did not properly take into account the effect of certain allocations of unamortized debt discount.  In this Amendment, the Company corrects this error and the financial statement herein reflect a loss of $135,078 on the early extinguishment of June 2012 Note (as reflected in the Condensed Consolidated Statements of Operations), a loss of $234,042 relating to the issuance of common stock for the final conversion of the June 2012 Note (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $(99,980) (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”).  After restatement, total Stockholders’ Equity, as of September 30, 2014, remains unchanged at $2,358,126.

Because these revisions are treated as corrections of errors to our prior period financial results, the revisions are considered to be a “restatement” under U.S. generally accepted accounting principles. Accordingly, the revised financial information included in this Amendment has been identified as “restated”.

Items Amended in this Amendment

In this Amendment, the following Items have been revised in part:

·   Part I, Item I Financial Statements (including Note 1 - Organization and Basis of Presentation which contains tabular disclosure regarding the restatement).

·   Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

·   Part I, Item 4. Controls and Procedures.

·   Part II, Item 6. Exhibits (including currently dated certifications required by Rule 13a-14(a) under the Exchange Act).

Items in Original Report not identified above have not been modified in this Amendment. For convenience, this Amendment includes Items from the Original Report that have not been modified.  Except as required for the restatement or as addressed in the Original Report, this Amendment is as of the period ended September 30, 2014 and the date of the Original Report and does not address subsequent events  You should read this Amendment in connection with the Company’s other filings with the SEC subsequent to the Original Filing.

Restatement of Other Financial Statements

In addition to this Amendment, we are concurrently filing an amendment to our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014. We are filing amendments to such reports to restate our unaudited condensed consolidated financial statements and related financial information for the periods contained in those reports and to amend certain other Items within those reports consistent with the amendments set forth herein.

Disclosure and Internal Control Considerations

Management has assessed the effect of the restatement on the Company's internal control over financial reporting and disclosure controls and procedures and reports its conclusions in Part I, Item 4 of this Amendment.

ULURU Inc.

INDEX TO FORM 10-Q/A

For the Quarter Ended SEPTEMBER 30, 2014

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements. (Restated)	3
	Condensed Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013 (audited)	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2014 and 2013	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2014 and 2013	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	35
Item 4.	Controls and Procedures. (Revised)	35
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	36
Item 1A.	Risk Factors.	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	36
Item 3.	Defaults Upon Senior Securities.	36
Item 4.	Mine Safety Disclosures.	36
Item 5.	Other Information.	36
Item 6.	Exhibits.	37
	Signatures.	37

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements. (Restated)

ULURU Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2014			December 31, 2013
	(Unaudited)			(Audited)
	(As restated, see Note 1)
ASSETS
Current Assets
Cash and cash equivalents	$	40,394		$	5,119
Accounts receivable, net		705,942			185,078
Notes receivable and accrued interest, current portion		---			777,710
Inventory		319,402			395,605
Prepaid expenses and deferred charges		105,957			123,812
Total Current Assets		1,171,695			1,487,324
Property, Equipment and Leasehold Improvements, net		488,782			638,614
Other Assets
Intangible assets, net		3,315,452			3,670,837
Investment in unconsolidated subsidiary		---			---
Deferred financing costs, net		---			86,770
Deposits		18,069			18,069
Total Other Assets		3,333,521			3,775,676
TOTAL ASSETS	$	4,993,998		$	5,901,614
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	1,460,635		$	1,734,725
Accrued liabilities		262,243			315,963
Accrued interest		---			13,360
Convertible notes payable, net of unamortized debt discount, current portion		---			1,147,057
Deferred revenue, current portion		58,959			58,959
Total Current Liabilities		1,781,837			3,270,064
Long Term Liabilities
Deferred revenue, net of current portion		854,035			898,133
Total Long Term Liabilities		854,035			898,133
TOTAL LIABILITIES		2,635,872			4,168,197
COMMITMENTS AND CONTINGENCIES		---			---
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value; 20,000 shares authorized;
Preferred Stock Series A, 1,000 shares designated; no shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		---			---
Common Stock - $0.001 par value; 200,000,000 shares authorized;
24,458,018 and 18,871,420 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		24,458			18,872
Additional paid-in capital		56,212,114			53,336,127
Accumulated  (deficit)		(53,878,446	)		(51,621,582	)
TOTAL STOCKHOLDERS’ EQUITY		2,358,126			1,733,417
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,993,998		$	5,901,614
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
							(As restated, see Note 1)
Revenues
License fees	$	14,861		$	11,400		$	44,098		$	33,827
Royalty income		24,439			10,276			41,452			10,276
Product sales, net		283,483			88,904			548,508			197,405
Total Revenues		322,783			110,580			634,058			241,508
Costs and Expenses
Cost of goods sold		223,646			60,245			377,779			104,236
Research and development		172,556			201,244			544,574			577,712
Selling, general and administrative		389,876			302,093			1,270,228			914,509
Amortization of intangible assets		119,763			119,763			355,385			355,385
Depreciation		58,702			59,688			178,809			185,536
Total Costs and Expenses		964,543			743,033			2,726,775			2,137,378
Operating (Loss)		(641,760	)		(632,453	)		(2,092,717	)		(1,895,870	)
Other Income (Expense)
Interest and miscellaneous income		198			15,088			5,258			55,564
Interest expense		(27,030	)		(125,904	)		(24,061	)		(385,965	)
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---			---
Foreign currency transaction (loss)		(10,267	)		---			(10,267	)		---
Loss on early extinguishment of convertible note		---			---			(135,078	)		---
Gain on sale of equipment		---			---			---			3,627
(Loss) Before Income Taxes		(678,859	)		(743,269	)		(2,256,865	)		(2,222,644	)
Income taxes		---			---			---			---
Net (Loss)	$	(678,859	)	$	(743,269	)	$	(2,256,865	)	$	(2,222,644	)
Less preferred stock dividends		---			(6,061	)		---			(30,236	)
Net (Loss) Allocable to Common Stockholders	$	(678,859	)	$	(749,330	)	$	(2,256,865	)	$	(2,252,880	)
Basic and diluted net (loss) per common share	$	(0.03	)	$	(0.05	)	$	(0.10	)	$	(0.16	)
Weighted average number of common shares outstanding		24,518,208			15,659,822			23,363,579			13,677,186
The accompanying notes are an integral part of these consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2014			2013
	(As restated, see Note 1)
OPERATING ACTIVITIES :
Net loss	$	(2,256,865	)	$	(2,222,644	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets		355,385			355,385
Depreciation		178,809			185,536
Share-based compensation for stock and options issued to employees		14,452			10,933
Share-based compensation for options issued to non-employees		56,951			45,910
Equity in earnings (loss) of unconsolidated subsidiary		---			---
Amortization of debt discount on convertible note		(78,078	)		134,052
Amortization of deferred financing costs		7,309			55,841
Warrants issued (cancelled) for services		72,771			(48,776	)
Common stock issued (cancelled) for services		(22,650	)		158,250
Common stock issued for wages		---			20,000
Common stock issued for interest due on convertible note		2,063			101,917
Loss on early extinguishment of convertible note		135,078			---
Gain on sale of equipment		---			(3,627	)
Change in operating assets and liabilities:
Accounts receivable		(520,864	)		(104,529	)
Inventory		76,203			39,659
Prepaid expenses and deferred charges		17,855			63,452
Notes receivable and accrued interest		777,710			538,566
Accounts payable		(274,090	)		(637,401	)
Accrued liabilities		(53,720	)		(29,638	)
Accrued interest		(13,360	)		(7,158	)
Deferred revenue		(44,098	)		91,173
Total		687,726			969,545
Net Cash Used in Operating Activities		(1,569,139	)		(1,253,099	)
INVESTING ACTIVITIES :
Purchase of property and equipment		(28,977	)		(32,030	)
Proceeds from sale of equipment		---			4,937
Net Cash Used in Investing Activities		(28,977	)		(27,093	)
FINANCING ACTIVITIES :
Proceeds from sale of common stock and warrants, net		610,000			1,391,446
Proceeds from exercise of common stock warrants		1,800,000			---
Proceeds from redemption of preferred stock, net		---			1,864
Repayment of principle due on convertible note		(776,609	)		(81,666	)
Net Cash Provided by Financing Activities		1,633,391			1,311,644
Net Increase in Cash		35,275			31,452
Cash,  beginning of period		5,119			21,549
Cash,  end of period	$	40,394		$	53,001
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	$	29,006		$	33,544
Non-cash investing and financing activities:
Issuance of common stock for principle due on convertible notes	$	582,029		$	566,414
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ULURU Inc.

NOTES TO

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. COMPANY OVERVIEW AND BASIS OF PRESENTATION

Company Overview

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

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2014 and the results of its operations for the three and nine months ended September 30, 2014 and 2013 and cash flows for the nine months ended September 30, 2014 and 2013 have been made.

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

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 31, 2014, including the risk factors set forth therein.

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Restatement of Prior Period Financial Statements

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined that entries recorded in the Original Report reflecting a gain of $142,703 on the early extinguishment of the June 2012 Note on January 22, 2014 (as reflected in the Condensed Consolidated Statements of Operations), a loss of $410,873 relating to the issuance of common stock for the final conversion of the June 2012 Note that occurred on March 7, 2014 (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $970 (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”) did not properly take into account the effect of certain allocations of unamortized debt discount.  In this Amendment, the Company corrects this error and the financial statement herein reflect a loss of $135,078 on the early extinguishment of June 2012 Note (as reflected in the Condensed Consolidated Statements of Operations), a loss of $234,042 relating to the issuance of common stock for the final conversion of the June 2012 Note (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $(99,980) (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”).  After restatement, total Stockholders’ Equity, as of September 30, 2014, remains unchanged at $2,358,126.

The following tables present the effects of the restatement on the previously issued financial statements presented herein.

Condensed Consolidated Statements of Operations (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Operating (Loss)		(2,092,717	)		(2,092,717	)		---
Interest and miscellaneous income		5,258			5,258			---
Interest expense		(125,011	)		(24,061	)		100,950
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---
Foreign currency transaction (loss)		(10,267	)		(10,267	)		---
Gain (loss) on early extinguishment of convertible note		142,703			(135,078	)		(277,781	)
(Loss) Before Income Taxes		(2,080,034	)		(2,256,865	)		(176,831	)
Income taxes		---			---			---
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Less preferred stock dividends		---			---			---
Net (Loss) Allocable to Common Stockholders	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Basic and diluted net (loss) per common share	$	(0.09	)	$	(0.10	)	$	(0.01	)

Condensed Consolidated Balance Sheet (Unaudited)	As of September 30, 2014
	As previously reported			As restated			Adjustment
Common stock		24,458			24,458			---
Additional paid-in capital		56,035,283			56,212,114			176,831
Accumulated (deficit)		(53,701,615	)		(53,878,446	)		(176,831	)
Total Stockholders’ Equity		2,358,126			2,358,126			---

Condensed Consolidated Statements of Cash Flows (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Amortization of debt discount on convertible note		22,872			(78,078	)		(100,950	)
Gain (loss) on early extinguishment of convertible note		(142,703	)		135,078			277,781
Changes in operating assets and liabilities: Total		510,895			687,726			176,831
Net Cash Used in Operating Activities		(1,569,139	)		(1,569,139	)		---

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NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2014 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 31, 2014, with the inclusion of the following significant accounting policy:

Foreign currency transaction gain (loss)

Our functional currency and our reporting currency is the U.S. dollar and foreign currency transactions are primarily undertaken in Euros.  Monetary assets and liabilities are translated using the foreign currency exchange rate prevailing at the balance sheet date.  Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of foreign currency exchange in effect at the date of the transaction.  Expenses are translated at average foreign currency exchange rates for the period.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of net income.

NOTE 3. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

There were no new accounting pronouncements adopted or enacted during the periods presented that had, or are expected to have, a material impact on our financial statements.

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 of Altrazeal®.

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

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2014		%			2013		%			2014		%			2013		%
Domestic	$	8,992		3	%	$	17,197		16	%	$	30,435		5	%	$	54,594		23	%
International		313,791		97	%		93,383		84	%		603,623		95	%		186,914		77	%
Total	$	322,783		100	%	$	110,580		100	%	$	634,058		100	%	$	241,508		100	%

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

		Three Months Ended September 30,						Nine Months Ended September 30,
Customers	Product	2014			2013			2014			2013
Customer A	Altrazeal®		93	%		---			76	%		---
Customer B	Altrazeal®		2	%		70	%		15	%		66	%
Total			95	%		70	%		91	%		66	%

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NOTE 5. NOTES RECEIVABLE

On June 27, 2012, we entered into a Securities Purchase Agreement related to our issuance of a $2,210,000 Secured Convertible Note (the “June 2012 Note”), with Inter-Mountain Capital Corp., a Delaware corporation (“Inter-Mountain”).  As part of the June 2012 Note transaction, we received $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the “Investor Notes”) and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  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.

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 of the deduction and offset, the outstanding amount owed to us under the Investor Notes was reduced to zero.

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

NOTE 6. INVENTORY

As of September 30, 2014, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials.  Inventories are stated at the lower of cost (first in, first out method) or market.  We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage.  In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements.  As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required.

The components of inventory, at the different stages of production, consisted of the following at September 30, 2014 and December 31, 2013:

Inventory	September 30, 2014		December 31, 2013
Finished goods	$	20,917	$	85,993
Work-in-progress		267,603		299,464
Raw materials		30,882		10,148
Total	$	319,402	$	395,605

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NOTE 7. PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2014 and December 31, 2013:

Property, equipment and leasehold improvements	September 30, 2014			December 31, 2013
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,597,987			1,581,728
Computers, office equipment, and furniture		153,078			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,275,902			2,246,925
Less: accumulated depreciation and amortization		( 1,787,120	)		(1,608,311	)
Property, equipment and leasehold improvements, net	$	488,782		$	638,614

Depreciation expense on property, equipment and leasehold improvements was $58,702 and $59,688 for the three months ended September 30, 2014 and 2013, respectively, and was $178,809 and $185,536 for the nine months ended September 30, 2014 and 2013, respectively.

NOTE 8. INTANGIBLE ASSETS

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2014 and December 31, 2013:

Intangible assets	September 30, 2014			December 31, 2013
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		( 6,310,486	)		(5,955,101	)
Intangible assets, net	$	3,315,452		$	3,670,837

Amortization expense for intangible assets was $119,763 and $119,763 for the three months ended September 30, 2014 and 2013, respectively, and was $355,385 and $355,385 for the nine months ended September 30, 2014 and 2013, respectively.

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2014, is as follows:

Calendar Years	Future Amortization Expense
2014 (Three months)	$	119,763
2015		475,148
2016		476,450
2017		475,148
2018		475,148
2019 & Beyond		1,293,795
Total	$	3,315,452

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NOTE 9. INVESTMENTS IN UNCONSOLIDATED ENTITIES

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

Altrazeal Trading Ltd.

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.  On February 1, 2014, Altrazeal Trading Ltd. transferred all of their rights and obligations under the existing shareholders’ agreement to Altrazeal Trading GmbH.

Audited financial statements of Altrazeal Trading Ltd. for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 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 reporting period.  We believe that our share of the cumulative losses of Altrazeal Trading Ltd. for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon audited financial statements received in May 2014, our unrecorded share of Altrazeal Trading Ltd. losses for the year ended December 31, 2012 totaled $129,207.

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

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	136,661
Total liabilities	$	660,006
Total stockholders’ equity	$	(523,345	)
Statement of operations
Revenues	$	61,028
Net (loss)	$	(516,829	)

Altrazeal Trading GmbH

On February 1, 2014, Altrazeal Trading Ltd. transferred all of their rights and obligations under the existing shareholders’ agreement to Altrazeal Trading GmbH.  As a result of this transfer, we received a non-dilutable 25% ownership interest in Altrazeal Trading GmbH.

Audited financial statements of Altrazeal Trading GmbH for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of Altrazeal Trading GmbH. in our financial statements for each reporting period.  We believe that our share of the cumulative losses of Altrazeal Trading GmbH for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon the unaudited financial statements for the year ended December 31, 2013, our unrecorded share of Altrazeal Trading GmbH cumulative losses as of December 31, 2013 totaled $213,370.

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

Altrazeal Trading GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	757,784
Total liabilities	$	1,563,046
Total stockholders’ equity	$	(805,262	)
Statement of operations
Revenues	$	---
Net (loss)	$	(798,009	)

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ORADISC GmbH

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.

Audited financial statements of ORADISC GmbH for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of ORADISC GmbH. in our financial statements for each reporting period.  We believe that our share of the cumulative losses of ORADISC GmbH for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon the unaudited financial statements for the year ended December 31, 2013, our unrecorded share of ORADISC GmbH cumulative losses as of December 31, 2013 totaled $11,430.

Summarized financial information for our investment in ORADISC GmbH assuming 100% ownership is as follows:

ORADISC GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	305,069
Total liabilities	$	302,572
Total stockholders’ equity	$	2,497
Statement of operations
Revenues	$	---
Net (loss)	$	(34,671	)

Altrazeal AG

On February 1, 2014, we executed a shareholders’ agreement with Altrazeal AG, a single purpose entity for the marketing of Altrazeal® in several territories, including Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, the Commonwealth of Independent States, Jordan, Syria, Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand).  As a result of this transaction, we received a non-dilutable 25% ownership interest in Altrazeal AG.

