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ULURU Reports Financial Results For Third Quarter 2016



11/15/2016 8:59:19 AM

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ADDISON, Texas, Nov. 14, 2016 /PRNewswire/ -- ULURU Inc. (OTCQB: ULUR) today announced its financial results for the third quarter ended September 30, 2016 and provided a review of its operating activities.

Commenting on ULURU Inc. (the "Company") activities, Helmut Kerschbaumer, Interim President and CEO, stated, "Building on the licensing agreements we announced last quarter; namely Saraya Ltd in Japan and Juthis Corporation in South Korea, the development and expansion of our international distribution network continues to be a primary focus of the Company."

As part of our promotional campaign in Asia for Altrazeal®, our product was showcased at the North Borneo Wound Conference 2016 held in Kinabalu, Malaysia on August 19 21, 2016.  At the Wound Conference, many attendees visited our booth and were clearly impressed by demonstrations of Altrazeal® and its ability to be used on a variety of wounds.

Also occurring during the past quarter has been various new publications by our international distributors regarding Altrazeal®, in particular an article published in Germany in September 2016 by Medical Special titled "Methacrylates a new class of wound dressing for the treatment of acute and chronic wounds".

Commenting on the Company's operating cost structure, Mr. Kerschbaumer said, "We continue to focus on spending our money wisely and doing more with less.  The results of some of our cost saving strategies are evident in our recent financial results and we look to continue with this effort." 

Mr. Kerschbaumer also added, "With respect to actual sales, it is no doubt disappointing that we were not in a position to recognize Altrazeal® product sales during the first three quarters of 2016.  We believe that this is a result of the continued dislocation and confusion brought about by the insolvency filings by our two primary international distributors, Altrazeal AG and Altrazeal Trading GmbH.  These insolvency filings have also had, unfortunately, a negative effect on product sales in many of our new emerging territories.  However, we are continuing to work hard to stabilize our distribution network and to re-establish a pattern of consistent product orders in territories where Altrazeal® is available."  "We are also pleased to report that in September 2016 we received confirmation of our compliance with ISO standards from an independent audit of our quality management system and of our standard operating procedures; which allows the Company to maintain its CE mark certification."

Commenting on the Company's capital structure, Mr. Kerschbaumer said, "Another primary focus of the Company during the past quarter has been our efforts to raise capital in order to fund our business plan. While we continue to explore various alternatives, there is no assurance that our efforts will be successful or if they are successful that they will be on terms that are attractive.  We are also very pleased to report that in August 2016 the Company has completely paid off the indebtedness to Inter-Mountain Capital Corp."

Commenting on the status of OraDisc, Mr. Kerschbaumer said, "Our efforts to marry our ORADISC mucoadhesive film delivery vehicle with appropriate active compounds that we believe will be of interest to the pharmaceutical industry continues, although we are somewhat constrained at this time by our limited cash resources."

FINANCIAL RESULTS

For the third quarter of 2016, the Company reported a net loss of approximately $686,000, or $0.01 per share, compared with a net loss of approximately $866,000, or $0.03 per share, for the same period last year.  For the nine months ended September 30, 2016, we reported a net loss of approximately $1,869,000, or $0.03 per share, compared with a net loss of approximately $2,334,000, or $0.09 per share, for the same period last year. 

Revenues
Revenues for the third quarter of 2016 were approximately $6,000, as compared to $25,000 for the same period last year.  The net decrease of approximately $19,000 in revenues from the third quarter of 2016 compared to the third quarter of 2015 is primarily attributable to the decrease of approximately $4,000 in Altrazeal® product sales as territories in Europe and the Middle East have not generated product orders consistent with prior year.  Also effecting the decrease in product sales has been the cancellation of the licensing agreement with Altrazeal AG, our prior distributor for Latin America, Africa, and parts of Asia, as there have not been any new product orders from these territories.  Another area of decrease has been in licensing fee revenues of $15,000 due to the cancellation of licensing agreements related to Altrazeal® and the recognition of all unamortized licenses fees occurring in the first and second quarters of 2016.

Revenues for the nine months ended September 30, 2016 were approximately $379,000, as compared to $578,000 for the comparative period of 2015.  The net decrease of $199,000 in revenues is primarily attributable to a decrease of approximately $515,000 in Altrazeal® product sales as territories in Europe and the Middle East have not generated product orders consistent with prior year.  Also effecting the decrease in product sales has been the cancellation of the licensing agreement with Altrazeal AG, our prior distributor for Latin America, Africa, and parts of Asia, as there have not been any new product orders from these territories. The decrease in Altrazeal® product sales was partially offset by the recognition of unamortized licensing fees of approximately $316,000 related to the cancellation of distribution agreements with three distributors; Altrazeal AG, KunWha Pharmaceutical Co., and Jiangxi Aiqilin Pharmaceuticals Group.  The recognition of unamortized licensing fees is based upon the cancellation of the distribution agreements and that there are no further performance obligations that are required by the Company under each distribution agreement.  The Company originally received a licensing payment from Altrazeal AG of $125,000 in September 2013, received a licensing payment from KunWha Pharmaceutical Co. of $50,000 in June 2008, and received licensing payments from Jiangxi Aiqilin Pharmaceuticals Group of $250,000 and $100,000 in June 2010 and September 2011, respectively.

