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ULURU INC. 10-Q 2014

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
form10q_063014.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended:June 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 August 14, 2014, there were 24,570,518 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.

 
 

 



INDEX TO FORM 10-Q

For the Quarter Ended JUNE 30, 2014

   
Page
 
     
     
 
 
 
 
     
     
     
     
 
     
     
     
     
     
     
     
     
 
     
     
     
     



 

CONDENSED CONSOLIDATED BALANCE SHEETS

   
June 30, 2014
   
December 31, 2013
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
  $ 720,590     $ 5,119  
Accounts receivable, net
    428,993       185,078  
Notes receivable and accrued interest, current portion
    ---       777,710  
Inventory
    348,693       395,605  
Prepaid expenses and deferred charges
    87,749       123,812  
Total Current Assets
    1,586,025       1,487,324  
                 
Property, Equipment and Leasehold Improvements, net
    534,740       638,614  
                 
Other Assets
               
Intangible assets, net
    3,435,215       3,670,837  
Investment in unconsolidated subsidiary
    ---       ---  
Deferred financing costs, net
    ---       86,770  
Deposits
    18,069       18,069  
Total Other Assets
    3,453,284       3,775,676  
                 
TOTAL ASSETS
  $ 5,574,049     $ 5,901,614  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current Liabilities
               
Accounts payable
  $ 1,391,269     $ 1,734,725  
Accrued liabilities
    165,221       315,963  
Accrued interest
    12,501       13,360  
Convertible notes payable, net of unamortized debt discount, current portion
    124,448       1,147,057  
Deferred revenue, current portion
    58,959       58,959  
Total Current Liabilities
    1,752,398       3,270,064  
                 
Long Term Liabilities
               
Deferred revenue, net of current portion
    868,896       898,133  
Total Long Term Liabilities
    868,896       898,133  
                 
TOTAL LIABILITIES
    2,621,294       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 June 30, 2014 and December 31, 2013, respectively
    ---       ---  
                 
Common Stock - $0.001 par value; 200,000,000 shares authorized;
               
24,454,777 and 18,871,420 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively
    24,455       18,872  
Additional paid-in capital
    55,951,057       53,336,127  
Accumulated  (deficit)
    (53,022,757 )     (51,621,582 )
TOTAL STOCKHOLDERS’ EQUITY
    2,952,755       1,733,417  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 5,574,049     $ 5,901,614  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2014
   
2013
   
2014
   
2013
 
Revenues
                       
License fees
  $ 14,698     $ 11,274     $ 29,237     $ 22,427  
Royalty income
    17,012       ---       17,012       ---  
Product sales, net
    177,584       17,610       265,026       108,501  
Total Revenues
    209,294       28,884       311,275       130,928  
                                 
Costs and Expenses
                               
Cost of goods sold
    113,090       3,102       154,132       43,991  
Research and development
    184,423       211,183       372,019       376,468  
Selling, general and administrative
    411,279       351,726       880,352       612,416  
Amortization of intangible assets
    118,461       118,461       235,622       235,622  
Depreciation
    59,553       60,460       120,107       125,848  
Total Costs and Expenses
    886,806       744,932       1,762,232       1,394,345  
Operating (Loss)
    (677,512 )     (716,048 )     (1,450,957 )     (1,263,417 )
                                 
Other Income (Expense)
                               
Interest and miscellaneous income
    519       18,011       5,060       40,476  
Interest expense
    (32,722 )     (128,375 )     (97,981 )     (260,061 )
Equity in earnings (loss) of unconsolidated subsidiary
    ---       ---       ---       ---  
Gain on early extinguishment of convertible note
    ---       ---       142,703       ---  
Gain on sale of equipment
    ---       3,627       ---       3,627  
(Loss) Before Income Taxes
    (709,715 )     (822,785 )     (1,401,175 )     (1,479,375 )
                                 
Income taxes
    ---       ---       ---       ---  
Net (Loss)
  $ (709,715 )   $ (822,785 )   $ (1,401,175 )   $ (1,479,375 )
                                 
Less preferred stock dividends
    ---       (12,154 )     ---       (24,175 )
Net (Loss) Allocable to Common Stockholders
  $ (709,715 )   $ (834,939 )   $ (1,401,175 )   $ (1,503,550 )
                                 
                                 
Basic and diluted net (loss) per common share
  $ (0.03 )   $ (0.06 )   $ (0.06 )   $ (0.12 )
                                 
Weighted average number of common shares outstanding
    24,122,176       13,670,628       22,776,695       12,669,437  
                                 
The accompanying notes are an integral part of these consolidated financial statements.
 