Financial statements of Altrazeal AG for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of Altrazeal AG in our financial statements for such reporting period.  We believe that our share of the cumulative losses of Altrazeal AG for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

NOTE 10. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at September 30, 2014 and December 31, 2013:

Accrued Liabilities	September 30, 2014		December 31, 2013
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		98,424		148,683
Accrued insurance payable		47,999		60,113
Accrued property taxes		8,950		---
Product rebates/returns		13		32
Other		558		836
Total accrued liabilities	$	262,243	$	315,963

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NOTE 11. 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 Investor Notes in favor of the Company, each in the principal amount of $250,000 at an interest rate of 8.0% per annum, and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  The purchase price of the June 2012 Note also reflected a $200,000 original issue discount and $10,000 in attorney’s fees. The Purchase Agreement also includes representations and warranties, restrictive covenants, and indemnification provisions standard for similar transactions.

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

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

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

As part of the convertible debt financing, Inter-Mountain also received a total of seven warrants (the “Warrants”) to purchase, if they all vest, an aggregate of 3,142,857 shares of Common Stock, which number of shares could increase based upon the terms and conditions of the Warrants.  The Warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of Common Stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively.  Each of the three remaining Warrants has terminated, as described below.  As of September 30, 2014, we have issued 725,274 shares of Common Stock to Inter-Mountain for the cashless exercise of three warrants that vested prior to February 26, 2013 to purchase 1,571,428 shares of Common Stock.  Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  As of September 30, 2014, there is one warrant that remains vested but unexercised for 392,857 shares of Common Stock.  Inter-Mountain delivered a notice of a cashless exercise with respect to this warrant on or about May 1, 2014 purporting to exercise it with respect to the delivery of 782,284 shares of Common Stock.  We believe that, as a result of the December 2013 agreement, the warrant is exercisable, on a cashless basis, with respect to only 261,516 shares of Common Stock as of May 1, 2014 and, as a result, have not honored such warrant exercise.

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, which registration statement expired by rule on April 30, 2013.

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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 of the deduction and offset, 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.

On July 28, 2014, we issued 115,741 shares of Common Stock to Mr. Gray for the conversion and final payment of $125,000 due under the July 2011 Note and remitted to Mr. Gray the annual interest due on July 28, 2014 of $13,457.

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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.

On June 13, 2014, we issued 116,667 shares of Common Stock to Mr. Gray for the conversion and final payment of $140,000 due under the June 2011 Note and remitted to Mr. Gray the annual interest due on June 13, 2014 of $13,346.

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.

The amount of interest cost recognized from our convertible notes payable was $956 and $38,032 for the three months ended September 30, 2014 and 2013, respectively, and was $20,853 and $124,677 for the nine months ended September 30, 2014 and 2013, respectively.

The amount of debt discount amortized from our convertible notes payable was $552 and $44,591 for the three months ended September 30, 2014 and 2013, respectively, and was $(78,078) and $134,052 for the nine months ended September 30, 2014 and 2013, respectively.

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NOTE 12. 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 (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 took place at four closings over 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 (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.

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 $150,000 on each of March 31, 2014 and April 30, 2014.  The Company issued 750,000 shares of Common Stock to Sacks on each of January 31, 2014 and February 28, 2014 and 250,000 shares of Common Stock on each of March 31, 2014 and April 30, 2014.  Under the terms of the Warrants, TPT made payments of $300,000 on each of March 31, 2014 and April 30, 2014 and the Company issued 500,000 shares of Common Stock to TPT on each date, respectively.

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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NOTE 13. STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2014, we had 24,458,018 shares of Common Stock issued and outstanding.  We issued 3,241 shares of Common Stock for the three months ended September 30, 2014 comprised of 115,741 shares of Common Stock issued for the conversion and final payment of the July 2011 Note held by Kerry Gray and the net cancellation of 112,500 shares of Common Stock related to consulting services provided to the Company.

Preferred Stock

As of September 30, 2014, we had no shares of Series A Preferred Stock (the “Series A Shares”).  For the three months ended September 30, 2014, we did not issue or redeem any Series A Shares.

Warrants

The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2013		4,665,451		$	0.82
Warrants issued		80,000		$	1.20
Warrants exercised		(3,000,000	)	$	0.60
Warrants cancelled		(69,050	)	$	3.22
Balance as of September 30, 2014 (1)		1,676,401		$	1.14

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all had vested, 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 were exercised in 2013.  Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  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.  For the purposes of this Table, only such net vested shares of Common Stock from one unexercised warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of Common Stock.

For the nine months ended September 30, 2014, we issued a warrant to Torrey Hills Capital, Inc., to purchase up to an aggregate of 80,000 shares of our Common Stock at an exercise price of $1.20 per share, for consulting services.

Of the warrant shares subject to exercise as of September 30, 2014, expiration of the right to exercise is as follows:

Date of Expiration	Number of Warrant Shares of Common Stock Subject to Expiration
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
January 15, 2019		80,000
Total		1,676,401

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NOTE 14. EARNINGS PER SHARE

Basic and Diluted Net Loss Per Share

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

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2014 and December 31, 2013:

	September 30, 2014		December 31, 2013
Warrants to purchase Common Stock		1,676,401		4,665,451
Stock options to purchase common stock		1,699,907		1,014,907
Unvested restricted common stock		---		---
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (1)		---		3,124,680
Common stock issuable upon the assumed conversion of our convertible note payable from June 2011 (2)		---		127,712
Common stock issuable upon the assumed conversion of our convertible note payable from July 2011 (2)		---		125,603
Total		3,376,308		9,058,353

(1)

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.  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.

(2)

On June 13, 2014, Mr. Gray elected to convert the outstanding principal balance ($140,000) of the June 2011 Note and we issued 116,667 shares of Common Stock for such conversion.  On July 28, 2014, Mr. Gray elected to convert the outstanding principal balance ($125,000) of the July 2011 Note and we issued 115,741 shares of Common Stock for such conversion.

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NOTE 15. SHARE BASED COMPENSATION

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

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

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Incentive Stock Options  (1)
Quantity		125,000		---		125,000		232,500
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	101,171		---	$	101,171	$	56,112
Nonstatutory Stock Options  (2)
Quantity		560,000		---		560,000		735,000
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	453,250		---	$	453,250	$	177,388

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013.

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

	Nine Months Ended September 30,
	2014			2013
Incentive Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---
Nonstatutory Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---

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

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Stock Options (Incentive and Nonstatutory)

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	6,164	$	5,425	$	16,836	$	11,438
Selling, general and administrative		18,316		19,662		54,567		44,414
Total share-based compensation expense	$	24,480	$	25,087	$	71,403	$	55,852

At September 30, 2014, 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 $635,461.  The period over which the unearned share-based compensation is expected to be recognized is approximately three years.

The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Stock Options		Weighted Average Exercise Price per Share
Outstanding as of December 31, 2013		1,014,907	$	2.12
Granted		685,000	$	1.15
Forfeited/cancelled		---		---
Exercised		---		---
Outstanding as of September 30, 2014		1,699,907	$	1.73

The following table presents the stock option grants outstanding and exercisable as of September 30, 2014:

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		8.5		595,000	$	0.33
	685,000		1.15		8.2		15,000		1.15
	53,334		2.38		3.7		53,334		2.38
	69,073		25.12		2.8		69,073		25.12
	1,699,907	$	1.73		8.0		732,407	$	2.83

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Restricted Stock Awards

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

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	---	$	---	$	---	$	444
Selling, general and administrative		---		---		---		547
Total share-based compensation expense	$	---	$	---	$	---	$	991

At September 30, 2014, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is zero.

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of Common Stock subject to potential issue as of September 30, 2014 and the changes therein during the nine months then ended:

	Restricted stock		Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2013		---		---
Shares granted		---		---
Shares forfeited/cancelled		---		---
Shares exercised/issued		---		---
Outstanding as of September 30, 2014		---		---

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, June 13, 2013, and on June 5, 2014, 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, 600,000 shares, and 1,000,000 shares, respectively, to a total of 2,800,000 shares.

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

As of September 30, 2014, we had granted options to purchase 2,061,167 shares of Common Stock since the inception of the Equity Incentive Plan, of which 1,699,907 were outstanding at a weighted average exercise price of $1.73 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the Equity Incentive Plan, of which none were outstanding.  As of September 30, 2014, there were 1,030,647 shares that remained available for future grants under our Equity Incentive Plan.

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NOTE 16. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

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

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

The following table summarizes the fair value of our financial instruments at September 30, 2014 and December 31, 2013.

Description	September 30, 2014		December 31, 2013
Assets:
Notes receivable and accrued interest		---	$	777,710
Liabilities:
Convertible note – June 2011		---	$	138,220
Convertible note – July 2011		---	$	120,738
Convertible note – June 2012		---	$	888,099

NOTE 17. INCOME TAXES

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

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NOTE 18. COMMITMENTS AND CONTINGENCIES

Operating Leases

On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease commenced on April 1, 2006 and originally continued until April 1, 2013.  The lease required a minimum monthly lease obligation of $9,330, which 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 required a minimum monthly lease obligation of $9,193, which was inclusive of monthly operating expenses, until March 31, 2014 and at such time, increased to $9,379, which was inclusive of monthly operating expenses.  Effective August 1, 2014, our minimum monthly lease obligation increased to $9,436, 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 September 30, 2014:

Calendar Years	Future Lease Expense
2014 (Three months)	$	30,539
2015		29,051
2016		---
2017		---
2018		---
Total	$	59,590

Rent expense for our operating leases amounted to $32,369 and $31,083 for the three months ended September 30, 2014 and 2013, respectively, and $93,195 and $86,125 for the nine months ended September 30, 2014 and 2013, 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.

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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 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.

For the nine months ended September 30, 2014 and 2013, the Company recorded revenues, in approximate numbers, of $586,000 and $169,000, respectively, with the various Altrazeal Distributors, which represented approximately 92% and 70% of our total revenues.

As of September 30, 2014 and December 31, 2013, Altrazeal Distributors had an outstanding net accounts receivable, in approximate numbers, of $703,000 and $174,000, respectively, which represented approximately 99% and 97% of our gross outstanding accounts receivables.

Related Party Obligations

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

As of September 30, 2014, the following table summarizes the compensation temporarily deferred and subsequent repayments:

Name	2014			2013			2012		2011		Total
Kerry P. Gray (1) (2)	$	(154,986	)	$	(91,000	)	$	220,673	$	140,313	$	115,000
Terrance K. Wallberg		(25,000	)		(35,769	)	$	24,230	$	36,539		---
Key executives		(28,239	)		(20,000	)	$	27,253	$	20,986		---
Total	$	(208,225	)	$	(146,769	)	$	272,156	$	197,838	$	115,000

(1)

During 2014, Mr. Gray temporarily deferred compensation of $115,000 which consisted of $62,500 earned as salary compensation for his duties as President of the Company and $52,500 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors.  During 2014, Mr. Gray was also repaid $269,986 of temporarily deferred compensation, of which $100,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

(2)

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.

As of September 30, 2014 and December 31, 2013, the Company’s obligation for temporarily deferred compensation was $115,000 of which $62,500 was included in accrued liabilities and $52,500 was included in accounts payable, and $323,225 of which $207,500 was included in accounts payable and $115,725 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 September 30, 2014, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.

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

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NOTE 19. LEGAL PROCEEDINGS

On or about August 22, 2014, Inter-Mountain filed a Complaint against Uluru in a matter now pending in the U.S. Federal Court for the District of Utah, Central Division.  The Complaint relates to Inter-Mountain’s delivery of a notice of a cashless exercise with respect to its last remaining warrant to purchase Common Stock on or about May 1, 2014 purporting to exercise it with respect to the delivery of 782,284 shares of Common Stock under the non-standard cashless exercise or conversion provisions in the warrant.  Uluru declined to honor the exercise on the basis that, as a result of an amendment to the warrant agreed to in December 2013, the warrant was exercisable, on a cashless basis, with respect to only 261,516 shares of Common Stock as of May 1, 2014.   Inter-Mountain alleges that Uluru’s refusal to honor the exercise constitutes a breach of the warrant, breach of implied covenant of good faith and fair dealing, unjust enrichment, a violation of securities laws and common law fraud and seeks actual damages, consequential damages, treble damages, specific performance, attorneys’ fees and costs and other relief.  Answers, counterclaims, and answers to counterclaims have been filed, and Uluru expects scheduling and discovery to commence soon.  Uluru denies any breach or other wrongdoing and is vigorously defending the matter.

On or about November 6, 2012, Discus Dental, LLC (“Discus”) and Philips Oral Healthcare Inc. (“Philips”) filed a Complaint against Uluru in the United States District Court, Central District of California (the “Action”).  Discus, a subsidiary of Philips’ parent company, is party to a license agreement under which Uluru’s predecessor granted it a defined license.  The license contractually required that Discus use commercially reasonable efforts to, market and sell Aphthasol® paste, a prescription pharmaceutical.  Prior to the filing of the Action,  Uluru sent a demand letter contending that Discus did not fulfill its obligations under the license agreement, including the obligation to retain an adequate selling organization and otherwise use commercially reasonable efforts to market and sell Aphthasol® paste.  In response to Uluru’s demand letter, the Plaintiffs instituted the Action seeking a declaratory judgment that Discus did not breach the license agreement.  On November 20, 2012, the Plaintiffs filed Amended Complaint adding  a claim requesting that Uluru be ordered to return certain royalty payments that  Discus paid to  Uluru after the expiration of the license period.  On October 7, 2014, Discus filed a Second Amended Complaint, withdrawing Philips as a plaintiff and adding claims that Uluru breached the license by allegedly making a profit from the manufacture of Aphthasol® paste.  Uluru has denied liability with regard to Discus’s claims and has asserted counterclaims for breach of contract against Discus, seeking compensatory damages and attorneys’ fees.  The Action is currently set for trial in February 2015.

NOTE 20. SUBSEQUENT EVENTS

Not applicable.

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

You should read the following discussion and analysis together with all financial and non-financial information appearing elsewhere in this Amendment and with our consolidated financial statements and related notes included in our 2013 Annual Report on Form 10-K, referred to as our 2013 Form 10-K, which has been previously filed with the Securities and Exchange Commission on March 31, 2014, including the risk factors set forth therein.  In addition to historical information, the following discussion and other parts of this Amendment contain forward-looking information that involve risks and uncertainties, including the statement that our cash and cash equivalents are sufficient to fund our operations and capital expenditures through 2014 and beyond.  Our actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2013 Form 10-K under “Risks Associated with our Business”.

Management’s Discussion and Analysis of Financial Condition and Results of Operations has been revised for the effects of the restatement.  See Note 1 – Organization and Basis of Presentation.

Business Overview

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

Our strategy is twofold:

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

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

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

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

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

Recent Developments (as of September 30, 2014)

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.  On February 1, 2014, we executed a shareholders’ agreement with Altrazeal AG and 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.

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.  Currently, such marketing efforts are being performed by Altrazeal Trading GmbH, an affiliate of Melmed Holding AG.

On July 8, 2014, we announced the expansion of our international marketing network to include Russia, Greece and the United Arab Emirates.  On September 30, 2014, we announced the further expansion of our international marketing network to include Germany.

As of the end of the third quarter 2014, we have now shipped Altrazeal® to twenty two international territories and expect to ship Altrazeal® to several new territories in the fourth quarter of 2014.

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RESULTS OF OPERATIONS

Fluctuations in Operating Results

Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the timing and amount of payments received pursuant to our current and future collaborations, and the progress and timing of expenditures related to our development, commercialization, and sale efforts. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results may not be a good indication of our future performance.

Comparison of the three months ended September 30, 2014 and 2013

Total Revenues

Revenues were approximately $323,000 for the three months ended September 30, 2014, as compared to revenues of approximately $111,000 for the three months ended September 30, 2013, and were comprised of, in approximate numbers, licensing fees of $15,000 from Altrazeal® and OraDisc™ licensing agreements, royalties of $24,000 from the sale of Altrazeal®, and product sales of approximately $284,000 for Altrazeal®.

The third quarter 2014 revenues represent an overall increase of approximately $212,000 versus the comparative third quarter 2013 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $195,000 in Altrazeal® product sales by our international distributors, an increase of $14,000 in royalties related to Altrazeal®, and an increase of $3,000 in Altrazeal® licensing.

 Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2014 was approximately $224,000 and was comprised of $213,000 of costs from the sale of our Altrazeal® products and $11,000 from the write-off of obsolete inventory.  Cost of goods sold for the three months ended September 30, 2013 was approximately $60,000 and was comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled approximately $173,000 for the three months ended September 30, 2014, including $6,000 in share-based compensation, as compared to approximately $201,000 for the three months ended September 30, 2013, which included $5,000 in share-based compensation.  The decrease of approximately $28,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $22,000 in regulatory costs and a decrease of $19,000 in direct research costs primarily related to Altrazeal®.  These expense decreases were partially offset by an increase of $13,000 in scientific compensation related primarily to a higher head count.

The direct research and development expenses for the three months ended September 30, 2014 and 2013 were, in approximate numbers, as follows:

	Three months ended September 30,
Technology	2014		2013
Wound care & nanoparticle	$	46,000	$	62,000
OraDisc™		4,000		7,000
Aphthasol® & other technologies		---		---
Total	$	50,000	$	69,000

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Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $390,000 for the three months ended September 30, 2014, including $18,000 in share-based compensation, as compared to approximately $302,000 for the three months ended September 30, 2013, which included $20,000 in share-based compensation.

