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, 2017

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, a smaller reporting company or an emerging growth company. See definition of “accelerated filer”, “large accelerated filer”,  “smaller reporting company” and “emerging growth 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
       
Emerging growth company
 
o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act .   o

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

As of August 14, 2017, there were 201,349,431 shares of the registrant’s Common Stock, $0.001 par value per share (“Common Stock”), nil shares of Series A Preferred Stock, $0.001 par value per share, issued and outstanding, and nil shares of Series B Preferred Stock, $0.001 par value per share, issued and outstanding.




ULURU Inc.

INDEX TO FORM 10-Q

For the Three and Six Months Ended JUNE 30, 2017

   
Page
 
     
3
     
 
 
 
 
     
     
     
     
 
     
     
     
     
     
     
     
     
 
     
     

- 2 -

PAR T I – FINANCIAL INFORMATION
 
I TEM 1.
Financial Statements.
ULU RU Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

   
June 30, 2017
   
December 31, 2016
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
  $ 5,454,561     $ 36,615  
Accounts receivable, net
    2,611       61,788  
Inventory
    549,824       559,600  
Prepaid expenses and deferred charges
    37,436       135,394  
Total Current Assets
    6,044,432       793,397  
                 
Property, Equipment and Leasehold Improvements, net
    64,684       126,741  
                 
Other Assets
               
Intangible asset - patents, net
    198,411       216,781  
Intangible asset - licensing rights, net
    3,866,498       3,181,087  
Deposits
    18,069       18,069  
Total Other Assets
    4,082,978       3,415,937  
                 
TOTAL ASSETS
  $ 10,192,094     $ 4,336,075  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
         
Current Liabilities
               
Accounts payable
  $ 2,174,138     $ 2,026,671  
Accrued liabilities
    161,628       315,300  
Accrued interest
    36,644       53  
Promissory note payable, current portion
    ---       20,000  
Deferred revenue, current portion
    34,294       45,764  
Total Current Liabilities
    2,406,704       2,407,788  
                 
Long Term Liabilities
               
Convertible notes payable, net of unamortized debt discount and debt issuance costs
    390,714       ---  
Deferred revenue, net of current portion
    355,604       358,462  
Total Long Term Liabilities
    746,318       358,462  
                 
TOTAL LIABILITIES
    3,153,022       2,766,250  
                 
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, 2017 and December 31, 2016, respectively
    ---       ---  
Preferred Stock Series B, 1,250 shares designated; 1,250 and nil shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
    1       ---  
                 
Common Stock - $0.001 par value; 200,000,000 shares authorized;
               
76,349,431 and 62,974,431 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
    76,349       62,974  
Additional paid-in capital
    68,682,507       62,220,850  
Accumulated  (deficit)
    (61,719,785 )     (60,713,999 )
TOTAL STOCKHOLDERS’ EQUITY
    7,039,072       1,569,825  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 10,192,094     $ 4,336,075  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 





ULU RU Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


   
Three Months Ended June 30,
   
Six months Ended June 30,
 
   
2017
   
2016
   
2017
   
2016
 
Revenues
                       
License fees
  $ 1,436     $ 259,813     $ 2,858     $ 361,089  
Product sales, net
    2,878       4,520       218,573       12,036  
Total Revenues
    4,314       264,333       221,431       373,125  
                                 
Costs and Expenses
                               
Cost of product sold
    345       528       82,279       1,451  
Research and development
    48,192       135,331       108,321       271,490  
Selling, general and administrative
    329,923       384,900       724,530       703,701  
Amortization of intangible assets
    113,027       199,526       202,334       398,162  
Depreciation
    32,842       33,165       65,558       66,330  
Total Costs and Expenses
    524,329       753,450       1,183,022       1,441,134  
Operating (Loss)
    (520,015 )     (489,117 )     (961,591 )     (1,068,009 )
                                 
Other Income (Expense)
                               
Interest and miscellaneous income
    2       515       4       537  
Interest expense
    (133,864 )     (44,445 )     (155,141 )     (91,203 )
Foreign currency transaction gain (loss)
    (3,181 )     (3,196 )     (3,071 )     1,090  
Gain on settlement of liability
    114,013       ---       114,013       ---  
Accommodation fee due on promissory note
    ---       ---       ---       (25,000 )
(Loss) Before Income Taxes
    (543,045 )     (536,243 )     (1,005,786 )     (1,182,585 )
                                 
Income taxes
    ---       ---       ---       ---  
Net (Loss)
  $ (543,045 )   $ (536,243 )   $ (1,005,786 )   $ (1,182,585 )
                                 
                                 
Basic and diluted net (loss) per common share
  $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.02 )
                                 
Weighted average number of common shares outstanding
    76,349,431       62,974,431       69,772,774       50,316,681  
                                 
The accompanying notes are an integral part of these consolidated financial statements.
 



 
ULURU Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Six Months Ended June 30,
 
   
2017
   
2016
 
OPERATING ACTIVITIES :
           
Net loss
  $ (1,005,786 )   $ (1,182,585 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:
               
                 
Amortization of intangible assets
    202,334       398,162  
Depreciation
    65,558       66,330  
Share-based compensation for stock and options issued to employees
    8,697       15,913  
Share-based compensation for options issued to non-employees
    ---       30,102  
Amortization of debt discount on promissory note
    87,006       26,012  
Amortization of debt issuance costs
    1,916       18,658  
                 
Change in operating assets and liabilities:
               
Accounts receivable
    59,177       39,080  
Inventory
    9,776       (50,618 )
Prepaid expenses and deferred charges
    97,958       72,080  
Deposits
    ---       (2,895 )
Accounts payable
    147,467       31,190  
Accrued liabilities
    (153,672 )     (115,457 )
Accrued interest
    36,591       2,864  
Deferred revenue
    (14,328 )     (321,089 )
Total
    548,480       210,332  
Net Cash Used in Operating Activities
    (457,306 )     (972,253 )
                 
INVESTING ACTIVITIES :
               
Purchase of equipment
    (3,501 )     ---  
Net Cash Used in Investing Activities
    (3,501 )     ---  
                 
FINANCING ACTIVITIES :
               
Proceeds from issuance of convertible notes and warrant, net
    983,092       ---  
Proceeds from sale of preferred stock, net
    4,915,661       ---  
Proceeds from sale of common stock and warrants, net
    ---       1,732,338  
Offering costs associated with acquisition of licensing rights in 2015
    ---       (21,950 )
Additional principle due on promissory note due to accommodation fee
    ---       25,000  
Proceeds from issuance of promissory notes
    120,000       ---  
Repayment of principle due on promissory notes
    (140,000 )     (225,000 )
Net Cash Provided by Financing Activities
    5,878,753       1,510,388  
                 
Net Increase in Cash
    5,417,946       538,135  
                 
Cash,  beginning of period
    36,615       180,000  
Cash,  end of period
  $ 5,454,561     $ 718,135  
                 
SUPPLEMENTAL CASH FLOW DISCLOSURE:
               
Cash paid for interest
  $ 2,672     $ 14,239  
                 
Non-cash investing and financing activities:
               
Issuance of common stock for acquisition of licensing rights
  $ 869,375       ---  
Issuance of common stock for principle due on promissory note
    ---     $ 45,000  
Issuance of common stock for interest due on promissory note
    ---     $ 2,239  
Issuance of common stock for services
    ---     $ 36,000  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 




ULU RU Inc.

NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1.
COMPANY OVERVIEW AND BASIS OF PRESENTATION

Company Overview

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

Basis of Presentation

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. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of June 30, 2017 and the results of its operations for the three and six months ended June 30, 2017 and 2016 and cash flows for the six months ended June 30, 2017 and 2016 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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

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, 2016, referred to as our 2016 Form 10-K as filed with the Securities and Exchange Commission on April 17, 2017, 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, 2017 are consistent with those discussed in Note 2 to the consolidated financial statements in our 2016 Form 10-K, as filed with the Securities and Exchange Commission on April 17, 2017.
 
 
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

Our entire business is managed by a single management team, which reports to the Chief Executive Officer.  Our corporate headquarters in the United States collects proceeds from product sales, licensing fees, and royalties from our arrangements with external customers and licensees.  Our revenues are currently derived primarily from distribution partners for international activities and our domestic sales activities for our products.

Revenues per geographic area for the three and six months ended June 30 are summarized as follows:

   
Three Months Ended June 30,
   
Six months Ended June 30,
 
Revenues
 
2017
   
%
   
2016
   
%
   
2017
   
%
   
2016
   
%
 
Domestic
  $ 2,878       67 %   $ 4,520       2 %   $ 5,415       2 %   $ 12,036       3 %
International
    1,436       33 %     259,813       98 %     216,016       98 %     361,089       97 %
Total
  $ 4,314       100 %   $ 264,333       100 %   $ 221,431       100 %   $ 373,125       100 %

A significant portion of our revenues are derived from a few major customers.  For the three months ended June 30, 2017 and 2016, three customers and one customer, respectively, had greater than 10% of total revenues and represented in the aggregate 66% and 88%, respectively, of total revenues.  For the six months ended June 30, 2017 and 2016, one customer and two customers, respectively, had greater than 10% of total revenues and represented in  the aggregate 97% and 89%, respectively, of total revenues.
 
 
NOTE 5.
INVENTORY

As of June 30, 2017, 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 net realizable value.  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, 2017 and December 31, 2016:

Inventory
 
June 30, 2017
   
December 31, 2016
 
  Raw materials
  $ 32,532     $ 35,800  
  Work-in-progress
    414,106       424,741  
  Finished goods
    103,186       99,059  
  Total
  $ 549,824     $ 559,600  


NOTE 6.
PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at June 30, 2017 and December 31, 2016:

Property, equipment and leasehold improvements
 
June 30, 2017
   
December 31, 2016
 
  Laboratory equipment
  $ 424,888     $ 424,888  
  Manufacturing equipment
    1,604,894       1,604,894  
  Computers, office equipment, and furniture
    154,781       151,280  
  Computer software
    4,108       4,108  
  Leasehold improvements
    95,841       95,841  
      2,284,512       2,281,011  
  Less: accumulated depreciation and amortization
    (2,219,828 )     (2,154,270 )
  Property, equipment and leasehold improvements, net
  $ 64,684     $ 126,741  

Depreciation expense on property, equipment and leasehold improvements was $32,842 and $33,165 for the three months ended June 30, 2017 and 2016, respectively, and was $65,558 and $66,330 for the six months ended June 30, 2017 and 2016, respectively.



 
NOTE 7.
INTANGIBLE ASSETS

Patents

Intangible patent assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at June 30, 2017 and December 31, 2016:

Intangible assets – patents
 
June 30, 2017
   
December 31, 2016
 
  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
    (7,400,217 )     (7,381,847 )
  Less: reserve for impairment
    (2,027,310 )     (2,027,310 )
  Intangible assets - patents, net
  $ 198,411     $ 216,781  

Amortization expense for intangible patents assets was $9,236 and $118,461 for the three months ended June 30, 2017 and 2016, respectively, and was $18,370 and $236,924 for the six months ended June 30, 2017 and 2016, respectively.

The future aggregate amortization expense for intangible patent assets, remaining as of June 30, 2017, is as follows:

Calendar Years
 
Future Amortization
Expense
 
  2017 (Six months)
  $ 18,674  
  2018
    37,044  
  2019
    37,044  
  2020
    37,145  
  2021
    37,044  
  2022 & Beyond
    31,460  
  Total
  $ 198,411  

 
Licensing rights

Acquisition of Licensing Rights – 2017

On February 27, 2017, we entered into a Note, Warrant and Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Velocitas Partners, LLC (“Velocitas") and Velocitas I LLC (“Velo LLC”), an entity controlled by Velocitas, with respect to an aggregate financing of up to $6,000,000.

Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 10. Convertible Debt.

At the second closing of the financing event with Velocitas and Velo LLC, which occurred on March 31, 2017, the Company acquired the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock.  The Company has valued the acquisition of the Altrazeal distributor agreement from Velocitas at $869,375 based on the closing price of $0.065 per share of the Company’s Common Stock on March 31, 2017.

 
Licensing rights, net consisted of the following at June 30, 2017 and December 31, 2016:

Intangible assets - licensing rights
 
June 30, 2017
   
December 31, 2016
 
  Intangible assets – licensing rights, gross
  $ 4,381,881     $ 3,512,506  
  Less: accumulated amortization
    (515,383 )     (331,419 )
  Intangible assets - licensing rights, net
  $ 3,866,498     $ 3,181,087  

Amortization expense for intangible licensing rights assets was $103,791 and $81,065 for the three months ended June 30, 2017 and 2016, respectively, and was $183,964 and $161,238 for the six months ended June 30, 2017 and 2016, respectively.

The future aggregate amortization expense for intangible licensing rights assets, remaining as of June 30, 2017, is as follows:

Calendar Years
 
Future Amortization
Expense
 
  2017 (Six months)
  $ 209,862  
  2018
    416,303  
  2019
    416,303  
  2020
    416,303  
  2021
    416,303  
  2022 & Beyond
    1,991,424  
  Total
  $ 3,866,498  


NOTE  8.
ACCRUED LIABILITIES

Accrued liabilities consisted of the following at June 30, 2017 and December 31, 2016:

Accrued Liabilities
 
June 30, 2017
   
December 31, 2016
 
  Accrued compensation/benefits
  $ 121,170     $ 274,874  
  Accrued insurance payable
    5,916       40,422  
  Accrued property taxes
    2,700       ---  
  Accrued royalties
    31,797       ---  
  Product rebates/returns
    45       4  
  Total accrued liabilities
  $ 161,628     $ 315,300  

 
NOTE 9.
PROMISSORY NOTES PAYABLE

On December 15, 2016, January 18, 2017, and February 16, 2017, we issued Promissory Notes to Velocitas with purchase prices of $20,000, $65,000, and $30,000, respectively.  Each of the Promissory Notes bore interest at the rate of 6.0% per annum with payment of principal and interest due on the earlier of (i) 180 days from the date of issuance, (ii) the date of closing of any debt or equity financing transaction by and between Uluru and Velocitas, or (iii) the payment to Uluru of certain invoices due from selected Company’s distributors.  Each of the Promissory Notes was secured by a pledge of certain product inventory and there were no debt issuance costs incurred by the Company.  On February 27, 2017, each of the Promissory Notes was repaid in connection with the issuance of the Convertible Promissory Note dated February 27, 2017 in the amount of $500,000 (the “Initial Note”) under the Purchase Agreement with Velocitas.

