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: September
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 November 1, 2008 was
65,509,481.











ULURU Inc.





INDEX
TO FORM 10-Q





For
the Three Months Ended SEPTEMBER 30, 2008











PagePART I
            FINANCIAL INFORMATIONItem 1.
            Financial Statements
            3Condensed Consolidated Balance Sheets as of September 30,
      2008 (unaudited) and December 31, 2007
            3Condensed Consolidated Statements of Operations
      (unaudited) for the three and nine months ended September 30, 2008 and
      2007
            4Condensed Consolidated Statements of Cash Flows
      (unaudited) for the nine months ended September 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
            16Item 3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            25Item 4.
            Controls and Procedures
            26PART II
            OTHER INFORMATIONItem 1.
            Legal Proceedings
            26Item 1A.
            Risk Factors
            26Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            27Item 3.
            Defaults Upon Senior Securities
            27Item 4.
            Submission of Matters to a Vote of
      Security Holders
            27Item 5.
            Other Information
            27Item 6.
            Exhibits
            28Signatures
            28


- 2
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 Table of
Contents


PART 1 – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS








ULURU Inc.


CONDENSED
CONSOLIDATED BALANCE SHEETS








September
      30, 2008
                            
                            
                            December
      31, 2007(Unaudited)
                            
                            
                            (Audited)ASSETSCurrent
      AssetsCash
      and cash equivalents
                            
                            $
                            9,532,621
                            
                            
                            $
                            13,979,828Accounts
      receivable
                            
                            
                            222,947
                            
                            
                            
                            836,075Inventory
                            
                            
                            619,056
                            
                            
                            
                            319,413Prepaid
      expenses and deferred charges
                            
                            
                            492,208
                            
                            
                            
                            400,830Total
      Current Assets
                            
                            
                            10,866,832
                            
                            
                            
                            15,536,146Property
      and Equipment, net
                            
                            
                            1,876,229
                            
                            
                            
                            1,532,881Other
      AssetsPatents,
      net
                            
                            
                            10,233,705
                            
                            
                            
                            11,033,477Licensing
      rights, net
                            
                            
                            142,650
                            
                            
                            
                            ---Deposits
                            
                            
                            18,069
                            
                            
                            
                            20,499Total
      Other Assets
                            
                            
                            10,394,424
                            
                            
                            
                            11,053,976TOTAL
      ASSETS
                            
                            $
                            23,137,485
                            
                            
                            $
                            28,123,003LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                            
                            $
                            1,141,025
                            
                            
                            $
                            790,412Accrued
      liabilities
                            
                            
                            649,647
                            
                            
                            
                            424,395Deferred
      revenue – current portion
                            
                            
                            124,864
                            
                            
                            
                            55,147Royalty
      advance
                            
                            
                            52,470
                            
                            
                            
                            120,035Total
      Current Liabilities
                            
                            
                            1,968,006
                            
                            
                            
                            1,389,989Long
      Term LiabilitiesDeferred
      revenue, net – less current portion
                            
                            
                            1,029,221
                            
                            
                            
                            495,281TOTAL
      LIABILITIES
                            
                            
                            2,997,227
                            
                            
                            
                            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;65,509,481
      and 62,416,881 shares issued and outstanding at September 30, 2008 and
      December 31, 2007, respectively
                            
                            
                            65,509
                            
                            
                            
                            62,417Additional
      paid-in capital
                            
                            
                            43,783,037
                            
                            
                            
                            42,989,518Accumulated  (deficit)
                            
                            
                            (23,708,288
                            )
                            
                            
                            (16,814,202
                            )TOTAL
      STOCKHOLDERS’ EQUITY
                            
                            
                            20,140,258
                            
                            
                            
                            26,237,733TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                            
                            $
                            23,137,485
                            
                            
                            $
                            28,123,003The
      accompanying notes are an integral part of these consolidated financial
      statements.





