UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For the
quarterly period ended: June 30,
2008





OR





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





For the
transition period from: ___ to ___.





Commission
File Number: 000-49670





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)





(214)
905-5145


Registrant's
Telephone Number, including Area Code





Indicate
by check mark whether the issuer (1) 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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerate filer”,
“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check
one):





Large
      accelerated filer o
            
            Accelerated
      filer þNon-accelerated
      filer o
            
            Smaller
      reporting company o





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





The
number of outstanding shares of our common stock on August 8, 2008 was
65,533,548.








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 Table of Contents








ULURU Inc.





INDEX
TO FORM 10-Q





For
the Three Months Ended JUNE 30, 2008











PagePART I
            FINANCIAL INFORMATIONItem 1.
            Financial Statements
            3Condensed Consolidated Balance Sheets as of June 30, 2008
      (unaudited) and December 31, 2007
            3Condensed Consolidated Statements of Operations
      (unaudited) for the three and six months ended June 30, 2008 and
      2007
            4Condensed Consolidated Statements of Cash Flows
      (unaudited) for the six months ended June 30, 2008 and
      2007
            5Notes to Condensed Consolidated Financial Statements
      (unaudited)
            6Item 2.
            Management's Discussion and Analysis of Financial Condition
      and Results of Operations
            17Item 3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            24Item 4.
            Controls and Procedures
            24PART II
            OTHER INFORMATIONItem 1.
            Legal Proceedings
            25Item 1A.
            Risk Factors
            25Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            25Item 3.
            Defaults Upon Senior Securities
            25Item 4.
            Submission of Matters to a Vote of Security
      Holders
            26Item 5.
            Other Information
            26Item 6.
            Exhibits
            27Signatures
            27





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PART 1 – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS








ULURU Inc.


CONDENSED
CONSOLIDATED BALANCE SHEETS








June
      30, 2008
            
            
            December
      31, 2007(Unaudited)
            
            
            (Audited)ASSETSCurrent
      AssetsCash
      and cash equivalents
            
            $
            11,684,039
            
            
            $
            13,979,828Accounts
      receivable
            
            
            334,842
            
            
            
            836,075Inventory
            
            
            304,549
            
            
            
            319,413Prepaid
      expenses and deferred charges
            
            
            213,285
            
            
            
            400,830Total
      Current Assets
            
            
            12,536,715
            
            
            
            15,536,146Property
      and Equipment, net
            
            
            1,891,882
            
            
            
            1,532,881Other
      AssetsPatents,
      net
            
            
            10,502,241
            
            
            
            11,033,477Licensing
      rights, net
            
            
            142,650
            
            
            
            ---Deposits
            
            
            19,439
            
            
            
            20,499Total
      Other Assets
            
            
            10,664,330
            
            
            
            11,053,976TOTAL
      ASSETS
            
            $
            25,092,927
            
            
            $
            28,123,003LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
            
            $
            686,887
            
            
            $
            790,412Accrued
      liabilities
            
            
            532,170
            
            
            
            424,395Deferred
      revenue – current portion
            
            
            135,358
            
            
            
            55,147Royalty
      advance
            
            
            77,900
            
            
            
            120,035Total
      Current Liabilities
            
            
            1,432,315
            
            
            
            1,389,989Long
      Term LiabilitiesDeferred
      revenue, net – less current portion
            
            
            1,055,777
            
            
            
            495,281TOTAL
      LIABILITIES
            
            
            2,488,092
            
            
            
            1,885,270COMMITMENTS
      AND CONTINGENCIES
            
            
            ---
            
            
            
            ---STOCKHOLDERS'
      EQUITYPreferred
      stock - $0.001 par value; 20,000 shares authorized;no
      shares issued and outstanding
            
            
            ---
            
            
            
            ---Common
      Stock - $0.001 par value; 200,000,000 shares authorized;62,466,881
      and 62,416,881 shares issued and outstanding at June 30, 2008 and December
      31, 2007, respectively
            
            
            62,467
            
            
            
            62,417Additional
      paid-in capital
            
            
            43,504,925
            
            
            
            42,989,518Accumulated  (deficit)
            
            
            (20,962,557
            )
            
            
            (16,814,202
            )TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            22,604,835
            
            
            
            26,237,733TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            25,092,927
            
            
            $
            28,123,003The
      accompanying notes are an integral part of these consolidated financial
      statements.








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ULURU
Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)








Three
      Months Ended June 30,
            
            
            Six
      Months Ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007REVENUESLicense
      fees
            
            $
            25,522
            
            
            $
            16,831
            
            
            $
            39,293
            
            
            $
            154,880Royalty
      income
            
            
            84,772
            
            
            
            81,456
            
            
            
            160,346
            
            
            
            136,918Product
      sales
            
            
            405
            
            
            
            ---
            
            
            
            166,878
            
            
            
            ---Other
            
            
            (15,000
            )
            
            
            20,501
            
            
            
            (15,000
            )
            
            
            210,501Total
      Revenues
            
            
            95,699
            
            
            
            118,788
            
            
            
            351,517
            
            
            
            502,299COSTS
      AND EXPENSESCost
      of goods sold
            
            
            119
            
            
            
            ---
            
            
            
            137,734
            
            
            
            ---Research
      and development
            
            
            867,544
            
            
            
            553,755
            
            
            
            1,742,760
            
            
            
            1,119,163Selling,
      general and administrative
            
            
            1,341,235
            
            
            
            693,588
            
            
            
            2,234,470
            
            
            
            1,288,826Amortization
            
            
            269,183
            
            
            
            268,630
            
            
            
            538,367
            
            
            
            534,173Depreciation
            
            
            30,202
            
            
            
            17,173
            
            
            
            50,474
            
            
            
            33,877Total
      Costs and Expenses
            
            
            2,508,283
            
            
            
            1,533,146
            
            
            
            4,703,805
            
            
            
            2,976,039OPERATING
      (LOSS)
            
            
            (
      2,412,584
            )
            
            
            (1,414,358
            )
            
            
            (4,352,288
            )
            
            
            (2,473,740
            )Other
      Income (Expense)Interest
      and miscellaneous income
            
            
            78,888
            
            
            
            205,825
            
            
            
            203,933
            
            
            
            419,630Interest
      expense
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            (1,574
            )(LOSS)
      BEFORE INCOME TAXES
            
            
            (
      2,333,696
            )
            
            
            (1,208,533
            )
            
            
            (4,148,355
            )
            
            
            (2,055,684
            )Income
      taxes
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---NET
      (LOSS)
            
            $
            (2,333,696
            )
            
            $
            (1,208,533
            )
            
            $
            (4,148,355
            )
            
            $
            (2,055,684
            )Basic
      and diluted net (loss) per common share
            
            $
            (0.04
            )
            
            $
            (0.02
            )
            
            $
            (0.07
            )
            
            $
            (0.03
            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
            
            
            62,466,881
            
            
            
            61,916,935
            
            
            
            62,445,519
            
            
            
            61,326,745The
      accompanying notes are an integral part of these consolidated financial
      statements.