On February 21, 2017, we issued a promissory note to Kirkwood Investors, Inc. (“Kirkwood”) with a purchase price of $25,000.  The promissory note bore interest at the rate of 6.0% per annum with payment of principal and interest due on the earlier of (i) 60 days from the date of issuance, (ii) the date of closing of any debt or equity financing transaction by Uluru, or (iii) no later than two days after receiving written request by Kirkwood.  The promissory note was secured by a pledge of certain product inventory and accounts receivables and there were no debt issuance costs incurred by the Company.  The Company’s Vice President and Chief Financial Officer, Terrance K. Wallberg, is President and sole shareholder of Kirkwood.  On February 27, 2017, the outstanding promissory note to Kirkwood was repaid in connection with the issuance of the Initial Note under the Purchase Agreement with Velocitas.
 
 
NOTE 10.
CONVERTIBLE DEBT

Debt Financing – February and March 2017

On February 27, 2017, the Company entered into the Purchase Agreement with Velocitas and Velo LLC under which the Company received gross proceeds of $6,000,000, in two closing with the initial closing occurring on February 27, 2017 and the second closing occurring on March 31, 2017, which we refer to as the March 2017 Offering.

The first closing, which occurred on February 27, 2017, included the purchase by Velocitas at face value of the $500,000 Initial Note, with the Initial Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances).

The second closing, which occurred on March 31, 2017, included the purchase by Velocitas at face value the additional $500,000 Secured Convertible Note dated March 31, 2017 (the “Second Note”) with the Second Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances), and Velo LLC purchasing 1,250 shares of Series B Convertible Preferred Stock of the Company for gross proceeds of $5,000,000, at an as-converted-to-Common Stock purchase price of $0.04 per share.

The Initial Note and the Second Note are convertible into shares of Common Stock at a conversion price of $0.04 per share, subject to equitable adjustments, with mandatory conversion of all unpaid principal and interest required on the second anniversary of each Note.  The Initial Note and the Second Note are secured by all of the assets of the Company and its subsidiaries pursuant to a Security Agreement executed at the initial closing.
 
The Series B Convertible Preferred Stock that was issued in connection with the second closing, (a) voted together with the Common Stock as a single class (subject to standard protective provisions for the Series B Convertible Preferred Stock), (b) had the same dividend rights as the Common Stock, (c) had a liquidation preference equal to the greater of its purchase price and its as converted-to-Common Stock value, (d) automatically converted into Common Stock when the number of authorized shares of Common Stock is increased within 190 days of the second closing as necessary to permit all outstanding convertible or exercisable securities (including the Series B Convertible Preferred Stock) to convert to Common Stock, and (e) was convertible into Common Stock at the discretion of the holder, subject to the availability of authorized shares. On August 1, 2017, all 1,250 outstanding shares of Series B Convertible Preferred Stock converted into 125,000,000 shares of Common Stock as a result of the approval by the stockholders at the 2017 Annual Meeting of Stockholders held on July 25, 2017, and the filing in July 2017, of an amendment increasing our authorized shares of Common Stock to 750,000,000 shares.
 
As a condition of the March 2017 Offering, the Company issued to Velocitas at the second closing a warrant to purchase up to 57,055,057 shares of Common Stock (the “Warrant”).  The Warrant has an exercise price of $0.04 per share, a 10-year term and is subject to cashless exercise. In addition, at the second closing, the Company acquired the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock.

The Company, Velocitas, Velo LLC, and certain affiliates also signed a Voting Agreement (the “Voting Agreement”) pursuant to which the parties agreed to set the size of the Board of Directors at six directors, and agreed to vote for the election to the Board of Directors of four persons designated by Velocitas (initially to be Anish Shah, Oksana Tiedt, Vaidehi Shah and Arindam Bose), one director designated by Bradley J. Sacks and one additional director designated by a major investor or by the Board of Directors.  In addition, the parties to the Voting Agreement have agreed to vote in favor of a proposal to amend the Company’s articles of incorporation to increase the authorized shares as required to permit the conversion of the Series B Convertible Preferred Stock.

In addition, the Company, Velocitas, Velo LLC, and certain affiliates entered into an Investor Rights Agreement (the “Investor Rights Agreement”) that provides the parties thereto with demand Form S-3 and piggy back registration rights, Rule 144 information rights, and right of first offer (or preemptive rights) in connection with future sales of securities by the Company (subject to standard exceptions).  The Investor Rights Agreement includes indemnification obligations associated with the registration rights.  Michael I. Sacks and Bradley Sacks and affiliates are parties to the Investor Rights Agreement, in part in exchange for the termination by certain of such persons and The Punch Trust of a Registration Rights Agreement dated as of January 31, 2014.
 
As required by the Purchase Agreement, at the initial closing, the Company appointed Ms. Vaidehi Shah to serve as the Company’s Chief Executive Officer and to also serve as a member of the Company’s Board of Directors.  Concurrent with the initial closing and as a condition of the March 2017 Offering, the Company received resignation notices from Helmut Kerschbaumer, the Company’s Interim President, Chief Executive and Director, and Klaus Kuehne, a member of the Company’s Board of Directors.

As required by the Purchase Agreement, at the second closing, the Company appointed Mr. Anish Shah and Ms. Oksana Tiedt to join the Company and to serve as part of the Company’s executive management team and together with Mr. Arindam Bose to join the Company’s Board of Directors.

Concurrent with the second closing and as a condition of the Financing, the Company received resignation notices from Robert F. Goldrich and Terrance K. Wallberg, each being a member of the Company’s Board of Directors.  Mr. Wallberg continues to serve as the Company’s Vice President, Chief Financial Officer, Secretary, and Treasurer.  Also occurring at the second closing, Mr. Bradley J. Sacks stepped down as Chairman of the Board of Directors and Ms. Vaidehi Shah, the Company’s Chief Executive Officer and Director, assumed such duties.  Mr. Sacks continues to serve as a Director of the Company.

 
Using specific guidelines in accordance with U.S. GAAP, we allocated the value of the proceeds received to the promissory note and to the warrant on a relative fair value basis.  We calculated the fair value of the warrant issued with the debt 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 of the warrant was recorded as a debt discount and is being amortized over the expected term of the promissory note to interest expense.

Information relating to the Initial Note and Second Note is as follows:

                             
As of June 30, 2017
 
Transaction
 
Initial
 Principal
Amount
   
Interest
Rate
 
Maturity
Date
 
Conversion Price
   
Principal
Balance
   
Unamortized
Debt
Discount
   
Unamortized Debt Issuance Costs
   
Carrying
Value
 
  Initial Note
  $ 500,000       12.5 %
02/27/2019
  $ 0.04     $ 500,000     $ 297,147     $ 7,496     $ 195,357  
  Second Note
  $ 500,000       12.5 %
03/31/2019
  $ 0.04     $ 500,000     $ 297,147     $ 7,496     $ 195,357  
  Total
  $ 1,000,000                       $ 1,000,000     $ 594,294     $ 14,992     $ 390,714  

As part of the Initial Note and the Second Note, at the holder’s option, all unpaid principle and interest due under each convertible promissory note may be converted into shares of Common Stock based on a conversion price of $0.04 per share.  The Initial Note and the Second Note matures on February 27, 2019 and March 31, 2019, respectively, and on each maturity date each convertible promissory note, and accrued interest thereon, is subject to mandatory conversion based on a conversion price of $0.04 per share.

The amount of interest cost recognized from our promissory notes and our convertible debt was $31,165 and $4,747 for the three months ended June 30, 2017 and 2016, respectively, and $37,341 and $12,973 for the six months ended June 30, 2017 and 2016, respectively.

The amount of debt discount amortized from our promissory notes and our convertible debt was $87,006 and $12,997 for the three months ended June 30, 2017 and 2016, respectively, and $87,006 and $26,012 for the six months ended June 30, 2017 and 2016, respectively.

The amount of debt issuance costs amortized from our promissory notes was $1,916 and $9,290 for the three months ended June 30, 2017 and 2016, respectively, and $1,916 and $18,658 for the six months ended June 30, 2017 and 2016, respectively.
 
NOTE 11.
EQUITY TRANSACTIONS

Preferred Stock Transaction

March 2017 Offering

On February 27, 2017, the Company entered into a Note, Warrant and Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Velocitas and Velo LLC under which the Company received gross proceeds of $6,000,000, in two closing with the initial closing occurring on February 27, 2017 and the second closing occurring on March 31, 2017 (the “March 2017 Offering”).

The second closing included, among other transaction components, the purchase by Velo LLC of 1,250 shares of Series B Convertible Preferred Stock of the Company for $5,000,000.

Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 10. Convertible Debt.
 
Common Stock Transaction

March 2016 Offering

On March 29, 2016, we entered into a Stock Purchase Agreement with fifteen investors for the offer and sale of 25,245,442 shares of Common Stock and warrants to purchase an additional 25,245,442 shares of Common Stock at a purchase price of $0.0713 per unit, with each unit consisting of one share and one warrant to purchase Common Stock, for an aggregate purchase price of $1,800,000 (the “March 2016 Offering).  The issue price of the shares sold was based on a 10% discount to the average closing price between March 7, 2016 and March 11, 2016 and the warrant exercise price was based on a 10% premium to the same average closing price.  The warrants have an exercise price of $0.0871 per share and a five-year term.  The warrants also include cashless exercise provisions and a “full ratchet” anti-dilution provision under which the exercise price of such warrants resets to any lower sales price at which the Company offers or sells Common Stock or Common Stock equivalents for one year (subject to standard exceptions).

 
The March 2016 Offering resulted in gross proceeds of $1,800,000, of which $1,439,000 was received in March 2016 and $361,000 was received in April 2016.  As part of the offering expenses, we paid to a European placement agent a referral fee of $26,000 which is equal to 10% of the gross proceeds, provided that the investors referred by such placement agent are not U.S. Persons and were solicited outside the United States.

Purchasers in the March 2016 Offering include Michael I. Sacks ($1,000,000), the father of Bradley J. Sacks, the former Chairman of our Board of Directors, Centric Capital Ventures, LLC ($19,000), an investment entity controlled by Bradley J. Sacks, Terrance K. Wallberg ($50,000), our Vice President and Chief Financial Officer, and Daniel G. Moro ($10,000), our former Vice President of Polymer Drug Delivery.
 
 
NOTE 12.
STOCKHOLDERS’ EQUITY

Common Stock

As of June 30, 2017, we had 76,349,431 shares of Common Stock issued and outstanding.  For the six months ended June 30, 2017, we issued 13,375,000 shares of Common Stock to Velocitas for the acquisition of licensing rights.

Preferred Stock

As of June 30, 2017, we had no shares of Series A Preferred Stock (the “Series A Shares”) issued and outstanding.  For the six months ended June 30, 2017, we did not issue or redeem any Series A Shares.

As of June 30, 2017, we had 1,250 shares of Series B Preferred Stock (the “Series B Shares”) issued and outstanding.  For the six months ended June 30, 2017, we issued 1,250 Series B Shares to Velocitas and did not redeem any Series B Shares.
 
Warrants

The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of June 30, 2017 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, 2016
    26,179,560     $ 0.11  
Warrants issued
    57,055,057     $ 0.04  
Warrants exercised
    ---       ---  
Warrants cancelled
    ---       ---  
Balance as of June 30, 2017
    83,234,617     $ 0.06  

For the six months ended June 30, 2017, we issued a warrant to purchase up to an aggregate of 57,055,057 shares of our Common Stock at an exercise price of $0.04 per share pursuant to the March 2017 Offering.

Of the warrant shares subject to exercise as of June 30, 2017, expiration of the right to exercise is as follows:

Date of Expiration
 
Number of Warrant Shares of Common Stock Subject to Expiration
 
  March 14, 2018
    660,000  
  January 15, 2019
    80,000  
  April 30, 2020
    194,118  
  March 30, 2021
    25,245,442  
  March 31, 2027
    57,055,057  
  Total
    83,234,617  




NOTE 13.
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, 2017 and December 31, 2016:

   
June 30, 2017
   
December 31, 2016
 
Warrants to purchase Common Stock
    83,234,617       26,179,560  
Stock options to purchase Common Stock
    227,403       691,237  
Common stock issuable upon the assumed conversion of  our convertible promissory notes (1)
    31,250,000       ---  
Common stock issuable upon the assumed conversion of  our Series B preferred stock (2)
    125,000,000       ---  
  Total
    239,712,020       26,870,797  

(1)
As part of the Initial Note and the Second Note, at the holder’s option, all unpaid principle and interest due under each convertible promissory note may be converted into shares of Common Stock based on a conversion price of $0.04 per share.  The Initial Note and the Second Note matures on February 27, 2019 and March 31, 2019, respectively, and on each maturity date each convertible promissory note, and accrued interest thereon, is subject to mandatory conversion based on a conversion price of $0.04 per share.  For the purposes of this Table, we have assumed that all outstanding principal and interest will be converted on each applicable maturity date.
(2)
Pursuant to the March 2017 Offering, Velo LLC purchased 1,250 shares of Series B Convertible Preferred Stock of the Company for $5,000,000.  The Series B Convertible Preferred Stock that was issued in the March 2017 Offering, (a) voted together with the Common Stock as a single class (subject to standard protective provisions for the Series B Convertible Preferred Stock), (b) had the same dividend rights as the Common Stock, (c) had a liquidation preference equal to the greater of its purchase price and its as converted-to-Common Stock value, (d) automatically converted into Common Stock when the number of authorized shares of Common Stock was increased within 190 days of the second closing as necessary to permit all outstanding convertible or exercisable securities (including the Series B Convertible Preferred Stock) to convert to Common Stock, and (e) was convertible into Common Stock  at the discretion of the holder, subject to the availability of authorized shares, at an as-converted-to-Common Stock purchase price of $0.04 per share.   On August 1, 2017, all 1,250 outstanding shares of Series B Convertible Preferred Stock converted into 125,000,000 shares of Common Stock as a result of the approval by the stockholders at the 2017 Annual Meeting of Stockholders held on July 25, 2017, and the filing in July 2017, of an amendment increasing our authorized shares of Common Stock to 750,000,000 shares.
 


 
 
NOTE 14.
SHARE BASED COMPENSATION

The Company’s share-based compensation plan, the 2006 Equity Incentive Plan, as amended (“Equity Incentive Plan”), is administered by 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 did not grant any incentive stock option awards to executives or employees or any non-statutory stock option awards to directors or non-employees for the three and six months ended June 30, 2017 and 2016, 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.

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,
 
   
2017
   
2016
   
2017
   
2016
 
Research and development
  $ 1,682     $ 323     $ 3,345     $ 8,993  
Selling, general and administrative
    2,691       17,825       5,352       37,022  
  Total share-based compensation expense
  $ 4,373     $ 18,148     $ 8,697     $ 46,015  

As of June 30, 2017, 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 $4,200.  The period over which the unearned share-based compensation is expected to be recognized is approximately three months.