The increase of approximately $88,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, an increase of $93,000 in legal expenses related to a licensing agreement dispute, an increase of $44,000 in sales and marketing expenses, an increase of $24,000 related to doubtful account accruals, and an increase of $5,000 in legal fees related to our patents.  These expense increases were partially offset by a decrease of $66,000 in investor relations consulting related to share-based compensation, a decrease of $10,000 related to property tax accruals, and a decrease of $2,000 in director fee expenses.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $120,000 for the three months ended September 30, 2014 as compared to approximately $120,000 for the three months ended September 30, 2013.  The expense for each period consists of amortization associated with our acquired patents.  There were no additional purchases of patents during the three months ended September 30, 2014 and 2013, respectively.

Depreciation

Depreciation expense totaled approximately $59,000 for the three months ended September 30, 2014 as compared to approximately $60,000 for the three months ended September 30, 2013.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $200 for the three months ended September 30, 2014 as compared to approximately $15,000 for the three months ended September 30, 2013.  The decrease of approximately $15,000 in interest income is attributable to the offset in January 2014 of the outstanding Inter-Mountain notes receivable.

Interest Expense

Interest expense totaled approximately $27,000 for the three months ended September 30, 2014 as compared to approximately $126,000 for the three months ended September 30, 2013.  Interest expense is comprised of financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and financing costs related to our convertible debt.  The decrease of approximately $99,000 is primarily attributable to the deduction and offset in January 2014 of the outstanding notes receivable against the outstanding principle due on the convertible promissory note with Inter-Mountain and the final payoff of the convertible promissory note with Inter-Mountain in March 2014, the final payoff of the June 2011 convertible promissory note in June 2014, and the final payoff of the July 2011 convertible note in July 2014.

Foreign currency transaction (loss)

Foreign currency transaction loss totaled approximately $10,000 for the three months ended September 30, 2014 as compared to nil for the three months ended September 30, 2013.

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Comparison of the nine months ended September 30, 2014 and 2013

Total Revenues

Revenues were approximately $634,000 for the nine months ended September 30, 2014, as compared to revenues of approximately $242,000 for the nine months ended September 30, 2013, and were comprised of, in approximate numbers, licensing fees of $44,000 from Altrazeal® and OraDisc™ licensing agreements, royalties of $41,000 from the sale of Altrazeal®, and product sales of approximately $549,000 for Altrazeal®.

The nine months ended September 30, 2014 revenues represent an overall increase of approximately $392,000 versus the comparative nine months ended September 30, 2013 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $351,000 in Altrazeal® product sales by our international distributors, an increase of $31,000 in royalties related to Altrazeal®, and an increase of $10,000 in Altrazeal® licensing.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2014 was approximately $378,000 and was comprised of $367,000 of costs from the sale of our Altrazeal® products and $11,000 from the write-off of obsolete inventory.  Cost of goods sold for the nine months ended September 30, 2013 was approximately $104,000 and was comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled approximately $545,000 for the nine months ended September 30, 2014, including $17,000 in share-based compensation, as compared to approximately $578,000 for the nine months ended September 30, 2013, which included $12,000 in share-based compensation.  The decrease of approximately $33,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $69,000 in regulatory costs, a decrease of $49,000 in direct research costs primarily related to Altrazeal®, and a decrease of $12,000 in miscellaneous operating costs.  There expense decreases were partially offset by an increase of $77,000 in scientific compensation related to share-based compensation and a higher head count and an increase of $20,000 in clinical study costs related to Altrazeal®.

The direct research and development expenses for the nine months ended September 30, 2014 and 2013 were, in approximate numbers, as follows:

	Nine months ended September 30,
Technology	2014		2013
Wound care & nanoparticle	$	170,000	$	216,000
OraDisc™		11,000		14,000
Aphthasol® & other technologies		2,000		2,000
Total	$	183,000	$	232,000

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Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $1,270,000 for the nine months ended September 30, 2014, including $54,000 in share-based compensation, as compared to approximately $915,000 for the nine months ended September 30, 2013, which included $45,000 in share-based compensation.

The increase of approximately $355,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, an increase of $160,000 in legal expenses related to a licensing agreement dispute, an increase of $90,000 in sales and marketing expenses, an increase of $75,000 in investor relations consulting related to share-based compensation, an increase of $16,000 in legal fees related to our patents, an increase of $9,000 in compensation costs related to share-based compensation, an increase of $8,000 in director fees related to share-based compensation, an increase of $8,000 in insurance costs, an increase of $7,000 in occupancy costs, and an increase of $3,000 in miscellaneous expenses.  These expense increases were partially offset a decrease of $10,000 in consulting related to product licensing, a decrease of $9,000 in consulting costs related to XBRL reporting, and a decrease of $2,000 related to property tax accruals.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $355,000 for the nine months ended September 30, 2014 as compared to approximately $355,000 for the nine months ended September 30, 2013.  The expense for each period consists primarily of amortization associated with our acquired patents.  There were no additional purchases of patents during the nine months ended September 30, 2014 and 2013, respectively.

Depreciation

Depreciation expense totaled approximately $179,000 for the nine months ended September 30, 2014 as compared to approximately $186,000 for the nine months ended September 30, 2013.  The decrease of approximately $7,000 is attributable to certain equipment being fully depreciated.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $5,000 for the nine months ended September 30, 2014 as compared to approximately $56,000 for the nine months ended September 30, 2013.  The decrease of approximately $51,000 in interest income is attributable to the offset in January 2014 of the outstanding Inter-Mountain notes receivable.

Interest Expense

Interest expense totaled approximately $24,000 for the nine months ended September 30, 2014 as compared to approximately $386,000 for the nine months ended September 30, 2013.  Interest expense is comprised of financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and financing costs related to our convertible debt.  The decrease of approximately $362,000 is primarily attributable to the deduction and offset in January 2014 of the outstanding notes receivable against the outstanding principle due on the convertible promissory note with Inter-Mountain and the final payoff of the convertible promissory note with Inter-Mountain in March 2014, the final payoff of the June 2011 convertible promissory note in June 2014, and the final payoff of the July 2011 convertible note in July 2014.

Foreign currency transaction (loss)

Foreign currency transaction loss totaled approximately $10,000 for the nine months ended September 30, 2014 as compared to nil for the nine months ended September 30, 2013.

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LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the public and private sales of convertible debentures and common stock.  Product sales, royalty payments, contract research, licensing fees and milestone payments from our corporate alliances have provided, and are expected in the future to provide, funding for operations. Our principal source of liquidity is cash and cash equivalents.  As of September 30, 2014 our cash and cash equivalents were approximately $40,000 which is an increase of approximately $35,000 as compared to our cash and cash equivalents at December 31, 2013 of approximately $5,000.  Our working capital (current assets less current liabilities) was approximately $(610,000) at September 30, 2014 as compared to our working capital at December 31, 2013 of approximately $(1,783,000).

Consolidated Cash Flow Data

	Nine Months Ended September 30,
Net Cash Provided by (Used in)	2014			2013
Operating activities	$	(1,569,000	)	$	(1,253,000	)
Investing activities		(29,000	)		(27,000	)
Financing activities		1,633,000			1,311,000
Net Increase in cash and cash equivalents	$	35,000		$	31,000

Operating Activities

For the nine months ended September 30, 2014, net cash used in operating activities was approximately $1,569,000.  The principal components of net cash used for the nine months ended September 30, 2014 were, in approximate numbers, our net loss of $2,257,000, a decrease of $274,000 in accounts payable due to timing of vendor payments, a decrease of $54,000 in accrued liabilities related to compensation and insurance, a decrease of $44,000 in deferred revenues due to amortization of revenues, a decrease of $13,000 in accrued interest, and an increase of $521,000 in accounts receivable.  Our net loss for the nine months ended September 30, 2014 included substantial non-cash charges of approximately $722,000 in the form of share-based compensation, amortization of patents, depreciation, amortization of debt discount, amortization of deferred financings costs, interest due on convertible notes settled with common stock, common stock and warrants issued for services, and the loss on early extinguishment of a convertible note.  The aforementioned net cash used for the nine months ended September 30, 2014 was partially offset by, in approximate numbers, a decrease of $778,000 in notes receivable due to our offset in January 2014 of all outstanding Investor Notes issued by Inter-Mountain, a decrease of $76,000 in inventory, and a decrease of $18,000 in prepaid expenses.

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

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2014 was approximately $29,000 and relates to the purchase of equipment for the manufacture of Altrazeal® and equipment for our computer systems.

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

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Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2014 was approximately $1,633,000 and was comprised of, in approximate numbers, the final funding of $500,000 from the sale of common stock and warrants pursuant to the January 2013 Offering,  the final funding $110,000 from the sale of common stock and warrants pursuant to the March 2013 Offering, the funding of $1,800,000 from the exercise of warrants to purchase 3,000,000 shares of common stock pursuant to the Implementation Agreement with Sacks and TPT, and the repayment of $777,000 of principle due on the convertible promissory note with Inter-Mountain attributable to the deduction and offset in January 2014 of the outstanding Investor Notes against the outstanding principle due on the convertible promissory note with Inter-Mountain.

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

Liquidity

As of September 30, 2014, we had cash and cash equivalents of approximately $40,000.  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 those of our licensees, 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 as of the date of the Original Report, the expected level of operating expenses, expected collection of accounts receivable, and the projected sales of our existing products combined with other revenues, 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 expenditures spending during 2014.  However, we cannot be sure that revenues or other liquidity sources will reach anticipated levels.

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.  Currently, we have no agreements as of the date of the Original Report with respect to our potential receipt of additional capital.  We cannot be certain that necessary funding will be available on terms acceptable to us, or at all.

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

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

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Contractual Obligations

The following table summarizes our outstanding contractual cash obligations as of September 30, 2014, which consists of a lease agreement for office and laboratory space in Addison, Texas and a lease agreement for office equipment.  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	$	59,590	$	59,590	$	---	$	---	$	---
Total contractual cash obligations	$	59,590	$	59,590	$	---	$	---	$	---

Capital Expenditures

For the nine months ended September 30, 2014 and 2013, our expenditures for property, equipment, and leasehold improvements were, in approximate numbers, $29,000, and $32,000, respectively.  Such expenditures in 2014 relate primarily to the purchase of equipment for the manufacture of Altrazeal® and equipment for our computer systems.  At this time, we believe that our capital expenditures for the remainder of 2014 will be approximately $5,000 and consist of equipment related to the manufacture of our products.

Off-Balance Sheet Arrangements

As of September 30, 2014, 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.

Concentrations of Credit Risk

Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, potentially expose us to concentrations of credit risk due to the use of a limited number of banking institutions and due to maintaining cash balances in banks, which, at times, may exceed the limits of amounts insured by the Federal Deposit Insurance Corporation.  Currently, we utilized Bank of America, N.A. and Bank of America Investment Services, Inc. as our banking institutions.  At September 30, 2014 and December 31, 2013 our cash and cash equivalents totaled approximately $40,000 and $5,000, 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 September 30, 2014 and at December 31, 2013.  As of September 30, 2014, three customers exceeded the 5% threshold, with 67%, 22% and 11%, respectively.  Two customers exceeded the 5% threshold at December 31, 2013, with 86% and 11%, 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.  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 revenues and all of our expenses are denominated in U.S. dollars, although we are recently experiencing an increase in revenues in international territories denominated in a foreign currency.  Certain of our licensing and distribution agreements in international territories are denominated in Euros.  Currently, we do not employ forward contracts or other financial instruments to mitigate foreign currency risk.  As our international operations continue to grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  Our critical accounting policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on March 31, 2014.  We had no significant changes in our critical accounting policies since our last annual report.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amendment (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should”, “expect”, “anticipate”, “estimate”, “will”, “target”, “may”, “project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.  Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements include, among other things, statements regarding the Company’s expected cash and cash equivalents and working capital being sufficient to fund our operations and capital expenditure requirements through 2014 and beyond, and other statements, including the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years.

In addition, as a result of the restatement of financial statements described in, and effected by, this Amendment, the Company is subject to additional risks associated with potential inquiries by the Securities and Exchange Commission, demands and lawsuits by shareholders and other possible legal or investigative actions. To the extent any such inquiry, demand or lawsuit occurs, it will harm the Company’s liquidity and divert management’s attention from the operation of the business.  It may also harm customer relationships, the ability of the Company to raise capital as needed and other aspects of the Company’s business. The Company has included additional important factors in the cautionary statements included in its 2013 Annual Report on Form 10-K, particularly under “Risk Associated with our Business” that the Company believes could cause actual results to differ materially from any forward-looking statement.

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

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

This item is not applicable to smaller reporting companies.

ITEM 4. Controls and Procedures. (Revised)

Evaluation of Disclosure Controls and Procedures

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

Change in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting; however, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined, as reported in Part I, Item 1, Note 1 of this Amendment, that the financial statements included in the Original Report included an error, which is corrected in this Amendment.  As a result, we reevaluated our internal controls over financial reporting effective as of September 30, 2014 and identified a material weakness in the effectiveness of our internal control over financial reporting with respect to our accounting for the early extinguishment of the June 2012 Note and the issuance of common stock for the final conversion of the June 2012 Note.  A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

After identifying this material weakness, we implemented new procedures, including enhanced documentation, analysis and review of non-routine accounting matters.  We have retrained those working in corporate finance, as to the importance of appropriate communication and review of non-routine accounting matters so that any such changes can be properly assessed under generally accepted accounting principles.

As of March 31, 2015, management believes our remediation efforts are effective with respect to our internal control over financial reporting and that the previous material weakness in our internal control over financial reporting has been remediated. Notwithstanding the beliefs of managers, we will continue to assess the effectiveness of our remediation efforts in connection with our evaluations of internal control over financial reporting. There remains a risk that the processes and procedures on which we currently rely will fail to be sufficiently effective, which could result in an error in our disclosure in the future. Moreover, because of the inherent limitations in all control systems, no evaluation of controls—even where we conclude the controls are operating effectively—can provide absolute assurance that all control issues have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake.

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PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings.

On or about August 22, 2014, Inter-Mountain Capital Corp. (“Inter-Mountain”) filed a Complaint against Uluru in a matter now pending in the U.S. Federal Court for the District of Utah, Central Division.  The Complaint relates to Inter-Mountain’s delivery of a notice of a cashless exercise with respect to its last remaining warrant to purchase Common Stock on or about May 1, 2014 purporting to exercise it with respect to the delivery of 782,284 shares of Common Stock under the non-standard cashless exercise or conversion provisions in the warrant.  Uluru declined to honor the exercise on the basis that, as a result of an amendment to the warrant agreed to in December 2013, the warrant was exercisable, on a cashless basis, with respect to only 261,516 shares of Common Stock as of May 1, 2014.   Inter-Mountain alleges that Uluru’s refusal to honor the exercise constitutes a breach of the warrant, breach of implied covenant of good faith and fair dealing, unjust enrichment, a violation of securities laws and common law fraud and seeks actual damages, consequential damages, treble damages, specific performance, attorneys’ fees and costs and other relief.  Answers, counterclaims, and answers to counterclaims have been filed, and Uluru expects scheduling and discovery to commence soon.  Uluru denies any breach or other wrongdoing and is vigorously defending the matter.

On or about November 6, 2012, Discus Dental, LLC (“Discus”) and Philips Oral Healthcare Inc. (“Philips”) filed a Complaint against Uluru in the United States District Court, Central District of California (the “Action”).  Discus, a subsidiary of Philips’ parent company, is party to a license agreement under which Uluru’s predecessor granted it a defined license.  The license contractually required that Discus use commercially reasonable efforts to, market and sell Aphthasol® paste, a prescription pharmaceutical.  Prior to the filing of the Action,  Uluru sent a demand letter contending that Discus did not fulfill its obligations under the license agreement, including the obligation to retain an adequate selling organization and otherwise use commercially reasonable efforts to market and sell Aphthasol® paste.  In response to Uluru’s demand letter, the Plaintiffs instituted the Action seeking a declaratory judgment that Discus did not breach the license agreement.  On November 20, 2012, the Plaintiffs filed Amended Complaint adding  a claim requesting that Uluru be ordered to return certain royalty payments that  Discus paid to  Uluru after the expiration of the license period.  On October 7, 2014, Discus filed a Second Amended Complaint, withdrawing Philips as a plaintiff and adding claims that Uluru breached the license by allegedly making a profit from the manufacture of Aphthasol® paste.  Uluru has denied liability with regard to Discus’s claims and has asserted counterclaims for breach of contract against Discus, seeking compensatory damages and attorneys’ fees.  The Action is currently set for trial in February 2015.

There are no material proceedings to which any director, officer or any of our affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, our affiliates, or security holder, is a party adverse to us or our consolidated subsidiary or has a material interest adverse thereto.

ITEM 1A.  Risk Factors.

This item is not applicable to smaller reporting companies.  Information about certain risks associated with an investment in our common stock is found in Part I, Item 1A of our Annual Report on Form 10-K, as filed with the SEC on March 31, 2014.

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

None.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information.

None.

- 36 -

ITEM 6. Exhibits.