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ULURU Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Six
      Months Ended June 30,2008
            
            
            2007OPERATING
      ACTIVITIES :Net
      (loss)
            
            $
            (4,148,355
            )
            
            $
            (2,055,684
            )Adjustments
      to reconcile net (loss) to net cash (used in) provided by operating
      activities:Amortization
            
            
            538,367
            
            
            
            534,173Depreciation
            
            
            53,666
            
            
            
            33,877Share-based
      compensation for stock and options issued to employees
            
            
            387,671
            
            
            
            55,473Share-based
      compensation for options issued to non-employees
            
            
            80,286
            
            
            
            165,837Change
      in operating assets and liabilities:Accounts
      receivable
            
            
            501,233
            
            
            
            606,678Inventory
            
            
            14,864
            
            
            
            (314,792
            )Prepaid
      expenses and deferred charges
            
            
            187,545
            
            
            
            108,201Deposits
            
            
            1,060
            
            
            
            ---Accounts
      payable
            
            
            (103,525
            )
            
            
            422,468Accrued
      liabilities
            
            
            107,775
            
            
            
            (139,574
            )Deferred
      revenue
            
            
            640,707
            
            
            
            578,152Royalty
      advance
            
            
            (42,134
            )
            
            
            (46,048
            )Total
            
            
            2,367,515
            
            
            
            2,004,445Net
      Cash (Used in) Operating Activities
            
            
            (1,780,840
            )
            
            
            (51,239
            )INVESTING
      ACTIVITIES :Purchase
      of property and equipment
            
            
            (419,799
            )
            
            
            (530,797
            )Purchase
      of licensing rights
            
            
            (142,650
            )
            
            
            ---Net
      Cash (Used in) Investing Activities
            
            
            (562,449
            )
            
            
            (530,797
            )FINANCING
      ACTIVITIES :Payment
      of asset purchase obligation
            
            
            ---
            
            
            
            (350,000
            )Proceeds
      from warrant exercises
            
            
            ---
            
            
            
            274,939Proceeds
      from stock option exercises
            
            
            47,500
            
            
            
            ---Net
      Cash Provided by (Used in) Financing Activities
            
            
            47,500
            
            
            
            (75,061
            )Net
      (Decrease) in Cash
            
            
            (2,295,789
            )
            
            
            (657,097
            )Cash,  beginning
      of period
            
            
            13,979,828
            
            
            
            16,918,007Cash,  end
      of period
            
            $
            11,684,039
            
            
            $
            16,260,910Supplemental
      Schedule of Noncash Investing and Financing Activities :For
      the six months ended June 30, 2007, the issuance of 1,527,061 shares of
      common stock pursuant to cashless exercise of warrants to purchase
      1,534,400 shares of common stock
            
            
            
            
            
            $
            ---OTHER
      SUPPLEMENTAL INFORMATIONCash
      paid for interest
            
            $
            ---
            
            
            $
            1,574The
      accompanying notes are an integral part of these consolidated financial
      statements.








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ULURU Inc.





NOTES
TO


CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








NOTE
1.                      COMPANY
OVERVIEW AND BASIS OF PRESENTATION





Company
Overview





ULURU
Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada
corporation.  We are an emerging pharmaceutical company focused on
establishing a market leadership position in the development of wound
management, plastic surgery and oral care products utilizing innovative drug
delivery solutions to improve the clinical outcome of patients and provide a
pharmacoeconomic benefit to healthcare providers.





Basis of
Presentation





In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of American (“U.S. GAAP”) for interim
financial information and with the instructions to Form 10-Q and include the
account of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary,
Uluru Delaware Inc., a Delaware corporation.  Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the Company’s financial position as of June
30, 2008 and the results of its operations for the three and six months ended
June 30, 2008 and 2007 and cash flows for the six months ended June 30, 2008 and
2007 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, 2008 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2008.





These
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto contained in the Company’s Form
10-KSB filed with the Securities and Exchange Commission on March 28,
2008.








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NOTE
2.                      SIGNIFICANT
ACCOUNTING POLICIES








Revenue Recognition and
Deferred Revenue





License
Fees





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





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





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





Royalty
Income





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





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




Product
Sales
 
 We
recognize revenue and related costs from the sale of our products at the time
the products are shipped to the customer.
 
 Sponsored Research
Income
 
 Sponsored
research income has no significant associated costs since it is being paid only
for information pertaining to a specific research and development project in
which the sponsor may become interested in acquiring products developed
thereby.  Payments received prior to the Company’s performance are
deferred. Contract amounts are not recognized as revenue until the customer
accepts or verifies the research has been completed.




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NOTE
3.                      THE
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS





Recently Adopted Accounting
Standards





In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements (“SFAS No. 157”), which defines fair value, establishes
a framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements. SFAS No. 157 will be effective for fiscal years
beginning after November 15, 2007, which is the Company’s fiscal year 2008.
The adoption did not have a material effect on our consolidated financial
statements.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of FASB Statement No.
115. This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. Most of the provisions of
SFAS No. 159 apply only to entities that elect the fair value option. However,
the amendment to SFAS No. 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity's first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157.  The adoption did not have a material
effect on our consolidated financial statements.





In
June 2007, the Emerging Issues Task Force (“EITF”) issued Issue
No. 07-3, Accounting for
Nonrefundable Advance Payments for Goods or Services To Be Used in Future
Research and Development Activities (“EITF 07-3”) which concluded that
nonrefundable advance payments for goods or services to be received in the
future for use in research and development activities should be deferred and
capitalized. The capitalized amounts should be expensed as the related goods are
delivered or services are performed. Such capitalized amounts should be charged
to expense if expectations change such that the goods will not be delivered or
services will not be performed. The provisions of EITF 07-3 are effective for
new contracts entered into during fiscal years beginning after December 15,
2007. The consensus on EITF 07-3 may not be applied to earlier periods and early
adoption is not permitted. The adoption did not have a material effect on our
consolidated financial statements.





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NOTE
4.                      SEGMENT
INFORMATION





We
operate in one business segment, the research, development, and
commercialization of pharmaceutical products.  Our corporate
headquarters in the United States collects product sales, licensing fees,
royalties, and sponsored research revenues from our arrangements with external
customers and licensees.  Our entire business is managed by a single
management team, which reports to the Chief Executive Officer.





Our
revenues are currently derived primarily from one licensee for domestic
activities and from two licensees for international activities.





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
            
            2008
            
            
            %
            
            
            2007
            
            
            %
            
            
            2008
            
            
            %
            
            
            2007
            
            
            %Domestic
            
            $
            7,013
            
            
            
            7
            %
            
            $
            45,431
            
            
            
            38
            %
            
            $
            194,013
            
            
            
            55
            %
            
            $
            256,549
            
            
            
            51
            %International
            
            
            88,686
            
            
            
            93
            %
            
            
            73,357
            
            
            
            62
            %
            
            
            157,504
            
            
            
            45
            %
            
            
            245,750
            
            
            
            49
            %Total
            
            $
            95,699
            
            
            
            100
            %
            
            $
            118,788
            
            
            
            100
            %
            
            $
            351,517
            
            
            
            100
            %
            
            $
            502,299
            
            
            
            100
            %








A
significant portion of our revenues are derived from a few major
customers.  Customers with greater than 10% of total sales for the
three and six months ended June 30 are represented on the following
table:





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,Customers
            Product
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Discus Dental, Inc.
            Aphthasol®
            
            
            23
            %
            
            
            21
            %
            
            
            59
            %
            
            
            9
            %Meldex International
            OraDiscTM B
            
            
            26
            %
            
            
            12
            %
            
            
            11
            %
            
            
            4
            %ProStrakan, Ltd.
            Zindaclin®
            
            
            66
            %
            
            
            50
            %
            
            
            34
            %
            
            
            45
            %Novartis Consumer Health
            Sponsored research
            
            
            (16
            %)
            
            
            17
            %
            
            
            (
      4
            %)
            
            
            4
            %Wyeth Pharmaceuticals, Inc.
            Sponsored research
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            36
            %Total
            
            
            
            100
            %
            
            
            100
            %
            
            
            100
            %
            
            
            100
            %





The
results for the three months ended June 30, 2008, include a $15,000 fee
adjustment for a sponsored research program with Novartis Consumer Health,
thereby causing negative percentages in the table.