The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of June 30, 2017 and the changes therein during the six months then ended:

   
Stock Options
   
Weighted Average Exercise Price per Share
 
Outstanding as of December 31, 2016
    691,237     $ 1.94  
Granted
    ---       ---  
Forfeited/cancelled
    (463,834 )   $ 1.16  
Exercised
    ---       ---  
Outstanding as of June 30, 2017
    227,403     $ 3.54  
 
The following table presents the stock option grants outstanding and exercisable as of June 30, 2017:

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
 
  140,000     $ 0.33       5.7       140,000     $ 0.33  
  65,000       1.15       7.2       65,000       1.15  
  22,403       30.48       0.8       22,403       30.48  
  227,403     $ 3.54       5.7       227,403     $ 3.54  
 

 
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, 2017, we had granted options to purchase 2,061,167 shares of Common Stock since the inception of the Equity Incentive Plan, of which 227,403 were outstanding at a weighted average exercise price of $3.54 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, 2017, there were 2,503,151 shares that remained available for future grants under our Equity Incentive Plan.

 
NOTE 15.
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 promissory 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, 2017 and December 31, 2016.
Description
 
June 30, 2017
   
December 31, 2016
 
  Liabilities:
           
    Convertible promissory note – March 2017
  $ 500,000       ---  
    Convertible promissory note – February 2017
  $ 500,000       ---  
    Promissory note – December 2016
    ---     $ 20,000  
    Total
  $ 1,000,000     $ 20,000  

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 promissory notes and our convertible promissory note balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.
 
 
NOTE 16.
INCOME TAXES

For the six months ended June 30, 2017, the Company incurred a consolidated tax loss of approximately $1,655,000.

As of June 30, 2017, the Company has consolidated net operating loss carryforwards and research credit carryforwards for income tax purposes of approximately $58,107,000 and $555,000 respectively. The Company has provided a full valuation allowance for all of its deferred tax assets. As a result, the effective tax rate is zero and the net deferred tax assets are zero.

The Tax Reform Act of 1986 contains provisions, which limit the amount of NOL and tax credit carryforwards that companies may utilize in any one year in the event of cumulative changes in ownership over a three-year period in excess of 50%.  Since the effective date of the Tax Reform Act of 1986, the Company has completed significant share issuances in 2003, 2016, and 2017 which may significantly limit our ability to utilize our NOL and tax credit carryforwards against taxable earnings in future periods.


NOTE 17.
COMMITMENTS AND CONTINGENCIES

Operating Leases

On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease commenced on April 1, 2006 and originally continued until April 1, 2013.  The lease required a minimum monthly lease obligation of $9,330, which was inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which was inclusive of monthly operating expenses.  On February 22, 2013, we executed an Amendment to Lease Agreement (the “Lease Amendment”) that renewed and extended our lease until March 31, 2015.  The Lease Amendment required a minimum monthly lease obligation of $9,193, which was inclusive of monthly operating expenses, until March 31, 2014 and at such time, increased to $9,379, which was inclusive of monthly operating expenses.  On March 17, 2015, we executed a Second Amendment to Lease Agreement (the “Second Amendment”) that renewed and extended our lease until March 31, 2018.  The Second Amendment requires a minimum monthly lease obligation of $9,436, which is inclusive of monthly operating expenses.
 
On January 16, 2015 we entered into a lease agreement for certain office equipment.  The office equipment lease, that commenced on February 1, 2015 and continues until February 1, 2018, requires a minimum lease obligation of $551 per month.

The future minimum lease payments under the 2015 office lease and the 2015 equipment lease are as follows as of June 30, 2017:

Calendar Years
 
Future Lease Expense
 
  2017 (Six months)
  $ 60,601  
  2018
    29,199  
  2019
    ---  
  2020
    ---  
  Total
  $ 89,800  

Rent expense for our operating leases amounted to $33,596 and $30,571 for the three months ended June 30, 2017 and 2016, respectively, and $65,944 and $60,531 for the six months ended June 30, 2017 and 2016, respectively.

 
Indemnification

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.  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

Note, Warrant and Preferred Stock Purchase Agreement

On February 27, 2017, we entered into the Purchase Agreement with Velocitas and Velo LLC, an entity controlled by Velocitas, with respect to an aggregate financing of up to $6,000,000.

Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 10. Convertible Debt.

On March 31, 2017, the second closing of the Purchase Agreement included, amongst other transaction components, the Company acquiring the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock.  The Company has valued the acquisition of the Altrazeal distributor agreement from Velocitas at $869,375 based on the closing price of $0.065 per share of the Company’s Common Stock on March 31, 2017.

For the three months ended June 30, 2017 and 2016, the Company did not record any revenues with Velocitas GmbH, an affiliated entity of Velocitas.  For the six months ended June 30, 2017 and 2016, the Company recorded revenues, in approximate numbers, of $215,000 and nil, respectively, with Velocitas GmbH which represented 97% and 0% of our total revenues, respectively.  As of June 30, 2017 and December 31, 2016, Velocitas GmbH did not have any outstanding net accounts receivable.
 
Consulting Agreement - Velocitas GmbH

On April 1, 2017, the Company entered into a Consulting Agreement with Velocitas GmbH to provide the Company with operational support services in the fields of regulatory administration, finance, international customer account management, manufacturing, supply chain logistics, and other services required by the Company. Velocitas GmbH will receive a monthly payment of $25,833 for providing such services to the Company.

Temporary Advances

On December 15, 2016, January 18, 2017, and February 16, 2017, we issued Promissory Notes to Velocitas with purchase prices of $20,000, $65,000, and $30,000, respectively.  Each of the Promissory Notes bore interest at the rate of 6.0% per annum with payment of principal and interest due on the earlier of (i) 180 days from the date of issuance, (ii) the date of closing of any debt or equity financing transaction by and between Uluru and Velocitas, or (iii) the payment to Uluru of certain invoices due from selected Company’s distributors.  Each of the Promissory Notes was secured by a pledge of certain product inventory and there were no debt issuance costs incurred by the Company.  On February 27, 2017, each of the Promissory Notes was repaid in connection with the issuance of the Initial Note under the Purchase Agreement with Velocitas.

On February 21, 2017, we issued a promissory note to Kirkwood with a purchase price of $25,000.  The promissory note bore interest at the rate of 6.0% per annum with payment of principal and interest due on the earlier of (i) 60 days from the date of issuance, (ii) the date of closing of any debt or equity financing transaction by the Company, or (iii) no later than two days after receiving written request by Kirkwood.  The promissory note was secured by a pledge of certain product inventory and accounts receivables and there were no debt issuance costs incurred by the Company.  The Company’s Vice President and Chief Financial Officer, Terrance K. Wallberg, is President and sole shareholder of Kirkwood.  On February 27, 2017, the outstanding promissory note to Kirkwood was repaid in connection with the issuance of the Initial Note under the Purchase Agreement with Velocitas.

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 and manage the Company’s cash and financial resources.

As of June 30, 2017, the Company’s obligation to these executives for temporarily deferred compensation was approximately $397,000 of which approximately $72,000 was included in accrued liabilities and $325,000 was included in accounts payable.

As of December 31, 2016, the Company’s obligation to these executives for temporarily deferred compensation was approximately $473,000 of which approximately $200,000 was included in accrued liabilities and approximately $273,000 was included in accounts payable.


 
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, 2017, 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.  As of June 30, 2017, the Company has accrued approximately $32,000 of expense relating to future milestone payments to Access.

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.

Prescription Drug User Fee Obligation

The Company was assessed prescription drug user fees (“PDUFA”) by the United States Department of Health and Human Services (the “DHHS”) for the sale and manufacture of Aphthasol®.  The Company had contested the assessments as it believed such fees should be waived because the Company should qualify for abatement of the PDUFA fees.  However, the Company’s challenge has been denied by the DHHS.  As of June 30, 2017, the Company has recognized amounts due, to include potential penalties and interest, of approximately $1,054,000 related to the unpaid PDUFA fees.  The PDUFA fees remain unpaid as of the date of this Quarterly Report on Form 10-Q (this “Report”).  Since the Company has not yet reached a settlement with the DHHS, it is possible that the Company may be subject to additional collection costs.


NOTE 18.
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; however, one or more events may lead to a formal dispute or proceeding in the future.
 

NOTE 19.
SUBSEQUENT EVENTS

On August 1, 2017, all 1,250 outstanding shares of Series B Convertible Preferred Stock converted into 125,000,000 shares of Common Stock as a result of the approval by the stockholders at the 2017 Annual Meeting of Stockholders held on July 25, 2017, and the filing in July 2017, of an amendment increasing our authorized shares of Common Stock to 750,000,000 shares.

 

 
ITEM 2.
M anag ement’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 Quarterly Report on Form 10-Q (this “Report”) and with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016, referred to as our 2016 Form 10-K, which has been previously filed with the Securities and Exchange Commission on April 17, 2017, 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 involves risks and uncertainties.  Our actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2016 Form 10-K under “Risks Associated with our Business”.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report and other written and oral statements ULURU Inc. (together with our subsidiaries, “we”, “our”, “us”, “ULURU” or 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 that they do not relate strictly to historical or current facts,  Forward-looking statements may include words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”, “project”, “guidance”, “will”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements are likely to relate to, among other things, the Company’s goals, plans and projections regarding its financial position, statements indicating that the Company has cash and cash equivalents sufficient to fund our operations in the future, statements regarding expected cash flows, market position, product development, product approvals, increases in revenue, expense levels, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, acquisitions, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years.  No assurance can be given that any goal or plan set forth in forward-looking statements can be achieved, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made.  We undertake no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

Business Overview

ULURU Inc. is a Nevada corporation.  We are a specialty medical technology company committed to developing and commercializing a range of innovative wound care and muco-adhesive film products based on our patented Nanoflex® and OraDisc TM technologies, with the goal of improving outcomes for patients, health care professionals and payers.

Utilizing these two platform technologies, a number of products were developed of which one is being actively marketed in the wound care market. This product, Altrazeal® Transforming Powder Dressing (“Altrazeal®”), based on our Nanoflex® technology, has the potential to change the way health care providers approach wound treatment.  Altrazeal® is indicated for both exuding acute wounds such as partial thickness burns, donor sites, surgical wounds, and trauma and for chronic wounds such as venous leg ulcers, diabetic foot ulcers, and pressure ulcers. Altrazeal® is registered for sale with the United States Food and Drug Administration (the “FDA”), the European Union (the “EU”) and a number of other international markets.

Our current strategy is to primarily focus on the commercialization of Altrazeal® and to establish a leadership position in wound management by developing and commercializing a customer focused portfolio of innovative wound care products.  We will also evaluate the potential for commercialization of the other products as well as explore strategic collaborations to further develop our oral mucoadhesive film technology (OraDisc TM ) for systemic drug delivery and for delivery of actives to the oral cavity.

We will also continue to execute a series of operational plans to enhance and streamline our business. We are restructuring our operations to improve efficiency and reduce cost, including production, distribution, and administration costs. We are also undertaking efforts to stimulate sales, enhance marketing, and expedite regulatory approvals for new market entry of Altrazeal®.

Recent Developments

Operations

On February 27, 2017, the Company appointed Vaidehi Shah to serve as the Company’s Chief Executive Officer and on April 1, 2017 the Company engaged Velocitas GmbH to provide operational support services in the fields of regulatory administration, finance, international customer account management, manufacturing, supply chain logistics and other services required by the Company.  During the second quarter ended June 30, 2017, our new team initiated a number of business activities with the aim of reassessing Altrazeal®’s marketing strategy to accelerate sales as well as improving the Company’s operations to create a strong organizational foundation going forward.  These activities include (i) showcasing Altrazeal® to new physicians, hospitals, clinics, and marketing partners to evaluate potential strategies for the domestic market, (ii) recruiting and increasing staff responsible for oversight of international sales and marketing, (iii) engaging third-party experts to assess and oversee the Company’s quality management system and regulatory affairs, (iv) reviewing manufacturing and operational processes to increase cost efficiencies, and (v) negotiating and settling pending financial liabilities.

 
Debt Financing and Preferred Stock Offering – March 2017

On February 27, 2017, the Company entered into a Note, Warrant and Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Velocitas Partners, LLC (“Velocitas") and Velocitas I LLC (“Velo LLC”), an entity controlled by Velocitas, under which the Company received gross proceeds of $6,000,000, in two closing with the initial closing occurring on February 27, 2017 and the second closing occurring on March 31, 2017 (the “March 2017 Offering”).

The first closing, which occurred on February 27, 2017, included the purchase by Velocitas at face value of the $500,000 Secured Convertible Note dated February 27, 2017 (the “Initial Note”), with the Initial Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances).  The second closing, which occurred on March 31, 2017, included the purchase by Velocitas at face value the additional $500,000 Secured Convertible Note (the “Second Note”) with the Second Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances),, and Velo LLC purchasing 1,250 shares of Series B Convertible Preferred Stock of the Company for gross proceeds of $5,000,000, at an as-converted-to-Common Stock purchase price of $0.04 per share.

The Initial Note and the Second Note are convertible into shares of Common Stock at a conversion price of $0.04 per share, subject to equitable adjustments, with mandatory conversion of all unpaid principal and interest required on the second anniversary of each Note.  The Initial Note and the Second Note are secured by all of the assets of the Company and its subsidiaries pursuant to a Security Agreement executed at the initial closing.

The Series B Convertible Preferred Stock that was issued in connection with the second closing, (a) voted together with the Common Stock as a single class (subject to standard protective provisions for the Series B Convertible Preferred Stock), (b) had the same dividend rights as the Common Stock, (c) had a liquidation preference equal to the greater of its purchase price and its as converted-to-Common Stock value, (d) automatically converted into Common Stock when the number of authorized shares of Common Stock was increased within 190 days of the second closing as necessary to permit all outstanding convertible or exercisable securities (including the Series B Convertible Preferred Stock) to convert to Common Stock, and (e) was convertible into Common Stock at the discretion of the holder, subject to the availability of authorized shares.  On August 1, 2017, all 1,250 outstanding shares of Series B Convertible Preferred Stock converted into 125,000,000 shares of Common Stock as a result of the approval by the stockholders at the 2017 Annual Meeting of Stockholders held on July 25, 2017, and the filing in July 2017, of an amendment increasing our authorized shares of Common Stock to 750,000,000 shares.

As a condition of the March 2017 Offering, the Company issued to Velocitas at the second closing a warrant to purchase up to 57,055,057 shares of Common Stock (the “Warrant”).  The Warrant has an exercise price of $0.04 per share, a 10-year term and is subject to cashless exercise. In addition, at the second closing, the Company acquired the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock.
 