Exhibit Number		Description
3.1		Restated Articles of Incorporation dated November 5, 2007. (1)
3.2		Amended and Restated Bylaws dated December 5, 2008. (2)
31.1	*	Certification of Principal Executive Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended.
31.2	*	Certification of Principal Accounting Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended.
32.1	**	Certification of Chief Executive Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	***	XBRL Instance Document
101.SCH	***	XBRL Taxonomy Extension Schema Document
101.CAL	***	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	***	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	***	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	***	XBRL Taxonomy Extension Presentation Linkbase Document
---------------------------------------------------
(1)		Incorporated by reference to the Company’s Form 8-K filed on November 6, 2007.
(2)		Incorporated by reference to the Company’s Form 8-K filed on December 11, 2008.
	*	Filed herewith.
	**	Filed herewith.  This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act of 1934.
	***	Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q/A is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Form 10-Q/A to be signed on its behalf by the undersigned, thereunto duly authorized.

	ULURU Inc.
Date:  April 1, 2015	By:	/s/ Kerry P. Gray
		Kerry P. Gray
		Chief Executive Officer and President
		(Principal Executive Officer)
Date:  April 1, 2015	By:	/s/ Terrance K. Wallberg
		Terrance K. Wallberg
		Chief Financial Officer and Vice President
		(Principal Financial and Accounting Officer)

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EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer of ULURU Inc.

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

the Securities Exchange Act of 1934, as Amended

I, Kerry P. Gray, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q/A 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: April 1, 2015	/s/ Kerry P. Gray
	Kerry P. Gray
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Accounting Officer of ULURU Inc.

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

the Securities Exchange Act of 1934, as Amended

I, Terrance K. Wallberg, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q/A 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: April 1, 2015	/s/ Terrance K. Wallberg
	Terrance K. Wallberg
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer of ULURU Inc.

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

to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q/A for the period ended September 30, 2014, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:

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

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

Date: April 1, 2015	/s/ Kerry P. Gray
	Kerry P. Gray
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer of ULURU Inc.

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

to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q/A for the period ended September 30, 2014, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:

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

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

Date: April 1, 2015	/s/ Terrance K. Wallberg
	Terrance K. Wallberg
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

COMPANY OVERVIEW AND BASIS OF PRESENTATION (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013	Dec. 31, 2013
Loss on conversion of convertible note settled with common stock				$ 234,042
Amortization of debt discount on convertible notes included in interest expense				(99,980)
Condensed Consolidated Statements of Operations (Unaudited) [Abstract]
Operating (Loss)	(641,760)		(632,453)	(2,092,717)		(1,895,870)
Interest and miscellaneous income	198		15,088	5,258		55,564
Interest expense	(27,030)		(125,904)	(24,061)	[1]	(385,965)
Equity in earnings (loss) of unconsolidated subsidiary	0		0	0		0
Foreign currency transaction (loss)	(10,267)		0	(10,267)		0
Gain (loss) on early extinguishment of convertible note	0		0	(135,078)	[1]	0
(Loss) Before Income Taxes	(678,859)		(743,269)	(2,256,865)	[1]	(2,222,644)
Income taxes	0		0	0		0
Net (Loss)	(678,859)		(743,269)	(2,256,865)	[1]	(2,222,644)
Less preferred stock dividends	0		(6,061)	0		(30,236)
Net (Loss) Allocable to Common Stockholders	(678,859)		(749,330)	(2,256,865)	[1]	(2,252,880)
Basic and diluted net (loss) per common share	$ (0.03)		$ (0.05)	$ (0.10)	[1]	$ (0.16)
Condensed Consolidated Balance Sheet (Unaudited) [Abstract]
Common stock	24,458			24,458			18,872
Additional paid-in capital	56,212,114	[1]		56,212,114	[1]		53,336,127
Accumulated (deficit)	(53,878,446)	[1]		(53,878,446)	[1]		(51,621,582)
Total Stockholders' Equity	2,358,126			2,358,126			1,733,417
Condensed Consolidated Statements of Cash Flows (Unaudited) [Abstract]
Net (Loss)	(678,859)		(743,269)	(2,256,865)	[1]	(2,222,644)
Amortization of debt discount on convertible note	552		44,591	(78,078)	[1]	134,052
Gain (loss) on early extinguishment of convertible note	0		0	135,078	[1]	0
Changes in operating assets and liabilities: Total				687,726	[1]	969,545
Net Cash Used in Operating Activities				(1,569,139)		(1,253,099)
As Previously Reported [Member]
Loss on conversion of convertible note settled with common stock				410,873
Amortization of debt discount on convertible notes included in interest expense				970
Condensed Consolidated Statements of Operations (Unaudited) [Abstract]
Operating (Loss)				(2,092,717)
Interest and miscellaneous income				5,258
Interest expense				(125,011)
Equity in earnings (loss) of unconsolidated subsidiary				0
Foreign currency transaction (loss)				(10,267)
Gain (loss) on early extinguishment of convertible note				142,703
(Loss) Before Income Taxes				(2,080,034)
Income taxes				0
Net (Loss)				(2,080,034)
Less preferred stock dividends				0
Net (Loss) Allocable to Common Stockholders				(2,080,034)
Basic and diluted net (loss) per common share				$ (0.09)
Condensed Consolidated Balance Sheet (Unaudited) [Abstract]
Common stock	24,458			24,458
Additional paid-in capital	56,035,283			56,035,283
Accumulated (deficit)	(53,701,615)			(53,701,615)
Total Stockholders' Equity	2,358,126			2,358,126
Condensed Consolidated Statements of Cash Flows (Unaudited) [Abstract]
Net (Loss)				(2,080,034)
Amortization of debt discount on convertible note				22,872
Gain (loss) on early extinguishment of convertible note				(142,703)
Changes in operating assets and liabilities: Total				510,895
Net Cash Used in Operating Activities				(1,569,139)
Adjustment [Member]
Condensed Consolidated Statements of Operations (Unaudited) [Abstract]
Operating (Loss)				0
Interest and miscellaneous income				0
Interest expense				100,950
Equity in earnings (loss) of unconsolidated subsidiary				0
Foreign currency transaction (loss)				0
Gain (loss) on early extinguishment of convertible note				(277,781)
(Loss) Before Income Taxes				(176,831)
Income taxes				0
Net (Loss)				(176,831)
Less preferred stock dividends				0
Net (Loss) Allocable to Common Stockholders				(176,831)
Basic and diluted net (loss) per common share				$ (0.01)
Condensed Consolidated Balance Sheet (Unaudited) [Abstract]
Common stock	0			0
Additional paid-in capital	176,831			176,831
Accumulated (deficit)	(176,831)			(176,831)
Total Stockholders' Equity	0			0
Condensed Consolidated Statements of Cash Flows (Unaudited) [Abstract]
Net (Loss)				(176,831)
Amortization of debt discount on convertible note				(100,950)
Gain (loss) on early extinguishment of convertible note				277,781
Changes in operating assets and liabilities: Total				176,831
Net Cash Used in Operating Activities				$ 0

[1] As restated, see Note 1

XML

FAIR VALUE MEASUREMENTS (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Assets [Abstract]
Notes receivable and accrued interest	$ 0	$ 777,710
Convertible note - June 2011 [Member]
Liabilities [Abstract]
Convertible note payable	0	138,220
Convertible note - July 2011 [Member]
Liabilities [Abstract]
Convertible note payable	0	120,738
Convertible note - June 2012 [Member]
Liabilities [Abstract]
Convertible note payable	$ 0	$ 888,099

XML

EQUITY TRANSACTIONS (Details) (USD $)	0 Months Ended	9 Months Ended	0 Months Ended
	Jan. 31, 2014	Sep. 30, 2014 Director	Mar. 31, 2014	Mar. 14, 2014	Feb. 28, 2014	Jan. 06, 2014	Nov. 14, 2013	Oct. 24, 2013	Sep. 06, 2013	Jul. 15, 2013	May 07, 2013	Mar. 14, 2013	Jan. 03, 2013	Apr. 30, 2014	Jan. 03, 2014	Dec. 21, 2012
Common Stock Transactions [Abstract]
Number of days within which request is declared effective	60 days
Number of days for which statement is effective	80 days
Number of additional days for which filing of statement can be done	60 days
SPA [Member]
Common Stock Transactions [Abstract]
Number of maximum directors that could be appointed		2
Common Stock [Member]
Common Stock Transactions [Abstract]
Number of securities called by warrants (in shares)															3,000,000
Proceeds from offering	450,000		$ 450,000	$ 110,000	$ 450,000	$ 500,000	$ 132,000	$ 300,000	$ 300,000	$ 110,000	$ 500,000	$ 88,000	$ 400,000
Shares purchased under stock purchased agreement (in shares)				275,000		1,250,000	330,000	750,000	750,000	275,000	1,250,000	220,000	1,000,000
Shares issued on exercise of warrants (in shares)	750,000		750,000		750,000
Common Stock [Member] | Subsequent Event [Member]
Common Stock Transactions [Abstract]
Proceeds from offering														450,000
Shares issued on exercise of warrants (in shares)														750,000
Common Stock [Member] | March SPA [Member]
Common Stock Transactions [Abstract]
Equity investment		440,000
Share price (in dollars per share)												$ 0.60
Issuance of shares of common stock under securities purchase agreement (in shares)		1,100,000
Number of securities called by warrants (in shares)		660,000
Maximum amount of common stock purchased under common stock purchase agreement												88,000
Common Stock [Member] | March SPA [Member] | Four-month anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement												110,000
Common Stock [Member] | March SPA [Member] | Eight-month anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement												132,000
Common Stock [Member] | March SPA [Member] | One-year anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement												110,000
Common Stock [Member] | SPA [Member]
Common Stock Transactions [Abstract]
Equity investment		2,000,000
Share price (in dollars per share)																$ 0.60
Issuance of shares of common stock under securities purchase agreement (in shares)		5,000,000
Number of securities called by warrants (in shares)		3,000,000
Maximum amount of common stock purchased under common stock purchase agreement																400,000
Common Stock [Member] | SPA [Member] | Four-month anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement																500,000
Common Stock [Member] | SPA [Member] | Eight-month anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement																600,000
Common Stock [Member] | SPA [Member] | One-year anniversary [Member]
Common Stock Transactions [Abstract]
Maximum amount of common stock purchased under common stock purchase agreement																500,000
Common Stock [Member] | Sacks [Member]
Common Stock Transactions [Abstract]
Proceeds from offering	450,000		150,000		450,000									150,000
Issuance of shares of common stock under assignment agreement (in shares)	750,000		250,000		750,000									250,000
Common Stock [Member] | TPT [Member]
Common Stock Transactions [Abstract]
Proceeds from offering			$ 300,000											$ 300,000
Issuance of shares of common stock under assignment agreement (in shares)			500,000											500,000

XML

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	3 Months Ended			9 Months Ended								12 Months Ended	0 Months Ended	1 Months Ended	23 Months Ended	84 Months Ended
	Sep. 30, 2014		Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2011		Dec. 31, 2013	Aug. 01, 2014	Mar. 31, 2013	Feb. 22, 2013	Mar. 31, 2013	Mar. 07, 2008
Future minimum lease payments [Abstract]
2014 (Three months)	$ 30,539			$ 30,539
2015	29,051			29,051
2016	0			0
2017	0			0
2018	0			0
Total	59,590			59,590
Rent expense for operating lease	32,369		31,083	93,195		86,125
Related Party Obligations [Abstract]
Concentration risk, percentage (in hundredths)	95.00%		70.00%	91.00%		66.00%
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract]
Deferred compensation liability				(208,225)		(146,769)		272,156		197,838
Deferred compensation	115,000			115,000								323,225
Compensation accounts payable												207,500
Compensation accrued liabilities												115,725
Milestone payments [Line Items]
Future milestone obligations	4,750,000			4,750,000
Access Pharmaceuticals [Member] | Annual Sales, Certain Products [Member] | Minimum [Member]
Milestone payments [Line Items]
Milestone for payment				20,000,000
Access Pharmaceuticals [Member] | Annual Sales, Certain Products [Member] | Maximum [Member]
Milestone payments [Line Items]
Milestone for payment				40,000,000
Access Pharmaceuticals [Member] | Annual Sales, Any One Certain Product [Member]
Milestone payments [Line Items]
Milestone for payment				20,000,000
Access Pharmaceuticals [Member] | Cumulative Sales, Certain Products [Member] | Minimum [Member]
Milestone payments [Line Items]
Milestone for payment				50,000,000
Access Pharmaceuticals [Member] | Cumulative Sales, Certain Products [Member] | Maximum [Member]
Milestone payments [Line Items]
Milestone for payment				100,000,000
ProStrakan Ltd [Member]
Milestone payments [Line Items]
Future milestone obligations																	1,400,000
Royalty percentage (in hundredths)																	30.00%
Kerry P. Gray [Member]
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract]
Deferred compensation liability				(154,986)	[1],[2]	(91,000)	[1],[2]	220,673	[1],[2]	140,313	[1],[2]
Deferred compensation	115,000	[1],[2]	221,500	115,000	[1],[2]	221,500
Deferred compensation liability pursuant to separation agreement						11,500
Deferred compensation liability pursuant to duties as president				62,500
Deferred compensation liability pursuant to duties as chairman				52,500		210,000
Repayment of temporarily deferred compensation				269,986		312,500
Proceeds from issuance of common stock under March 2013 offering				100,000		300,000
Terrance K. Wallberg [Member]
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract]
Deferred compensation liability				(25,000)		(35,769)		24,230		36,539
Deferred compensation	0			0
Key Executives [Member]
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract]
Deferred compensation liability				(28,239)		(20,000)		27,253		20,986
Deferred compensation	0			0
Altrazeal Trading Ltd. [Member]
Related Party Obligations [Abstract]
Related party sales				586,000		169,000
Outstanding accounts receivable	703,000			703,000								174,000
Altrazeal Trading Ltd. [Member] | Sales Revenue, Goods, Net [Member]
Related Party Obligations [Abstract]
Concentration risk, percentage (in hundredths)				92.00%		70.00%
Altrazeal Trading Ltd. [Member] | Accounts Receivable [Member]
Related Party Obligations [Abstract]
Concentration risk, percentage (in hundredths)				99.00%								97.00%
Office and Laboratory Space [Member]
Operating Leased Assets [Line Items]
Minimum monthly lease obligation													9,436	9,193	9,776	9,330
Future minimum monthly lease obligation after specified period				9,379
Office Equipment [Member]
Operating Leased Assets [Line Items]
Minimum monthly lease obligation				$ 744

[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.

[2] During 2014, Mr. Gray temporarily deferred compensation of $115,000 which consisted of $62,500 earned as salary compensation for his duties as President of the Company and $52,500 for his duties as Chairman of the Executive Committee of the Company's Board of Directors. During 2014, Mr. Gray was also repaid $269,986 of temporarily deferred compensation, of which $100,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

XML

ACCRUED LIABILITIES (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Accrued liabilities [Abstract]
Accrued taxes - payroll	$ 106,299	$ 106,299
Accrued compensation/benefits	98,424	148,683
Accrued insurance payable	47,999	60,113
Accrued property taxes	8,950	0
Product rebates/returns	13	32
Other	558	836
Total accrued liabilities	$ 262,243	$ 315,963

XML

ACCRUED LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2014

ACCRUED LIABILITIES [Abstract]

Accrued liabilities

Accrued liabilities consisted of the following at September 30, 2014 and December 31, 2013:

Accrued Liabilities	September 30, 2014		December 31, 2013
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		98,424		148,683
Accrued insurance payable		47,999		60,113
Accrued property taxes		8,950		---
Product rebates/returns		13		32
Other		558		836
Total accrued liabilities	$	262,243	$	315,963

XML

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2014

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 20. SUBSEQUENT EVENTS

Not applicable.

XML

EARNINGS PER SHARE (Details) (USD $)	3 Months Ended	9 Months Ended		12 Months Ended		0 Months Ended
	Sep. 30, 2014	Sep. 30, 2014		Dec. 31, 2013		Jun. 13, 2014	Jul. 28, 2014	Jul. 28, 2014	Jul. 31, 2013	Jul. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		3,376,308		9,058,353
Conversion price (in dollars per share)	$ 0.35	$ 0.35
Common stock issued from convertible note payable	435,502
Value of convertilble notes for which shares were issued	$ 152,000
Shares issued (in shares)	435,502
Secured convertible note [Member] | June 2011 Note [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock issued from convertible note payable						116,667
Annual principal payment						140,000
Shares issued (in shares)						116,667
Secured convertible note [Member] | July 2011 Note [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Conversion price (in dollars per share)	$ 1.08	$ 1.08
Common stock issued from convertible note payable							115,741	115,741
Annual principal payment						$ 140,000	$ 125,000	$ 125,000	$ 12,501	$ 11,542
Shares issued (in shares)							115,741	115,741
Warrants to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		1,676,401		4,665,451
Stock options to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		1,699,907		1,014,907
Unvested restricted common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		0		0
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		0	[1]	3,124,680	[1]
Common stock issuable upon the assumed conversion of our convertible notes payable from June 2011 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		0	[2]	127,712	[2]
Common stock issuable upon the assumed conversion of our convertible notes payable from July 2011 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculating basic and diluted net loss per common share (in shares)		0	[2]	125,603	[2]

[1] 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. 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.

[2] On June 13, 2014, Mr. Gray elected to convert the outstanding principal balance ($140,000) of the June 2011 Note and we issued 116,667 shares of Common Stock for such conversion. On July 28, 2014, Mr. Gray elected to convert the outstanding principal balance ($125,000) of the July 2011 Note and we issued 115,741 shares of Common Stock for such conversion.