NOTE
5.                      INVENTORY





As of
June 30, 2008, our inventory was comprised of raw materials used in the
production of Aphthasol® and AltrazealTM along with AltrazealTM finished
goods.  Inventory consisted of the following at June 30, 2008 and
December 31, 2007:





Inventory
            
            June
      30, 2008
            
            
            December
      31, 2007Raw materials
            
            $
            108,126
            
            
            $
            137,311Work-in-progress
            
            
            ---
            
            
            
            182,102Finished goods
            
            
            196,423
            
            
            
            ---Total
            
            $
            304,549
            
            
            $
            319,413






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NOTE
6.                      PROPERTY
AND EQUIPMENT





Property
and equipment, net, consisted of the following at June 30, 2008 and December 31,
2007:





Property and equipment
            
            June
      30, 2008
            
            
            December
      31, 2007Laboratory equipment
            
            $
            414,623
            
            
            $
            412,683Manufacturing equipment
            
            
            1,463,919
            
            
            
            1,071,173Computers, office equipment, and furniture
            
            
            141,065
            
            
            
            115,953Computer software
            
            
            4,108
            
            
            
            4,108Leasehold improvements
            
            
            95,841
            
            
            
            95,8412,119,556
            
            
            
            1,699,758Less: accumulated depreciation and amortization
            
            
            (
      227,674
            )
            
            
            (
      166,877
            )Property and equipment, net
            
            $
            1,891,882
            
            
            $
            1,532,881





Depreciation
and amortization expense on property and equipment was $33,768 and $20,186 for
the three months ended June 30, 2008 and 2007, respectively and was $57,605 and
$39,730 for the six months ended June 30, 2008 and 2007,
respectively.








NOTE
7.                      PATENTS





Patents,
net, consisted of the following at June 30, 2008 and December 31,
2007:





Patents
            
            June
      30, 2008
            
            
            December
      31, 2007Patents
            
            $
            13,354,938
            
            
            $
            13,354,938Less: accumulated amortization
            
            
            (
      2,852,697
            )
            
            
            (
      2,321,461
            )Patents, net
            
            $
            10,502,241
            
            
            $
            11,033,477





Amortization
expense on patents was $265,617 and $265,617 for the three months ended June 30,
2008 and 2007, respectively and was $531,236 and $528,320 for the six months
ended June 30, 2008 and 2007, respectively.  The future aggregate
amortization expense for patent assets, remaining as of June 30, 2008, is as
follows:





Calendar
      Years
            
            Future
      Amortization
              Expense2008 (Six months)
            
            $
            537,0722009
            
            
            1,065,3902010
            
            
            1,065,3902011
            
            
            1,015,4362012
            
            
            723,4282013 & Beyond
            
            
            6,095,525Total
            
            $
            10,502,241








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NOTE
8.                      STOCKHOLDERS’
EQUITY





Common
Stock





As of
June 30, 2008 the Company had 62,466,881 shares of common stock issued and
outstanding.  The Company did not issue any shares of common stock
during the three months ended June 30, 2008 pursuant to the exercise of stock
options or warrants.





Warrants





The
following table summarizes the warrants outstanding and the number of shares of
common stock subject to exercise as of June 30, 2008 and the changes therein
during the six months then ended:





Number
      of Shares of Common Stock Subject to Exercise
            
            
            Weighted
      – Average
              Exercise
      PriceBalance
      as of December 31, 2007
            
            
            5,861,667
            
            
            $
            0.52Warrants
      issued
            
            
            ---
            
            
            
            ---Warrants
      exercised
            
            
            ---
            
            
            
            ---Warrants
      cancelled
            
            
            ---
            
            
            
            ---Balance
      as of June 30, 2008
            
            
            5,861,667
            
            
            $
            0.52






Of the
warrant shares subject to exercise as of June 30, 2008, expiration of the right
to exercise is as follows:


Date of expiration
            
            Number
      of Warrant Shares of Common Stock Subject to ExpirationOctober 12, 2010
            
            
            3,066,667August 30, 2011
            
            
            1,125,000December 6, 2011
            
            
            1,670,000Total
            
            
            5,861,667








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NOTE
9.                      EARNINGS
PER SHARE





Basic and Diluted Net Loss
Per Share





In
accordance with SFAS No. 128, Earnings per Share, basic
earnings (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the
period.  Diluted earnings (loss) per common share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding during the period increased to include potential dilutive common
shares.  The effect of outstanding stock options, restricted vesting
common stock and warrants, when dilutive, is reflected in diluted earnings
(loss) per common share by application of the treasury stock
method.  We have excluded all outstanding stock options, restricted
vesting common stock and warrants from the calculation of diluted net loss per
common share because all such securities are antidilutive for all periods
presented.





Shares
used in calculating basic and diluted net loss per common share exclude these
potential common shares as of June 30, 2008 and December 31, 2007:





June
      30, 2008
            
            
            December
      31, 2007Antidilutive
      warrants to purchase common stock
            
            
            5,861,667
            
            
            
            5,861,667Antidilutive
      options to purchase common stock
            
            
            3,905,000
            
            
            
            2,225,000Restricted
      vesting common stock
            
            
            125,117
            
            
            
            55,195Total
            
            
            9,891,784
            
            
            
            8,141,862

















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NOTE
10.                      SHARE
BASED COMPENSATION





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





We follow
the fair value recognition provisions of SFAS 123R, Share-Based Payments ("SFAS
No. 123(R)"), 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.  We use the Black-Scholes
option-pricing model to estimate the fair value of share-based awards with the
following weighted average assumptions for the three months ended June
30:





2008
            
            
            2007Incentive
      Stock OptionsExpected
      volatility  (1)
            
            
            69.8
            %
            
            
            49.4
            %Risk-free
      interest rate %  (2)
            
            
            3.43
            %
            
            
            4.55
            %Expected
      term (in years)
            
            
            5.0
            
            
            
            3.4Dividend
      yield  (3)
            
            
            0.0
            %
            
            
            0.0
            %Forfeiture
      rate
            
            
            4.4
            %
            
            
            0.0
            %Nonstatutory
      Stock OptionsExpected
      volatility  (1)
            
            
            69.8
            %
            
            
            49.4
            %Risk-free
      interest rate %  (2)
            
            
            3.33
            %
            
            
            4.54
            %Expected
      term (in years)
            
            
            3.0
            
            
            