In addition, the Company, Velocitas, Velo LLC, and certain affiliates signed a Voting Agreement (the “Voting Agreement”) pursuant to which the parties agreed to set the size of the Board of Directors at six directors, and agreed to vote for the election to the Board of Directors of four persons designated by Velocitas (initially to be Anish Shah, Oksana Tiedt, Vaidehi Shah and Arindam Bose), one director designated by Bradley J. Sacks and one additional director designated by a major investor or by the Board of Directors.  In addition, the parties to the Voting Agreement have agreed to vote in favor of a proposal to amend the Company’s articles of incorporation to increase the authorized shares as required to permit the conversion of the Series B Convertible Preferred Stock.

In addition, the Company, Velocitas, Velo LLC, and certain affiliates entered into an Investor Rights Agreement (the “Investor Rights Agreement”) that provides the parties thereto with demand Form S-3 and piggy back registration rights, Rule 144 information rights, and rights of first offer (or preemptive rights) in connection with future sales of securities by the Company (subject to standard exceptions).  The Investor Rights Agreement includes indemnification obligations associated with the registration rights.  Michael I. Sacks and Bradley Sacks and affiliates are parties to the Investor Rights Agreement, in part in exchange for the termination by certain of such persons and The Punch Trust of a Registration Rights Agreement dated as of January 31, 2014.

As required by the Purchase Agreement, at the initial closing, the Company appointed Ms. Vaidehi Shah to serve as the Company’s Chief Executive Officer and to also serve as a member of the Company’s Board of Directors.  Concurrent with the initial closing and as a condition of the March 2017 Offering, the Company received resignation notices from Helmut Kerschbaumer, the Company’s Interim President, Chief Executive and Director, and Klaus Kuehne, a member of the Company’s Board of Directors.

As required by the Purchase Agreement, at the second closing, the Company appointed Mr. Anish Shah and Ms. Oksana Tiedt to join the Company and to serve as part of the Company’s executive management team and together with Mr. Arindam Bose to join the Company’s Board of Directors.

Concurrent with the second closing and as a condition of the Financing, the Company received resignation notices from Robert F. Goldrich and Terrance K. Wallberg, each being a member of the Company’s Board of Directors.  Mr. Wallberg continues to serve as the Company’s Vice President, Chief Financial Officer, Secretary, and Treasurer.  Also occurring at the second closing, Mr. Bradley J. Sacks stepped down as Chairman of the Board of Directors and Ms. Vaidehi Shah, the Company’s Chief Executive Officer and Director, assumed such duties.  Mr. Sacks continues to serve as a Director of the Company.



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 and commercialization efforts. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results may not be a good indication of our future performance.

Comparison of the three months ended June 30, 2017 and 2016

Total Revenues

Revenues were approximately $4,000 for the three months ended June 30, 2017, as compared to revenues of approximately $264,000 for the three months ended June 30, 2016, and were composed of, in approximate amounts, product sales of $3,000 for Altrazeal® and licensing fees of $1,000 from a OraDisc™ licensing agreement.

The decrease of approximately $260,000 in revenues is primarily attributable to a decrease of approximately $258,000 in licensing fees due to the one-time recognition in the second quarter of 2016 of unamortized licensing fees related to the cancellation by the Company of the licensing agreement with two distributors; KunWha Pharmaceutical Co., and Jiangxi Aiqilin Pharmaceuticals Group, and a decrease of approximately $2,000 in Altrazeal® product sales.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the three months ended June 30, 2017 and 2016 were approximately $350 and $530, respectively, and were comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled approximately $48,000 for the three months ended June 30, 2017, including $1,000 in share-based compensation, compared to approximately $135,000 for the three months ended June 30, 2016, which included $300 in share-based compensation.  The decrease of approximately $87,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $40,000 direct research costs primarily related to product development and product registration costs, a decrease of $39,000 in scientific compensation related wage reductions by existing staff and lower head-count, and a decrease of $8,000 in other miscellaneous expenses.

Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $330,000 for the three months ended June 30, 2017, including $3,000 in share-based compensation, compared to approximately $385,000 for the three months ended June 30, 2016, which included $18,000 in share-based compensation.  The decrease of approximately $55,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $42,000 in investor relations consulting, a decrease of $28,000 in consulting costs for product marketing, a decrease of $27,000 in costs associated with marketing and promotion of Altrazeal®, a decrease of $27,000 in other miscellaneous expenses.  These expense decreases were partially offset by, in approximate numbers, an increase of $33,000 in corporate travel costs, an increase of $30,000 in compensation related to an increase in head count, and an increase of $6,000 in other miscellaneous expenses.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $113,000 for the three months ended June 30, 2017 as compared to approximately $200,000 for the three months ended June 30, 2016.  The expense for each period consists primarily of amortization associated with our acquired patents and licensing rights.  The decrease of approximately $87,000 is attributable to the impairment in 2016 of two patents; “Amlexanox (OraDisc™ A)” and “OraDisc™”.  We did not purchase any additional licensing rights during the three months ended June 30, 2017.

Depreciation

Depreciation expense totaled approximately $33,000 for the three months ended June 30, 2017 as compared to approximately $33,000 for the three months ended June 30, 2016.

 
Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $2 for the three months ended June 30, 2017 as compared to approximately $515 for the three months ended June 30, 2016.

Interest Expense

Interest expense totaled approximately $134,000 for the three months ended June 30, 2017 as compared to approximately $44,000 for the three months ended June 30, 2016.  Interest expense typically includes financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and debt issuance costs related to our promissory notes.  The increase of approximately $90,000 in interest expense is primarily attributable to costs associated with the two convertible promissory notes with Velocitas from the March 2017 Offering.

Foreign Currency Transaction Gain (Loss)

Foreign currency transaction loss totaled approximately $3,000 for the three months ended June 30, 2017 as compared to a foreign currency transaction loss of approximately $3,000 for the three months ended June 30, 2016.
 
Gain on Settlement of Liability

Gain on settlement of liability totaled approximately $114,000 for the three months ended June 30, 2017 as compared to nil for the three months ended June 30, 2016.  In June 2017, the Company was able settle certain liabilities for less than the original obligation recognized by the Company.


Comparison of the six months ended June 30, 2017 and 2016

Total Revenues

Revenues were approximately $221,000 for the six months ended June 30, 2017, as compared to revenues of approximately $373,000 for the six months ended June 30, 2016, and were composed of, in approximate amounts, product sales of $218,000 for Altrazeal® and licensing fees of $3,000 from a OraDisc™ licensing agreement.

The decrease of approximately $152,000 in revenues is primarily attributable to a decrease of approximately $358,000 in licensing fees due to the one-time recognition in 2016 of unamortized licensing fees related to the cancellation by the Company of licensing agreements with three distributors; Altrazeal AG, KunWha Pharmaceutical Co., and Jiangxi Aiqilin Pharmaceuticals Group.  The revenue decrease was partially offset by an increase of approximately $206,000 in Altrazeal® product sales.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the six months ended June 30, 2017 and 2016 were approximately $82,000 and $1,000, respectively, and were comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled approximately $108,000 for the six months ended June 30, 2017, including $3,000 in share-based compensation, compared to approximately $271,000 for the six months ended June 30, 2016, which included $9,000 in share-based compensation.  The decrease of approximately $163,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $110,000 in scientific compensation related to wage reductions by existing staff, lower head-count, and lower share-based compensation, a decrease of $47,000 direct research costs primarily related to consulting costs and product registration costs, and a decrease of $6,000 in other miscellaneous expenses.
 
Selling, General and Administrative

Selling, general and administrative expenses totaled approximately $725,000 for the six months ended June 30, 2017, including $6,000 in share-based compensation, compared to approximately $704,000 for the six months ended June 30, 2016, which included $37,000 in share-based compensation.  The increase of approximately $21,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, an increase of $45,000 in corporate travel costs, an increase of $37,000 in costs associated with marketing and promotion of Altrazeal®, an increase of $32,000 in royalty expenses associated with product sales, an increase of $26,000 in consulting costs for product marketing, an increase of $25,000 in compensation related to an increase in head count, and an increase of $6,000 in accounting fees.  These expense increases were partially offset by, in approximate numbers, a decrease of $55,000 in investor relations consulting, a decrease of $30,000 in share-based director fee compensation, a decrease of $29,000 in travel costs associated with product marketing, a decrease of $36,000 in other miscellaneous expenses.

 
Amortization of Intangible Assets

Amortization of intangible assets expense totaled approximately $202,000 for the six months ended June 30, 2017 as compared to approximately $398,000 for the six months ended June 30, 2016.  The expense for each period consists primarily of amortization associated with our acquired patents and licensing rights.  The decrease of approximately $196,000 is attributable to the impairment in 2016 of two patents; “Amlexanox (OraDisc™ A)” and “OraDisc™”.  We purchased additional licensing rights of approximately $869,000 from Velocitas during the six months ended June 30, 2017.

Depreciation

Depreciation expense totaled approximately $66,000 for the six months ended June 30, 2017 as compared to approximately $66,000 for the six months ended June 30, 2016.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled approximately $4 for the six months ended June 30, 2017 as compared to approximately $537 for the six months ended June 30, 2016.

Interest Expense

Interest expense totaled approximately $155,000 for the six months ended June 30, 2017 as compared to approximately $91,000 for the six months ended June 30, 2016.  Interest expense typically includes financing costs for our insurance policies, interest costs related to regulatory fees, and interest costs and amortization of debt discount and debt issuance costs related to our promissory notes.  The increase of approximately $64,000 in interest expense is primarily attributable to costs associated with the two convertible promissory notes with Velocitas from the March 2017 Offering.
 
Foreign Currency Transaction Gain (Loss)

Foreign currency transaction loss totaled approximately $3,000 for the six months ended June 30, 2017 as compared to a foreign currency transaction gain of approximately $1,000 for the six months ended June 30, 2016.  The decrease of approximately $4,000 is related to fluctuations in the Euro exchange rate experienced during 2017 and the pricing of Altrazeal® to our international distributors being denominated in Euros.

Gain on Settlement of Liability

Gain on settlement of liability totaled approximately $114,000 for the six months ended June 30, 2017 as compared to nil for the three months ended June 30, 2016.  In June 2017, the Company was able settle certain liabilities for less than the original obligation recognized by the Company.

Accommodation fee due on promissory note

Accommodation fee due on promissory note was nil for the six months ended June 30, 2017 as compared to $25,000 for the six months ended June 30, 2016.  The fee was based on a January 2016 Waiver Agreement with Inter-Mountain Capital Corp (“Inter-Mountain”).  The Waiver Agreement relates to the April 2015 Note and our failure to make the installment payment under the April 2015 Note due in November 2015 on a timely basis.  Under the terms of the Waiver Agreement, we agreed to remit the November 2015 installment payment of $45,000 in cash and to pay Inter-Mountain an accommodation fee of $25,000, with the accommodation fee being added to the outstanding loan balance.
 



LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the public and private sales of convertible notes, rights to acquire Common Stock, and Common Stock.  Product sales, royalty payments, licensing fees and milestone payments from our corporate alliances have also provided, and are expected in the future to provide, funding for operations.

Our principal source of liquidity is cash and cash equivalents.  As of June 30, 2017, our cash and cash equivalents were approximately $5,455,000, which is an increase of approximately $5,418,000 as compared to our cash and cash equivalents at December 31, 2016 of approximately $37,000.  Our working capital (current assets less current liabilities) was approximately $3,638,000 at June 30, 2017 as compared to our working capital at December 31, 2016 of approximately $(1,614,000).


Consolidated Cash Flow Data
     
   
Six Months Ended June 30,
 
Net Cash Provided by (Used in)
 
2017
   
2016
 
Operating activities
  $ (457,000 )   $ (972,000 )
Investing activities
    (4,000 )     ---  
Financing activities
    5,879,000       1,510,000  
Net increase in cash and cash equivalents
  $ 5,418,000     $ 538,000  

Operating Activities

For the six months ended June 30, 2017, net cash used in operating activities was approximately $457,000.  The principal components of net cash used for the six months ended June 30, 2017 were, in approximate numbers, our net loss of $1,006,000, a decrease of $154,000 in accrued liabilities due to reclassification of compensation liabilities and a decrease of $14,000 in deferred revenues due to amortization of revenues.  Our net loss for the six months ended June 30, 2017 included substantial non-cash charges of approximately $366,000 in the form of share-based compensation, amortization of patents and licensing rights, depreciation, amortization of debt discount, and amortization of debt issuance costs.  The aforementioned net cash used for the six months ended June 30, 2017 was partially offset by, in approximate numbers, an increase of $147,000 in accounts payable due to reclassification of compensation liabilities, an increase of $37,000 in accrued interest, a decrease of $98,000 in prepaid expenses related to insurance and listing fees, a decrease of $59,000 in accounts receivable due to collection activities, and a decrease of $10,000 in inventories.

For the six months ended June 30, 2016, net cash used in operating activities was approximately $972,000.  The principal components of net cash used for the six months ended June 30, 2016 were, in approximate numbers, our net loss of $1,183,000, a decrease of $321,000 in deferred revenues due to amortization of revenues, a decrease of $115,000 in accrued liabilities due to repayment of temporary compensation deferrals, an increase of $50,000 in inventory, and an increase of $2,000 in deposits.  Our net loss for the six months ended June 30, 2016 included substantial non-cash charges of approximately $555,000 in the form of share-based compensation, amortization of patents and licensing rights, depreciation, amortization of debt discount, amortization of debt issuance costs.  The aforementioned net cash used for the six months ended June 30, 2016 was partially offset by, in approximate numbers, a decrease of $72,000 in prepaid expenses related to insurance, listing fees, and consulting, a decrease of $39,000 in accounts receivable due to collection activities, an increase of $31,000 in accounts payable due to timing of vendor payments, and an increase of $2,000 in accrued interest.
 
Investing Activities

Net cash used in investing activities for the six months ended June 30, 2017 was approximately $4,000 and relates to the purchase of computer equipment.

There were no investing activities for the six months ended June 30, 2016.

 
Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2017 was approximately $5,879,000 and was composed of, in approximate numbers, the net proceeds of $5,899,000 from the March 2017 Offering and the net proceeds of $120,000 from certain short-term promissory notes issued to Velocitas and Kirkwood Investors, Inc. (“Kirkwood”).  The aforementioned net cash provided for the six months ended June 30, 2017 was partially offset by the repayment of $140,000 of short-term promissory notes issued to Velocitas and Kirkwood.