 



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Six Months Ended June 30,
 
   
2014
   
2013
 
OPERATING ACTIVITIES :
           
Net loss
  $ (1,401,175 )   $ (1,479,375 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:
               
                 
Amortization of intangible assets
    235,622       235,622  
Depreciation
    120,107       125,848  
Share-based compensation for stock and options issued to employees
    9,276       6,218  
Share-based compensation for options issued to non-employees
    37,647       25,538  
Equity in earnings (loss) of unconsolidated subsidiary
    ---       ---  
Amortization of debt discount on convertible note
    22,320       89,461  
Amortization of deferred financing costs
    7,309       37,457  
Warrants issued (cancelled) for services
    72,771       (48,776 )
Common stock issued for services
    42,600       71,250  
Common stock issued for wages
    ---       20,000  
Common stock issued for interest due on convertible note
    2,063       71,942  
Gain on early extinguishment of convertible note
    (142,703 )     ---  
Gain on sale of equipment
    ---       (3,627 )
                 
Change in operating assets and liabilities:
               
Accounts receivable
    (243,915 )     95,119  
Inventory
    46,912       24,485  
Prepaid expenses and deferred charges
    36,063       116,787  
Notes receivable and accrued interest
    777,710       363,414  
Accounts payable
    (343,456 )     (532,509 )
Accrued liabilities
    (150,742 )     (53,034 )
Accrued interest
    (859 )     14,702  
Deferred revenue
    (29,237 )     (22,427 )
Total
    499,488       637,470  
                 
Net Cash Used in Operating Activities
    (901,687 )     (841,905 )
                 
INVESTING ACTIVITIES :
               
Purchase of property and equipment
    (16,233 )     ---  
Proceeds from sale of equipment
    ---       4,937  
Net Cash Provided by (Used in) Investing Activities
    (16,233 )     4,937  
                 
FINANCING ACTIVITIES :
               
Proceeds from sale of common stock and warrants, net
    610,000       981,446  
Proceeds from exercise of common stock warrants
    1,800,000       ---  
Repayment of principle due on convertible note
    (776,609 )     (81,666 )
Net Cash Provided by Financing Activities
    1,633,391       899,780  
                 
Net Increase in Cash
    715,471       62,812  
                 
Cash,  beginning of period
    5,119       21,549  
Cash,  end of period
  $ 720,590     $ 84,361  
                 
SUPPLEMENTAL CASH FLOW DISCLOSURE:
               
Cash paid for interest
  $ 14,516     $ 2,090  
                 
Non-cash investing and financing activities:
               
Issuance of common stock for principle due on convertible notes
  $ 597,029     $ 346,389  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 




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 June 30, 2014 and the results of its operations for the three and six months ended June 30, 2014 and 2013 and cash flows for the six months ended June 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 six months ended June 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.
 
 
NOTE 2.
SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 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.


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 six months ended June 30 are summarized as follows:

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
Revenues
 
2014
   
%
   
2013
   
%
   
2014
   
%
   
2013
   
%
 
Domestic
  $ 11,770       6 %   $ 17,610       61 %   $ 21,442       7 %   $ 37,397       29 %
International
    197,524       94 %     11,274       39 %     289,833       93 %     93,531       71 %
Total
  $ 209,294       100 %   $ 28,884       100 %   $ 311,275       100 %   $ 130,928       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 six months ended June 30 are represented on the following table:

     
Three Months Ended June 30,
   
Six Months Ended June 30,
 
Customers
Product
 
2014
   
2013
   
2014
   
2013
 
  Customer A
Altrazeal®
    87 %     ---       59 %     ---  
  Customer B
Altrazeal®
    3 %     ---       28 %     57 %
  Customer C
Altrazeal®
    *       29 %     *       *  
  Total
      90 %     29 %     87 %     57 %
  * Sales from this customer were less than 10% of total sales for the period reported.
 

 
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 June 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 June 30, 2014 and December 31, 2013:

Inventory
 
June 30, 2014
   
December 31, 2013
 
  Finished goods
  $ 22,230     $ 85,993  
  Work-in-progress
    308,001       299,464  
  Raw materials
    18,462       10,148  
  Total
  $ 348,693     $ 395,605  
 
 
 
NOTE 7.
PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

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

Property, equipment and leasehold improvements
 
June 30, 2014
   
December 31, 2013
 
  Laboratory equipment
  $ 424,888     $ 424,888  
  Manufacturing equipment
    1,597,961       1,581,728  
  Computers, office equipment, and furniture
    140,360       140,360  
  Computer software
    4,108       4,108  
  Leasehold improvements
    95,841       95,841  
      2,263,158       2,246,925  
  Less: accumulated depreciation and amortization
    ( 1,728,418 )     (1,608,311 )
  Property, equipment and leasehold improvements, net
  $ 534,740     $ 638,614  