- 3
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 Table of Contents


ULURU
Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)








Three
      Months Ended
                          September
      30,
                        
                        
                        Nine
      Months Ended
                          September
      30,2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007REVENUESLicense
      fees
                        
                        $
                        26,556
                        
                        
                        $
                        13,862
                        
                        
                        $
                        65,849
                        
                        
                        $
                        168,742Royalty
      income
                        
                        
                        80,822
                        
                        
                        
                        83,044
                        
                        
                        
                        241,168
                        
                        
                        
                        219,962Product
      sales
                        
                        
                        2,565
                        
                        
                        
                        ---
                        
                        
                        
                        169,443
                        
                        
                        
                        ---Other
                        
                        
                        15,494
                        
                        
                        
                        33,000
                        
                        
                        
                        494
                        
                        
                        
                        243,501Total
      Revenues
                        
                        
                        125,437
                        
                        
                        
                        129,906
                        
                        
                        
                        476,954
                        
                        
                        
                        632,205COSTS
      AND EXPENSESCost
      of goods sold
                        
                        
                        484
                        
                        
                        
                        ---
                        
                        
                        
                        138,218
                        
                        
                        
                        ---Research
      and development
                        
                        
                        901,344
                        
                        
                        
                        454,985
                        
                        
                        
                        2,644,104
                        
                        
                        
                        1,574,148Selling,
      general and administrative
                        
                        
                        1,731,877
                        
                        
                        
                        820,763
                        
                        
                        
                        3,966,347
                        
                        
                        
                        2,109,589Amortization
                        
                        
                        272,102
                        
                        
                        
                        272,083
                        
                        
                        
                        810,469
                        
                        
                        
                        806,256Depreciation
                        
                        
                        31,229
                        
                        
                        
                        19,015
                        
                        
                        
                        81,703
                        
                        
                        
                        52,892Total
      Costs and Expenses
                        
                        
                        2,937,036
                        
                        
                        
                        1,566,846
                        
                        
                        
                        7,640,841
                        
                        
                        
                        4,542,885OPERATING
      (LOSS)
                        
                        
                        (
      2,811,599
                        )
                        
                        
                        (1,436,940
                        )
                        
                        
                        (7,163,887
                        )
                        
                        
                        (3,910,680
                        )Other
      Income (Expense)Interest
      and miscellaneous income
                        
                        
                        65,868
                        
                        
                        
                        197,104
                        
                        
                        
                        269,801
                        
                        
                        
                        616,733Interest
      expense
                        
                        
                        ---
                        
                        
                        
                        ---
                        
                        
                        
                        ---
                        
                        
                        
                        (1,574
                        )(LOSS)
      BEFORE INCOME TAXES
                        
                        
                        (
      2,745,731
                        )
                        
                        
                        (1,239,836
                        )
                        
                        
                        (6,894,086
                        )
                        
                        
                        (3,295,521
                        )Income
      taxes
                        
                        
                        ---
                        
                        
                        
                        ---
                        
                        
                        
                        ---
                        
                        
                        
                        ---NET
      (LOSS)
                        
                        $
                        (2,745,731
                        )
                        
                        $
                        (1,239,836
                        )
                        
                        $
                        (6,894,086
                        )
                        
                        $
                        (3,295,521
                        )Basic
      and diluted net (loss) per common share
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.02
                        )
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.05
                        )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                        
                        
                        64,669,503
                        
                        
                        
                        62,164,868
                        
                        
                        
                        63,193,491
                        
                        
                        
                        61,609,244The
      accompanying notes are an integral part of these consolidated financial
      statements.








- 4
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ULURU Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Nine
      Months Ended September 30,2008
                                
                                
                                2007OPERATING
      ACTIVITIES :Net
      (loss)
                                
                                $
                                (6,894,086
                                )
                                
                                $
                                (3,295,521
                                )Adjustments
      to reconcile net (loss) to net cash (used in) provided by operating
      activities:Amortization
                                
                                
                                810,469
                                
                                
                                
                                806,256Depreciation
                                
                                
                                91,753
                                
                                
                                
                                52,892Share-based
      compensation for stock and options issued to employees
                                
                                
                                613,598
                                
                                
                                
                                90,139Share-based
      compensation for options issued to non-employees
                                
                                
                                135,513
                                
                                
                                
                                271,359Change
      in operating assets and liabilities:Accounts receivable
                                
                                
                                613,128
                                
                                
                                
                                568,096Inventory
                                
                                
                                (299,643
                                )
                                
                                
                                (319,413
                                )Prepaid expenses and deferred charges
                                
                                
                                ( 91,378
                                )
                                
                                
                                63,935Deposits
                                
                                
                                2,430
                                
                                
                                
                                250Accounts payable
                                
                                
                                350,613
                                
                                
                                
                                271,768Accrued liabilities
                                
                                
                                225,252
                                
                                
                                
                                (160,693
                                )Deferred revenue
                                
                                
                                603,657
                                
                                
                                