Net cash provided by financing activities for the six months ended June 30, 2016 was approximately $1,510,000 and was composed of, in approximate numbers, the net proceeds of $1,732,000 from the March 2016 Offering.  The aforementioned net cash provided for the six months ended June 30, 2016 was partially offset by the repayment of $200,000 in principle due on the promissory note with Inter-Mountain and by offering costs of $22,000 associated with the acquisition of licensing rights that occurred in December 2015.

Liquidity

As of June 30, 2017, we had cash and cash equivalents of approximately $5,455,000.

We expect to use our cash, cash equivalents, and investments on working capital, for general corporate purposes, on property and equipment, and for 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 2017 and beyond, such as the speed and degree of market acceptance, the impact of competition, the effectiveness of the sales and marketing efforts of our distributors and sub-distributors, and the outcome of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.

As of June 30, 2017, our net working capital (current assets less current liabilities) was approximately $3,638,000 and we believe that our current liquidity will be sufficient to fund operations beyond 2017.

In the event that we need to raise capital in the future, due to our limited revenue, we may be unable to obtain the necessary financing on terms acceptable to us, or at all.  If we are unable to raise capital when needed, we would be unable to continue our operations.  Even if we are able to raise capital, we may raise capital by selling equity securities, which will be dilutive to existing stockholders.  If we incur additional indebtedness, costs of financing may be extremely high, and we will be subject to default risks associated with such indebtedness, which may harm our ability to continue our operations.  We have no commitments with respect to additional capital.

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

§  
our ability to successfully commercialize our wound management products and the market acceptance of these products;
§  
our ability to establish and maintain collaborative arrangements with business partners for the  development and commercialization of certain product opportunities;
§  
scientific progress in our development programs;
§  
the marketing and sales efforts of our distributors and sub-distributors;
§  
the costs involved in filing, prosecuting and enforcing patent claims and our maintenance of patent rights;
§  
competing product developments;
§  
the trading volume and price of our capital stock;
§  
the actions of parties whose consents, waivers or prompt responses are required for approval of a financing (such as parties with rights of first refusal or consent rights);
§  
our general financial situation, including our revenues, liquidity, capitalization and other factors; and
§  
the cost of manufacturing and production scale-up.


 
Contractual Obligations

The following table summarizes our outstanding contractual cash obligations as of June 30, 2017, which is composed of a lease agreement for office and laboratory space in Addison, Texas and a lease agreement for office equipment.  These obligations and commitments assume non-termination of agreements and represent expected payments based on current operating forecasts, which are subject to change:

   
Payments Due By Period
 
Contractual Cash Obligations
 
Total
   
Less Than
1 Year
   
1-2
Years
   
3-5
Years
   
After 5
Years
 
  Operating leases
  $ 89,800     $ 89,800     $ ---     $ ---     $ ---  
  Total contractual cash obligations
  $ 89,800     $ 89,800     $ ---     $ ---     $ ---  

Capital Expenditures

For the six months ended June 30, 2017 and 2016, our expenditures for property, equipment, and leasehold improvements were approximately $4,000 and nil, respectively, and consisted primarily of computer equipment.

Off-Balance Sheet Arrangements

As of June 30, 2017, 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 South State Bank as our banking institutions.  At June 30, 2017 and December 31, 2016 our cash and cash equivalents totaled approximately $5,455,000 and $37,000, 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, 2017 and at December 31, 2016.  As of June 30, 2017, six customers exceeded the 5% threshold, with 29%, 20%, 10%, 10%, 8%, and 5%, respectively.  At December 31, 2016, one customer, being one of our international distributors, exceeded the 5% threshold with 95%.  We routinely assess the financial strength of our most significant customers and monitoring the amounts owed to us, taking appropriate action when necessary.  As a result, we believe that our prospective accounts receivable credit risk exposure is limited.

Concentrations of Foreign Currency Risk

Currently, a portion of our revenues and all of our expenses are denominated in U.S. dollars. We are 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.


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 2016 Form 10-K as filed with the Securities and Exchange Commission on April 17, 2017.  We had no significant changes in our critical accounting policies since our last annual report.
 
 
ITEM 3.
Qu ant itative and Qualitative Disclosures About Market Risk.

This item is not applicable to smaller reporting companies.


ITEM 4.
Contro ls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended, (the “Exchange Act”)).  Disclosure controls and procedures are controls and other procedures designed to reasonably assure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that this information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on this evaluation, our principal executive officer and principal financial officer concluded that as of June 30, 2017, our disclosure controls and procedures were not effective, at a reasonable assurance level, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and is (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure primarily as a result of the lack of segregation of duties.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





PART II - OTHER INFORMATION


ITEM 1.
  Legal Proceedings.

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


ITEM 1A.

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 2016 Form 10-K, as filed with the SEC on April 17, 2017.


ITEM 2.
U nregis tered Sales of Equity Securities and Use of Proceeds.

None, other than as previously reported.


ITEM 3.
D efault s Upon Senior Securities.

None.


ITEM 4.
Mine Safety Disclosures.

Not applicable.


ITEM 5.
O ther Information.

On April 1, 2017, the Company entered into a Consulting Agreement with Velocitas GmbH to provide the Company with operational support services in the fields of regulatory administration, finance, international customer account management, manufacturing, supply chain logistics, and other services required by the Company. Velocitas GmbH will receive a monthly payment of $25,833 for providing such services to the Company.  Each of Vaidehi Shah, our Chairman and Chief Executive Officer, Anish Shah, a director, Arindam Bose, a director, and Oksana Tiedt, a director are affiliated with Velocitas GmbH.



 
ITEM 6.
E xhib its.

Exhibit Number
 
Description
*
3.2
 
Amended and Restated Bylaws dated December 5, 2008. (1)
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 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.
 
#
Management contract or compensation plan arrangement
 
 

SI GNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
ULURU Inc.
   
 Date:  August 14, 2017
 
By:
 /s/ Vaidehi Shah
 
   
Vaidehi Shah
   
Chief Executive Officer
   
(Principal Executive Officer)
   
   
 Date:  August 14, 2017
 
By:
 /s/ Terrance K. Wallberg
 
   
Terrance K. Wallberg
   
Chief Financial Officer and Vice President
   
(Principal Financial and Accounting Officer)
 
 
- 29 -



RESTATED ARTICLES OF INCORPORATION

OF

ULURU INC.


The undersigned, for the purposes of forming a corporation, pursuant to and by virtue of Chapter 78 of the Nevada Revised Statutes, hereby certify and adopt the following Articles of Incorporation.

ARTICLE I

NAME

The name of the corporation shall be ULURU Inc.

ARTICLE II

LOCATION

The principal office of the Corporation is to be located at 3025 Las Vegas Boulevard, South, Las Vegas, Nevada 89109.  The corporation may also maintain offices at such other place or places within or outside the State of Nevada. Corporate business of every kind and nature may be conducted and meetings of the directors and stockholders held outside the State as well as inside the State.

ARTICLE III

PURPOSES

The nature of the business, or objects or purposes to                                                                                     be transacted, promoted, or carried on by the corporation are to engage in any lawful practice or activity.

ARTICLE IV

CAPITAL STOCK

All issued and outstanding shares of Common Stock, par value $.001 per share (“Old Common Stock”), outstanding as of the close of business on March 29, 2006 (the “Effective Date”) shall automatically and without any action on the part of the holder of the Old Common Stock be converted into 0.0025 times the number of shares of Old Common Stock, par value $.001 per share (“New Common Stock”).  Each holder of a certificate or certificates which immediately prior to the Effective Date represented outstanding shares of Old Common Stock (the “Old Certificates”) shall, from and after the Effective Date, be entitled to receive a certificate or certificates (the “New Certificates”) representing the shares of New Common Stock into which the shares of Old Common Stock formerly represented by such Old Certificates are converted under the terms hereof.  Prior to the Effective Date, there are 399,999,704 shares of issued and outstanding shares of Old Common Stock.  On the Effective Date, there will be approximately 1,000,000 issued and outstanding shares of New Common Stock.

Upon completion of the reverse stock split in the preceding paragraph, the total number of shares of stock which the corporation shall have authority to issue is Two Hundred Million and Twenty Thousand (200,020,000) shares, of which Two Hundred Million (200,000,000) shares shall be Common Stock, $0.001 par value per share, and Twenty Thousand (20,000) shares will be Preferred Stock, $0.001 par value per share (the “Preferred”).

The Preferred may be issued from time to time in one or more series.  The Board of Directors of the corporation is authorized from time to time to designate by resolution, one or more series of preferred stock, and the powers, preferences and rights, and relative participating, optional or other special rights, and qualifications, limitations or resolutions thereof as shall be permitted by Nevada law, and to fix or alter the number of shares comprising any such series and the designation thereof.

ARTICLE V

DIRECTORS

The number of directors constituting the first board of directors shall be three, who shall serve until their successors are duly elected and qualified.

Section 1.  Size of Board.  The members of the governing board of the Corporation shall be styled directors.  The number of directors of the Corporation, their qualifications, terms of office, manner of election, time and place of meeting, and powers and duties shall be such as are prescribed by statute and in the by-laws of the Corporation.

Directors need not be stockholders, but shall be of full age, and at least one of them shall be a citizen of the United States.

Section 2.  Powers of Board.  In furtherance and not in limitation of the powers conferred by the laws of the state of Nevada, the Board of Directors is expressly authorized and empowered:

(a)           To make, alter, amend, and repeal the By-Laws subject to the power of the shareholders to alter or repeal the By-Laws made by the Board of Directors;

(b)           Subject to the applicable provisions of the Bylaws then in effect, to determine, from time to time, whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to shareholder inspection. No shareholder shall have any right to inspect any of the accounts, books or documents of the Corporation, except as permitted by law, unless and until authorized to do so by resolution of the Board of Directors or of the Shareholders of the Corporation;

(c)           To issue stock of the Corporation for money, property, services rendered, labor performed, cash advanced, acquisitions for other corporations or for any other assets of value in accordance with the action of the board of directors without vote or consent of the shareholders and the judgment of the board of directors as to value received and in return therefore shall be conclusive and said stock, when issued, shall be fully-paid and non-assessable;

(d)           To authorize and issue, without shareholder consent, obligations of the Corporation, secured and unsecured, under such terms and conditions as the Board, in its sole discretion, may determine, and to pledge or mortgage, as security therefore, any real or personal property of the Corporation, including after-acquired property;

(e)           To determine whether any and, if so, what part, of the earned surplus of the Corporation shall be paid in dividends to the shareholders, and to direct and determine other use and disposition of any such earned surplus:

(f)           To fix, from time to time, the amount of the profits of the Corporation to be reserved as working capital or for any other lawful purpose;

(g)           To establish bonus, profit-sharing, stock option, or other types of incentive compensation plans for the employees, including officers and directors, of the Corporation, and to fix the amount of profits to be shared or distributed, and to determine the persons to participate in any such plans and the amount of their respective participations;

(h)           To designate, by resolution or resolutions passed by a majority of the whole Board, one or more committees, each consisting of two or more directors, which, to the extent permitted by law and authorized by the resolution or the By-Laws, shall have and may exercise the powers of the Board;

(i)           To provide for the reasonable compensation of its own members by By-Law, and to fix the terms and conditions upon which such compensation will be paid; and

(j)           In addition to the powers and authority herein before, or by statute, expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the corporation, subject, nevertheless, to the provisions of the laws of the state of Nevada, of these Articles of Incorporation, and of the By-Laws of the Corporation.

ARTICLE VI

ASSESSMENTS

The capital stock of the corporation, after the amount of the subscription price, or par value, has been paid in money, property or services, as the Directors shall determine, shall not be subject to assessment to pay the debts of the corporation, nor for any other purpose, and no stock issued as fully paid shall be assessable or assessed, and the Articles of Incorporation shall not be amended in this particular.

ARTICLE VII

INCORPORATORS

[Intentionally Omitted]

ARTICLE VIII

TERM

The corporation shall have perpetual existence.

ARTICLE IX

POWERS

The powers of the Corporation shall be those powers granted by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation is formed. In addition, the Corporation shall have the following specific powers:

(a)           To elect or appoint officers and agents of the Corporation and to fix their compensation;

(b)           To act as an agent for any individual, association, partnership, corporation or other legal entity;

(c)           To receive, acquire, hold, exercise rights arising out of the ownership or possession thereof, sell, or otherwise dispose of, shares or other interests in, or obligations of, individuals, associations, partnerships, corporations, or governments;

(d)           To receive, acquire, hold, pledge, transfer, or otherwise dispose of shares of the corporation, but such shares may only be purchased, directly or indirectly, out of earned surplus; and

(e)           To make gifts or contributions for the public welfare or for charitable, scientific or educational purposes, and in time of war, to make donations in aid of war activities.

ARTICLE X

LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS

The personal liability of a director or officer of the corporation to the corporation or the Shareholders for damages for breach of fiduciary duty as a director or officer shall be limited to acts or omissions which involve intentional misconduct, fraud or a knowing violation of law.

ARTICLE XI

INDEMNIFICATION

Each director and each officer of the corporation may be indemnified by the corporation as follows:

(a)           The corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partner-ship, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with the action, suit or proceeding, if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding, by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful;

(b)           The corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the corporation, to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit, if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper;

(c)           To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suitor proceeding referred to in subsections (a) and (b) of this Article, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the defense;

(d)           Any indemnification under subsections (a) and (b) unless ordered by a court or advanced pursuant to subsection (e), must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:

(i)           By the stockholders;

(ii)           By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding;

(iii)           If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or

(iv)           If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion;

(e)           Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law;

(f)           The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:

(i)           Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection (b) or for the advancement of expenses made pursuant to subsection (e) may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action;

(ii)           Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.

ARTICLE XII

PLACE OF MEETING:  CORPORATE BOOKS

Subject to the laws of the state of Nevada, the shareholders and the Directors shall have power to hold their meetings, and the Directors shall have power to have an office or offices and to maintain the books of the Corporation outside the state of Nevada, at such place or places as may from time to time be designated in the By-Laws or by appropriate resolution.

ARTICLE XIII

AMENDMENT OF ARTICLES

The provisions of these Articles of Incorporation may be amended, altered or repealed from time to time to the extent and in the manner prescribed by the laws of the State of Nevada, and additional provisions authorized by such laws as are then in force may be added. All rights herein conferred on the directors, officers and shareholders are granted subject to this reservation.

[Note: Company was created prior to 1991. Shareholders may have preemptive rights, unless the stock is registered under Section 12]


 
 

 



 
ULURU INC.
 