Depreciation expense on property, equipment and leasehold improvements was $59,553 and $60,460 for the three months ended June 30, 2014 and 2013, respectively, and was $120,107 and $125,848 for the six months ended June 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 June 30, 2014 and December 31, 2013:

Intangible assets
 
June 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
    ( 6,190,723 )     (5,955,101 )
  Intangible assets, net
  $ 3,435,215     $ 3,670,837  

Amortization expense for intangible assets was $118,461 and $118,461 for the three months ended June 30, 2014 and 2013, respectively, and was $235,622 and $235,622 for the six months ended June 30, 2014 and 2013, respectively.

The future aggregate amortization expense for intangible assets, remaining as of June 30, 2014, is as follows:
Calendar Years
 
Future Amortization
Expense
 
  2014 (Six months)
  $ 239,526  
  2015
    475,148  
  2016
    476,450  
  2017
    475,148  
  2018
    475,148  
  2019 & Beyond
    1,293,795  
  Total
  $ 3,435,215  





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 years ended December 31, 2012 and 2013 and unaudited financial statements for the three months and six months ended June 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 three months and six months ended June 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 updated unaudited 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 )

 
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.

As of June 30, 2014, ORADISC GmbH had not begun operations and accordingly the net book value of the investee assets had not been determined and there were no equity method investee gains or losses for the three months and six months ended June 30, 2014.

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 six months ended June 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 three months and six months ended June 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 June 30, 2014 and December 31, 2013:

Accrued Liabilities
 
June 30, 2014
   
December 31, 2013
 
  Accrued taxes – payroll
  $ 106,299     $ 106,299  
  Accrued compensation/benefits
    49,972       148,683  
  Accrued insurance payable
    ---       60,113  
  Accrued property taxes
    8,100       ---  
  Product rebates/returns
    14       32  
  Other
    836       836  
  Total accrued liabilities
  $ 165,221     $ 315,963  

 
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 June 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 June 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.

 
- 10 -

 
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.
 
- 11 -

 
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.

Information relating to our convertible notes payable is as follows:
                       
As of June 30, 2014
 
Transaction
 
Initial
 Principal
Amount
   
Interest
Rate
 
Maturity
Date
 
Conversion Price (1)
   
Principal
Balance
   
Unamortized
Debt
Discount
   
Carrying
Value
 
July 2011 Note
  $ 125,000       10.0 %
07/28/2014
  $ 1.08     $ 125,000     $ 552     $ 124,448  
Total
  $ 125,000                       $ 125,000     $ 552     $ 124,448  

(1)
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.

The amount of interest cost recognized from our convertible notes payable was $5,952 and $41,417 for the three months ended June 30, 2014 and 2013, respectively, and was $19,897 and $86,645 for the six months ended June 30, 2014 and 2013, respectively.

The amount of debt discount amortized from our convertible notes payable was $2,655 and $44,683 for the three months ended June 30, 2014 and 2013, respectively, and was $22,320 and $89,461 for the six months ended June 30, 2014 and 2013, respectively.

The future minimum payments relating to our convertible notes payable, as of June 30, 2014, are as follows:
 
   
Payments Due By Period
 
Transaction
 
Total
   
2014 (Six Months)
   
2015
   
2016
   
2017
   
2018
 
July 2011 Note
  $ 125,000     $ 125,000     $ ---     $ ---     $ ---     $ ---  
Total
  $ 125,000     $ 125,000     $ ---     $ ---     $ ---     $ ---  


 
- 12 -




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.


 
- 13 -



NOTE 13.
STOCKHOLDERS’ EQUITY

Common Stock

As of June 30, 2014, we had 24,454,777 shares of Common Stock issued and outstanding.  We issued 116,667 shares of Common Stock for the three months ended June 30, 2014 comprised of 116,667 shares of Common Stock issued for the conversion and final payment of the June 2011 Note held by Kerry Gray.

Preferred Stock

As of June 30, 2014, we had no shares of Series A Preferred Stock (the “Series A Shares”).  For the three months ended June 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 June 30, 2014 and the changes therein during the six 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
    ---       ---  
Balance as of June 30, 2014 (1)
    1,745,451     $ 1.22  

(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 six months ended June 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 June 30, 2014, expiration of the right to exercise is as follows:

Date of Expiration
 
Number of Warrant Shares of Common Stock Subject to Expiration
 
  July 23, 2014
    69,050  
  May 15, 2015
    357,155  
  June 13, 2016
    35,000  
  July 16, 2016
    116,667  
  July 28, 2016
    34,722  
  June 27, 2017
    392,857  
  March 14, 2018
    660,000  
  January 15, 2019
    80,000  
  Total
    1,745,451  


 
- 14 -




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 June 30, 2014 and December 31, 2013:

   
June 30, 2014
   
December 31, 2013
 
Warrants to purchase Common Stock
    1,745,451       4,665,451  
Stock options to purchase common stock
    1,014,907       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)
    115,741       125,603  
  Total
    2,876,099       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.