                                564,290Royalty advance
                                
                                
                                ( 67,565
                                )
                                
                                
                                ( 72,357
                                )Total
                                
                                
                                2,987,827
                                
                                
                                
                                2,136,522Net
      Cash (Used in) Operating Activities
                                
                                
                                (3,906,259
                                )
                                
                                
                                (1,158,999
                                )INVESTING
      ACTIVITIES :Purchase
      of property and equipment
                                
                                
                                (445,798
                                )
                                
                                
                                (537,198
                                )Purchase
      of licensing rights
                                
                                
                                (142,650
                                )
                                
                                
                                ---Net
      Cash (Used in) Investing Activities
                                
                                
                                (588,448
                                )
                                
                                
                                (537,198
                                )FINANCING
      ACTIVITIES :Payment
      of asset purchase obligation
                                
                                
                                ---
                                
                                
                                
                                (350,000
                                )Proceeds
      from warrant exercises
                                
                                
                                ---
                                
                                
                                
                                369,940Proceeds
      from stock option exercises
                                
                                
                                47,500
                                
                                
                                
                                20,000Net
      Cash Provided by Financing Activities
                                
                                
                                47,500
                                
                                
                                
                                39,940Net
      (Decrease) in Cash
                                
                                
                                (4,447,207
                                )
                                
                                
                                (1,656,257
                                )Cash,  beginning
      of period
                                
                                
                                13,979,828
                                
                                
                                
                                16,918,007Cash,  end
      of period
                                
                                $
                                9,532,621
                                
                                
                                $
                                15,261,750Supplemental
      Schedule of Noncash Investing and Financing Activities :For
      the nine months ended September 30, 2008, the issuance of 3,042,600 shares
      of common stock pursuant to cashless exercise of warrants to purchase
      3,066,667 shares of common stock
                                
                                $
                                ---For
      the nine months ended September 30, 2007, the issuance of 1,571,073 shares
      of common stock pursuant to cashless exercise of warrants to purchase
      1,589,400 shares of common stock
                                
                                
                                
                                
                                
                                $
                                ---OTHER
      SUPPLEMENTAL INFORMATIONCash
      paid for interest
                                
                                $
                                ---
                                
                                
                                $
                                1,574The
      accompanying notes are an integral part of these consolidated financial
      statements.





- 5
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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
September 30, 2008 and the results of its operations for the three and nine
months ended September 30, 2008 and 2007 and cash flows for the nine months
ended September 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 nine months ended September 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.





- 6
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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.
 - 7
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 Table of Contents


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.


- 8
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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 nine months ended September 30 are
summarized as follows:





Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,Revenues
                    
                    2008
                    
                    
                    %
                    
                    
                    2007
                    
                    
                    %
                    
                    
                    2008
                    
                    
                    %
                    
                    
                    2007
                    
                    
                    %Domestic
                    
                    $
                    32,995
                    
                    
                    
                    26
                    %
                    
                    $
                    59,309
                    
                    
                    
                    38
                    %
                    
                    $
                    227,007
                    
                    
                    
                    48
                    %
                    
                    $
                    315,858
                    
                    
                    
                    50
                    %International
                    
                    
                    92,442
                    
                    
                    
                    74
                    %
                    
                    
                    70,597
                    
                    
                    
                    62
                    %
                    
                    
                    249,947
                    
                    
                    
                    52
                    %
                    
                    
                    316,347
                    
                    
                    
                    50
                    %Total
                    
                    $
                    125,437
                    
                    
                    
                    100
                    %
                    
                    $
                    129,906
                    
                    
                    
                    100
                    %
                    
                    $
                    476,954
                    
                    
                    
                    100
                    %
                    
                    $
                    632,205
                    
                    
                    
                    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 nine months ended September 30 are represented on the following
table:





Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,Customers
                    Product
                    
                    2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Discus Dental, Inc.
                    Aphthasol®
                    
                    
                    20
                    %
                    
                    
                    20
                    %
                    
                    
                    49
                    %
                    
                    
                    11
                    %Meldex International
                    OraDiscTM B
                    
                    
                    22
                    %
                    
                    
                    11
                    %
                    
                    
                    14
                    %
                    
                    
                    6
                    %ProStrakan, Ltd.
                    Zindaclin®
                    
                    
                    44
                    %
                    
                    
                    44
                    %
                    
                    
                    36
                    %
                    
                    
                    44
                    %Novartis Consumer Health
                    Sponsored research
                    