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK

 
ULURU, Inc., a Nevada corporation (the “ Corporation ”), hereby certifies that the following resolution was duly adopted by action of the Board of Directors of the Corporation (the “ Board ”) on February 22, 2017 in accordance with the provisions of its Amended and Restated Articles of Incorporation (as amended, the " Articles of Incorporation ") and bylaws and section 78.390 of the Nevada Revised Statutes (as amended, the “ Nevada Revised Statues ”.
 
 
WHEREAS, the Corporation is authorized pursuant to its Articles of Incorporation to issue up to 20,000 shares of preferred stock, par value $0.001 per share, of the Corporation (“ Preferred Stock ”) in one or more series, of which 1,000 shares have been designated as Series A Preferred Stock, none of which are issued or outstanding (the “ Series A Preferred Stock ”);
 
 
WHEREAS, the Articles of Incorporation expressly authorizes the Board, subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to designate and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series; and
 
 
WHEREAS, it is the desire of the Board to designate a new series of Preferred Stock and fix the number of shares to be included in such new series and the designation, rights, preferences and limitations of the shares of such new series.
 
 
NOW, THEREFORE, BE IT RESOLVED, that the Board does hereby provide for the issue of a series of Preferred Stock and does hereby in this Certificate of Designation (the “ Certificate of Designation ”) establish and fix and herein state and express the designation, rights, preferences, powers, restrictions and limitations of such series of Preferred Stock as follows:
 
 
1.   Designation .  There shall be a series of Preferred Stock that shall be designated as “Series B Convertible Preferred Stock” (the “ Series B Preferred Stock ”) and the number of shares constituting such series shall be 1,250.  The rights, preferences, powers, restrictions and limitations of the Series B Preferred Stock shall be as set forth herein.
 
2.   Defined Terms .  For purposes hereof, the following terms shall have the following meanings:
 
“ Articles of Incorporation ” has the meaning set forth in the Recitals.
 
“ Board ” has the meaning set forth in the Recitals.
 
“ Certificate of Designation ” has the meaning set forth in the Recitals.
 
“ Common Stock ” means the common stock, par value $0.001 per share, of the Corporation.
 
“ Conversion Threshold ” means, at any given time, the number of duly authorized but unissued shares of Common Stock as shall at that time be sufficient to effect (a) the conversion of all outstanding shares of Series B Preferred Stock and other Convertible Securities, plus (b) the exercise of any Options.
 
“ Conversion Threshold Event ” has the meaning set forth in Section 7.1 .
 
“ Convertible Securities ” means any securities, including preferred stock, warrants, convertible promissory notes, (directly or indirectly), exercisable for, convertible into or exchangeable for Common Stock or securities that that are convertible into or exchangeable for Common Stock, but excluding Options.
 
“ Corporation ” has the meaning set forth in the Preamble.
 
“ Conversion Price ” means $0.04 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock.
 
“ Conversion Shares ” means the shares of Common Stock or other capital stock of the Corporation then issuable upon conversion of the Series B Preferred Stock in accordance with the terms of Section 7 .
 
“ Date of Issuance ” means, for any share of Series B Preferred Stock, the date on which the Corporation initially issues such share (without regard to any subsequent transfer of such share or reissuance of the certificate(s) representing such share).
 
“ Deemed Liquidation Event ” has the meaning set forth in Section 5.1(b) .
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
“ Initial Consideration ” has the meaning set forth in Section 5.1 .
 
“ Liquidated Damages ” has the meaning set forth in Section 7.2 .
 
“ Liquidation ” has the meaning set forth in Section 5.1(a) .
 
“ Liquidation Value ” means, with respect to any share of Series B Preferred Stock on any given date, the greater of (i) $4,000 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or similar transaction with respect to the Series B Preferred Stock) plus any dividends declared but not paid thereon, or (ii) such amount per share as would have been payable had all shares been converted into Common Stock pursuant to Section 7 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event.
 
“ Mandatory Conversion ” has the meaning set forth in Section 7.1 .
 
“ Mandatory Conversion Expiration ” has the meaning set forth in Section 7.1 .
 
“ Optional Conversion ” has the meaning set forth in Section 7.2 .
 
“ Options ” means any options to subscribe for or purchase Common Stock or Convertible Securities.
 
“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, governmental authority, unincorporated organization, trust, association or other entity.
 
“ Preferred Stock ” has the meaning set forth in the Recitals.
 
“ Purchase Agreement ” has the meaning set forth in Section 5.1 .
 
“ Purchasers ” has the meaning set forth in Section 5.1 .
 
“ SEC ” means the United States Securities Exchange Commission.
 
“ Series B Original Issue Price ” means $4,000 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock.
 
“ Series A Preferred Stock ” has the meaning set forth in the Recitals.
 
“ Series B Preferred Stock ” has the meaning set forth in Section 1 .
 
3.   Rank .  The Series B Preferred Stock will rank (i) pari passu with the Common Stock and the Series A Preferred Stock with respect to dividends and (ii) senior to the Common Stock and the Series A Preferred Stock with respect to rights upon a Liquidation.
 
4.   Dividends .
 
4.1   Accrual and Payment of Dividends .  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Designation) the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount at least equal to the sum of (i) any dividends previously declared but unpaid on the Series B Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series B Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series B Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series B Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series B Original Issue Price; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series B Preferred Stock pursuant to this Section 4.1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series B Preferred Stock dividend.
 
4.2   Partial Dividend Payments .  Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends declared but unpaid with respect to the Series B Preferred Stock, such payment shall be distributed pro rata among the holders thereof based upon the aggregate accrued and accumulated but unpaid dividends on the shares of Series B Preferred Stock held by each such holder.
 
5.   Liquidation .
 
5.1   Liquidation; Deemed Liquidation Event
 
(a)   Liquidation .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (collectively with a Deemed Liquidation Event, a “ Liquidation ”), the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock, Series A Preferred S tock or any other class of capital stock or Convertible Securities, by reason of their ownership thereof, an amount equal to the Liquidation Value of all shares of Series B Preferred Stock held by such holder, plus any dividends declared but unpaid on all such shares of Series B Preferred Stock.  Following the distribution in full of the Liquidation Value to each outstanding share of Series B Preferred Stock, the remaining assets of the Corporation shall be distributed pro rata to the holders of the Common Stock and the Series A Preferred Stock.
 
(b)   Deemed Liquidation .  Each of the following events shall be considered a “ Deemed Liquidation Event ” unless the holders of a majority of the Series B Preferred Stock elect otherwise by written notice sent to the Corporation (which election may be made or not made in their sole and absolute discretion) at least five (5) days prior to the effective date of any such event:
 
(i)  
A merger or consolidation in which the Corporation is a constituent party, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation;
 
(ii)  
The acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation), unless the Corporation’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Corporation’s acquisition or sale or otherwise) hold at least fifty one percent (51%) of the voting power of the surviving or acquiring entity substantially in the same proportion as their ownership of the Corporation; or
 
(iii)  
The sale, lease, transfer, license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, license or other disposition is to a wholly owned subsidiary of the Corporation.
 
Upon the consummation of any such Deemed Liquidation Event, the holders of the Series B Preferred Stock shall, in consideration for cancellation of their shares of Series B Preferred Stock, be entitled to the same rights such holders are entitled to under this Section 5 upon the occurrence of a Liquidation, including the right to receive the full preferential payment from the Corporation of the amounts payable with respect to the Series B Preferred Stock under Section 5.1(a) hereof.  Notwithstanding anything to the contrary in this Section 5.1 , the transactions contemplated by that certain Note, Warrant and Preferred Stock Purchase Agreement, dated February 24, 2017 (the “ Purchase Agreement ”), between the Corporation and the purchasers identified therein (the “ Purchasers ”) shall not be a Deemed Liquidation Event.
 
5.2   Insufficient Assets .  If upon any Liquidation (or Deemed Liquidation Event) the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of the shares of Series B Preferred Stock the full preferential amount to which they are entitled under Section 5.1 , then such assets will be distributed among the holders of the shares of Series B Preferred Stock at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.
 
5.3   Amount Deemed Paid or Distributed . The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any Deemed Liquidation Event shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board; provided, however, that any shares of capital stock shall be valued based on:
 
(a)   if traded on a securities exchange registered with the SEC or traded on a market that requires that participating companies be current in their reporting under the Exchange Act, then the value shall be deemed to be the average of the closing prices of the securities on such exchange or market, as the case may be, over the thirty (30) day period ending three (3) days prior to the closing of such transaction;
 
(b)   if actively traded in any other market (which shall mean greater than $50,000 in dollar volume traded per day, determined by multiplying the number of shares traded per day by the daily volume weighted average price as reported by Bloomberg L.P.), the value shall be deemed to be the average of the closing bid prices over the thirty (30) day calendar period ending three (3) days prior to the closing of such transaction; or
 
(c)   if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.
 
5.4   Allocation of Escrow . In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow and/or is payable to the stockholders of the Corporation subject to contingencies, the definitive transaction agreement shall provide that (a) the portion of such consideration that is not placed in escrow and not subject to any contingencies (the " Initial Consideration ") shall be allocated among the holders of capital stock of the Corporation in accordance with Section 5.1 and 5.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and (b) any additional consideration which becomes payable to the stockholders of the Corporation or the acquiring entities upon release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 5.1 and 5.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction.
 
5.5   Notice .  
 
(a)   Notice Requirement .  In the event of any Liquidation (or Deemed Liquidation Event), the Corporation shall, within ten (10) days of the date the Board approves such action, or no later than twenty (20) days of any stockholders' meeting called to approve such action, or within twenty (20) days of the commencement of any involuntary proceeding, whichever is earlier, give each holder of shares of Series B Preferred Stock written notice of the proposed action.  Such written notice shall describe the material terms and conditions of such proposed action, including (i) a description of the stock, cash and property to be received by the holders of shares of Series B Preferred Stock upon consummation of the proposed action, (ii) the anticipated closing date of such proposed action and (iii) a copy of each definitive agreement related to such proposed action.  If any material change in the facts set forth in the initial notice shall occur, the Corporation shall promptly give written notice to each holder of shares of Series B Preferred Stock of such material change.
 
6.   Voting .
 
6.1   Voting Generally .  Each holder of outstanding shares of Series B Preferred Stock shall be entitled to vote (i) with holders of outstanding shares of Common Stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration (whether at a meeting of stockholders of the Corporation, by written action of stockholders in lieu of a meeting or otherwise), and (ii) with respect to any non-waivable provisions of governing law or by the provisions of Section 5.1(b) and Section 8 below that require a separate vote of the holders of the Series B Preferred Stock, with holders of the Series B Preferred Stock, voting together as a separate and single class, with respect to any and all matters presented to the holders of the Series B Preferred Stock for their action or consideration (whether at a meeting of stockholders of the Corporation, by written action of stockholders in lieu of a meeting or otherwise). In any such vote, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which the share of Series B Preferred Stock is convertible pursuant to Section 7 herein as of the record date for such vote or written consent or, if there is no specified record date, as of the date of such vote or written consent.  Each holder of outstanding shares of Series B Preferred Stock shall be entitled to notice of all stockholder meetings (or requests for written consent) in accordance with the Corporation's bylaws.
 
6.2   Other Special Voting Rights .  Except as required by non-waivable provisions of governing law (with any provisions subject to waiver being waived hereby) or as set forth herein, the holders of shares of Series B Preferred Stock will have no other special voting rights.
 
7.   Conversion .
 
7.1   Conversion .
 
(a)   Optional Conversion . Subject to the provisions of this Section 7 , each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time in whole or in part, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series B Original Issue Price by the Conversion Price in effect at the time of conversion; provided, that no holder of shares of Series B Preferred Stock shall be entitled to convert such share to the extent that the conversion of such share of Series B Preferred Stock would require the issuance of a number of shares of Common Stock that then exceed the number of authorized but unissued shares of Common Stock as of the date of such conversion.
 
(b)   Mandatory Conversion . Subject to the provisions of this Section 7 , if on or prior to the date that is one hundred and ninety (190) days following the initial date of issuance of the Series B Preferred Stock (the “ Mandatory Conversion Expiration ”), a Conversion Threshold Event, as defined below, occurs, each and every outstanding share of Series B Preferred Stock held by stockholders shall automatically convert, without the payment of additional consideration by the holder thereof or any action by the Corporation or holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the (i) Series B Original Issue Price, and (ii) by the then applicable Conversion Price (the “ Mandatory Conversion ”).  A “ Conversion Threshold Event ” shall have occurred upon the occurrence of (1) the amendment by the Corporation of the Articles of Incorporation, as amended and restated, in accordance with the terms and conditions required by the Articles of Incorporation and the Nevada Revised Statutes to increase the authorized shares of Common Stock to a number equal to or greater than the Conversion Threshold, and (2) the Corporation receives aggregate gross proceeds of at least four million dollars ($4,000,000) upon the sale of shares of capital stock of the Corporation pursuant to one or more of the following: (x) the Purchase Agreement, (y) the Secondary Placement (as defined in the Purchase Agreement) or (z) the Backstop Agreement dated February 24, 2017 among Bradley Sacks, the Corporation and Velocitas Partners LLC. The Conversion Price shall be subject to adjustment as provided in Section 7.4 below.
 
7.2   Procedures for Conversion; Effect of Conversion
 
(a)   Procedures for Optional Conversion . In order for a holder of Series B Preferred Stock to voluntarily convert shares of Series B Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series B Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, an indemnity bond in form and amount requested by the transfer agent of the Corporation and a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series B Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Series B Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the " Optional Conversion Time "), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Optional Conversion Time but in no event later than four (4) business days, (i) issue and deliver (or cause its transfer agent to issue or deliver) to such holder of Series B Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series B Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (ii) pay all declared but unpaid dividends on the shares of Series B Preferred Stock converted.
 
(b)   Procedures for Mandatory Conversion .  If a Conversion Threshold Event occurs on or prior to the Mandatory Conversion Expiration in accordance with Section 7.1(b), all outstanding shares of Series B Preferred Stock shall be converted to the number of shares of Common Stock calculated pursuant to Section 7.1 as of the consummation of the Conversion Threshold Event without any further action by the relevant holder of such shares of Series B Preferred Stock or the Corporation.  As promptly as practicable following such Conversion Threshold Event (but in any event within ten (10) days thereafter), the Corporation shall send each holder of shares of Series B Preferred Stock written notice of the Conversion Threshold Event and the date of the Mandatory Conversion.  If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing.  Upon the surrender of such certificate(s) and accompanying materials, the Corporation shall as promptly as practicable (but in any event within four (4) business days thereafter) deliver to the relevant holder a certificate in such holder's name for the number of shares of Common Stock to which such holder shall be entitled upon conversion of the applicable shares of Series B Preferred Stock.
 