Research and Development
Research and development expenses for the third quarter of 2016 were $119,000, including $(3,000) in share-based compensation, as compared to $172,000, including $19,000 in share-based compensation, for the same period last year.  The decrease of approximately $53,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $19,000 direct research costs primarily related to consulting costs and product registration costs, and a decrease of $65,000 in scientific compensation related wage reductions by existing staff, lower head count, and lower share-based compensation.  These expense decreases were partially offset by an increase of $29,000 in regulatory consulting costs related to our annual audit for ISO compliance and an increase of $2,000 in miscellaneous operating costs.

Research and development expenses for the nine months ended September 30, 2016 were $391,000, including $6,000 in share-based compensation, as compared to $596,000, including $56,000 in share-based compensation for the same period last year.  The decrease of approximately $205,000 in research and development expenses was primarily due to, in approximate numbers, a decrease of $118,000 in direct research costs primarily related to consulting costs and product registration costs, and a decrease of $158,000 in scientific compensation related wage reductions by existing staff, lower head count, and lower share-based compensation.  These expense decreases were partially offset by an increase of $61,000 in regulatory consulting costs and an increase of $10,000 in miscellaneous operating costs.

Selling, general and administrative
Selling, general and administrative expenses for the third quarter of 2016 were $305,000, including $17,000 in share-based compensation, compared to $502,000, including $52,000 in share-based compensation, for the same period last year.  The decrease of approximately $197,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $86,000 in directors fees that is composed of a decrease of $33,000 in share-based compensation and a decrease of $53,000 in cash compensation, a decrease of $55,000 in compensation as costs associated with our Interim President and Chief Executive Officer are categorized under international sales management whereas the costs for our prior President and Chief Executive Officer were categorized under compensation, a decrease of $44,000 related to accruals for doubtful accounts receivables, a decrease of $28,000 in shareholder costs related to the timing of the annual meeting of stockholders being held in September 2015, and a decrease of $4,000 in miscellaneous expenses.  These expense decreases were partially offset by, in approximate numbers, an increase of $17,000 in operating costs associated with international sales management and an increase of $3,000 in brand marketing and convention costs.

Selling, general and administrative expenses for the nine months ended September 30, 2016 were $1,008,000, including $54,000 in share-based compensation, compared to $1,443,000, including $160,000 in share-based compensation, for the same period last year.  The decrease of approximately $435,000 in selling, general and administrative expenses was primarily due to, in approximate numbers, a decrease of $259,000 in directors fees that is composed of a decrease of $157,000 in cash compensation and a decrease of $102,000 in share-based compensation, a decrease of $156,000 in compensation, as costs associated with our Interim President and Chief Executive Officer are categorized under international sales management whereas the costs for our prior President and Chief Executive Officer were categorized under compensation, a decrease of $44,000 in legal costs due to the settlement of a licensing agreement dispute, a decrease of $26,000 in shareholder costs related to the timing of the annual meeting of stockholders being held in September 2015, a decrease of $24,000 related to accruals for doubtful accounts receivables, a decrease of $13,000 in legal fees related to our patents, a decrease of $7,000 in accounting fees, a decrease of $4,000 in property tax accruals, and a decrease of $7,000 in miscellaneous expenses. These expense decreases were partially offset by, in approximate numbers, an increase of $55,000 in operating costs associated with international sales management, an increase of $25,000 in brand marketing and convention costs, and an increase of $25,000 in commission costs relating to a product license as the prior year included a one-time credit adjustment.

Amortization of Intangible Assets
Amortization of intangible assets expense for the third quarter of 2016 was $202,000 as compared to $120,000 for the same period last year.  The expense for each period consists primarily of amortization associated with our acquired patents and acquired licensing rights.  The increase of approximately $82,000 is attributable to the acquisition of licensing rights that occurred in December 2015. 

Amortization of intangible assets expense for the nine months ended September 30, 2016 were $600,000 as compared to $355,000 for the same period last year.  The increase of approximately $245,000 is attributable to the acquisition of licensing rights that occurred in December 2015. 

There were no additional purchases of patents or licensing rights during the three and nine months ended September 30, 2016 and 2015, respectively.

Depreciation
Depreciation expense for the third quarter of 2016 was $33,000 as compared to $42,000 for the same period last year.  The decrease of approximately $9,000 is attributable to certain equipment being fully depreciated.

Depreciation expense for the nine months ended September 30, 2016 was $100,000 as compared to $147,000 for the same period last year.  The decrease of approximately $47,000 is attributable to certain equipment being fully depreciated.

Interest Expense
Interest expense for the third quarter of 2016 was $33,000 as compared to $52,000 for the same period last year.  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 financing costs related to debt.  The decrease of approximately $19,000 in interest expense is primarily attributable to the decreased principal balance due under the April 2015 Note with Inter-Mountain and accruals for interest expense associated with regulatory fees.

Interest expense for the nine months ended September 30, 2016 was $124,000 as compared to $128,000 for the same period last year.  The decrease of approximately $4,000 in interest expense is primarily attributable to the decreased principal balance due under the April 2015 Note with Inter-Mountain.

Foreign Currency transaction Gain (Loss)
Foreign currency transaction loss for the third quarter of 2016 was approximately $300 as compared to a foreign currency transaction gain of approximately $1,000 for the same period last year.  The decrease of approximately $1,300 is related to fluctuations in the Euro exchange rate experienced during 2015 and 2016 and the pricing of Altrazeal® to our international distributors being denominated in Euros.

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