            1.0Dividend
      yield  (3)
            
            
            0.0
            %
            
            
            0.0
            %Forfeiture
      rate
            
            
            0.0
            %
            
            
            0.0
            %





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














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





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Incentive
      Stock OptionsQuantity
            
            
            120,000
            
            
            
            35,000
            
            
            
            1,375,000
            
            
            
            35,000Weighted
      average fair value per share
            
            $
            0.76
            
            
            $
            1.61
            
            
            $
            1.25
            
            
            $
            1.61Fair
      value
            
            $
            90,605
            
            
            $
            56,355
            
            
            $
            1,722,009
            
            
            $
            56,335Nonstatutory
      Stock OptionsQuantity
            
            
            270,000
            
            
            
            80,000
            
            
            
            355,000
            
            
            
            155,000Weighted
      average fair value per share
            
            $
            0.53
            
            
            $
            1.06
            
            
            $
            0.70
            
            
            $
            0.97Fair
      value
            
            $
            142,726
            
            
            $
            84,627
            
            
            $
            249,375
            
            
            $
            149,862








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
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Research
      and development
            
            $
            35,872
            
            
            $
            29,410
            
            
            $
            68,001
            
            
            $
            55,820Selling,
      general and administrative
            
            
            206,489
            
            
            
            78,136
            
            
            
            367,095
            
            
            
            143,260Total
      share-based compensation expense
            
            $
            242,361
            
            
            $
            107,546
            
            
            $
            435,096
            
            
            $
            199,080





At June
30, 2008, 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 $3,006,335.  The period over which the
unearned share-based compensation is expected to be recognized is approximately
four years.





The
activity for stock options is summarized as follows:





Stock
      Options
            
            
            Weighted
      Average Exercise Price per ShareOutstanding
      as of December 31, 2007
            
            
            2,225,000
            
            
            $
            2.54Granted
            
            
            1,755,000
            
            
            
            2.15Forfeited/cancelled
            
            
            (25,000
            )
            
            
            2.31Exercised
            
            
            (50,000
            )
            
            
            0.95Outstanding
      as of June 30, 2008
            
            
            3,905,000
            
            
            $
            2.39








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The
following table presents the stock option grants outstanding and exercisable as
of June 30, 2008:





Options
      Outstanding
            
            
            Options
      ExercisableStock
      Options Outstanding
            
            
            Weighted
      Average Exercise Price per Share
            
            
            Weighted
      Average Remaining Contractual Life in Years
            
            
            Stock
      Options Exercisable
            
            
            Weighted
      Average Exercise Price per Share830,000
            
            
            $
            0.94
            
            
            
            8.8
            
            
            
            243,750
            
            
            $
            0.95885,000
            
            
            
            1.59
            
            
            
            8.8
            
            
            
            650,000
            
            
            
            1.651,315,000
            
            
            
            2.45
            
            
            
            6.6
            
            
            
            ---
            
            
            
            ---105,000
            
            
            
            4.00
            
            
            
            8.5
            
            
            
            87,500
            
            
            
            4.00690,000
            
            
            
            4.48
            
            
            
            9.2
            
            
            
            ---
            
            
            
            ---80,000
            
            
            
            4.95
            
            
            
            8.9
            
            
            
            80,000
            
            
            
            4.953,905,000
            
            
            $
            2.39
            
            
            
            8.1
            
            
            
            1,061,250
            
            
            $
            1.93








Restricted Stock
Awards





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





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





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Research
      and development
            
            $
            4,297
            
            
            $
            3,202
            
            
            $
            7,955
            
            
            $
            6,368Selling,
      general and administrative
            
            
            13,937
            
            
            
            7,974
            
            
            
            24,906
            
            
            
            15,862Total
      share-based compensation expense
            
            $
            18,234
            
            
            $
            11,176
            
            
            $
            32,861
            
            
            $
            22,230





At June
30, 2008, the balance of unearned share-based compensation to be expensed in
future periods related to restricted stock awards, as adjusted for expected
forfeitures, is approximately $295,102.





The
activity for restricted stock awards is summarized as follows:





Restricted
      stock
            
            
            Weighted
      Average Grant Date Fair ValueOutstanding
      as of December 31, 2007
            
            
            55,195
            
            
            $
            4.00Granted
            
            
            71,677
            
            
            
            2.50Forfeited/cancelled
            
            
            (1,755
            )
            
            
            4.00Exercised
            
            
            ---
            
            
            
            ---Outstanding
      as of June 30, 2008
            
            
            125,117
            
            
            $
            3.14








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Summary of
Plans





2006
Equity Incentive Plan





In March
2006 our board of directors (“Board”) adopted and our stockholders approved our
2006 Equity Incentive Plan (“Incentive Plan”), which initially provided for the
issuance of up to 2 million shares of our Common Stock pursuant to stock option
and other equity awards.  At the annual meeting of the stockholders
held on May 8, 2007, our stockholders approved an amendment to the Incentive
Plan to increase from 2 million shares to 6 million shares the total number of
shares of Common Stock issuable under the Incentive Plan pursuant to stock
option and other equity awards.  As of June 30, 2008, we had granted
options to purchase 3,960,000 shares of Common Stock, of which 3,905,000 were
outstanding at a weighted average exercise price of $2.39 per share and 125,117
shares of restricted stock.  There are 1,914,883 shares that remain
available for future grant under our Incentive Plan.








NOTE
11.                      INCOME
TAXES





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








NOTE
12.                      SUBSEQUENT
EVENTS





On July
9, 2008, ULURU, Cardinia Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of ULURU (“Cardinia”), Bio Med Sciences, Inc., a New
York corporation (“BioMed”), and the members of a certain Holders Representative
Committee, acting as the representatives of the holders of capital stock of Bio
Med, entered into an Agreement and Plan of Merger (the
“Agreement”).  Under the Agreement, Cardinia will merge with and into
BioMed, as a result of which ULURU will acquire all of the issued and
outstanding shares of BioMed and BioMed will become a wholly-owned subsidiary of
ULURU (the “Merger”).  The consummation of the Merger is contingent
upon the satisfaction of certain closing conditions set forth in the
Agreement.  There can be no assurance that such conditions will be
satisfied.





See the
description included below in the section of this quarterly report on Form 10-Q
entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” for a discussion of ULURU’s payment obligations in
connection with its acquisition of BioMed.





The
foregoing description of the transactions contemplated by the Agreement does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Agreement, a copy of which is attached as Exhibit 10.1 to
this quarterly report on Form 10-Q.











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ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION








You
should read the following discussion and analysis together with all financial
and non-financial information appearing elsewhere in this report and with our
consolidated financial statements and related notes included in our 2007 Annual
Report on Form 10-KSB, referred to as our 2007 Form 10-KSB, which has been
previously filed with the Securities and Exchange Commission. In addition to
historical information, the following discussion and other parts of this report
contain forward-looking information that involves risks and uncertainties,
including the statement that our cash and cash equivalents are sufficient to
fund our operations for the foreseeable future.  Our actual results
could differ materially from those anticipated by such forward-looking
information due to competitive factors and other risks discussed in our 2007
Form 10-KSB under “Risks Associated with our Business”.