(c)   Effect of Conversion .  All shares of the Series B Preferred Stock converted as provided in this Section 7 shall no longer be deemed outstanding as of the effective time of the applicable conversion and all rights with respect to such shares of Series B Preferred Stock shall immediately cease and terminate as of such time, other than the right of the holder to receive shares of Common Stock in exchange therefor. All shares of Common Stock issued hereunder by the Corporation shall be duly and validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof.   Any shares of Series B Preferred Stock so converted shall be retired and cancelled and may not be reauthorized or reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series B Preferred Stock accordingly.
 
(d)   Liquidated Damages . In the event that shares issuable upon conversion are not delivered to an express courier addressed to the holder within seven (7) full business days following the Corporation’s receipt of certificates representing all converted shares owned by the holder (duly endorsed to the extent required hereunder), the Corporation shall pay all damages and losses relating to such failure to deliver shares (the “ Liquidated Damages "). Liquidated Damages shall include, without limitation, $100 per day after the above seven (7) day period for each 100,000 shares of Common Stock issuable upon such conversion (or increments thereof).
 
7.3   No Charge or Payment .  The issuance of certificates for shares of Common Stock upon conversion of shares of Series B Preferred Stock pursuant to Section 7.1 shall be made without payment of additional consideration by, or other charge, cost or tax to, the holder in respect thereof. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series B Preferred Stock pursuant to Section 7.1 . The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
 
7.4   Adjustment to Conversion Price and Number of Conversion Shares .  The Conversion Price and the number of Conversion Shares issuable on conversion of the shares of Series B Preferred Stock shall be subject to adjustment from time to time as provided in this Section   7.4 .
 
(a)   Adjustment for Dividends, Stock Splits and Combinations .  If the Corporation shall, at any time or from time to time after the Date of Issuance, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Corporation payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Conversion Shares issuable upon conversion of the Series B Preferred Stock shall be proportionately increased. If the Corporation at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased and the number of Conversion Shares issuable upon conversion of the Series B Preferred Stock shall be proportionately decreased.  Any adjustment under this Section 7.4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.
 
(b)   Adjustment for Reorganization, Reclassification, Consolidation or Merger .  Subject to the provisions of Section 5.1(b) , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by Section 7.4(a) ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series B Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series B Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 7 with respect to the rights and interests thereafter of the holders of the Series B Preferred Stock, to the end that the provisions set forth in this Section 7 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series B Preferred Stock
 
(c)   Certificate as to Adjustment .
 
(i)  
As promptly as reasonably practicable following any adjustment of the Conversion Price, but in any event not later than ten (10) days thereafter, the Corporation shall furnish to each holder of record of Series B Preferred Stock at the address specified for such holder in the books and records of the Corporation (or at such other address as may be provided to the Corporation in writing by such holder) a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.
 
(ii)  
As promptly as reasonably practicable following any adjustment of the Conversion Price, but in any event not later than ten (10) days thereafter, the Corporation shall furnish to such holder a certificate of an executive officer certifying the Conversion Price then in effect and the number of Conversion Shares or the amount, if any, of other shares of stock, securities or assets then issuable to such holder upon conversion of the shares of Series B Preferred Stock held by such holder.
 
(d)   Notices .  In the event:
 
(i)  
that the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series B Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
 
(ii)  
of any capital reorganization of the Corporation, any reclassification of the Common Stock, any Liquidation (including a Deemed Liquidation Event) or any other consolidation or merger of the Corporation with or into another Person, or sale of all or substantially all of the Corporation's assets to another Person; or
 
(iii)  
of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation;
 
then, and in each such case, the Corporation shall send or cause to be sent to each holder of record of Series B Preferred Stock at the address specified for such holder in the books and records of the Corporation (or at such other address as may be provided to the Corporation in writing by such holder) at least ten (10) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (a) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (b) the effective date on which such Liquidation (including a Deemed Liquidation Event), reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Corporation shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon conversion of the Series B Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series B Preferred Stock and the Conversion Shares.
 
 
7.5   Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series B Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
 
8.   Protective Provision .  So long as any shares of Series B Preferred Stock are outstanding, the Corporation will not, either directly or indirectly by amendment, merger, consolidation or otherwise, without (in addition to any other vote required by law or the Articles of Incorporation) the written consent or affirmative vote of the holders of at least seventy-five percent (75%) of the shares of Series B Preferred Stock then outstanding, given in writing or by vote at a meeting, consenting or voting separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
 
8.1   amend, alter or repeal any provision of the Articles of Incorporation (including this Certificate of Designation) or Bylaws of the Corporation, as amended in a manner that adversely affects the powers, preferences or rights of the Series B Preferred Stock in any respect;
 
8.2   increase or decrease the authorized number of shares of Series B Preferred Stock;
 
8.3   designate or issue any new series of Preferred Stock;
 
8.4   (i) reclassify, alter or amend any existing capital stock of the Corporation that is pari passu with the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series B Preferred Stock in respect of any such right, preference or privilege, or (ii) reclassify, alter or amend any existing capital of the Corporation that is junior to the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series B Preferred Stock in respect of any such right, preference or privilege, or (iii) otherwise alter the amount of shares or rights of shares of Common Stock issuable upon conversion of the Series B Preferred Stock;
 
8.5   issue any Preferred Stock or otherwise create, or authorize the creation of, or issue any Preferred Stock; or
 
8.6   enter into any contract providing for obligations of the Corporation with respect to any of the foregoing matters.
 
9.   Miscellaneous
 
9.1   Notices .  Except as otherwise provided herein, all notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (iv) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such holder's address at it appears in the stock records of the Corporation (or at such other address for a stockholder as shall be specified in a notice given in accordance with this Section 9 ).
 
9.2   Headings .  The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and will not be deemed to limit or affect any of the provisions hereof.
 
RESOLVED, FURTHER, that any authorized office of the Corporation be and hereby is authorized and directed to prepare and file this Certificate of Designation with the Nevada Secretary of State in accordance with the forgoing resolution and the applicable provisions of law.
 
 
 
 
 
 
 
BARBARA K. CEGAVSKE
Secretary of State
 
202 North Carson Street
 
Carson City, Nevada 89701-4201 (775) 684-5708
Website:  www.nvsos.gov
 
*090204*

 
 
Certificate of Amendment
(PURSUANT TO NRS 78.385 AND 78.390)
 
    USE BLACK INK ONLY - DO NOT HIGHLIGHT

 
ABOVE SPACE IS FOR OFFICE USE ONLY

 
Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
 
1.   Name of corporation:
 
    ULURU Inc.
 
 
2.  
The articles have been amended as follows:   (provide article numbers, if available)
 

RESOLVED, that the third paragraph of Article IV of the Restated Articles of Incorporation be, and it hereby is, amended by deleting such paragraph in entirety and substituting the following in its place:
 
The total number of shares of stock which the corporation shall have authority to issue is Seven Hundred Fifty Million and Twenty Thousand (750,020,000) shares, of which Seven Hundred Fifty Million (750,000,000) shall be Common Stock, $0.001 par value per share, and Twenty Thousand (20,000) shares shall be Preferred Stock, $0.001 par value per share (the “Preferred”).
 
 
3.   The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is:  163,535,888 in favor, or 81.21%
 
                                                                                                              Date:                   Time:
4.  
  Effective date and time of filing: (optional)    July 26, 2017
 
                                                                                                              (must not be later than 90 days after the certficate is filed)

5.  
Signature: (required)
 
X      /s/ Terrance K. Wallberg
 
Signature of Officer
 
*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.
 

 
IMPORTANT:   Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected
 

 
This form must be accompanied by appropriate fees.
 
Nevada Secretary of State Amend Profit-After
Revised:  1-5-

 
ULURU Inc.

CONSULTING  AGREEMENT
(Velocitas GmbH)

This Consulting Agreement (this “ Agreement ”) dated as of the 1st day of April, 2017 (the “ Effective Date ”), is made by and between Uluru Delaware Inc., a Delaware corporation, being a wholly owned subsidiary of ULURU Inc., a Nevada corporation,  (collectively the “Company”), and Velocitas GmbH (the “ Consultant ”).

WHEREAS, the Company desires to engage the Consultant to serve as a Consultant and perform consulting services on behalf of the Company and the Consultant desires to perform such services on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein the parties hereby agree as follows:

1.            Consulting Services .
 
 (a)           The Company hereby retains the Consultant and the Consultant hereby agrees to perform such consulting and advisory services in the Field of Interest (as defined below) as the Company may request, including those set forth in Schedule A and such other services as may be mutually agreed upon by Consultant and the Company from time to time (the “Consulting Services”). For purpose of this Agreement, “ Field of Interest ” shall mean:  Wound care management, transmucosal drug delivery, general corporate purposes.

(b)           The Consultant agrees to be available to render the Consulting Services, at such times and locations as may be mutually agreed, from time to time as requested by the Company. Except as provided in Schedule A, the Consultant may deliver the Consulting Services over the telephone, in person, by email, or by written correspondence.

(c)           The Consultant agrees to devote Consultant’s best efforts to performing the Consulting Services. The Consultant shall comply with all rules, procedures and standards promulgated from time to time by the Company with regard to the Consultant’s access to and use of the Company’s property, information, intellectual property, equipment and facilities.

2.            Compensation.   The Company shall pay the Consultant a consulting fee and fixed business expenses as provided in Schedule A . Additionally, the Company will reimburse the Consultant for such reasonable business expenses as are incurred by the Consultant in the performance of Consulting Services for the Company and pre-approved in writing by the Company.

3.            Independent contractor. In furnishing the Consulting Services, the Consultant understands that Consultant will at all times be acting as an independent contractor of the Company and, as such, will not be an employee of the Company and will not by reason of this Agreement or by reason of his Consulting Services to the Company be entitled to participate in or to receive any benefit or right under any of the Company’s employee benefit or welfare plans. The Consultant also will be responsible for paying all withholding and other taxes required by law to be paid as and when the same become due and payable. Consultant shall not enter into any agreements or incur any obligations on behalf of the Company.

4.            Terms .  Either party may terminate this Agreement, in writing, at any time for any reason, without cause and with a thirty (30) day notice period.  Either party may terminate this Agreement immediately by written notice if it is discovered that the other party has intentionally or in a willful, wanton or reckless manner made any material, false representation, report or claim relative to this Agreement; or engaged in any deceptive trade practices.  Upon termination, Consultant will immediately (a) transition all client and other information to the Company; (b) discontinue use of all client data; (b) destroy any and all client data and other Confidential Information; and (c) cease representation, in any manner, as a Consultant of the Company. Upon termination, Consultant will receive no further compensation from Company and Consultant waives rights to such compensation.

         5.            Exceptions to this Agreement .

(a)            Managing Conflicts of Interest . The Consultant represents and agrees that the execution, delivery, and performance of this Agreement does not and will not conflict with any other agreement, policy, or rule applicable to the Consultant including without limitation, any regulation, condition of employment or ethical rule to which the Consultant may be subject. The Consultant will not (x) disclose to the Company any information that the Consultant is required to keep secret pursuant to an existing confidentially agreement with a third party, (y) use the funding, resources, facilities, or inventions of any other third party to perform the Consulting Services, or (z) perform the Consulting Services in any manner that would give the any other third party rights to any intellectual property created in connection with such services. The Consultant agrees to not, without the prior written consent of the Company, undertake any assignments with other third parties that could create a conflict of interest with regard to the business activities of the Company and / or that may affect the Consultant’s ability to deliver his obligations under this Agreement in a timely and effective manner.

(b)            Prior Inventions and Interests .   The Consultant has informed the Company, in writing, of any and all inventions, assets and companies and ventures in the Field of Interest in which the Consultant has directly or indirectly, an economic or other interest or affiliation and otherwise intends to exclude from this Agreement because such arrangement was established by the Consultant prior to the Effective Date. The Consultant acknowledges that after execution of this Agreement Consultant shall have no right to exclude any Company Inventions or other Business Opportunities (as defined in Section 7) from this Agreement.

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     6.            Confidential Information .

(a)           While providing the Consulting Services to the Company and thereafter, the Consultant shall not, directly or indirectly, use any Confidential Information (as defined below) other than pursuant to the Consultants provision of the Consulting Services by and for the benefit of the Company, or disclose to anyone outside of the Company any such Confidential Information. The term “Confidential Information’ as used throughout this Agreement shall mean all trade secrets, proprietary information and other data or information (and any tangible evidence, record or representation thereof), written or oral, whether prepared, conceived or developed by a consultant or employee of the Company (including the Consultant) or received by the Company from an outside source, which is in the possession of the Company (whether or not the property of the Company) and which is maintained in secrecy or confidence by the company. Without limiting the generality of the foregoing, Confidential Information shall include:

(i)           any idea, improvement, invention, innovation, development, concept, technical data, design, formula, device, pattern, sequence, method, process, composition of matter, computer program or software, source code, object code, algorithm, model, diagram, flow chart, product specification or design, plan for a new or revised product, sample, compilation of information, or work in process, or parts thereof, and any and all revisions and improvements relating to any of the foregoing (in each case whether or not reduced to tangible form); and

(ii)           the name of any customer, supplier, employee, prospective customer, sales agent, supplier or consultant, any sales plan, marketing material, plan or survey, business plan or opportunity, product or development plan or specification, business proposal, financial record, or business record or other record or information relating to the present or proposed business of the company.

Notwithstanding the foregoing, the term Confidential Information shall not apply to information which the Company has voluntarily disclosed to the public without restriction or which has otherwise lawfully entered the public domain.

(b)           The Consultant acknowledges that the Company from time to time has in its possession information (including product and development plans and specifications) which represents information which is claimed by others to be proprietary and which the Company has agreed to keep confidential. The Consultant agrees that all such information shall be Confidential Information for the purposes of this Agreement.

(c)           The Consultant agrees that all originals and all copies of materials containing, representing, evidencing, recording, or constituting any Confidential Information, however and whenever produced (whether by the Consultant or others), shall be the sole property of the Company.

(d)           Without limiting any of the foregoing, Consultant hereby acknowledges that Consultant is aware, that the federal and state securities laws prohibit any person who is in possession of material, non-public information concerning the matters which are subject of this Agreement from purchasing or selling securities of the Company (other than from or to the Company) and/or any other form, entity or organization which may be a party to a transaction, or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person may purchase or sell such securities. Consultant agrees that Consultant will not purchase or sell, or enter into any agreements with respect to the purchase or sale, of any securities of the Company (other than to or from the Company), including options, warrants and other derivative securities, unless and until all material, non-public information concerning the matters, which are subject of this agreement ceases to materialize or is fully disclosed to the public.