 
- 15 -



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 six months ended June 30:

   
Three Months Ended
June 30,
   
Six Months Ended
 June 30,
 
   
2014
   
2013
   
2014
   
2013
 
Incentive Stock Options  (1)
                       
Quantity
    ---       ---       ---       232,500  
Weighted average fair value per share
    ---       ---       ---     $ 0.24  
Fair value
    ---       ---       ---     $ 56,112  
                                 
Nonstatutory Stock Options  (2)
                               
Quantity
    ---       ---       ---       735,000  
Weighted average fair value per share
    ---       ---       ---     $ 0.24  
Fair value
    ---       ---       ---     $ 177,388  

 
(1)
The Company did not award any incentive stock options for the three months ended June 30, 2014 and 2013, respectively.
 
(2)
The Company did not award any nonstatutory stock options for the three months ended June 30, 2014 and 2013, respectively.

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:

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

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


 
- 16 -





Stock Options (Incentive and Nonstatutory)

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

   
Three Months Ended
 June 30,
   
Six Months Ended
 June 30,
 
   
2014
   
2013
   
2014
   
2013
 
Research and development
  $ 5,365     $ 5,365     $ 10,672     $ 6,013  
Selling, general and administrative
    17,018       16,419       36,251       24,752  
  Total share-based compensation expense
  $ 22,383     $ 21,784     $ 46,923     $ 30,765  

At June 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 $105,520.  The period over which the unearned share-based compensation is expected to be recognized is approximately twenty one months.

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

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

The following table presents the stock option grants outstanding and exercisable as of June 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       8.7       272,500     $ 0.33  
  53,334       2.38       4.0       53,334       2.38  
  30,002       14.40       2.8       30,002       14.40  
  39,071       33.35       3.3       39,071       33.35  
  1,014,907     $ 2.12       8.1       394,907     $ 4.94  



 
- 17 -




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 six months ended June 30:

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

At June 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 June 30, 2014 and the changes therein during the six 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 June 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 June 30, 2014, we had granted options to purchase 1,376,167 shares of Common Stock since the inception of the Equity Incentive Plan, of which 1,014,907 were outstanding at a weighted average exercise price of $2.12 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the Equity Incentive Plan, of which none were outstanding.  As of June 30, 2014, there were 1,715,647 shares that remained available for future grants under our Equity Incentive Plan.
 
 
- 18 -

 
 
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 June 30, 2014 and December 31, 2013.

Description
 
June 30, 2014
   
December 31, 2013
 
Assets:
           
Notes receivable and accrued interest
    ---     $ 777,710  
                 
Liabilities:
               
Convertible note – June 2011
    ---     $ 138,220  
Convertible note – July 2011
  $ 124,448     $ 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.


 
- 19 -



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 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 June 30, 2014:

Calendar Years
 
Future Lease Expense
 
  2014 (Six months)
  $ 60,737  
  2015
    28,881  
  2016
    ---  
  2017
    ---  
  2018
    ---  
  Total
  $ 89,618  

Rent expense for our operating leases amounted to $30,446 and $30,014 for the three months ended June 30, 2014 and 2013, respectively, and $60,826 and $55,042 for the six months ended June 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 IPMD, Altrazeal Trading GmbH, Altrazeal AG, and Melmed Holding AG (collectively, the “Altrazeal Distributors”) and Mr. Kuehne currently serves as a director of Altrazeal AG.  In such capacities, Mr. Kerschbaumer may be considered, either singularly or collectively, to have control of, and make investment and business decisions on behalf of the Altrazeal Distributors and Mr. Kuehne may be considered, either singularly of collectively, to have control of, and make investment and business decisions on behalf of Altrazeal AG.

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

For the six months ended June 30, 2014 and 2013, the Company recorded product sales, in approximate numbers, of $244,000 and $71,000, respectively, with the various Altrazeal Distributors, which represented approximately 78% and 54% of our total revenues.

As of June 30, 2014 and December 31, 2013, Altrazeal Distributors had an outstanding accounts receivable, in approximate numbers, of $424,000 and $174,000, respectively, which represented approximately 99% and 97% of our gross outstanding accounts receivables.
 