Business
Overview





ULURU
Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada
corporation.  We are an emerging pharmaceutical company focused on
establishing a market leadership position in the development of wound
management, plastic surgery and oral care products utilizing innovative drug
delivery solutions to improve the clinical outcome of patients and provide a
pharmacoeconomic benefit to healthcare providers.  Utilizing our
technologies, three of our products have been approved for marketing in various
global markets.  In addition, numerous additional products are under
development utilizing our Mucoadhesive Film and Nanoparticle Aggregate
technologies with AltrazealTM, the first product developed from our Nanoparticle
Aggregate technology, which was launched in the United States in June
2008.





Recent
Developments





On July
9, 2008 the Company announced that it signed a definitive agreement to acquire
Bio Med Sciences Inc., a New York corporation (“BioMed”), for $10 million
subject to adjustment based on manufacturing and revenue targets. BioMed is a
privately-held specialty wound care, burn care and scar management company with
an established presence with burn specialists and plastic
surgeons.  BioMed is a profitable company and the acquisition is
expected to be immediately accretive to the Company’s consolidated
earnings.





BioMed
has a range of wound, burn care and scar management products developed from its
patented Silon® film technology.  The patents covering this technology
extend beyond 2020.  The products have unique features which allow
them to be clearly differentiated in these markets.  BioMed has a well
recognized presence in the burn care market where its scar management product
line has a market leadership position.





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The
acquisition of BioMed will give us additional complimentary products,
manufacturing, product development and other resources along with a commercial
base to more rapidly develop a strong presence in the wound and burn care
markets. The acquisition of BioMed will provide ULURU with the following
strategic benefits:


§
            Established
      relationships with many key opinion leaders in the wound and burn care
      market.§
            A
      complementary product line that has potential for significant growth with
      a direct sales effort.§
            An
      established customer service and support group that can service both wound
      care and burn care product lines.§
            An
      experienced wound care medical specialist to support the sales effort and
      provide clinical assistance to the medical profession.§
            Product
      distribution capabilities.§
            Extensive
      regulatory experience as a result of Bio Med having successfully obtained
      10 medical device 510 (k) approvals from the FDA.§
            Considerable
      biomaterial engineering and medical product development
      expertise.§
            Expertise
      and capabilities that further expands our infrastructure to support the
      development and marketing of current and future
  products.§
            Control
      over the manufacture of the OraDiscTM range of products, which are
      currently being manufactured by BioMed.§
            Significant
      reduction in the cost of OraDiscTM and the potential for future cost
      reductions for the wound care line of products.§
            Significant
      reduction in contract development expenses for
OraDiscTM.§
            Operating
      expense synergies.





The
acquisition of Bio Med will be governed by an Agreement and Plan of Merger (the
“Agreement”).  Under the Agreement, a wholly-owned subsidiary of ULURU
will merge with and into BioMed, as a result of which ULURU will acquire all of
the issued and outstanding shares of BioMed and BioMed will become a
wholly-owned subsidiary of ULURU (the “Merger”).  The consummation of
the Merger is contingent upon the satisfaction of certain closing conditions set
forth in the Agreement.  There can be no assurance that such
conditions will be satisfied.





Upon the
consummation of the Merger, the holders of BioMed stock will receive an
aggregate of $7,000,000 and will be entitled to receive a subsequent payment
equal to $3,000,000 on the six month anniversary of the closing of the Merger,
which subsequent payment may be made by ULURU in either cash or through the
issuance of shares of ULURU common stock.  The form of consideration
of such subsequent payment will be determined at the sole discretion of
ULURU.  In addition, after the making of such subsequent payment, and
solely upon the achievement of certain milestones involving the achievement of
certain product and manufacturing revenue thresholds, ULURU has agreed to pay to
the former shareholders of BioMed up to a maximum aggregate amount of $2,000,000
in cash (payable in traunches, the amounts of which will be determined based on
the particular milestone that is achieved, if any).  ULURU plans to
fund the acquisition of Bio Med through privately generated funds supported by
revolving and term debt.





The
foregoing description of the transactions contemplated by the Agreement does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Agreement, a copy of which is attached as Exhibit 10.1 to
this quarterly report on Form 10-Q.




On June
23, 2008 the Company announced that Ronald A. Ahrens had been appointed to serve
on the Company’s Board of Directors.  Mr. Ahrens has been an advisor
to Merck & Company, Inc. since 1995, when he retired as President of Merck
Consumer Healthcare Group Worldwide.  He had previously served as
Executive Vice President of Merck Consumer Healthcare Group
International.  From 1985 to 1990 Mr. Ahrens was Consumer Group
President, North America of Bristol-Myers Squibb and previously was President of
Bristol Myers Products Division.  Prior to 1985, he held senior
management and sales and marketing positions with Richardson Vicks,
Bristol-Myers Squibb and Procter and Gamble.







- 18
-
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RESULTS OF
OPERATIONS





Fluctuations in Operating
Results





Our
results of operations have fluctuated significantly from period to period in the
past and are likely to continue to do so in the future. We anticipate that our
quarterly and annual results of operations will be impacted for the foreseeable
future by several factors, including the timing and amount of payments received
pursuant to our current and future collaborations, and the progress and timing
of expenditures related to our development 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, 2008 and 2007





Total
Revenues





Revenues
were $95,699 for the three months ended June 30, 2008, as compared to revenues
of $118,788 for the three months ended June 30, 2007, and were comprised of
licensing fees of $25,522 from two OraDiscTM licensing agreements, domestic
royalties of $21,608 from the sale of Aphthasol® by our distributor, foreign
royalties of $63,164 from the sale of Zindaclin®, a $15,000 fee adjustment for a
sponsored research program, and Altrazeal® product sales of $405.





The
second quarter 2008 revenues represent an overall decrease of approximately
$23,000 versus the comparative second quarter 2007 revenues, primarily due to
decreases of $35,500 in sponsored research and $3,300 in Aphthasol® domestic
royalties.   These decreases were partially offset by increases
of $6,600 in Zindaclin® royalties and $8,700 in licensing fees for OraDiscTM
related technologies





Costs and
Expenses





Cost
of Goods Sold





Cost of
goods sold for the three months ended June 30, 2008 was $119 and consisted
primarily of product costs for the initial sales of our Altrazeal® wound
dressing.  We did not sell any finished goods in the second quarter of
2007; therefore we had no direct cost of sales.





Research
and Development





Research
and development expenses totaled $867,544 for the three months ended June 30,
2008, including $40,169 in share-based compensation, compared to $553,755 for
the three months ended June 30, 2007, including $32,612 in share-based
compensation.  The increase of approximately $314,000 in research and
development expenses was due primarily to increases in direct research costs of
$52,000, clinical testing expense for our wound care technologies of $53,000,
regulatory consulting and expenses of $66,000, and additional personnel costs of
approximately $144,000.