                    
                    ---
                    
                    
                    
                    25
                    %
                    
                    
                    ---
                    
                    
                    
                    9
                    %Wyeth Pharmaceuticals, Inc.
                    Sponsored research
                    
                    
                    ---
                    
                    
                    
                    ---
                    
                    
                    
                    ---
                    
                    
                    
                    29
                    %Total
                    
                    
                    
                    86
                    %
                    
                    
                    100
                    %
                    
                    
                    99
                    %
                    
                    
                    99
                    %








NOTE
5.                      INVENTORY





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





Inventory
                  
                  September
      30, 2008
                  
                  
                  December
      31, 2007Raw materials
                  
                  $
                  101,803
                  
                  
                  $
                  137,311Work-in-progress
                  
                  
                  333,182
                  
                  
                  
                  182,102Finished goods
                  
                  
                  184,071
                  
                  
                  
                  ---Total
                  
                  $
                  619,056
                  
                  
                  $
                  319,413


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NOTE
6.                      PROPERTY
AND EQUIPMENT





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





Property and equipment
                    
                    September
      30, 2008
                    
                    
                    December
      31, 2007Laboratory equipment
                    
                    $
                    427,888
                    
                    
                    $
                    412,683Manufacturing equipment
                    
                    
                    1,469,046
                    
                    
                    
                    1,071,173Computers, office equipment, and furniture
                    
                    
                    148,673
                    
                    
                    
                    115,953Computer software
                    
                    
                    4,108
                    
                    
                    
                    4,108Leasehold improvements
                    
                    
                    95,841
                    
                    
                    
                    95,8412,145,556
                    
                    
                    
                    1,699,758Less: accumulated depreciation and amortization
                    
                    
                    (
      269,327
                    )
                    
                    
                    (
      166,877
                    )Property and equipment, net
                    
                    $
                    1,876,229
                    
                    
                    $
                    1,532,881





Depreciation
and amortization expense on property and equipment was $34,794 and $22,562 for
the three months ended September 30, 2008 and 2007, respectively, and was
$92,400 and $62,292 for the nine months ended September 30, 2008 and 2007,
respectively.








NOTE
7.                      PATENTS





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





Patents
                  
                  September
      30, 2008
                  
                  
                  December
      31, 2007Patents
                  
                  $
                  13,354,938
                  
                  
                  $
                  13,354,938Less: accumulated amortization
                  
                  
                  (
      3,121,233
                  )
                  
                  
                  (
      2,321,461
                  )Patents, net
                  
                  $
                  10,233,705
                  
                  
                  $
                  11,033,477





Amortization
expense on patents was $268,536 and $268,536 for the three months ended
September 30, 2008 and 2007, respectively, and was $799,772 and $796,856 for the
nine months ended September 30, 2008 and 2007, respectively.





The
future aggregate amortization expense for patent assets, remaining as of
September 30, 2008, is as follows:


Calendar
      Years
                  
                  Future
      Amortization
                    Expense2008 (Three months)
                  
                  $
                  268,5362009
                  
                  
                  1,065,3902010
                  
                  
                  1,065,3902011
                  
                  
                  1,015,4362012
                  
                  
                  723,4282013 & Beyond
                  
                  
                  6,095,525Total
                  
                  $
                  10,233,705





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NOTE
8.                      STOCKHOLDERS’
EQUITY





Common
Stock





As of
September 30, 2008 the Company had 65,509,481 shares of common stock issued and
outstanding.  The Company issued 3,042,600 shares of common stock
during the three months ended September 30, 2008 pursuant to the cashless
exercise of warrants to purchase 3,066,667 shares of common stock.





Warrants





The
following table summarizes the warrants outstanding and the number of shares of
common stock subject to exercise as of September 30, 2008 and the changes
therein during the nine 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
                        
                        
                        3,066,667
                        
                        
                        
                        0.01Warrants
      cancelled
                        
                        
                        ---
                        
                        
                        
                        ---Balance
      as of September 30, 2008
                        
                        
                        2,795,000
                        
                        
                        $
                        1.07








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


Date of expiration
                  
                  Number
      of Warrant Shares of Common Stock Subject to ExpirationAugust 30, 2011
                  
                  
                  1,125,000December 6, 2011
                  
                  
                  1,670,000Total
                  
                  
                  2,795,000





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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 September 30, 2008 and December 31,
2007:





September
      30, 2008
                  
                  
                  December
      31, 2007Antidilutive
      warrants to purchase common stock
                  
                  
                  2,795,000
                  
                  
                  
                  5,861,667Antidilutive
      options to purchase common stock
                  
                  
                  3,950,000
                  
                  
                  
                  2,225,000Restricted
      vesting common stock
                  
                  
                  125,117
                  
                  
                  
                  55,195Total
                  
                  
                  6,870,117
                  
                  
                  
                  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 nine months ended September
30:





2008
                          
                          
                          2007Incentive Stock OptionsExpected
      volatility  (1)
                          
                          
                          67.7
                          %
                          
                          
                          52.1
                          %Risk-free
      interest rate %  (2)
                          
                          
                          2.77
                          %
                          
                          
                          4.28
                          %Expected
      term (in years)
                          
                          
                          5.0
                          
                          
                          
                          4.9Dividend
      yield  (3)
                          
                          
                          0.0
                          %
                          
                          
                          0.0
                          %Forfeiture
      rate
                          
                          
                          5.1
                          %
                          
                          
                          0.0
                          %Nonstatutory Stock OptionsExpected
      volatility  (1)
                          
                          
                          69.4
                          %
                          
                          
                          49.4
                          %Risk-free
      interest rate %  (2)
                          
                          
                          3.23
                          %
                          
                          
                          4.67
                          %Expected
      term (in years)
                          
                          
                          3.3
                          
                          
                          
                          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.











- 13
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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 nine months ended September 30:





Three
      Months Ended
                        September
      30,
                      
                      
                      Nine
      Months Ended
                        September
      30,2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007Incentive Stock OptionsQuantity
                      
                      
                      75,000
                      
                      
                      
                      600,000
                      
                      
                      
                      1,450,000
                      
                      
                      
                      635,000Weighted
      average fair value per share
                      
                      $
                      0.89
                      
                      
                      $
                      2.25
                      
                      
                      $
                      1.23
                      
                      
                      $
                      2.21Fair
      value
                      
                      $
                      66,702
                      
                      
                      $
                      1,347,275
                      
                      
                      $
                      1,788,711
                      
                      
                      $
                      1,403,630Nonstatutory Stock OptionsQuantity
                      
                      
                      ---
                      
                      
                      
                      50,000
                      
                      
                      
                      355,000
                      
                      
                      
                      205,000Weighted
      average fair value per share
                      
                      
                      ---
                      
                      
                      $
                      0.93
                      
                      
                      $
                      0.70
                      
                      
                      $
                      0.96Fair
      value
                      
                      
                      ---
                      
                      
                      $
                      46,714
                      
                      
                      $
                      249,375
                      
                      
                      $
                      196,576








Stock Options (Incentive and
Nonstatutory)





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





Three
      Months Ended
                    September
      30,
                  
                  
                  Nine
      Months Ended
                    September
      30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Research
      and development
                  
                  $
                  38,821
                  
                  
                  $
                  31,147
                  
                  
                  $
                  106,822
                  
                  
                  $
                  86,967Selling,
      general and administrative
                  
                  
                  223,699
                  
                  
                  
                  97,742
                  
                  
                  
                  590,794
                  
                  
                  
                  241,002Total
      share-based compensation expense
                  
                  $
                  262,520
                  
                  
                  $
                  128,889
                  
                  
                  $
                  697,616
                  
                  
                  $
                  327,969





At
September 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 $2,775,045.  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
                      
                      
                      1,805,000
                      
                      
                      
                      2.12Forfeited/cancelled
                      
                      
                      (30,000
                      )
                      
                      
                      1.78Exercised
                      
                      
                      (50,000
                      )
                      
                      
                      0.95Outstanding
      as of September 30, 2008
                      
                      
                      3,950,000
                      
                      
                      $
                      2.37







The
following table presents the stock option grants outstanding and exercisable as
of September 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 Share845,000
                    
                    
                    $
                    0.94
                    
                    
                    
                    8.5
                    
                    
                    
                    284,374
                    
                    
                    $
                    0.95930,000
                    
                    
                    
                    1.59
                    
                    
                    
                    8.6
                    
                    
                    
                    650,000
                    
                    
                    
                    1.651,300,000
                    
                    
                    
                    2.45
                    
                    
                    
                    6.3
                    
                    
                    
                    ---
                    
                    
                    
                    ---875,000
                    
                    
                    
                    4.47
                    
                    
                    
                    8.9
                    
                    
                    