 
- 20 -

 
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 June 30, 2014, the following table summarizes the compensation temporarily deferred and subsequent repayments:

Name
 
2014
   
2013
   
2012
   
2011
   
Total
 
  Kerry P. Gray (1) (2)
  $ (257,500 )   $ (91,000 )   $ 220,673     $ 140,313     $ 12,486  
  Terrance K. Wallberg
    (25,000 )     (35,769 )   $ 24,230     $ 36,539       ---  
  Key executives
    (28,239 )     (20,000 )   $ 27,253     $ 20,986       ---  
  Total
  $ (310,739 )   $ (146,769 )   $ 272,156     $ 197,838     $ 12,486  

 
(1)
During 2014, Mr. Gray was repaid $257,500 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 June 30, 2014 and December 31, 2013, the Company’s obligation for temporarily deferred compensation was $12,486 which was included in accrued liabilities, 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 June 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.


NOTE 19.
LEGAL PROCEEDINGS

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


NOTE 20.
SUBSEQUENT EVENTS

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.




 
- 21 -




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

You should read the following discussion and analysis together with all financial and non-financial information appearing elsewhere in this report and with our consolidated financial statements and related notes included in our 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 report contain forward-looking information that involve risks and uncertainties, including the statement that our cash and cash equivalents are sufficient to fund our operations and capital expenditures through 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”.

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.


 
- 22 -



Recent Developments

Altrazeal® marketing and licensing activities

On September 30, 2013, we executed an Exclusive License and Supply Agreement with Altrazeal AG (the “AG Agreement”) to market Altrazeal® in several territories, including Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, and the Commonwealth of Independent States.  Under the terms of the AG Agreement, we received an up-front licensing payment, will receive certain royalties on product sales within the territories, and will supply Altrazeal® at an agreed upon price.  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.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.

In February 2014, we executed an amendment to the Melmed Agreement for the purpose of expanding the territories to include Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia.  It is anticipated that Altrazeal® will be launched in a number of these markets in 2014.  Currently, such marketing efforts are being performed by Altrazeal Trading GmbH, an affiliate of Melmed Holding AG.

On May 27, 2014, we announced the completion of initial shipments of Altrazeal® to Spain, Portugal, and Italy.  On July 8, 2014, we announced the completion of initial shipments of Altrazeal® to Serbia, Macedonia, Montenegro and Afghanistan.  In addition, the international marketing network has been expanded to include Russia, Greece and the United Arab Emirates.

Repayment of Convertible Note – June 2012

On January 22, 2014, we provided notice to Inter-Mountain Capital Corp. (“Inter-Mountain”) of our election to exercise our rights under the $2,210,000 Secured Convertible Note issued to Inter-Mountain (the “June 2012 Note”) and to offset amounts we owed to Inter-Mountain against amounts it owed to us under certain 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 the June 2012 Note as a result of the deduction and offset, that no warrants will become exercisable as a result of the offset, and that any warrants unvested as of January 22, 2014 shall immediately and automatically terminate.   As a result, the outstanding amount owed under the June 2012 Note was reduced to approximately $317,000 as of January 22, 2014.

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

Repayment of 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 was due on June 13, 2014.  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.



 
- 23 -




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 June 30, 2014 and 2013

Total Revenues

Revenues were approximately $209,000 for the three months ended June 30, 2014, as compared to revenues of approximately $29,000 for the three months ended June 30, 2013, and were comprised of, in approximate numbers, licensing fees of $14,000 from Altrazeal® and OraDisc™ licensing agreements, royalties of $17,000 from the sale of Altrazeal®, and product sales of approximately $178,000 for Altrazeal®.

The second quarter 2014 revenues represent an overall increase of approximately $180,000 versus the comparative second quarter 2013 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $160,000 in Altrazeal® product sales by our international distributors, an increase of $17,000 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 June 30, 2014 was approximately $113,000 and was comprised entirely of costs associated with Altrazeal®.  Cost of goods sold for the three months ended June 30, 2013 was approximately $3,000 and was comprised entirely of costs associated with Altrazeal®.



 
- 24 -

 
Research and Development

Research and development expenses totaled approximately $184,000 for the three months ended June 30, 2014, including $5,000 in share-based compensation, as compared to approximately $211,000 for the three months ended June 30, 2013, which included $5,000 in share-based compensation.  The decrease of approximately $27,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $29,000 in regulatory costs, a decrease of $21,000 in direct research costs related to Altrazeal®, and a decrease of $13,000 in miscellaneous operating costs.  These expense decreases were partially offset by an increase of $36,000 in scientific compensation related primarily to a higher head count.