The
direct research and development expenses for the three months ended June 30,
2008 and 2007 were as follows:





Three
      Months Ended
              June
      30,Technology
            
            2008
            
            
            2007Wound care & nanoparticle
            
            $
            194,133
            
            
            $
            158,992OraDiscTM
            
            
            90,314
            
            
            
            74,383Aphthasol® & other technologies
            
            
            8,288
            
            
            
            7,031Total
            
            $
            292,735
            
            
            $
            240,406






Selling,
General and Administrative





Selling,
general and administrative expenses totaled $1,341,235 for the three months
ended June 30, 2008, including $220,426 in share-based compensation, compared to
$693,588 for the three months ended June 30, 2007, including $86,110 in
share-based compensation.  The increase of approximately $647,000 in
selling, general and administrative expenses was due primarily to increased
administration salary and benefit expenses of approximately $299,000, which
included the recognition of additional share-based compensation of $134,000, an
increase in executive personnel due to hiring of our executive vice president of
operations, and the associated employer costs.  Additional cost
increases of approximately $323,000 were incurred for the ramp-up of our sales
and marketing efforts, which included expenses for compensation and benefits of
$154,000, brand marketing expenses of $74,000, sales expenses of $61,000 and
distribution related expenses of $35,000.  We also incurred increased
costs for our insurance coverage of $26,000, legal expenses of $23,000
associated with merger and acquisition agreements, and a $20,000 due diligence
fee for potential borrowing activities.  Each of these factors were
partially offset by a decrease in shareholder expenses of $10,000 and a decrease
of $34,000 in expenses for Director compensation.





Amortization





Amortization
expense totaled $269,183 for the three months ended June 30, 2008 as compared to
$268,630 for the three months ended June 30, 2007.  The expense for
each period consists primarily of amortization associated with our
patents.  There were no additional purchases of patents during the
three months ended June 30, 2008.





Depreciation





Depreciation
expense totaled $30,202 for the three months ended June 30, 2008 as compared to
$17,173 for the three months ended June 30, 2007.  The increase of
approximately $13,000 is attributable to our purchase of additional equipment,
primarily manufacturing related items, during 2008.





Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $78,888 for the three months ended June 30,
2008 as compared to $205,825 for the three months ended June 30,
2007.  The decrease of approximately $127,000 is attributable to a
decrease in interest income due to lower cash balances and interest yields in
2008.








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Comparison of the six months
ended June 30, 2008 and 2007





Total
Revenues





Revenues
were $351,517 for the six months ended June 30, 2008, as compared to revenues of
$502,299 for the six months ended June 30, 2007, and were comprised of licensing
fees of $39,293 for two OraDiscTM licensing agreement, domestic royalties of
$42,134 from the sale of Aphthasol® by our distributor, foreign royalties of
$118,212 from the sale of Zindaclin®, a $15,000 fee adjustment for a sponsored
research program, Aphthasol® product sales to our distributor of $166,473, and
Altrazeal® product sales of $405.





The six
months ended June 30, 2008 revenues represent an overall decrease of
approximately $151,000 versus the comparative six months ended June 30, 2007
revenues, primarily due to decreases of $225,000 in sponsored research and
$133,000 in Zindaclin® license fees, both of which were non-recurring revenues
from the prior year.  These decreases were partially offset by an
increase of $27,000 in Zindaclin® royalties,
increased licensing fees of $17,000 for OraDiscTM technologies, and
by Aphthasol® product sales of approximately $166,000 that occurred in 2008 with
no product sales occurring in 2007.





Costs and
Expenses





Cost
of Goods Sold





Cost of
goods sold for the six months ended June 30, 2008 was $137,734 and consisted of
costs associated with the manufacture of Altrazeal® and for
Aphthasol®.  We did not sell any finished goods in the six months
ended June 30, 2007; therefore we had no direct cost of sales.





Research
and Development





Research
and development expenses totaled $1,742,760 for the six months ended June 30,
2008, including $75,956 in share-based compensation, compared to $1,119,163 for
the six months ended June 30, 2007, including $62,188 in share-based
compensation.  The increase of approximately $624,000 in research and
development expenses was due primarily to increases in direct research costs of
$169,000, clinical testing expenses for our wound care technologies of $141,000,
regulatory consulting and expenses of $71,000, and additional scientific
personnel costs of approximately $235,000.  The direct research and
development expenses for the six months ended June 30, 2008 and 2007 were as
follows:





Six
      Months Ended
              June
      30,Technology
            
            2008
            
            
            2007Wound care & nanoparticle
            
            $
            432,449
            
            
            $
            258,859OraDiscTM
            
            
            189,663
            
            
            
            189,943Aphthasol® & other technologies
            
            
            26,582
            
            
            
            31,073Total
            
            $
            648,694
            
            
            $
            478,875






Selling,
General and Administrative





Selling,
general and administrative expenses totaled $2,234,470 for the six months ended
June 30, 2008, including $392,001 in share-based compensation, compared to
$1,288,826 for the six months ended June 30, 2007, including $159,122 in
share-based compensation.  The increase of approximately $945,000 in
selling, general and administrative expenses was due primarily to increased
administration salary and benefit expenses of approximately $578,000, which
included the recognition of additional share-based compensation of $233,000, an
increase in executive personnel due to hiring of our executive vice president of
operations, and the associated employer costs.  Other factors
affecting the increase were costs of approximately $418,000 for the ramp-up of
our sales and marketing efforts, , which included expenses for compensation and
benefits of $177,000, brand marketing expenses of $143,000, sales expenses of
$63,000 and distribution related expenses of $35,000.  We also
incurred increases in our insurance costs of $51,000, additional travel expenses
of $24,000, and a $20,000 due diligence fee for potential borrowing
activities.  Each of these factors was partially offset by a decrease
in legal expense of $35,000 as last year’s expense included fees associated with
a registration statement and various other non-recurring legal matters, a
decrease of $34,000 in expenses associated with accounting and auditing
services, decreased legal cost associated with our patents of $25,000, and a
decrease in expense of $60,000 for Director compensation..





Amortization





Amortization
expense totaled $538,367 for the six months ended June 30, 2008 as compared to
$534,173 for the six months ended June 30, 2007.  The expense for each
period consists primarily of amortization associated with our
patents.  There were no additional purchases of patents during the six
months ended June 30, 2008.





Depreciation





Depreciation
expense totaled $50,474 for the six months ended June 30, 2008 as compared to
$33,877 for the six months ended June 30, 2007.  The increase of
approximately $17,000 is attributable to our purchase of additional equipment,
primarily manufacturing items, during 2008.





Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $203,933 for the six months ended June 30, 2008
as compared to $419,630 for the six months ended June 30, 2007.  The
decrease of approximately $216,000 is attributable to a decrease in interest
income due to lower cash balances and interest yields in 2008.





Interest
Expense





There was
no interest expense for the six months ended June 30, 2008 as compared to the
expense of $1,574 for the six months ended June 30, 2007.  The
interest expense for the six months ended June 30, 2007 consisted of financing
costs for our insurance policies.





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LIQUIDITY AND CAPITAL
RESOURCES





We have
funded our operations primarily through the private sales of convertible
debentures and common stock.  Product sales, royalty payments,
contract research, licensing fees and milestone payments from our corporate
alliances have provided, and are expected in the future to provide funding for
operations. Our principal source of liquidity is cash and cash
equivalents.  As of June 30, 2008 our cash and cash equivalents were
$11,684,039 which is a decrease of $2,295,789 as compared to our cash and cash
equivalents at December 31, 2007 of $13,979,828.  Our working capital
(current assets less current liabilities) was $11,104,400 at June 30, 2008 as
compared to our working capital at December 31, 2007 of
$14,146,157.