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INVENTORY (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Components of inventory [Abstract]
Finished goods	$ 20,917	$ 85,993
Work-in-progress	267,603	299,464
Raw materials	30,882	10,148
Total	$ 319,402	$ 395,605

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2014

FAIR VALUE MEASUREMENTS [Abstract]

Fair value of financial instruments

The following table summarizes the fair value of our financial instruments at September 30, 2014 and December 31, 2013.

Description	September 30, 2014		December 31, 2013
Assets:
Notes receivable and accrued interest		---	$	777,710
Liabilities:
Convertible note – June 2011		---	$	138,220
Convertible note – July 2011		---	$	120,738
Convertible note – June 2012		---	$	888,099

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SHARE BASED COMPENSATION, Allocated Compensation expense (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stock Options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 24,480	$ 25,087	$ 71,403	$ 55,852
Stock Options [Member] | Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	6,164	5,425	16,836	11,438
Stock Options [Member] | Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	18,316	19,662	54,567	44,414
Restricted Stock [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	0	0	0	991
Restricted Stock [Member] | Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	0	0	0	444
Restricted Stock [Member] | Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 0	$ 0	$ 0	$ 547

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CONVERTIBLE DEBT (Details) (USD $)	3 Months Ended		9 Months Ended			0 Months Ended	1 Months Ended		0 Months Ended			12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013	Jun. 13, 2014	Jul. 31, 2013	Jul. 31, 2012	Jul. 28, 2014	Jul. 28, 2014	Jan. 22, 2014	Dec. 31, 2012 Tranche PromissoryNote	Jun. 13, 2011	Jul. 31, 2011	Jun. 27, 2012	Jul. 15, 2013	Feb. 26, 2013	Dec. 31, 2013	Jun. 30, 2011
Debt Instrument [Line Items]
Amortization of debt discount on convertible notes	$ 552	$ 44,591	$ (78,078)	[1]	$ 134,052
Information relating to convertible notes payable [Abstract]
Conversion Price (in dollars per share)	$ 0.35		$ 0.35
Interest cost recognized	956	38,032	20,853		124,677
Shares issued (in shares)	435,502
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	$ 0.35		$ 0.35
Number of warrants that vest upon payment of notes (in shares)	3		3
Warrants exercised (in shares)			3,000,000
Number of warrants that vest upon payment of notes but unexercised (in shares)	1		1
Minimum period during which registration statement is to be declared effective after filing with SEC			90 days
Maximum period during which registration statement is to be declared effective after filing with SEC			180 days
Warrant - June 2011 Debt Offering [Member]
Class of Warrant or Right [Line Items]
Number of securities called by warrants (in shares)													35,000
Exercise price of warrants (in dollars per share)													$ 1.20
Warrant - July 2011 Debt Offering [Member]
Class of Warrant or Right [Line Items]
Number of securities called by warrants (in shares)														34,722
Exercise price of warrants (in dollars per share)														$ 1.08
Warrant - June 2012 Debt Offering [Member]
Class of Warrant or Right [Line Items]
Number of warrants			7
Number of securities called by warrants (in shares)	3,142,857		3,142,857
Exercise price of warrants (in dollars per share)	$ 0.35		$ 0.35
Number of securities vested (in shares)															785,714
Common Stock [Member]
Class of Warrant or Right [Line Items]
Number of securities vested (in shares)												392,857				392,857	392,857
Inter-Mountain [Member]
Class of Warrant or Right [Line Items]
Number of securities called by warrants (in shares)												3,142,857						1,571,428
Exercise price of warrants (in dollars per share)												$ 0.35
Shares issued on exercise of warrants			725,274
Warrants exercised (in shares)			1,571,428
Cashless exercise of warrants (in shares)			1
Maximum contingent issue of shares to be issued on cashless exercise of warrants (in shares)			782,284
Minimum contingent issue of shares to be issued on cashless exercise of warrants (in shares)			261,516
June 2012 Note [Member]
Information relating to convertible notes payable [Abstract]
Initial principal amount	2,210,000		2,210,000
Secured convertible note [Member] | June 2011 Note [Member]
Debt Instrument [Line Items]
Conversion number of equity instruments (in shares)			116,667
Annual principal payment							14,001												14,653
Notice prior to the relevant payment date							15 days	15 days
Information relating to convertible notes payable [Abstract]
Initial principal amount	140,000		140,000
Interest Rate (in hundredths)	10.00%		10.00%				12.00%	12.00%
Maturity Date					Jun. 13, 2014
Conversion Price (in dollars per share)	$ 1.20		$ 1.20
Interest Payable							553	2,080
Deferred interest payable							14,001	14,653
Shares issued (in shares)						116,667
Secured convertible note [Member] | June 2011 Note [Member] | Maximum [Member]
Information relating to convertible notes payable [Abstract]
Conversion Price (in dollars per share)	$ 1.80		$ 1.80
Secured convertible note [Member] | July 2011 Note [Member]
Debt Instrument [Line Items]
Conversion number of equity instruments (in shares)								115,741
Stock price trigger (in dollars per share)								$ 2.16
Annual principal payment						140,000	12,501	11,542	125,000	125,000
Notice prior to the relevant payment date							15 days	15 days
Information relating to convertible notes payable [Abstract]
Initial principal amount	125,000		125,000
Interest Rate (in hundredths)	10.00%		10.00%				12.00%	12.00%
Maturity Date			Jul. 28, 2014
Conversion Price (in dollars per share)	$ 1.08		$ 1.08
Interest Payable						13,346	492	1,643	13,457	13,457
Deferred interest payable							12,501	11,542
Shares issued (in shares)									115,741	115,741
Secured convertible note [Member] | June 2012 Note [Member]
Debt Instrument [Line Items]
Purchase price paid in cash												500,000
Purchase price paid in the form of promissory notes			1,500,000									1,500,000
Number of promissory notes issued under purchase agreement			6									6
Principal amount of promissory notes	250,000		250,000									250,000
Original issue discount reflected in purchase price												200,000
Attorney's fees reflected in purchase price												10,000
Amount of monthly installment												83,333
Number of calendar days after the date of registration to commence monthly installment												30 days
Monthly installment payment terms												If the monthly installment is paid in common stock, such shares being issued will be based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days. The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of common stock during the preceding twenty trading days is less than $0.05.
Percentage of weighted average prices of shares of common stock (in hundredths)												80.00%
Declined percentage of weighted average prices of shares of common stock (in hundredths)												70.00%
Preceding number of trading days to calculate weighted average common stock price												20 days
Weighted average price of shares of common stock, Maximum (in dollars per share)												$ 0.05
Amount convertible under initial tranche												710,000
Number of subsequent tranches												6
Amount of each subsequent tranche plus interest												250,000
Percentage of outstanding principal balance prepaid in cash (in hundredths)												120.00%
Entry amount of judgment not stayed												100,000
Period within which judgment not stayed												30 days
Increased interest rate in the event of default (in hundredths)												18.00%
Information relating to convertible notes payable [Abstract]
Interest Rate (in hundredths)	8.00%		8.00%
Conversion Price (in dollars per share)												$ 0.35
Percentage of prepayment premium not incurred as per notice (in hundredths)											120.00%
Reduction of notes payable											317,000
Shares issued (in shares)			435,502
Current maturity of long-term debt	$ 152,000		$ 152,000

[1] As restated, see Note 1

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2014

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 of Altrazeal®.

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

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2014		%			2013		%			2014		%			2013		%
Domestic	$	8,992		3	%	$	17,197		16	%	$	30,435		5	%	$	54,594		23	%
International		313,791		97	%		93,383		84	%		603,623		95	%		186,914		77	%
Total	$	322,783		100	%	$	110,580		100	%	$	634,058		100	%	$	241,508		100	%

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

		Three Months Ended September 30,						Nine Months Ended September 30,
Customers	Product	2014			2013			2014			2013
Customer A	Altrazeal®		93	%		---			76	%		---
Customer B	Altrazeal®		2	%		70	%		15	%		66	%
Total			95	%		70	%		91	%		66	%

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 2,275,902		$ 2,275,902		$ 2,246,925
Less: accumulated depreciation and amortization	(1,787,120)		(1,787,120)		(1,608,311)
Property, equipment and leasehold improvements, net	488,782		488,782		638,614
Depreciation expense	58,702	59,688	178,809	185,536
Laboratory Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	424,888		424,888		424,888
Manufacturing Equipment [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	1,597,987		1,597,987		1,581,728
Computers, Office Equipment, and Furniture [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	153,078		153,078		140,360
Computer Software [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	4,108		4,108		4,108
Leasehold Improvements [Member]
Property, equipment and leasehold improvements, net [Abstract]
Property, equipment and leasehold improvements, gross	$ 95,841		$ 95,841		$ 95,841

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INVENTORY (Tables)

9 Months Ended

Sep. 30, 2014

INVENTORY [Abstract]

Components of inventory

The components of inventory, at the different stages of production, consisted of the following at September 30, 2014 and December 31, 2013:

Inventory	September 30, 2014		December 31, 2013
Finished goods	$	20,917	$	85,993
Work-in-progress		267,603		299,464
Raw materials		30,882		10,148
Total	$	319,402	$	395,605

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2014

SEGMENT INFORMATION [Abstract]

Revenues per geographic area

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

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2014		%			2013		%			2014		%			2013		%
Domestic	$	8,992		3	%	$	17,197		16	%	$	30,435		5	%	$	54,594		23	%
International		313,791		97	%		93,383		84	%		603,623		95	%		186,914		77	%
Total	$	322,783		100	%	$	110,580		100	%	$	634,058		100	%	$	241,508		100	%

Customers with greater than 10% of total sales

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

		Three Months Ended September 30,						Nine Months Ended September 30,
Customers	Product	2014			2013			2014			2013
Customer A	Altrazeal®		93	%		---			76	%		---
Customer B	Altrazeal®		2	%		70	%		15	%		66	%
Total			95	%		70	%		91	%		66	%

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LEGAL PROCEEDINGS (Details)	9 Months Ended
	Sep. 30, 2014
LEGAL PROCEEDINGS [Abstract]
Number of shares under non-standard cashless exercise (in shares)	782,284
Number of shares exercisable on cashless basis (in shares)	261,516

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INTANGIBLE ASSETS (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 9,625,938		$ 9,625,938		$ 9,625,938
Less: accumulated amortization	(6,310,486)		(6,310,486)		(5,955,101)
Intangible assets, net	3,315,452		3,315,452		3,670,837
Amortization expense	119,763	119,763	355,385	355,385
Future aggregate amortization expense for intangible assets [Abstract]
2014 (Three months)	119,763		119,763
2015	475,148		475,148
2016	476,450		476,450
2017	475,148		475,148
2018	475,148		475,148
2019 & Beyond	1,293,795		1,293,795
Total	3,315,452		3,315,452
Patents [Member] | Amlexanox (Aphthasol) [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	2,090,000		2,090,000		2,090,000
Patents [Member] | Amlexanox (OraDiscA) [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	6,873,080		6,873,080		6,873,080
Patents [Member] | ORADISC [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	73,000		73,000		73,000
Patents [Member] | Hydrogel Nanoparticle Aggregate [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 589,858		$ 589,858		$ 589,858

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Tables)

9 Months Ended

Sep. 30, 2014

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract]

Property, equipment and leasehold improvements

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2014 and December 31, 2013:

Property, equipment and leasehold improvements	September 30, 2014			December 31, 2013
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,597,987			1,581,728
Computers, office equipment, and furniture		153,078			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,275,902			2,246,925
Less: accumulated depreciation and amortization		( 1,787,120	)		(1,608,311	)
Property, equipment and leasehold improvements, net	$	488,782		$	638,614

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INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2014

INTANGIBLE ASSETS [Abstract]

Intangible assets

Intangible assets, net consisted of the following at September 30, 2014 and December 31, 2013:

Intangible assets	September 30, 2014			December 31, 2013
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		( 6,310,486	)		(5,955,101	)
Intangible assets, net	$	3,315,452		$	3,670,837

Future aggregate amortization expense for intangible assets

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2014, is as follows:

Calendar Years	Future Amortization Expense
2014 (Three months)	$	119,763
2015		475,148
2016		476,450
2017		475,148
2018		475,148
2019 & Beyond		1,293,795
Total	$	3,315,452

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THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2014

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS [Abstract]

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

NOTE 3. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

There were no new accounting pronouncements adopted or enacted during the periods presented that had, or are expected to have, a material impact on our financial statements.

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INVESTMENTS IN UNCONSOLIDATED ENTITIES (Tables)

9 Months Ended

Sep. 30, 2014

Altrazeal Trading Ltd. [Member]

Schedule of Equity Method Investments [Line Items]

Summarized financial information for investment

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

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	136,661
Total liabilities	$	660,006
Total stockholders’ equity	$	(523,345	)
Statement of operations
Revenues	$	61,028
Net (loss)	$	(516,829	)

Altrazeal Trading GmbH [Member]

Schedule of Equity Method Investments [Line Items]

Summarized financial information for investment

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

Altrazeal Trading GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	757,784
Total liabilities	$	1,563,046
Total stockholders’ equity	$	(805,262	)
Statement of operations
Revenues	$	---
Net (loss)	$	(798,009	)

ORADISC GmbH [Member]

Schedule of Equity Method Investments [Line Items]

Summarized financial information for investment

Summarized financial information for our investment in ORADISC GmbH assuming 100% ownership is as follows:

ORADISC GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	305,069
Total liabilities	$	302,572
Total stockholders’ equity	$	2,497
Statement of operations
Revenues	$	---
Net (loss)	$	(34,671	)

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SEGMENT INFORMATION (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Licensee Segment	Sep. 30, 2013
SEGMENT INFORMATION [Abstract]
Number of business segments			1
Number of international licensees			7
Revenues per geographic area [Abstract]
Total Revenues	$ 322,783	$ 110,580	$ 634,058	$ 241,508
Total revenue, percentage (in hundredths)	100.00%	100.00%	100.00%	100.00%
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	95.00%	70.00%	91.00%	66.00%
Customer A [Member] | Altrazeal [Member]
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	93.00%	0.00%	76.00%	0.00%
Customer B [Member] | Altrazeal [Member]
Revenue, Major Customer [Line Items]
Sales from major customer, percentage (in hundredths)	2.00%	70.00%	15.00%	66.00%
Domestic [Member]
Revenues per geographic area [Abstract]
Total Revenues	8,992	17,197	30,435	54,594
Total revenue, percentage (in hundredths)	3.00%	16.00%	5.00%	23.00%
International [Member]
Revenues per geographic area [Abstract]
Total Revenues	$ 313,791	$ 93,383	$ 603,623	$ 186,914
Total revenue, percentage (in hundredths)	97.00%	84.00%	95.00%	77.00%

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SHARE BASED COMPENSATION, Stock options grant outstanding and exercisable (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	1,699,907
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 1.73
Options Outstanding, Weighted Average Remaining Contractual Life in Years	8 years
Stock Options Exercisable (in shares)	732,407
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.83
Exercise Price Range 1 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	892,500
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 0.33
Options Outstanding, Weighted Average Remaining Contractual Life in Years	8 years 6 months
Stock Options Exercisable (in shares)	595,000
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 0.33
Exercise Price Range 2 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	685,000
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 1.15
Options Outstanding, Weighted Average Remaining Contractual Life in Years	8 years 2 months 12 days
Stock Options Exercisable (in shares)	15,000
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 1.15
Exercise Price Range 3 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	53,334
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.38
Options Outstanding, Weighted Average Remaining Contractual Life in Years	3 years 8 months 12 days
Stock Options Exercisable (in shares)	53,334
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 2.38
Exercise Price Range 4 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding (in shares)	69,073
Options Outstanding, Weighted Average Exercise Price per Share (in dollars per share)	$ 25.12
Options Outstanding, Weighted Average Remaining Contractual Life in Years	2 years 9 months 18 days
Stock Options Exercisable (in shares)	69,073
Options Exercisable, Weighted Average Exercise Price per Share (in dollars per share)	$ 25.12

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Sep. 30, 2014		Dec. 31, 2013
Current Assets
Cash and cash equivalents	$ 40,394		$ 5,119
Accounts receivable, net	705,942		185,078
Notes receivable and accrued interest, current portion	0		777,710
Inventory	319,402		395,605
Prepaid expenses and deferred charges	105,957		123,812
Total Current Assets	1,171,695		1,487,324
Property, Equipment and Leasehold Improvements, net	488,782		638,614
Other Assets
Intangible assets, net	3,315,452		3,670,837
Investment in unconsolidated subsidiary	0		0
Deferred financing costs, net	0		86,770
Deposits	18,069		18,069
Total Other Assets	3,333,521		3,775,676
TOTAL ASSETS	4,993,998		5,901,614
Current Liabilities
Accounts payable	1,460,635		1,734,725
Accrued liabilities	262,243		315,963
Accrued interest	0		13,360
Convertible notes payable, net of unamortized debt discount, current portion	0		1,147,057
Deferred revenue, current portion	58,959		58,959
Total Current Liabilities	1,781,837		3,270,064
Long Term Liabilities
Deferred revenue, net of current portion	854,035		898,133
Total Long Term Liabilities	854,035		898,133
TOTAL LIABILITIES	2,635,872		4,168,197
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value; 20,000 shares authorized; Preferred Stock Series A, 1,000 shares designated; no shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	0		0
Common Stock - $0.001 par value; 200,000,000 shares authorized; 24,458,018 and 18,871,420 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	24,458		18,872
Additional paid-in capital	56,212,114	[1]	53,336,127
Accumulated (deficit)	(53,878,446)	[1]	(51,621,582)
TOTAL STOCKHOLDERS' EQUITY	2,358,126		1,733,417
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 4,993,998		$ 5,901,614

[1] As restated, see Note 1

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INVESTMENTS IN UNCONSOLIDATED ENTITIES (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2012	Dec. 31, 2013
Statement of operations [Abstract]
Gains losses on equity method investments	$ 0	$ 0	$ 0	$ 0
Minimum [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of noncontrolling interest (in hundredths)	20.00%		20.00%
Maximum [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of noncontrolling interest (in hundredths)	50.00%		50.00%
Altrazeal Trading Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Non-dilutable ownership interest (in hundredths)					25.00%
Unrecorded profit (loss)					129,207
Balance sheet [Abstract]
Total assets					136,661
Total liabilities					660,006
Total stockholders' equity					(523,345)
Statement of operations [Abstract]
Revenues					61,028
Net (loss)					(516,829)
ORADISC GmbH [Member]
Schedule of Equity Method Investments [Line Items]
Non-dilutable ownership interest (in hundredths)						25.00%
Unrecorded profit (loss)						11,430
Balance sheet [Abstract]
Total assets						305,069
Total liabilities						302,572
Total stockholders' equity						2,497
Statement of operations [Abstract]
Revenues						0
Net (loss)						(34,671)
Gains losses on equity method investments	0		0
Altrazeal Trading GmbH [Member]
Schedule of Equity Method Investments [Line Items]
Unrecorded profit (loss)						213,370
Balance sheet [Abstract]
Total assets						757,784
Total liabilities						1,563,046
Total stockholders' equity						(805,262)
Statement of operations [Abstract]
Revenues						0
Net (loss)						$ (798,009)
Altrazeal AG [Member]
Schedule of Equity Method Investments [Line Items]
Non-dilutable ownership interest (in hundredths)	25.00%		25.00%

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COMPANY OVERVIEW AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2014

COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]

COMPANY OVERVIEW AND BASIS OF PRESENTATION

NOTE 1. COMPANY OVERVIEW AND BASIS OF PRESENTATION

Company Overview

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

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2014 and the results of its operations for the three and nine months ended September 30, 2014 and 2013 and cash flows for the nine months ended September 30, 2014 and 2013 have been made.