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

   
Three Months Ended June 30,
 
Technology
 
2014
   
2013
 
  Wound care & nanoparticle
  $ 63,000     $ 84,000  
  OraDisc™
    4,000       4,000  
  Aphthasol® & other technologies
    1,000       1,000  
  Total
  $ 68,000     $ 89,000  

Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $411,000 for the three months ended June 30, 2014, including $17,000 in share-based compensation, as compared to approximately $352,000 for the three months ended June 30, 2013, which included $17,000 in share-based compensation.

The increase of approximately $60,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, an increase of $27,000 in legal expenses related to a licensing agreement dispute, an increase of $26,000 in sales and marketing expenses, an increase of $22,000 in compensation costs, an increase of $4,000 related to property tax accruals, an increase of $5,000 in legal fees related to our patents, and an increase of $3,000 in investor relations consulting.  These expense increases were partially offset by a decrease of $27,000 related to doubtful account accruals.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $118,000 for the three months ended June 30, 2014 as compared to approximately $118,000 for the three months ended June 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 June 30, 2014 and 2013, respectively.
 
Depreciation

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

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $500 for the three months ended June 30, 2014 as compared to approximately $18,000 for the three months ended June 30, 2013.  The decrease of approximately $17,000 in interest income is attributable to the offset in January 2014 of the outstanding Inter-Mountain notes receivable.

Interest Expense

Interest expense totaled approximately $33,000 for the three months ended June 30, 2014 as compared to approximately $128,000 for the three months ended June 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 $95,000 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 in March 2014 of the convertible promissory note with Inter-Mountain.
 
- 25 -

 
 
Comparison of the six months ended June 30, 2014 and 2013

Total Revenues

Revenues were approximately $311,000 for the six months ended June 30, 2014, as compared to revenues of approximately $131,000 for the six months ended June 30, 2013, and were comprised of, in approximate numbers, licensing fees of $29,000 from Altrazeal® and OraDisc™ licensing agreements, royalties of $17,000 from the sale of Altrazeal®, and product sales of approximately $265,000 for Altrazeal®.

The six months ended June 30, 2014 revenues represent an overall increase of approximately $180,000 versus the comparative six months ended June 30, 2013 revenues.  The increase in revenues is primarily attributable to, in approximate numbers, an increase of $156,000 in Altrazeal® product sales by our international distributors, an increase of $17,000 in royalties related to Altrazeal®, and an increase of $7,000 in Altrazeal® licensing.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the six months ended June 30, 2014 was approximately $154,000 and was comprised entirely of costs associated with Altrazeal®.  Cost of goods sold for the six months ended June 30, 2013 was approximately $44,000 and was comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled approximately $372,000 for the six months ended June 30, 2014, including $11,000 in share-based compensation, as compared to approximately $376,000 for the six months ended June 30, 2013, which included $6,000 in share-based compensation.  The decrease of approximately $4,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $47,000 in regulatory costs, a decrease of $30,000 in direct research costs related to Altrazeal®, and a decrease of $12,000 in miscellaneous operating costs.  There expense decreases were partially offset by an increase of $65,000 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 six months ended June 30, 2014 and 2013 were, in approximate numbers, as follows:

   
Six Months Ended June 30,
 
Technology
 
2014
   
2013
 
  Wound care & nanoparticle
  $ 124,000     $ 154,000  
  OraDisc™
    7,000       8,000  
  Aphthasol® & other technologies
    2,000       1,000  
  Total
  $ 133,000     $ 163,000  


 
- 26 -

 
Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $880,000 for the six months ended June 30, 2014, including $36,000 in share-based compensation, as compared to approximately $612,000 for the six months ended June 30, 2013, which included $25,000 in share-based compensation.

The increase of approximately $268,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, an increase of $142,000 in investor relations consulting related to share-based compensation, an increase of $66,000 in legal expenses related to a licensing agreement dispute, an increase of $46,000 in sales and marketing expenses, an increase of $10,000 in compensation costs related to share-based compensation, an increase of $11,000 in legal fees related to our patents, an increase of $10,000 in director fees related to share-based compensation, an increase of $8,000 related to property tax accruals, an increase of $6,000 in insurance costs, and an increase of $5,000 in miscellaneous expenses.  These expense increases were partially offset by a decrease of $27,000 related to doubtful account accruals and a decrease of $9,000 in consulting costs related to XBRL reporting.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $236,000 for the six months ended June 30, 2014 as compared to approximately $236,000 for the six months ended June 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 six months ended June 30, 2014 and 2013, respectively.