                    369,374
                    
                    
                    
                    4.453,950,000
                    
                    
                    $
                    2.37
                    
                    
                    
                    7.9
                    
                    
                    
                    1,303,748
                    
                    
                    $
                    2.29


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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 nine months ended September 30:





Three
      Months Ended
                    September
      30,
                  
                  
                  Nine
      Months Ended
                    September
      30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Research
      and development
                  
                  $
                  4,544
                  
                  
                  $
                  3,237
                  
                  
                  $
                  12,499
                  
                  
                  $
                  9,605Selling,
      general and administrative
                  
                  
                  14,090
                  
                  
                  
                  8,062
                  
                  
                  
                  38,996
                  
                  
                  
                  23,924Total
      share-based compensation expense
                  
                  $
                  18,634
                  
                  
                  $
                  11,299
                  
                  
                  $
                  51,495
                  
                  
                  $
                  33,529





At
September 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 $276,468.





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 September 30, 2008
                  
                  
                  125,117
                  
                  
                  $
                  3.14







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 September 30, 2008, we had
granted options to purchase 4,005,000 shares of Common Stock, of which 3,950,000
were outstanding at a weighted average exercise price of $2.37 per share and
125,117 shares of restricted stock.  There are 1,869,883 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





None.







- 15
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 Table of Contents




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





To date,
we have not completed the acquisition of Bio Med Sciences, Inc. (“BioMed”) due
to the uncertainties in the current economic climate, the availability of equity
markets, and the contraction of debt financing.  The agreement
regarding our proposed acquisition of BioMed included a provision that provided
either ULURU or BioMed the right to provide written notice of termination in the
event that the merger was not consummated on or before August 31,
2008.  The agreement also stipulates that the consummation of the
BioMed 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.  Neither ULURU nor BioMed have provided any written notice
to terminate the agreement and both parties continue in their discussions to
consummate the acquisition.  Moreover, ULURU may continue to pursue
the requisite 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.





On
October 21, 2008, we announced the commencement of a clinical study to evaluate
patients with graft donor sites treated with AltrazealTM Silver compared with a
market leading silver containing carboxymethylcellulose dressing.  The
study will be conducted at four clinical sites with 40 evaluable patients being
enrolled.  The first study site has been initiated and we plan to
initiate additional sites within the next thirty days.





Each
enrolled patient will have two skin graft donor sites, with one graft site
having AltrazealTM Silver being applied and the other graft site having the
competitive dressing being applied.  The primary study objective will
be to evaluate wound healing.  Secondary study objectives include
evaluating the incidence of wound infection, number of dressing changes, patient
pain and provider and patient satisfaction.





This
clinical study is designed to support our eventual marketing of AltrazealTM
Silver and provide the necessary clinical data to apply for a CE mark which will
then enable AltrazealTM Silver to be marketed in Europe and Canada.





We
continue in our strategy to develop a wide range of AltrazealTM products
incorporating active compounds for the treatment of the various phases of wound
healing, infection, inflammation, debridement, maturation and
closure.  AltrazealTM Silver will be the first product to demonstrate
execution of this strategy and by implementing this strategy, we believe that we
will be delivering the products necessary to significantly improve wound
healing.





On
September 30, 2008 we announced that we have filed a 510k application with the
United States Food and Drug Administration (FDA) for AltrazealTM
Silver.





Preclinical
studies conducted to support the filing have shown that superior healing rates
in numerous porcine wound models have been achieved relative to competitive
silver dressings. Additionally, in toxicology and in vitro bacteria inhibition
studies AltrazealTM Silver has performed favorably relative to competitive silver
dressings. This data should favorably position AltrazealTM Silver in the market,
providing benefits to both the patient and the health care
provider.








- 16
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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 September 30, 2008 and 2007





Total
Revenues





Revenues
were $125,437 for the three months ended September 30, 2008, as compared to
revenues of $129,906 for the three months ended September 30, 2007, and were
comprised of licensing fees of $26,556 from two OraDiscTM licensing agreements,
domestic royalties of $25,430 from the sale of Aphthasol® by our distributor,
foreign royalties of $55,392 from the sale of Zindaclin®, sponsored research
programs of $15,494, and AltrazealTM product sales of $2,565.