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

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 31, 2014, including the risk factors set forth therein.

Restatement of Prior Period Financial Statements

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined that entries recorded in the Original Report reflecting a gain of $142,703 on the early extinguishment of the June 2012 Note on January 22, 2014 (as reflected in the Condensed Consolidated Statements of Operations), a loss of $410,873 relating to the issuance of common stock for the final conversion of the June 2012 Note that occurred on March 7, 2014 (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $970 (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”) did not properly take into account the effect of certain allocations of unamortized debt discount.  In this Amendment, the Company corrects this error and the financial statement herein reflect a loss of $135,078 on the early extinguishment of June 2012 Note (as reflected in the Condensed Consolidated Statements of Operations), a loss of $234,042 relating to the issuance of common stock for the final conversion of the June 2012 Note (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $(99,980) (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”).  After restatement, total Stockholders’ Equity, as of September 30, 2014, remains unchanged at $2,358,126.

The following tables present the effects of the restatement on the previously issued financial statements presented herein.

Condensed Consolidated Statements of Operations (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Operating (Loss)		(2,092,717	)		(2,092,717	)		---
Interest and miscellaneous income		5,258			5,258			---
Interest expense		(125,011	)		(24,061	)		100,950
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---
Foreign currency transaction (loss)		(10,267	)		(10,267	)		---
Gain (loss) on early extinguishment of convertible note		142,703			(135,078	)		(277,781	)
(Loss) Before Income Taxes		(2,080,034	)		(2,256,865	)		(176,831	)
Income taxes		---			---			---
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Less preferred stock dividends		---			---			---
Net (Loss) Allocable to Common Stockholders	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Basic and diluted net (loss) per common share	$	(0.09	)	$	(0.10	)	$	(0.01	)

Condensed Consolidated Balance Sheet (Unaudited)	As of September 30, 2014
	As previously reported			As restated			Adjustment
Common stock		24,458			24,458			---
Additional paid-in capital		56,035,283			56,212,114			176,831
Accumulated (deficit)		(53,701,615	)		(53,878,446	)		(176,831	)
Total Stockholders’ Equity		2,358,126			2,358,126			---

Condensed Consolidated Statements of Cash Flows (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Amortization of debt discount on convertible note		22,872			(78,078	)		(100,950	)
Gain (loss) on early extinguishment of convertible note		(142,703	)		135,078			277,781
Changes in operating assets and liabilities: Total		510,895			687,726			176,831
Net Cash Used in Operating Activities		(1,569,139	)		(1,569,139	)		---

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2014

EARNINGS PER SHARE [Abstract]

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

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2014 and December 31, 2013:

	September 30, 2014		December 31, 2013
Warrants to purchase Common Stock		1,676,401		4,665,451
Stock options to purchase common stock		1,699,907		1,014,907
Unvested restricted common stock		---		---
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (1)		---		3,124,680
Common stock issuable upon the assumed conversion of our convertible note payable from June 2011 (2)		---		127,712
Common stock issuable upon the assumed conversion of our convertible note payable from July 2011 (2)		---		125,603
Total		3,376,308		9,058,353

(1)

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.  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.

(2)

On June 13, 2014, Mr. Gray elected to convert the outstanding principal balance ($140,000) of the June 2011 Note and we issued 116,667 shares of Common Stock for such conversion.  On July 28, 2014, Mr. Gray elected to convert the outstanding principal balance ($125,000) of the July 2011 Note and we issued 115,741 shares of Common Stock for such conversion.

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INCOME TAXES

9 Months Ended

Sep. 30, 2014

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 17. INCOME TAXES

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

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SHARE BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2014

SHARE BASED COMPENSATION [Abstract]

Stock option awards granted

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

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Incentive Stock Options  (1)
Quantity		125,000		---		125,000		232,500
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	101,171		---	$	101,171	$	56,112
Nonstatutory Stock Options  (2)
Quantity		560,000		---		560,000		735,000
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	453,250		---	$	453,250	$	177,388

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013.

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

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

	Nine Months Ended September 30,
	2014			2013
Incentive Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---
Nonstatutory Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---

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

Allocated share-based compensation expense

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	6,164	$	5,425	$	16,836	$	11,438
Selling, general and administrative		18,316		19,662		54,567		44,414
Total share-based compensation expense	$	24,480	$	25,087	$	71,403	$	55,852

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	---	$	---	$	---	$	444
Selling, general and administrative		---		---		---		547
Total share-based compensation expense	$	---	$	---	$	---	$	991

Stock option activity

The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Stock Options		Weighted Average Exercise Price per Share
Outstanding as of December 31, 2013		1,014,907	$	2.12
Granted		685,000	$	1.15
Forfeited/cancelled		---		---
Exercised		---		---
Outstanding as of September 30, 2014		1,699,907	$	1.73

Stock option grants outstanding and exercisable

The following table presents the stock option grants outstanding and exercisable as of September 30, 2014:

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		8.5		595,000	$	0.33
	685,000		1.15		8.2		15,000		1.15
	53,334		2.38		3.7		53,334		2.38
	69,073		25.12		2.8		69,073		25.12
	1,699,907	$	1.73		8.0		732,407	$	2.83

Nonvested restricted stock awards

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of Common Stock subject to potential issue as of September 30, 2014 and the changes therein during the nine months then ended:

	Restricted stock		Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2013		---		---
Shares granted		---		---
Shares forfeited/cancelled		---		---
Shares exercised/issued		---		---
Outstanding as of September 30, 2014		---		---

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LEGAL PROCEEDINGS

9 Months Ended

Sep. 30, 2014

LEGAL PROCEEDINGS [Abstract]

LEGAL PROCEEDINGS

NOTE 19. LEGAL PROCEEDINGS

On or about August 22, 2014, Inter-Mountain filed a Complaint against Uluru in a matter now pending in the U.S. Federal Court for the District of Utah, Central Division.  The Complaint relates to Inter-Mountain’s delivery of a notice of a cashless exercise with respect to its last remaining warrant to purchase Common Stock on or about May 1, 2014 purporting to exercise it with respect to the delivery of 782,284 shares of Common Stock under the non-standard cashless exercise or conversion provisions in the warrant.  Uluru declined to honor the exercise on the basis that, as a result of an amendment to the warrant agreed to in December 2013, the warrant was exercisable, on a cashless basis, with respect to only 261,516 shares of Common Stock as of May 1, 2014.   Inter-Mountain alleges that Uluru’s refusal to honor the exercise constitutes a breach of the warrant, breach of implied covenant of good faith and fair dealing, unjust enrichment, a violation of securities laws and common law fraud and seeks actual damages, consequential damages, treble damages, specific performance, attorneys’ fees and costs and other relief.  Answers, counterclaims, and answers to counterclaims have been filed, and Uluru expects scheduling and discovery to commence soon.  Uluru denies any breach or other wrongdoing and is vigorously defending the matter.

On or about November 6, 2012, Discus Dental, LLC (“Discus”) and Philips Oral Healthcare Inc. (“Philips”) filed a Complaint against Uluru in the United States District Court, Central District of California (the “Action”).  Discus, a subsidiary of Philips’ parent company, is party to a license agreement under which Uluru’s predecessor granted it a defined license.  The license contractually required that Discus use commercially reasonable efforts to, market and sell Aphthasol® paste, a prescription pharmaceutical.  Prior to the filing of the Action,  Uluru sent a demand letter contending that Discus did not fulfill its obligations under the license agreement, including the obligation to retain an adequate selling organization and otherwise use commercially reasonable efforts to market and sell Aphthasol® paste.  In response to Uluru’s demand letter, the Plaintiffs instituted the Action seeking a declaratory judgment that Discus did not breach the license agreement.  On November 20, 2012, the Plaintiffs filed Amended Complaint adding  a claim requesting that Uluru be ordered to return certain royalty payments that  Discus paid to  Uluru after the expiration of the license period.  On October 7, 2014, Discus filed a Second Amended Complaint, withdrawing Philips as a plaintiff and adding claims that Uluru breached the license by allegedly making a profit from the manufacture of Aphthasol® paste.  Uluru has denied liability with regard to Discus’s claims and has asserted counterclaims for breach of contract against Discus, seeking compensatory damages and attorneys’ fees.  The Action is currently set for trial in February 2015.

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2014

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2014 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 31, 2014, with the inclusion of the following significant accounting policy:

Foreign currency transaction gain (loss)

Our functional currency and our reporting currency is the U.S. dollar and foreign currency transactions are primarily undertaken in Euros.  Monetary assets and liabilities are translated using the foreign currency exchange rate prevailing at the balance sheet date.  Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of foreign currency exchange in effect at the date of the transaction.  Expenses are translated at average foreign currency exchange rates for the period.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of net income.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	20,000	20,000
Common Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized (in shares)	200,000,000	200,000,000
Common Stock, shares issued (in shares)	24,458,018	18,871,420
Common Stock, shares outstanding (in shares)	24,458,018	18,871,420
Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY
Shares designated to Series A (in shares)	1,000	1,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0

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EQUITY TRANSACTIONS

9 Months Ended

Sep. 30, 2014

EQUITY TRANSACTIONS [Abstract]

EQUITY TRANSACTIONS

NOTE 12. 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 (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 took place at four closings over 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 (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.

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 $150,000 on each of March 31, 2014 and April 30, 2014.  The Company issued 750,000 shares of Common Stock to Sacks on each of January 31, 2014 and February 28, 2014 and 250,000 shares of Common Stock on each of March 31, 2014 and April 30, 2014.  Under the terms of the Warrants, TPT made payments of $300,000 on each of March 31, 2014 and April 30, 2014 and the Company issued 500,000 shares of Common Stock to TPT on each date, respectively.

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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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 14, 2014
Entity Information [Line Items]
Entity Registrant Name	ULURU INC.
Entity Central Index Key	0001168220
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	true
Amendment Description	We are filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to our Quarterly Report on Form 10-Q for the period ended September 30, 2014 (the “Original Report”) as filed with the U.S. Securities and Exchange Commission on November 14, 2014 (a) to correct the Condensed Consolidated Financial Statements that were included in the Original Report, and (b) to modify other Items affected by the correction to the Condensed Consolidated Financial Statements.
Document Period End Date	Sep. 30, 2014
Common Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		24,458,018
Series A Preferred Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		0

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2014

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

NOTE 13. STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2014, we had 24,458,018 shares of Common Stock issued and outstanding.  We issued 3,241 shares of Common Stock for the three months ended September 30, 2014 comprised of 115,741 shares of Common Stock issued for the conversion and final payment of the July 2011 Note held by Kerry Gray and the net cancellation of 112,500 shares of Common Stock related to consulting services provided to the Company.

Preferred Stock

As of September 30, 2014, we had no shares of Series A Preferred Stock (the “Series A Shares”).  For the three months ended September 30, 2014, we did not issue or redeem any Series A Shares.

Warrants

The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2013		4,665,451		$	0.82
Warrants issued		80,000		$	1.20
Warrants exercised		(3,000,000	)	$	0.60
Warrants cancelled		(69,050	)	$	3.22
Balance as of September 30, 2014 (1)		1,676,401		$	1.14

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all had vested, 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 were exercised in 2013.  Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  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.  For the purposes of this Table, only such net vested shares of Common Stock from one unexercised warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of Common Stock.

For the nine months ended September 30, 2014, we issued a warrant to Torrey Hills Capital, Inc., to purchase up to an aggregate of 80,000 shares of our Common Stock at an exercise price of $1.20 per share, for consulting services.

Of the warrant shares subject to exercise as of September 30, 2014, expiration of the right to exercise is as follows:

Date of Expiration	Number of Warrant Shares of Common Stock Subject to Expiration
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
January 15, 2019		80,000
Total		1,676,401

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013
Revenues
License fees	$ 14,861	$ 11,400	$ 44,098		$ 33,827
Royalty income	24,439	10,276	41,452		10,276
Product sales, net	283,483	88,904	548,508		197,405
Total Revenues	322,783	110,580	634,058		241,508
Costs and Expenses
Cost of goods sold	223,646	60,245	377,779		104,236
Research and development	172,556	201,244	544,574		577,712
Selling, general and administrative	389,876	302,093	1,270,228		914,509
Amortization of intangible assets	119,763	119,763	355,385		355,385
Depreciation	58,702	59,688	178,809		185,536
Total Costs and Expenses	964,543	743,033	2,726,775		2,137,378
Operating (Loss)	(641,760)	(632,453)	(2,092,717)		(1,895,870)
Other Income (Expense)
Interest and miscellaneous income	198	15,088	5,258		55,564
Interest expense	(27,030)	(125,904)	(24,061)	[1]	(385,965)
Equity in earnings (loss) of unconsolidated subsidiary	0	0	0		0
Foreign currency transaction (loss)	(10,267)	0	(10,267)		0
Loss on early extinguishment of convertible note	0	0	(135,078)	[1]	0
Gain on sale of equipment	0	0	0		3,627
(Loss) Before Income Taxes	(678,859)	(743,269)	(2,256,865)	[1]	(2,222,644)
Income taxes	0	0	0		0
Net (Loss)	(678,859)	(743,269)	(2,256,865)	[1]	(2,222,644)
Less preferred stock dividends	0	(6,061)	0		(30,236)
Net (Loss) Allocable to Common Stockholders	$ (678,859)	$ (749,330)	$ (2,256,865)	[1]	$ (2,252,880)
Basic and diluted net (loss) per common share (in dollars per share)	$ (0.03)	$ (0.05)	$ (0.10)	[1]	$ (0.16)
Weighted average number of common shares outstanding (in shares)	24,518,208	15,659,822	23,363,579		13,677,186

[1] As restated, see Note 1

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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

9 Months Ended

Sep. 30, 2014

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract]

PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

NOTE 7. PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2014 and December 31, 2013:

Property, equipment and leasehold improvements	September 30, 2014			December 31, 2013
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,597,987			1,581,728
Computers, office equipment, and furniture		153,078			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,275,902			2,246,925
Less: accumulated depreciation and amortization		( 1,787,120	)		(1,608,311	)
Property, equipment and leasehold improvements, net	$	488,782		$	638,614

Depreciation expense on property, equipment and leasehold improvements was $58,702 and $59,688 for the three months ended September 30, 2014 and 2013, respectively, and was $178,809 and $185,536 for the nine months ended September 30, 2014 and 2013, respectively.

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INVENTORY

9 Months Ended

Sep. 30, 2014

INVENTORY [Abstract]

INVENTORY

NOTE 6. INVENTORY

As of September 30, 2014, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials.  Inventories are stated at the lower of cost (first in, first out method) or market.  We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage.  In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements.  As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required.

The components of inventory, at the different stages of production, consisted of the following at September 30, 2014 and December 31, 2013:

Inventory	September 30, 2014		December 31, 2013
Finished goods	$	20,917	$	85,993
Work-in-progress		267,603		299,464
Raw materials		30,882		10,148
Total	$	319,402	$	395,605

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18. COMMITMENTS AND CONTINGENCIES

Operating Leases

On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease commenced on April 1, 2006 and originally continued until April 1, 2013.  The lease required a minimum monthly lease obligation of $9,330, which 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 required a minimum monthly lease obligation of $9,193, which was inclusive of monthly operating expenses, until March 31, 2014 and at such time, increased to $9,379, which was inclusive of monthly operating expenses.  Effective August 1, 2014, our minimum monthly lease obligation increased to $9,436, 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 September 30, 2014:

Calendar Years	Future Lease Expense
2014 (Three months)	$	30,539
2015		29,051
2016		---
2017		---
2018		---
Total	$	59,590

Rent expense for our operating leases amounted to $32,369 and $31,083 for the three months ended September 30, 2014 and 2013, respectively, and $93,195 and $86,125 for the nine months ended September 30, 2014 and 2013, 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.