Consolidated
Cash Flow Data




Six
      Months Ended
              June
      30,Net Cash Provided by (Used
    in)
            
            2008
            
            
            2007Operating activities
            
            $
            (1,780,840
            )
            
            $
            ( 51,239
            )Investing activities
            
            
            (562,449
            )
            
            
            (
      530,797
            )Financing activities
            
            
            47,500
            
            
            
            ( 75,061
            )Net (Decrease) in cash and cash equivalents
            
            $
            (2,295,789
            )
            
            $
            (
      657,097
            )





Operating
Activities





For the
six months ended June 30, 2008, net cash used in operating activities was
$1,780,840.  The principal component of net cash used for the six
months ended June 30, 2008 stems from our net loss of approximately
$4,148,000.  This net loss for the six months ended June 30, 2008
included substantial non-cash charges in the form of share-based compensation,
amortization of patents, and depreciation.  These non-cash charges
totaled approximately $1,060,000.





Additional
uses of our net cash was a decrease of approximately $103,000 in accounts
payable due to timing of vendor payments and a decrease of $42,000 in our
royalty advance for Aphthasol® due to sales by our distributor.  These
uses of net cash were partially offset by a decrease of $501,000 in account
receivable due to customer collections, a decrease of $187,000 in prepaid
expenses due to expense amortization, an increase in accrued liabilities of
$108,000 due to timing, and an increase in deferred revenues of $641,000 from
the receipt of licensing agreements associated with our OraDiscTM
technologies.





For the
six months ended June 30, 2007, net cash used in operating activities was
$51,239.  The principal use of net cash for the six months ended June
30, 2007 was our net loss of approximately $2,056,000, which included $789,000
of non-cash charges.  Additional cash uses resulted from an increase
in inventory in the amount of $315,000 and a decrease in accrued liabilities of
$139,000.  These cash uses were partially offset by a decrease of
$607,000 in accounts receivable, a decrease of $108,000 in prepaid expenses due
to expense amortization, an increase of $422,000 in accounts payable due to
timing, and an increase of $578,000 in deferred revenues associated with the
receipt of milestones related to the signing of a licensing agreement for
OraDiscTMB.





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Investing
Activities





Net cash
used in investing activities during the six months ended June 30, 2008 was
$562,449 and consisted primarily of manufacturing equipment purchases for our
AltrazealTM and OraDiscTM products along with $142,650 for the buy-back of
OraDiscTM
licensing rights previously held by Zambon S.p.A.  For the comparable
six months of 2007, we purchased $530,797 of equipment, which was comprised
primarily of manufacturing equipment for the same two products.





Financing
Activities





Net cash
provided by financing activities during the six months ended June 30, 2008 was
$47,500 from the exercise of stock options to purchase 50,000 shares of our
common stock.  For the six months ended June 30, 2007, we received
$274,939 in cash from the exercise of warrants.  This was offset by a
payment of $350,000 related to an asset purchase in 2005.





The
agreement governing our acquisition of BioMed stipulates that the consummation
of such acquisition is contingent upon the prior completion of an equity or debt
financing, on terms satisfactory to ULURU in its sole discretion, pursuant to
which ULURU must receive gross proceeds of at least $7,000,000.  We
currently plan to pursue such financing, and accordingly finance our acquisition
of BioMed, through privately generated funds supported by revolving and term
debt.  We could elect to use existing cash as a financing source for
the acquisition as well.  In the event we are unable to adequately
finance our acquisition of BioMed, such acquisition may not occur.





Liquidity





As
discussed above, we have cash and cash equivalents totaling $11,684,039 as of
June 30, 2008, which we believe is sufficient to fund our operations for the
foreseeable future.  As we continue to expend funds to advance our
business plan, there can be no assurance that changes in our research and
development plans, capital expenditures and/or acquisitions of products or
businesses, including BioMed, or other events affecting our operations will not
result in the earlier depletion of our funds. We continue to search both
domestically and internationally for opportunities that will enable us to
continue expanding our business and explore alternative financing sources for
these activities, including the possibility of loans from banks and public
and/or private offerings of debt and equity securities. In appropriate
situations, we may seek financial assistance from other sources, including
contribution by others to joint ventures and other collaborative or licensing
arrangements for the development, testing, manufacturing and marketing of
products under development.





Off-Balance
Sheet Arrangements





As of
June 30, 2008, we did not have any off balance sheet arrangements.





Impact
of Inflation





We have
experienced only moderate price increases under our agreements with third-party
manufacturers as a result of raw material and labor price
increases.  We have generally passed these price increases along to
our customers.  However, there can be no assurance that possible
future inflation would not impact our operations.








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CRITICAL ACCOUNTING POLICIES
AND ESTIMATES





Management’s
Discussion and Analysis of Financial Condition and Results of Operations
addresses our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”) for
interim financial information. The preparation of our financial statements
requires that we make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis, we
evaluate these estimates and judgments. We base our estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.  Our critical
account policies are summarized in our Annual Report on Form 10-KSB for the year
ended December 31, 2007.  We had no significant changes in our
critical accounting policies since our last annual report.








SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS





This
quarterly report on Form 10-Q (including documents incorporated by reference)
and other written and oral statements the Company makes from time to time
contain certain “forward-looking” statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. You can identify these forward-looking statements by the fact they use
words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”,
“project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of
similar meaning and expression in connection with any discussion of future
operating or financial performance. One can also identify forward-looking
statements by the fact that they do not relate strictly to historical or current
facts.  Such forward-looking statements are based on current
expectations and involve inherent risks and uncertainties, including factors
that could delay, divert or change any of them, and could cause actual outcomes
to differ materially from current expectations. These statements are likely to
relate to, among other things, the Company’s goals, plans and projections
regarding its financial position, results of operations, cash flows, market
position, product development, product approvals, sales efforts, expenses,
performance or results of current and anticipated products and the outcome of
contingencies such as legal proceedings, acquisitions, including the currently
proposed acquisition of BioMed and the financing of such acquisition, and
financial results, which are based on current expectations that involve inherent
risks and uncertainties, including internal or external factors that could
delay, divert or change any of them in the next several years. The Company has
included important factors in the cautionary statements included in its 2007
Annual Report on Form 10-KSB, particularly under “Risk Associated with our
Business”, that the Company believes could cause actual results to differ
materially from any forward-looking statement.




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






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ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





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
(FDIC).  At June 30, 2008 and December 31, 2007 our cash and cash
equivalents totaled $11,684,039 and $13,979,828,
respectively.  However, because deposits are maintained at high
quality financial institutions, we do not believe that there is a significant
risk of loss of uninsured amounts.  We also invest cash in excess of
immediate requirements in money market accounts, certificates of deposit,
corporate commercial paper with high quality ratings, and U.S. government
securities.  These investments are not held for trading or other
speculative purposes.  We are exposed to credit risk in the event of
default by these high quality corporations.





Concentration
of credit risk with respect to trade accounts receivable are customers with
balances that exceed 5% of total consolidated trade accounts receivable at June
30, 2008 and at December 31, 2007.  As of June 30, 2008, five
customers exceeded the 5% threshold.  Two customers exceeded the 5%
threshold at December 31, 2007.  We believe that the customer accounts
are fully collectible as of June 30, 2008.