Depreciation

Depreciation expense totaled approximately $120,000 for the six months ended June 30, 2014 as compared to approximately $126,000 for the six months ended June 30, 2013.  The decrease of approximately $6,000 is attributable to certain equipment being fully depreciated.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $5,000 for the six months ended June 30, 2014 as compared to approximately $40,000 for the six months ended June 30, 2013.  The decrease of approximately $35,000 in interest income is attributable to the offset in January 2014 of the outstanding Inter-Mountain notes receivable.

Interest Expense

Interest expense totaled approximately $98,000 for the six months ended June 30, 2014 as compared to approximately $260,000 for the six months ended June 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 $162,000 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 in March 2014 of the convertible promissory note with Inter-Mountain.
 
 
 
- 27 -



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 June 30, 2014 our cash and cash equivalents were approximately $720,000 which is an increase of approximately $715,000 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 $(166,000) at June 30, 2014 as compared to our working capital at December 31, 2013 of approximately $(1,783,000).

Consolidated Cash Flow Data
   
Six Months Ended June 30,
 
Net Cash Provided by (Used in)
 
2014
   
2013
 
  Operating activities
  $ (902,000 )   $ (842,000 )
  Investing activities
    (16,000 )     5,000  
  Financing activities
    1,633,000       900,000  
  Net Increase in cash and cash equivalents
  $ 715,000     $ 63,000  

Operating Activities

For the six months ended June 30, 2014, net cash used in operating activities was approximately $902,000.  The principal components of net cash used for the six months ended June 30, 2014 were, in approximate numbers, our net loss of $1,401,000, a decrease of $344,000 in accounts payable due to timing of vendor payments, a decrease of $152,000 in accrued liabilities related to compensation and insurance, a decrease of $29,000 in deferred revenues due to amortization of revenues, and an increase of $244,000 in accounts receivable.  Our net loss for the six months ended June 30, 2014 included substantial non-cash charges of approximately $407,000 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 gain on early extinguishment of a convertible note.  The aforementioned net cash used for the six months ended June 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 $47,000 in inventory, and a decrease of $36,000 in prepaid expenses.

For the six months ended June 30, 2013, net cash used in operating activities was approximately $842,000.  The principal components of net cash used for the six months ended June 30, 2013 were, in approximate numbers, our net loss of $1,479,000, a decrease in accounts payable of $533,000 due to timing of vendor payments, a decrease in accrued liabilities of $53,000 due primarily to the final installment payments on our insurance premium financing, a decrease in deferred revenues of $22,000 due to amortization of revenues, and the cancellation of a warrant issued for service for $49,000.  Our net loss for the six months ended June 30, 2013 included substantial non-cash charges of approximately $680,000 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 six months ended June 30, 2013 was partially offset by, in approximate numbers, a decrease in notes receivable of $363,000 due to remittance of an Investor Note by Inter-Mountain, a decrease in prepaid expenses of $117,000 due to amortization of expenses, a decrease in receivables of $95,000 due to collection activities, a decrease in inventory of $24,000 related to product sales, and an increase in accrued interest of $15,000 related to our convertible debt.


 
- 28 -




Investing Activities

Net cash used in investing activities for the six months ended June 30, 2014 was approximately $16,000 and relates to the purchase of manufacturing equipment.

Net cash provided by investing activities for the six months ended June 30, 2013 was approximately $5,000 and is comprised of the proceeds from the sale of manufacturing equipment.

Financing Activities

Net cash provided by financing activities for the six month ended June 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 2,250,000 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 six month ended June 30, 2013 was approximately $900,000 and was comprised of, in approximate numbers, net proceeds of $895,000 from the sale of common stock and warrants pursuant to the January 2013 Offering, net proceeds of $86,000 from the sale of common stock and warrants pursuant to the March 2013 Offering, and payment of $81,000 for principle payments due on our convertible note with Inter-Mountain.

Liquidity

As of June 30, 2014, we had cash and cash equivalents of approximately $720,000.  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, the expected level of operating expenses, 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 with respect to our potential receipt of additional capital.  We cannot be certain that necessary funding will be available on terms acceptable to us, or at all.

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

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

 
- 29 -

 
Contractual Obligations

The following table summarizes our outstanding contractual cash obligations as of June 30, 2014, which consists of a lease agreement for office and laboratory space in Addison, Texas, a lease agreement for office equipment, amounts unpaid under a separation agreement with our current chief executive officer, Kerry P. Gray, and the principal balance due for our convertible note agreement.  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
  $ 89,618     $ 89,618     $ ---     $ ---     $ ---  
  Separation agreement
    12,486       12,486       ---       ---       ---  
  Convertible note and accrued interest
    138,457       138,457       ---       ---       ---  
  Total contractual cash obligations
  $ 240,561     $ 240,561     $ ---     $ ---     $ ---  

Capital Expenditures

For the six months ended June 30, 2014 and 2013, our expenditures for property, equipment, and leasehold improvements were, in approximate numbers, $16,000, and nil, respectively.  Such expenditures in 2014 relate primarily to the purchase of equipment for the manufacture of Altrazeal®.  At this time, we believe that our capital expenditures for the remainder of 2014 will be approximately $54,000 and consist of equipment related to the manufacture of our products and equipment for our computer systems.
 