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 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.

For the nine months ended September 30, 2014 and 2013, the Company recorded revenues, in approximate numbers, of $586,000 and $169,000, respectively, with the various Altrazeal Distributors, which represented approximately 92% and 70% of our total revenues.

As of September 30, 2014 and December 31, 2013, Altrazeal Distributors had an outstanding net accounts receivable, in approximate numbers, of $703,000 and $174,000, respectively, which represented approximately 99% and 97% of our gross outstanding accounts receivables.

Related Party Obligations

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

As of September 30, 2014, the following table summarizes the compensation temporarily deferred and subsequent repayments:

Name	2014			2013			2012		2011		Total
Kerry P. Gray (1) (2)	$	(154,986	)	$	(91,000	)	$	220,673	$	140,313	$	115,000
Terrance K. Wallberg		(25,000	)		(35,769	)	$	24,230	$	36,539		---
Key executives		(28,239	)		(20,000	)	$	27,253	$	20,986		---
Total	$	(208,225	)	$	(146,769	)	$	272,156	$	197,838	$	115,000

(1)

During 2014, Mr. Gray temporarily deferred compensation of $115,000 which consisted of $62,500 earned as salary compensation for his duties as President of the Company and $52,500 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors.  During 2014, Mr. Gray was also repaid $269,986 of temporarily deferred compensation, of which $100,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

(2)

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.

As of September 30, 2014 and December 31, 2013, the Company’s obligation for temporarily deferred compensation was $115,000 of which $62,500 was included in accrued liabilities and $52,500 was included in accounts payable, and $323,225 of which $207,500 was included in accounts payable and $115,725 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 September 30, 2014, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.

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

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2014

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 14. EARNINGS PER SHARE

Basic and Diluted Net Loss Per Share

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

Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2014 and December 31, 2013:

	September 30, 2014		December 31, 2013
Warrants to purchase Common Stock		1,676,401		4,665,451
Stock options to purchase common stock		1,699,907		1,014,907
Unvested restricted common stock		---		---
Common stock issuable upon the assumed conversion of our convertible note payable from June 2012 (1)		---		3,124,680
Common stock issuable upon the assumed conversion of our convertible note payable from June 2011 (2)		---		127,712
Common stock issuable upon the assumed conversion of our convertible note payable from July 2011 (2)		---		125,603
Total		3,376,308		9,058,353

(1)

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.  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.

(2)

On June 13, 2014, Mr. Gray elected to convert the outstanding principal balance ($140,000) of the June 2011 Note and we issued 116,667 shares of Common Stock for such conversion.  On July 28, 2014, Mr. Gray elected to convert the outstanding principal balance ($125,000) of the July 2011 Note and we issued 115,741 shares of Common Stock for such conversion.

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ACCRUED LIABILITIES

9 Months Ended

Sep. 30, 2014

ACCRUED LIABILITIES [Abstract]

ACCRUED LIABILITIES

NOTE 10. ACCRUED LIABILITIES

Accrued liabilities consisted of the following at September 30, 2014 and December 31, 2013:

Accrued Liabilities	September 30, 2014		December 31, 2013
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		98,424		148,683
Accrued insurance payable		47,999		60,113
Accrued property taxes		8,950		---
Product rebates/returns		13		32
Other		558		836
Total accrued liabilities	$	262,243	$	315,963

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INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2014

INTANGIBLE ASSETS [Abstract]

INTANGIBLE ASSETS

NOTE 8. INTANGIBLE ASSETS

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2014 and December 31, 2013:

Intangible assets	September 30, 2014			December 31, 2013
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		( 6,310,486	)		(5,955,101	)
Intangible assets, net	$	3,315,452		$	3,670,837

Amortization expense for intangible assets was $119,763 and $119,763 for the three months ended September 30, 2014 and 2013, respectively, and was $355,385 and $355,385 for the nine months ended September 30, 2014 and 2013, respectively.

The future aggregate amortization expense for intangible assets, remaining as of September 30, 2014, is as follows:

Calendar Years	Future Amortization Expense
2014 (Three months)	$	119,763
2015		475,148
2016		476,450
2017		475,148
2018		475,148
2019 & Beyond		1,293,795
Total	$	3,315,452

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INVESTMENTS IN UNCONSOLIDATED ENTITIES

9 Months Ended

Sep. 30, 2014

INVESTMENTS IN UNCONSOLIDATED ENTITIES [Abstract]

INVESTMENTS IN UNCONSOLIDATED ENTITIES

NOTE 9. INVESTMENTS IN UNCONSOLIDATED ENTITIES

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

Altrazeal Trading Ltd.

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.  On February 1, 2014, Altrazeal Trading Ltd. transferred all of their rights and obligations under the existing shareholders’ agreement to Altrazeal Trading GmbH.

Audited financial statements of Altrazeal Trading Ltd. for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 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 reporting period.  We believe that our share of the cumulative losses of Altrazeal Trading Ltd. for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon audited financial statements received in May 2014, our unrecorded share of Altrazeal Trading Ltd. losses for the year ended December 31, 2012 totaled $129,207.

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

Altrazeal Trading Ltd.	December 31, 2012
Balance sheet
Total assets	$	136,661
Total liabilities	$	660,006
Total stockholders’ equity	$	(523,345	)
Statement of operations
Revenues	$	61,028
Net (loss)	$	(516,829	)

Altrazeal Trading GmbH

On February 1, 2014, Altrazeal Trading Ltd. transferred all of their rights and obligations under the existing shareholders’ agreement to Altrazeal Trading GmbH.  As a result of this transfer, we received a non-dilutable 25% ownership interest in Altrazeal Trading GmbH.

Audited financial statements of Altrazeal Trading GmbH for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of Altrazeal Trading GmbH. in our financial statements for each reporting period.  We believe that our share of the cumulative losses of Altrazeal Trading GmbH for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon the unaudited financial statements for the year ended December 31, 2013, our unrecorded share of Altrazeal Trading GmbH cumulative losses as of December 31, 2013 totaled $213,370.

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

Altrazeal Trading GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	757,784
Total liabilities	$	1,563,046
Total stockholders’ equity	$	(805,262	)
Statement of operations
Revenues	$	---
Net (loss)	$	(798,009	)

ORADISC GmbH

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.

Audited financial statements of ORADISC GmbH for the year ended December 31, 2013 and unaudited financial statements for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of ORADISC GmbH. in our financial statements for each reporting period.  We believe that our share of the cumulative losses of ORADISC GmbH for the years ended December 31, 2012 and 2013 and for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

Based upon the unaudited financial statements for the year ended December 31, 2013, our unrecorded share of ORADISC GmbH cumulative losses as of December 31, 2013 totaled $11,430.

Summarized financial information for our investment in ORADISC GmbH assuming 100% ownership is as follows:

ORADISC GmbH	December 31, 2013 (Unaudited)
Balance sheet
Total assets	$	305,069
Total liabilities	$	302,572
Total stockholders’ equity	$	2,497
Statement of operations
Revenues	$	---
Net (loss)	$	(34,671	)

Altrazeal AG

On February 1, 2014, we executed a shareholders’ agreement with Altrazeal AG, a single purpose entity for the marketing of Altrazeal® in several territories, including Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, the Commonwealth of Independent States, Jordan, Syria, Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand).  As a result of this transaction, we received a non-dilutable 25% ownership interest in Altrazeal AG.

Financial statements of Altrazeal AG for the three months and nine months ended September 30, 2014 have not been released to us and, therefore, we have not included the effect of the financial activities of Altrazeal AG in our financial statements for such reporting period.  We believe that our share of the cumulative losses of Altrazeal AG for the nine months ended September 30, 2014 would exceed the carrying value of our investment, therefore the equity method of accounting would be suspended for such reporting periods and no additional losses would be charged to operations.

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CONVERTIBLE DEBT

9 Months Ended

Sep. 30, 2014

CONVERTIBLE DEBT [Abstract]

CONVERTIBLE DEBT

NOTE 11. 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 Investor Notes in favor of the Company, each in the principal amount of $250,000 at an interest rate of 8.0% per annum, and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  The purchase price of the June 2012 Note also reflected a $200,000 original issue discount and $10,000 in attorney’s fees. The Purchase Agreement also includes representations and warranties, restrictive covenants, and indemnification provisions standard for similar transactions.

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

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

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

As part of the convertible debt financing, Inter-Mountain also received a total of seven warrants (the “Warrants”) to purchase, if they all vest, an aggregate of 3,142,857 shares of Common Stock, which number of shares could increase based upon the terms and conditions of the Warrants.  The Warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of Common Stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively.  Each of the three remaining Warrants has terminated, as described below.  As of September 30, 2014, we have issued 725,274 shares of Common Stock to Inter-Mountain for the cashless exercise of three warrants that vested prior to February 26, 2013 to purchase 1,571,428 shares of Common Stock.  Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  As of September 30, 2014, there is one warrant that remains vested but unexercised for 392,857 shares of Common Stock.  Inter-Mountain delivered a notice of a cashless exercise with respect to this warrant on or about May 1, 2014 purporting to exercise it with respect to the delivery of 782,284 shares of Common Stock.  We believe that, as a result of the December 2013 agreement, the warrant is exercisable, on a cashless basis, with respect to only 261,516 shares of Common Stock as of May 1, 2014 and, as a result, have not honored such warrant exercise.

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, which registration statement expired by rule on April 30, 2013.

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 of the deduction and offset, 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.

On July 28, 2014, we issued 115,741 shares of Common Stock to Mr. Gray for the conversion and final payment of $125,000 due under the July 2011 Note and remitted to Mr. Gray the annual interest due on July 28, 2014 of $13,457.

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.

On June 13, 2014, we issued 116,667 shares of Common Stock to Mr. Gray for the conversion and final payment of $140,000 due under the June 2011 Note and remitted to Mr. Gray the annual interest due on June 13, 2014 of $13,346.

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.

The amount of interest cost recognized from our convertible notes payable was $956 and $38,032 for the three months ended September 30, 2014 and 2013, respectively, and was $20,853 and $124,677 for the nine months ended September 30, 2014 and 2013, respectively.

The amount of debt discount amortized from our convertible notes payable was $552 and $44,591 for the three months ended September 30, 2014 and 2013, respectively, and was $(78,078) and $134,052 for the nine months ended September 30, 2014 and 2013, respectively.

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2014

STOCKHOLDERS' EQUITY [Abstract]

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

The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise			Weighted – Average Exercise Price
Balance as of December 31, 2013		4,665,451		$	0.82
Warrants issued		80,000		$	1.20
Warrants exercised		(3,000,000	)	$	0.60
Warrants cancelled		(69,050	)	$	3.22
Balance as of September 30, 2014 (1)		1,676,401		$	1.14

(1) As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all had vested, 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 were exercised in 2013.  Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  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.  For the purposes of this Table, only such net vested shares of Common Stock from one unexercised warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of Common Stock.

Expiration dates for warrants subject to exercise

Of the warrant shares subject to exercise as of September 30, 2014, expiration of the right to exercise is as follows:

Date of Expiration	Number of Warrant Shares of Common Stock Subject to Expiration
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
January 15, 2019		80,000
Total		1,676,401

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SHARE BASED COMPENSATION (Details) (USD $)	0 Months Ended						3 Months Ended				9 Months Ended
	Jun. 13, 2014	Jun. 13, 2013	Jun. 14, 2012	Jun. 15, 2010	Dec. 17, 2009	May 08, 2007	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013		Mar. 31, 2006
Additional disclosures [Abstract]
Number of shares authorized (in shares)							2,800,000				2,800,000
Number of additional shares authorized (in shares)	1,000,000	600,000	400,000	200,000	200,000	266,667
Incentive Stock Options [Member]
Options Granted [Abstract]
Quantity (in shares)							125,000	[1]	0	[1]	125,000	[1]	232,500	[1]
Weighted average fair value per share (in dollars per share)							$ 0.81	[1]	$ 0	[1]	$ 0.81	[1]	$ 0.24	[1]
Fair value							$ 101,171	[1]	$ 0	[1]	$ 101,171	[1]	$ 56,112	[1]
Weighted average assumptions to estimate the fair value of share-based awards [Abstract]
Expected volatility (in hundredths)											107.66%	[2]	103.55%	[2]
Risk-fee interest rate % (in hundredths)											1.75%	[3]	0.81%	[3]
Expected term (in years)											5 years		5 years
Dividend yield (in hundredths)											0.00%	[4]	0.00%	[4]
Forfeiture rate (in hundredths)											0.00%		0.00%
Options, Outstanding [Roll Forward]
Granted (in shares)							125,000	[1]	0	[1]	125,000	[1]	232,500	[1]
Nonstatutory Stock Options [Member]
Options Granted [Abstract]
Quantity (in shares)							560,000	[5]	0	[5]	560,000	[5]	735,000	[5]
Weighted average fair value per share (in dollars per share)							$ 0.81	[5]	$ 0	[5]	$ 0.81	[5]	$ 0.24	[5]
Fair value							453,250	[5]	0	[5]	453,250	[5]	177,388	[5]
Weighted average assumptions to estimate the fair value of share-based awards [Abstract]
Expected volatility (in hundredths)											107.66%	[2]	103.55%	[2]
Risk-fee interest rate % (in hundredths)											1.75%	[3]	0.81%	[3]
Expected term (in years)											5 years		5 years
Dividend yield (in hundredths)											0.00%	[4]	0.00%	[4]
Forfeiture rate (in hundredths)											0.00%		0.00%
Options, Outstanding [Roll Forward]
Granted (in shares)							560,000	[5]	0	[5]	560,000	[5]	735,000	[5]
Stock Options [Member]
Options Granted [Abstract]
Quantity (in shares)											685,000
Options, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)											1,014,907
Granted (in shares)											685,000
Forfeited/cancelled (in shares)											0
Exercised (in shares)											0
Outstanding, end of period (in shares)							1,699,907				1,699,907
Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding, beginning of period (in dollars per share)											$ 2.12
Granted (in dollars per share)											$ 1.15
Forfeited/cancelled (in dollars per share)											$ 0
Exercised (in dollars per share)											$ 0
Outstanding, end of period (in dollars per share)							$ 1.73				$ 1.73
Nonvested Awards, unearned share-based compensation [Abstract]
Unearned share-based compensation expense							635,461				635,461
Unearned share-based compensation, recognition period											3 years
Restricted Stock [Member]
Nonvested restricted stock awards, Number of Shares [Roll Forward]
Outstanding, beginning of period (in shares)											0
Granted (in shares)											0
Forfeited/cancelled (in shares)											0
Exercised/issued (in shares)											0
Outstanding, end of period (in shares)							0				0
Nonvested restricted stock awards, Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)											$ 0
Granted (in dollars per share)											$ 0
Forfeited/cancelled (in dollars per share)											$ 0
Exercised/issued (in dollars per share)											$ 0
Outstanding, end of period (in dollars per share)							$ 0				$ 0
Nonvested Awards, unearned share-based compensation [Abstract]
Unearned share-based compensation expense
Restricted Stock [Member] | Minimum [Member]
Additional disclosures [Abstract]
Vesting period											2 years
Restricted Stock [Member] | Maximum [Member]
Additional disclosures [Abstract]
Vesting period											5 years
Contractual term											10 years
2006 Equity Incentive Plan [Member]
Additional disclosures [Abstract]
Number of shares authorized (in shares)															133,333
Number of shares available for grant (in shares)							1,030,647				1,030,647
2006 Equity Incentive Plan [Member] | Stock Options [Member]
Additional disclosures [Abstract]
Number of options granted to date (in shares)							2,061,167				2,061,167
2006 Equity Incentive Plan [Member] | Stock Options [Member] | Minimum [Member]
Additional disclosures [Abstract]
Vesting period											1 year
2006 Equity Incentive Plan [Member] | Stock Options [Member] | Maximum [Member]
Additional disclosures [Abstract]
Vesting period											4 years
2006 Equity Incentive Plan [Member] | Restricted Stock [Member]
Additional disclosures [Abstract]
Number of restricted shares granted to date (in shares)							68,616				68,616
2006 Equity Incentive Plan [Member] | Restricted Stock [Member] | Minimum [Member]
Additional disclosures [Abstract]
Vesting period											6 months
2006 Equity Incentive Plan [Member] | Restricted Stock [Member] | Maximum [Member]
Additional disclosures [Abstract]
Vesting period											5 years

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

[2] 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

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

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

[5] The Company did not award any nonstatutory stock options for the three months ended September 30, 2013.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2014

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 16. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

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

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

The following table summarizes the fair value of our financial instruments at September 30, 2014 and December 31, 2013.

Description	September 30, 2014		December 31, 2013
Assets:
Notes receivable and accrued interest		---	$	777,710
Liabilities:
Convertible note – June 2011		---	$	138,220
Convertible note – July 2011		---	$	120,738
Convertible note – June 2012		---	$	888,099

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COMPANY OVERVIEW AND BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2014

COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]

Basis of Presentation

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2014 and the results of its operations for the three and nine months ended September 30, 2014 and 2013 and cash flows for the nine months ended September 30, 2014 and 2013 have been made.