Foreign
Currency Exchange Rate Risk





The
royalty revenues we receive on Zindaclin® are a percentage of the net sales made
by the various sub-licensees of our licensee, ProStrakan Ltd.  All of
these sales are made in foreign countries and the majority are denominated in
foreign currencies. The royalty payment on these foreign sales is calculated
initially in the foreign currency in which the sale is made and is then
converted into U.S. dollars to determine the amount that ProStrakan Ltd pays us
for royalty revenues. Fluctuations in the exchange ratio of the U.S. dollar and
these foreign currencies will have the effect of increasing or decreasing our
royalty revenues even if there is a constant amount of sales in foreign
currencies. For example, if the U.S. dollar weakens against a foreign currency,
then our royalty revenues will increase given a constant amount of sales in such
foreign currency.





The
impact on our royalty revenues from foreign currency exchange rate risk is based
on a number of factors, including the exchange rate (and the change in the
exchange rate from the prior period) between a foreign currency and the U.S.
dollar, and the amount of Zindaclin® sales by the various sub-licensees of
ProStrakan Ltd  that are denominated in foreign currencies. We do not
currently hedge our foreign currency exchange rate risk.






ITEM 4:
CONTROLS AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures.
 
 Our chief
executive officer and our chief financial officer, after evaluating the
effectiveness of our “disclosure controls and procedures” (as defined in Rules
13a-14(c) of the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”)) as of the end of the period covered by this quarterly report, concluded
that the Company’s disclosure controls and procedures were (1) designed to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s chief executive
officer and chief financial officer by others within the Company, particularly
during the period in which this report was being prepared, and (2) effective, in
that they provide reasonable assurance that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms.
 
 Changes
in internal controls.
 
 There
were no changes in our internal controls over financial reporting during the
quarter ended June 30, 2008 that have materially affected, or are reasonably
likely to material affect, our internal controls over financial
reporting.


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PART II: OTHER INFORMATION








ITEM 1 -
LEGAL PROCEEDINGS





None.








ITEM 1A
– RISK FACTORS





There
have been no material changes in our risk factors from those disclosed in our
2007 Annual Report on Form 10-KSB filed on March 28, 2008, except as
follows:





We may not complete the
proposed acquisition of BioMed due to certain closing conditions not being
satisfied.





The
consummation of the proposed acquisition of BioMed by ULURU is subject to the
satisfaction of certain closing conditions, including the condition that ULURU
will have completed an equity or debt financing, on terms satisfactory to ULURU
in its sole discretion, pursuant to which ULURU will have received gross
proceeds of not less than $7,000,000.  We cannot assure that such
financing will occur or that any of the other closing conditions set forth in
the agreement governing the proposed acquisition of BioMed will be
satisfied.  If any of such conditions is not satisfied, the currently
proposed acquisition of BioMed may not occur.




Although we expect that the
acquisition of BioMed will result in benefits to the combined company, the
combined company may not realize those benefits because of integration and other
challenges.




Our
ability to realize the anticipated benefits of the acquisition of BioMed will
depend, in part, on our ability to integrate the business of BioMed with the
business of ULURU. The combination of two independent companies is a complex,
costly and time-consuming process. This process may disrupt the business of
either or both of the companies, and may not result in the full benefits
expected by ULURU and BioMed. The difficulties of combining the operations of
the companies include, among others:





§
            unanticipated
      issues in integrating information, communications and other
      systems;





§
            retaining
      key employees;





§
            consolidating
      corporate and administrative
infrastructures;





§
            the
      diversion of management’s attention from ongoing business concerns;
      and





§
            coordinating
      geographically separate
organizations.











ITEM
2 - UNREGISTERED SALE OF EQUITY SECURITIES





None.








ITEM 3
- DEFAULTS UPON SENIOR SECURITIES





None.





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ITEM
4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





Our
Annual Meeting of Stockholders was held on May 15, 2008.  At the
Annual Meeting, the stockholders of the Company (i) elected each of the persons
listed below to serve as a director of ULURU Inc. until the next annual meeting
or until his successor is elected, and (ii) ratified the appointment of Lane
Gorman Trubitt, L.L.P. as our independent auditors for the fiscal year ending
December 31, 2008.





We had
62,466,881 shares of common stock outstanding and entitled to vote as of April
1, 2008, the record date for the Annual Meeting.  At the Annual
Meeting, 45,983,210 shares of common stock were present in person or represented
by proxy, constituting a majority of all of the outstanding shares of our common
stock, for the two proposals indicated above.  The following sets
forth detailed information regarding the results of the voting at the Annual
Meeting:






Proposal
1            Election
of Directors





Director
            
            Votes
      in Favor
            
            
            Votes
      WithheldWilliam W. Crouse
            
            
            33,346,757
            
            
            
            12,636,453Jeffrey B. Davis
            
            
            33,346,748
            
            
            
            12,636,462Kerry P. Gray
            
            
            27,271,046
            
            
            
            18,712,164W. Anthony Vernon
            
            
            33,342,057
            
            
            
            12,641,153








Proposal
2            Ratification
of the appointment of Lane Gorman Trubitt, L.L.P. as our independent auditors
for the fiscal year ending December 31, 2008.





Votes in Favor:
            
            
            45,927,953Votes Against:
            
            
            11,971Abstentions:
            
            
            43,286











ITEM 5:
OTHER INFORMATION





On July
9, 2008, ULURU entered into an Agreement and Plan of Merger with BioMed (the
“Agreement”).  Under the Agreement, a wholly-owned subsidiary of ULURU
will merge with and into BioMed, as a result of which ULURU will acquire all of
the issued and outstanding shares of BioMed and BioMed will become a
wholly-owned subsidiary of ULURU (the “Merger”).  The consummation of
the Merger is contingent upon the satisfaction of certain closing conditions set
forth in the Agreement.  There can be no assurance that such
conditions will be satisfied.





See the
description included above in the section of this quarterly report on Form 10-Q
entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” for a discussion of ULURU’s payment obligations in
connection with its acquisition of BioMed.




The
foregoing description of the transactions contemplated by the Agreement does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Agreement, a copy of which is attached as Exhibit 10.1 to
this quarterly report on Form 10-Q.











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ITEM
6: EXHIBITS





Exhibit
      Number
            Description10.1
            Agreement and Plan or Merger, dated as of July 9, 2008,
      by and among ULURU Inc., Cardinia Acquisition Corp., BioMed Sciences,
      Inc., and the Holders Representative Committee referenced
      therein.31.1
            Certification of Principal Executive Officer of ULURU
      Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities
      Exchange Act of 1934, as Amended.31.2
            Certification of Principal Accounting Officer of ULURU
      Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities
      Exchange Act of 1934, as Amended.32.1*
            Certification of Chief Executive Officer of ULURU Inc.
      pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.32.2*
            Certification of Chief Financial Officer of ULURU Inc.
      pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.*
            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.









SIGNATURES:





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 8,
      2008
            
            By:
            /s/ Kerry P. GrayKerry
      P. GrayChief
      Executive Officer and President(Principal
      Executive Officer)Date:  August
      8, 2008
            
            By:
            /s/
      Terrance K. WallbergTerrance
      K. WallbergChief
      Financial Officer and Vice President(Principal
      Financial and Accounting Officer)












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