Off-Balance Sheet Arrangements

As of June 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 June 30, 2014 and December 31, 2013 our cash and cash equivalents totaled approximately $720,000 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 June 30, 2014 and at December 31, 2013.  As of June 30, 2014, three customers exceeded the 5% threshold, with 43%, 36% and 18%, 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.  As a result, we believe that accounts receivable credit risk exposure is limited.  We maintain an allowance for doubtful accounts, but historically have not experienced any significant losses related to an individual customer or group of customers.

Concentrations of Foreign Currency Risk

Currently, a portion of our 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.

 
- 30 -



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 quarterly report on Form 10-Q (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should”, “expect”, “anticipate”, “estimate”, “will”, “target”, “may”, “project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.  Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements include, among other things, statements regarding the Company’s expected cash and cash equivalents and working capital being sufficient to fund our operations and capital expenditure requirements through 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.  The Company has included 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.

 
- 31 -


 

 

Quantitative and Qualitative Disclosures About Market Risk.
 
This item is not applicable to smaller reporting companies.


Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

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

Changes in Internal Controls.

There were no changes in our internal controls over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to material affect, our internal controls over financial reporting.


PART II - OTHER INFORMATION


 Legal Proceedings.

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


 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.


 
- 32 -



Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Defaults Upon Senior Securities.

None.


Mine Safety Disclosures.

Not applicable.


Other Information.

    On June 27, 2012, we entered into a Purchase Agreement, related to our issuance of the June 2012 Note, with Inter-Mountain.  On or about December 30, 2013, we agreed to modify certain terms of our various agreements with Inter-Mountain (the “December 2013 Agreement”) to include the following; (i) outstanding warrants issued to Inter-Mountain in connection with the issuance of the June 2012 Note (the “Warrants”) will be modified so that the denominator in the cashless exercise calculations will be the “VWAP of the Common Stock two days prior to the exercise date” rather than the “Adjusted Price of the Common Stock”, (ii) all outstanding traunches (or partial traunches) of the June 2012 Note corresponding to the buyers notes, that have yet to be prepaid, will not use the $0.35 fixed price conversion feature in Section #3 of the June 2012 Note, (iii) all outstanding traunches (or partial traunches) of the June 2012 Note issued by the Company corresponding to buyer notes that have already funded, including half of buyer note number 4 (after funding of the $62,500 when funded) will maintain the $0.35 fixed conversion price component under Section #3 of the June 2012 Note, and (iv) Inter-Mountain will forebear selling shares of ULURU Common Stock through January 15, 2014, however, ULURU will deliver all of the 274,878 shares issuable as part of the December 2013 Agreement immediately as well as any other shares otherwise due under regular installments.  On January 2, 2014, we delivered 274,878 shares of Common Stock to Inter-Mountain pursuant to the December 2013 Agreement.

    As part of the convertible debt financing with Inter-Mountain, they received a total of seven Warrants to purchase, if they all vest, an aggregate of 3,142,857 shares of Common Stock, which number of shares could increase based upon the terms and conditions of the Warrants.  The Warrants have an exercise price of $0.35 per share, subject to certain pricing adjustments, and are exercisable, subject to vesting provisions and ownership limitations, until June 27, 2017.  Warrants for 785,714, 392,857, 392,857, and 392,857 shares of Common Stock vested on June 27, 2012, December 31, 2012, February 26, 2013, and July 15, 2013, respectively.  Each of the three remaining Warrants has terminated.  As of June 30, 2014, we have issued 725,274 shares of Common Stock to Inter-Mountain upon the cashless exercise of three Warrants that vested prior to February 26, 2013 with respect to 1,571,428 shares of Common Stock.  Such issuance of shares of Common Stock following the cashless exercise of such three Warrants by Inter-Mountain during 2013 were based upon the December 2013 Agreement that modified the formula in the Warrants for determining the number of shares to be issued upon a cashless exercise.  The modification to the formula consisted of revising the denominator from “Adjusted Price of the Common Stock” to “VWAP of the Common Stock two days prior to the exercise date” as part of the December 2013 Agreement.  As of June 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.


 
- 33 -



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)
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 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.