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

All intercompany transactions and balances have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 31, 2014, including the risk factors set forth therein.

Restatement of Prior Period Financial Statements

Restatement of Prior Period Financial Statements

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined that entries recorded in the Original Report reflecting a gain of $142,703 on the early extinguishment of the June 2012 Note on January 22, 2014 (as reflected in the Condensed Consolidated Statements of Operations), a loss of $410,873 relating to the issuance of common stock for the final conversion of the June 2012 Note that occurred on March 7, 2014 (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $970 (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”) did not properly take into account the effect of certain allocations of unamortized debt discount.  In this Amendment, the Company corrects this error and the financial statement herein reflect a loss of $135,078 on the early extinguishment of June 2012 Note (as reflected in the Condensed Consolidated Statements of Operations), a loss of $234,042 relating to the issuance of common stock for the final conversion of the June 2012 Note (as reflected in the Condensed Consolidated Balance Sheets and included under the caption “Additional paid-in capital”), and amortization of debt discount of $(99,980) (as reflected in the Condensed Consolidated Statements of Operations and included under the caption of “Interest expense”).  After restatement, total Stockholders’ Equity, as of September 30, 2014, remains unchanged at $2,358,126.

The following tables present the effects of the restatement on the previously issued financial statements presented herein.

Condensed Consolidated Statements of Operations (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Operating (Loss)		(2,092,717	)		(2,092,717	)		---
Interest and miscellaneous income		5,258			5,258			---
Interest expense		(125,011	)		(24,061	)		100,950
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---
Foreign currency transaction (loss)		(10,267	)		(10,267	)		---
Gain (loss) on early extinguishment of convertible note		142,703			(135,078	)		(277,781	)
(Loss) Before Income Taxes		(2,080,034	)		(2,256,865	)		(176,831	)
Income taxes		---			---			---
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Less preferred stock dividends		---			---			---
Net (Loss) Allocable to Common Stockholders	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Basic and diluted net (loss) per common share	$	(0.09	)	$	(0.10	)	$	(0.01	)

Condensed Consolidated Balance Sheet (Unaudited)	As of September 30, 2014
	As previously reported			As restated			Adjustment
Common stock		24,458			24,458			---
Additional paid-in capital		56,035,283			56,212,114			176,831
Accumulated (deficit)		(53,701,615	)		(53,878,446	)		(176,831	)
Total Stockholders’ Equity		2,358,126			2,358,126			---

Condensed Consolidated Statements of Cash Flows (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Amortization of debt discount on convertible note		22,872			(78,078	)		(100,950	)
Gain (loss) on early extinguishment of convertible note		(142,703	)		135,078			277,781
Changes in operating assets and liabilities: Total		510,895			687,726			176,831
Net Cash Used in Operating Activities		(1,569,139	)		(1,569,139	)		---

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STOCKHOLDERS' EQUITY (Details) (USD $)	9 Months Ended		12 Months Ended	0 Months Ended
	Sep. 30, 2014		Dec. 31, 2013 Warrant	Jan. 22, 2014 Warrant	Dec. 31, 2012	Jul. 15, 2013	Feb. 26, 2013	Jun. 27, 2012
Common Stock [Abstract]
Common Stock, shares issued (in shares)	24,458,018		18,871,420
Common Stock, shares outstanding (in shares)	24,458,018		18,871,420
Common stock issued during period (in shares)	3,241
Number shares of common stock issued for installment payments (in shares)	115,741
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	4,665,451
Warrants issued (in shares)	80,000
Warrants exercised (in shares)	(3,000,000)
Warrants cancelled (in shares)	(69,050)
Balance (in shares)	1,676,401	[1]
Warrants, Weighted-Average Exercise Price [Abstract]
Balance (in dollars per share)	$ 0.82
Warrants issued (in dollars per share)	$ 1.20
Warrants exercised (in dollars per share)	$ 0.60
Warrants cancelled (in dollars per share)	$ 3.22
Balance (in dollars per share)	$ 1.14	[1]
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	1,676,401	[1]
Exercise price of warrants (in dollars per share)	$ 0.35
Common stock vested upon initial warrant (in shares)	1,676,401	[1]
Cancellation of shares of common stock related to consulting services (in shares)	(112,500)
Inter-Mountain [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Warrants exercised (in shares)	(1,571,428)
Warrant shares subject to expiration [Abstract]
Number of warrants to purchase common stock (in shares)					7
Aggregate shares of common stock issued upon exercise of warrants (in shares)			1,571,428		3,142,857
Number of warrants exercised (in shares)			3
Exercise price of warrants (in dollars per share)					$ 0.35
Torrey Hills Capital, Inc. [Member]
Warrant shares subject to expiration [Abstract]
Aggregate shares of common stock issued upon exercise of warrants (in shares)	80,000
Exercise price of warrants (in dollars per share)	$ 1.20
Warrant - June 2012 Debt Offering [Member]
Warrant shares subject to expiration [Abstract]
Aggregate shares of common stock issued upon exercise of warrants (in shares)	3,142,857
Exercise price of warrants (in dollars per share)	$ 0.35
Warrant - June 2012 Debt Offering [Member] | Private Placement [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)					392,857	392,857	392,857	785,714
Balance (in shares)	392,857				392,857	392,857	392,857	785,714
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	392,857				392,857	392,857	392,857	785,714
Number of unexercised warrants (in shares)	1
Common stock vested upon initial warrant (in shares)	392,857				392,857	392,857	392,857	785,714
Warrant - June 2012 Debt Offering [Member] | Inter-Mountain [Member]
Warrant shares subject to expiration [Abstract]
Number of warrants terminated (in shares)				3
May 15, 2015 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	357,155
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	357,155
Common stock vested upon initial warrant (in shares)	357,155
June 13, 2016 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	35,000
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	35,000
Common stock vested upon initial warrant (in shares)	35,000
July 16, 2016 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	116,667
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	116,667
Common stock vested upon initial warrant (in shares)	116,667
July 28, 2016 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	34,722
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	34,722
Common stock vested upon initial warrant (in shares)	34,722
June 27, 2017 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	392,857
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	392,857
Common stock vested upon initial warrant (in shares)	392,857
March 14, 2018 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	660,000
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	660,000
Common stock vested upon initial warrant (in shares)	660,000
January 15, 2019 [Member]
Warrants and Number of Shares of Common Stock Subject to Exercise [Roll Forward]
Balance (in shares)	80,000
Warrant shares subject to expiration [Abstract]
Number of Warrant Shares of Common Stock Subject to Expiration (in shares)	80,000
Common stock vested upon initial warrant (in shares)	80,000
Series A Preferred Stock [Member]
Preferred Stock [Abstract]
Preferred stock, shares issued (in shares)	0
Preferred stock, shares outstanding (in shares)	0

[1] As part of the June 2012 Note, Inter-Mountain received a total of seven warrants to purchase, if they all had vested, 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 were exercised in 2013. Such issuance of shares of Common Stock following the cashless exercise of three warrants by Inter-Mountain during 2013 was based upon an agreement in December 2013 with Inter-Mountain modifying the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise. 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. For the purposes of this Table, only such net vested shares of Common Stock from one unexercised warrant (392,857 shares) have been included, based upon an exercise price of $0.35 per share of Common Stock.

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NOTES RECEIVABLE (Details) (June 2012 Note [Member], USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014 PromissoryNote	Dec. 31, 2012 PromissoryNote	Dec. 31, 2013
Information relating to convertible notes payable [Abstract]
Initial principal amount	$ 2,210,000
Percentage of prepayment premium of debt (in hundredths)	120.00%
Secured convertible note [Member]
Information relating to convertible notes payable [Abstract]
Purchase price paid in the form of promissory notes	1,500,000	1,500,000
Number of promissory notes issued under purchase agreement	6	6
Principal amount of promissory notes	250,000	250,000
Notes receivable and accrued interest			777,710
Notes receivable			687,500
Accrued interest			$ 90,210

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
OPERATING ACTIVITIES :
Net loss	$ (2,256,865)	[1]	$ (2,222,644)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets	355,385		355,385
Depreciation	178,809		185,536
Share-based compensation for stock and options issued to employees	14,452		10,933
Share-based compensation for options issued to non-employees	56,951		45,910
Equity in earnings (loss) of unconsolidated subsidiary	0		0
Amortization of debt discount on convertible note	(78,078)	[1]	134,052
Amortization of deferred financing costs	7,309		55,841
Warrants issued (cancelled) for services	72,771		(48,776)
Common stock issued (cancelled) for services	(22,650)		158,250
Common stock issued for wages	0		20,000
Common stock issued for interest due on convertible note	2,063		101,917
Loss on early extinguishment of convertible note	135,078	[1]	0
Gain on sale of equipment	0		(3,627)
Change in operating assets and liabilities:
Accounts receivable	(520,864)		(104,529)
Inventory	76,203		39,659
Prepaid expenses and deferred charges	17,855		63,452
Notes receivable and accrued interest	777,710		538,566
Accounts payable	(274,090)		(637,401)
Accrued liabilities	(53,720)		(29,638)
Accrued interest	(13,360)		(7,158)
Deferred revenue	(44,098)		91,173
Total	687,726	[1]	969,545
Net Cash Used in Operating Activities	(1,569,139)		(1,253,099)
INVESTING ACTIVITIES :
Purchase of property and equipment	(28,977)		(32,030)
Proceeds from sale of equipment	0		4,937
Net Cash Used in Investing Activities	(28,977)		(27,093)
FINANCING ACTIVITIES :
Proceeds from sale of common stock and warrants, net	610,000		1,391,446
Proceeds from exercise of common stock warrants	1,800,000		0
Proceeds from redemption of preferred stock, net	0		1,864
Repayment of principle due on convertible note	(776,609)		(81,666)
Net Cash Provided by Financing Activities	1,633,391		1,311,644
Net Increase in Cash	35,275		31,452
Cash, beginning of period	5,119		21,549
Cash, end of period	40,394		53,001
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	29,006		33,544
Non-cash investing and financing activities:
Issuance of common stock for principle due on convertible notes	$ 582,029		$ 566,414

[1] As restated, see Note 1

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NOTES RECEIVABLE

9 Months Ended

Sep. 30, 2014

NOTES RECEIVABLE [Abstract]

NOTES RECEIVABLE

NOTE 5. NOTES RECEIVABLE

On June 27, 2012, we entered into a Securities Purchase Agreement related to our issuance of a $2,210,000 Secured Convertible Note (the “June 2012 Note”), with Inter-Mountain Capital Corp., a Delaware corporation (“Inter-Mountain”).  As part of the June 2012 Note transaction, we received $1,500,000 in the form of six promissory notes in favor of the Company, each in the principal amount of $250,000 (the “Investor Notes”) and each of which becomes due as the outstanding balance under the June 2012 Note is reduced to certain levels.  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.

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 of the deduction and offset, the outstanding amount owed to us under the Investor Notes was reduced to zero.

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

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COMPANY OVERVIEW AND BASIS OF PRESENTATION (Tables)

9 Months Ended

Sep. 30, 2014

COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]

Effects of the restatement on the previously issued financial statements

The following tables present the effects of the restatement on the previously issued financial statements presented herein.

Condensed Consolidated Statements of Operations (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Operating (Loss)		(2,092,717	)		(2,092,717	)		---
Interest and miscellaneous income		5,258			5,258			---
Interest expense		(125,011	)		(24,061	)		100,950
Equity in earnings (loss) of unconsolidated subsidiary		---			---			---
Foreign currency transaction (loss)		(10,267	)		(10,267	)		---
Gain (loss) on early extinguishment of convertible note		142,703			(135,078	)		(277,781	)
(Loss) Before Income Taxes		(2,080,034	)		(2,256,865	)		(176,831	)
Income taxes		---			---			---
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Less preferred stock dividends		---			---			---
Net (Loss) Allocable to Common Stockholders	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Basic and diluted net (loss) per common share	$	(0.09	)	$	(0.10	)	$	(0.01	)

Condensed Consolidated Balance Sheet (Unaudited)	As of September 30, 2014
	As previously reported			As restated			Adjustment
Common stock		24,458			24,458			---
Additional paid-in capital		56,035,283			56,212,114			176,831
Accumulated (deficit)		(53,701,615	)		(53,878,446	)		(176,831	)
Total Stockholders’ Equity		2,358,126			2,358,126			---

Condensed Consolidated Statements of Cash Flows (Unaudited)	Nine Months Ended September 30, 2014
	As previously reported			As restated			Adjustment
Net (Loss)	$	(2,080,034	)	$	(2,256,865	)	$	(176,831	)
Amortization of debt discount on convertible note		22,872			(78,078	)		(100,950	)
Gain (loss) on early extinguishment of convertible note		(142,703	)		135,078			277,781
Changes in operating assets and liabilities: Total		510,895			687,726			176,831
Net Cash Used in Operating Activities		(1,569,139	)		(1,569,139	)		---

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

Future minimum lease payments

The future minimum lease payments under the 2013 office lease and the 2010 equipment lease are as follows as of September 30, 2014:

Calendar Years	Future Lease Expense
2014 (Three months)	$	30,539
2015		29,051
2016		---
2017		---
2018		---
Total	$	59,590

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

As of September 30, 2014, the following table summarizes the compensation temporarily deferred and subsequent repayments:

Name	2014			2013			2012		2011		Total
Kerry P. Gray (1) (2)	$	(154,986	)	$	(91,000	)	$	220,673	$	140,313	$	115,000
Terrance K. Wallberg		(25,000	)		(35,769	)	$	24,230	$	36,539		---
Key executives		(28,239	)		(20,000	)	$	27,253	$	20,986		---
Total	$	(208,225	)	$	(146,769	)	$	272,156	$	197,838	$	115,000

(1)

During 2014, Mr. Gray temporarily deferred compensation of $115,000 which consisted of $62,500 earned as salary compensation for his duties as President of the Company and $52,500 for his duties as Chairman of the Executive Committee of the Company’s Board of Directors.  During 2014, Mr. Gray was also repaid $269,986 of temporarily deferred compensation, of which $100,000 was used by Mr. Gray for funding required pursuant to the March 2013 Offering.

(2)

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.

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SHARE BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

SHARE BASED COMPENSATION [Abstract]

SHARE BASED COMPENSATION

NOTE 15. SHARE BASED COMPENSATION

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

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

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Incentive Stock Options  (1)
Quantity		125,000		---		125,000		232,500
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	101,171		---	$	101,171	$	56,112
Nonstatutory Stock Options  (2)
Quantity		560,000		---		560,000		735,000
Weighted average fair value per share	$	0.81		---	$	0.81	$	0.24
Fair value	$	453,250		---	$	453,250	$	177,388

(1)	The Company did not award any incentive stock options for the three months ended September 30, 2013.
(2)	The Company did not award any nonstatutory stock options for the three months ended September 30, 2013.

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

	Nine Months Ended September 30,
	2014			2013
Incentive Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---
Nonstatutory Stock Options
Expected volatility  (1)		107.66	%		103.55	%
Risk-free interest rate %  (2)		1.75	%		0.81	%
Expected term (in years)		5.0			5.0
Dividend yield  (3)		---			---
Forfeiture rate		---			---

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

Stock Options (Incentive and Nonstatutory)

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	6,164	$	5,425	$	16,836	$	11,438
Selling, general and administrative		18,316		19,662		54,567		44,414
Total share-based compensation expense	$	24,480	$	25,087	$	71,403	$	55,852

At September 30, 2014, 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 $635,461.  The period over which the unearned share-based compensation is expected to be recognized is approximately three years.

The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2014 and the changes therein during the nine months then ended:

	Stock Options		Weighted Average Exercise Price per Share
Outstanding as of December 31, 2013		1,014,907	$	2.12
Granted		685,000	$	1.15
Forfeited/cancelled		---		---
Exercised		---		---
Outstanding as of September 30, 2014		1,699,907	$	1.73

The following table presents the stock option grants outstanding and exercisable as of September 30, 2014:

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		8.5		595,000	$	0.33
	685,000		1.15		8.2		15,000		1.15
	53,334		2.38		3.7		53,334		2.38
	69,073		25.12		2.8		69,073		25.12
	1,699,907	$	1.73		8.0		732,407	$	2.83

Restricted Stock Awards

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

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

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2014		2013		2014		2013
Research and development	$	---	$	---	$	---	$	444
Selling, general and administrative		---		---		---		547
Total share-based compensation expense	$	---	$	---	$	---	$	991

At September 30, 2014, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is zero.

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of Common Stock subject to potential issue as of September 30, 2014 and the changes therein during the nine months then ended:

	Restricted stock		Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2013		---		---
Shares granted		---		---
Shares forfeited/cancelled		---		---
Shares exercised/issued		---		---
Outstanding as of September 30, 2014		---		---

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, June 13, 2013, and on June 5, 2014, 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, 600,000 shares, and 1,000,000 shares, respectively, to a total of 2,800,000 shares.

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

As of September 30, 2014, we had granted options to purchase 2,061,167 shares of Common Stock since the inception of the Equity Incentive Plan, of which 1,699,907 were outstanding at a weighted average exercise price of $1.73 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the Equity Incentive Plan, of which none were outstanding.  As of September 30, 2014, there were 1,030,647 shares that remained available for future grants under our Equity Incentive Plan.