7.            Inventions and Business Opportunities .

(a)            Certain inventions, products and services made by others . The Consultant will use best efforts to disclose to the Chief Executive Officer of the Company technology, product and other business opportunities which come to the attention of the Consultant in the Field of Interest (“Business Opportunities”), and any invention, improvement, discovery, process, formula or method or other intellectual property relating to or useful in, the Field of Interest, whether or not patentable or copyrightable, and whether or not discovered or developed by Consultant.

(b)            Certain inventions made by the Consultant . Subject to the Consultant’s obligations to the Institution, the Consultant agrees that all Confidential Information and all other discoveries, inventions, ideas, concepts, business strategies, trademarks, service marks, logos, processes, products, formulas, computer programs or software, source codes, object codes, algorithms, machines, apparatuses, items of manufacture or composition of matter, or any new uses thereof or improvements thereon, or any new designs or modifications or confederations of any kind, or works authorship of any kind, including, without limitation, compilations and derivative works, whether or not patentable or copyrightable, conceived, developed, reduced to practice or otherwise made by the Consultant, either alone or with others, and in any way related to or arising out of: (i) the Field of Interest when made on or after the Effective Date: (ii) the Consulting Services; or (iii) Confidential Information of the Company, whether or not conceived, developed, reduced to practice or made on the Company’s premises (collectively “ Company Inventions ”), and any and all services and products which embody, emulate or employ any such Company Invention or Confidential Information shall be the sole property of the Company and all copyrights, patents, patents rights, trademarks and reproduction rights to, and other proprietary rights in, each such Company Invention or Confidential Information, whether or not patentable or copyrightable, shall belong exclusively to the Company without further compensation to any kind to Consultant. The Consultant agrees that all such Company Inventions shall constitute works made for hire under the copyright laws of the United States and hereby assigns and, to the extent any such assignment cannot be made at the present time, agrees to assign to the company, without any additional consideration from the Company, any and all copyright, patents and other proprietary rights Consultant may have in any such Company Invention, together with the right to file and/or own wholly without restrictions applications for United States and foreign patents, trademark registration and copyright registration and any patent, or trademark or copyright registration issuing thereon.

8.            Consultant’s obligation to keep records . Consultant shall make and maintain adequate and current written records of all Company Inventions, Business Opportunities and services provided under this Agreement and shall disclose all Company Inventions and Business Opportunities promptly, fully and in writing to the Company immediately upon development of the same and at any time upon request.  All such records, whether paper or electronic, shall be the sole property of the Company and subject to Company’s control and review at any time.

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     9.            Consultant’s obligation to cooperate .  The Consultant will, at any time during or after the term of this Agreement, upon request of the Company, execute all documents and perform all lawful acts which the Company considers necessary or advisable to secure its rights hereunder and to carry out the intent of this Agreement. Without limiting the generality of the foregoing, the Consultant will : (i) assist the Company in any reasonable manner to obtain for the Company’s benefit patents or copyrights in any and all countries with respect to all Company Inventions assigned pursuant to Section 7 , and the Consultant will execute,  when requested, patent and other and other applications and assignments thereof to the Company, or Persons (as defined below) designated by it, and any other lawful documents deemed necessary by the Company to carry out the purposes of this Agreement; (ii) assist the Company in every way to enforce any patents or copyright obtained, including testifying in any suit or proceeding involving any off set patents or copyrights or executing any documents deemed necessary by the Company; and (iii) assist the Company in every way to pursue any business opportunities selected by the Company. For purposes of this Agreement, “ Person ” shall mean an individual, a corporation, an association, a partnership, an estate, a trust and any other entity or organization.

10.            Noncompetition . Subject to written waivers that may be provided by the Company upon request, which shall not be unreasonably withheld, the Consultant agrees that during the term of this Agreement and for a period of two years after the termination of this Agreement (the “ Restricted Period ”), the Consultant shall not directly or indirectly (i) provide any services in the Field of Interest to any Person other than the Company, (ii) become an owner, partner, shareholder, consultant, agent, employee or co-venturer of any person that has committed, or intends to commit, significant resources to the Field of Interest. Notwithstanding the foregoing, the Consultant may purchase as a passive investment up to one percent (1%) of any class or series of outstanding voting securities of any person that has committed significant resources to the Field of Interest if such class or series is listed on a national or regional securities exchange or publicly traded in the ‘over-the-counter” market.

11.            Non-solicitation . During the Restricted Period, the Consultant shall not (i) solicit, encourage, or take any other action which is intended to induce any employee of, or consultant to, the Company (or any other Person who may have been employed by, or may have been a consultant to, the company during the Term) to terminate his or its employment or relationship with the Company in order to become employed by or otherwise perform services for any other Person or (ii) solicit, endeavor to entice away from the Company or otherwise interfere with the relationship of the Company with any Person who has during the Term of the Agreement, or was within the then-most recent 12 month period, a client, customer, supplier or other business partner or prospect of the Company.

12.            Return of Property .   Upon termination of the Consultant’s engagement with the Company, or at any other time upon request of the Company, the Consultant shall return promptly any and all Confidential Information, including customer or prospective customer lists, other customer or prospective customer information or related materials, computer programs, software, electronic data, specifications, drawings, blueprints, medical devices, samples, reproductions, sketches, notes, notebooks, memoranda, reports, records, proposals, business plans, or copies of them, other documents or materials, tools, equipment, or other property belonging to the Company or its customers which the Consultant may then possess or have under its control. The Consultant further agrees that upon termination of this engagement, Consultant shall not take any documents or data in any form or of any description containing or pertaining to Confidential Information or any Company Inventions.

13.            Indemnification . Consultant will at all times, defend, indemnify and hold harmless Company, its officers, directors, successors and assigns (collectively, “Company Indemnified Parties”) from and against, and pay and reimburse the Company Indemnified Parties for, any and all liabilities, obligations, losses, damages, out of pocket costs or expenses arising out of or relating to claims of third parties with respect to (a) any alleged acts or omission of the Consultant in the performance of the activities contemplated hereby or any failure by Consultant to abide by any of the obligations set forth herein; (b) Consultants failure to comply with applicable laws and Company policies, including the Company’s anti corruption and other compliance policies; and (c) Consultants gross negligence or willful misconduct under this Agreement.

14.            Disparagement . Consultant agrees that during the course of the Agreement and after the termination of this Agreement with the Company, Consultant will not disparage the Company, its products, services, shareholders, agents or employees.

15.            Miscellaneous .

(a)            Entire agreement . This agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to such subject matter.

(b)              Assignment . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder, except as otherwise expressly provided herein. This Agreement shall not be assignable by operation of law or otherwise, except that the Company may assign this Agreement in connection with sale or other disposition of its business, or of that portion of its business to which this Agreement relates, whether by merger, consolidation, sale of assets or otherwise.

(c)              Amendments and supplement .  This Agreement may not be altered, changed or amended, except by an instrument in writing signed by the parties hereto.

(d)              No waiver .   The terms and conditions of this Agreement may be waived only by a written instrument signed by the party waiving compliance. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of such party thereafter to enforce each and every such provision. No waiver of any breach of or non-compliance with this Agreement shall be held to be a waiver of any other or subsequent breach or non-compliance.

(e)              Governing law . This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Texas, without regard to its principles of conflicts of laws.

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         (f)              Notice .  All notice and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt, sent via a reputable overnight courier service with conformation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date if receipt as confirmed:
 
 
To the Company:
   
         
   
ULURU Inc.
   
   
4452 Beltway Drive
   
   
Addison, TX 75001
   
   
Attention: Chief Financial Officer
   
 
 
To the Consultant
   
         
   
Velocitas GmbH
   
   
Landhausgasse 2/4
   
   
1010 Vienna, Austria
   
   
Attention: Geschäftsführer
   
 
(g)              Remedies .   The Consultant recognizes that money damages alone would not adequately compensate the Company in the event of breach by the Consultant of this Agreement, and the Consultant therefore agrees that, in addition to all other remedies available to the Company at law, in equity or otherwise, the Company shall be entitled to injunctive relief for the enforcement hereof. All rights and remedies hereunder are cumulative and are in addition to and not exclusive of any other rights and remedies available at law, in equity, by agreement or otherwise.

(h)              Survival; Validity . Notwithstanding the termination of the Consultant’s relationship with the Company (whether pursuant to Section 4 or otherwise), the Consultant’s covenants and obligations set forth in Sections 6, 7, 9, 10, 11, 12,13 and 14 shall remain in effect and be fully enforceable in accordance with the provisions thereof. In the event that any provision of this Agreement shall be determined to be unenforceable by reason of its extension for too great a period of time or over too large a geographic area or over too great a range of activities, it shall be interpreted to extend only over the maximum period of time, geographic area or range of activities as to which it may be enforceable. If, after application of the preceding sentence, any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable by a court of competent jurisdiction, the validity, legality and enforceability of the other provisions of this Agreement shall not be affected thereby. Except as otherwise provided in this Section 15(h) , any invalid, illegal or unenforceable provision of this Agreement shall be severable, and after any such severance, all other provisions hereof shall remain in full force and effect.

(i)              
Construction . A reference to a Section or a Schedule shall mean a Section in or Schedule to this Agreement unless otherwise expressly stated. The titles and headings herein are for reference purposes only and shall not in any manner limit the construction of this Agreement which shall be considered as a whole. The words “ include ,” “ includes ” and “ including ” when used herein shall be deemed in each case to be followed by the words “without limitation.” Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of names and pronouns shall include the plural and vice-versa.

(j)              Counterparts .  This Agreement may be executed in one or more counterparts, all of which together shall constitute one and the same Agreement.
 
IN WITNESS WHEREOF, the parties have caused this Consulting Agreement to be executed as an agreement under seal as of the Effective Date.
 
   
ULURU Inc.
 
         
   
By:
/s/ Terrance K. Wallberg
 
   
Name:
Terrance K. Wallberg
 
   
Title:
Vice President and Chief Financial Officer
 
         
         
   
Consultant:
 
         
   
By:
/s/ Oksana Tiedt
 
   
Name:
Oksana Tiedt
 
   
Title:
Managing Director
 

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SCHEDULE A: SCOPE OF WORK & COMPENSATION

1.            Description of Consulting Services

The Consultant shall serve as a Consultant and provide such consulting services as the Company reasonably requests in connection with the operation of the Company’s business and the development, manufacturing, marketing and sale of its proprietary products and technologies, including but not limited to:

 
·  
Present, promote and sell products/services to existing and prospective customers
 
·  
Establish and nurture relationships with KOLs in key markets
 
·  
Set up and organize training events with KOLs and sales partners
 
·  
Organize and support observation and other studies and publications in key markets
 
·  
Perform cost-­benefit and needs analysis of existing/potential customers
 
·  
Establish, develop and maintain positive business and customer relationships
 
·  
Reach out to customer leads through cold calling or follow up from existing leads
 
·  
Travel as required to develop new markets, customers, product sales as well as evaluate and monitor existing distribution partners
 
·  
Expedite the resolution of customer problems and complaints to maximize satisfaction
 
·  
Coordinate sales effort with team members and other departments
 
·  
Analyze the territory / market’s potential, track sales and distributor / partner performance, invoices and detailed status reports
 
·  
Source new products for acquisition, license or distribution
 
·  
Keep abreast of best practices and promotional trends
 
·  
Develop growth strategies and related business plans focused both on financial gain and customer satisfaction
 
·  
Conduct research to identify new markets and customer needs
 
·  
Prepare and negotiate sales contracts ensuring adherence to law-established rules and guidelines
 
·  
Provide trustworthy feedback and after-sales support
 
·  
Prepare marketing materials
 
·  
Organize promotional campaigns and events
 
·  
Develop and document required regulatory practices and procedures. Ensure adherence to regulatory standards during all business practices
 
·  
Provide oversight of the manufacturing processes
 
·  
Coordinate efforts of all manufacturing partners and ensure adherence to required manufacturing and documentation processes
 
·  
Coordinate logistics and manage the entire supply chain
 
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2.            Compensation .

 
(a)
Consulting fees.
 Consultant will be paid a monthly fee of $20,833.00 for providing Consulting Services.  Consultant shall invoice the Company monthly for Consulting Services rendered during the prior monthly period, and any amounts owed by the Company shall be paid within thirty (30) days after receipt of such invoices via wire transfer.
       
 
(b)
Expenses .
 Consultant will be paid a monthly fixed business expenses fee in the amount of $5,000 for reimbursement of fixed Consultant overhead expenses.  In addition, the Consultant shall be reimbursed by the Company for all reasonable, appropriate, or necessary expenses incurred in the performance of their duties hereunder that are pre-approved by an officer of the Company, including: (i) transportation expenses including air fare, car rentals or fuel expenses and taxi fare to and from all in-person meetings; (ii) reasonable hotel accommodations (as reasonably necessary in connection with in-person meetings); (iii) meals, and (iv) communications expenses such as wifi and phone charges. Consultant employee requesting reimbursement will present to the Company for approval an itemized expense voucher, in a form prescribed by ULURU together with receipts or other reasonable evidence or substantiation of these expenses as determined by the Company. Consultant shall invoice the Company for any such out of pocket expenses on a monthly basis and any amounts owed by the Company shall be paid within thirty (30) after receipt of such invoices.



A - 6

EXHIBIT 31.1


Certification of Principal Executive Officer of ULURU Inc.
Pursuant to Rule 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as Amended

I, Vaidehi Shah, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of ULURU Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
   
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
   
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14 , 2017
 
/s/ Vaidehi Shah
 
 
Vaidehi Shah
 
 
Chief Executive Officer
 
(Principal Executive Officer)



EXHIBIT 31.2

Certification of Principal Accounting Officer of ULURU Inc.
Pursuant to Rule 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as Amended

I, Terrance K. Wallberg, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of ULURU Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
   
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
   
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14 , 2017
 
/s/ Terrance K. Wallberg
 
 
Terrance K. Wallberg
 
 
Vice President and Chief Financial Officer
 
(Principal Financial and Accounting Officer)



 
EXHIBIT 32.1




Certification of Chief Executive Officer of ULURU Inc.
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:
   
(1.)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2.)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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


Date: August 14, 2017
 
/s/ Vaidehi Shah
 
 
Vaidehi Shah
 
 
Chief Executive Officer
 
(Principal Executive Officer)



 
EXHIBIT 32.2



Certification of Chief Financial Officer of ULURU Inc.
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Quarterly Report of ULURU Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned officer of ULURU Inc. does hereby certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), that to my knowledge:
   
(1.)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2.)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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


Date: August 14 , 2017
 
/s/ Terrance K. Wallberg
 
 
Terrance K. Wallberg
 
 
Vice President and Chief Financial Officer
 
(Principal Financial and Accounting Officer)