The third
quarter 2008 revenues represent an overall decrease of approximately $4,000
versus the comparative third quarter 2007 revenues, primarily due to decreases
of $17,500 in sponsored research and $2,000 in royalty
payments.  These decreases were partially offset by increases of
$12,700 in licensing fees for OraDiscTM related technologies and an increase of
$2,565 for the AltrazealTM product sales.





Costs and
Expenses





Cost
of Goods Sold





Cost of
goods sold for the three months ended September 30, 2008 was $484 and consisted
of product costs for the initial sales of our AltrazealTM wound
dressing.  We did not sell any finished goods in the third quarter of
2007; therefore we had no direct cost of sales.





Research
and Development





Research
and development expenses totaled $901,344 for the three months ended September
30, 2008, including $43,365 in share-based compensation, compared to $454,985
for the three months ended September 30, 2007, including $34,384 in share-based
compensation.  The increase of approximately $446,000 in research and
development expenses was due primarily to increases in direct research costs of
$198,000, regulatory consulting and governmental fees of $96,000, and additional
compensation costs of approximately $177,000.  These increases were
partially offset by a decrease in our clinical program expenses of $12,000 and a
decrease in operating expenses of $13,000.


The
direct research and development expenses for the three months ended September
30, 2008 and 2007 were as follows:
 
 Three
      Months Ended
                      September
      30,Technology
                    
                    2008
                    
                    
                    2007Wound care & nanoparticle
                    
                    $
                    140,393
                    
                    
                    $
                    15,628OraDiscTM
                    
                    
                    138,945
                    
                    
                    
                    62,299Aphthasol® & other technologies
                    
                    
                    6,132
                    
                    
                    
                    9,150Total
                    
                    $
                    285,470
                    
                    
                    $
                    87,077


- 17
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 Table of Contents




Selling,
General and Administrative





Selling,
general and administrative expenses totaled $1,731,877 for the three months
ended September 30, 2008, including $237,789 in share-based compensation,
compared to $820,763 for the three months ended September 30, 2007, including
$105,804 in share-based compensation.  The increase of approximately
$911,000 in selling, general and administrative expenses was due primarily to
cost increases of approximately $725,000 for the continued ramp-up of our sales
and marketing efforts, which included expenses for compensation and benefits of
$357,000, brand marketing expenses of $227,000, sales expenses of $126,000 and
distribution related expenses of $15,000.  Other increases incurred
were for administration salary and benefit expenses of approximately $163,000,
which included the recognition of additional share-based compensation of
$156,000 along with an increase in executive personnel due to the hiring of our
executive vice president of operations, and the associated employer
costs.  We also incurred increased costs for legal expenses of $45,000
associated with merger and acquisition agreements, corporate travel of $27,000,
legal expenses of $19,000 associated with our patents, operating/occupancy
expenses of $17,000, and a $30,000 due diligence fee for potential borrowing
activities.  Each of these factors were partially offset by a decrease
in shareholder expenses of $76,000 and a decrease of $39,000 in expenses for
Director compensation.





Amortization





Amortization
expense totaled $272,102 for the three months ended September 30, 2008 as
compared to $272,083 for the three months ended September 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 September 30, 2008.





Depreciation





Depreciation
expense totaled $31,229 for the three months ended September 30, 2008 as
compared to $19,015 for the three months ended September 30,
2007.  The increase of approximately $12,000 is attributable to our
purchase of additional equipment, primarily manufacturing related items, during
2008.





Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $65,868 for the three months ended September
30, 2008 as compared to $197,104 for the three months ended September 30,
2007.  The decrease of approximately $131,000 is attributable to a
decrease in interest income due to lower cash balances and interest yields in
2008.





- 18
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 Table of Contents





Comparison of the nine
months ended September 30, 2008 and 2007





Total
Revenues





Revenues
were $476,954 for the nine months ended September 30, 2008, as compared to
revenues of $632,205 for the nine months ended September 30, 2007, and were
comprised of licensing fees of $65,849 for two OraDiscTM licensing agreement,
domestic royalties of $67,564 from the sale of Aphthasol® by our distributor,
foreign royalties of $173,604 from the sale of Zindaclin®, sponsored research
programs of $494, Aphthasol® product sales to our distributor of $166,473, and
AltrazealTM product sales of $2,970.





The nine
months ended September 30, 2008 revenues represent an overall decrease of
approximately $155,000 versus the comparative nine months ended September 30,
2007 revenues, primarily due to decreases of $243,000 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 $26,000 in Zindaclin® royalties, increased licensing fees of $30,000
for OraDiscTM technologies, and by product sales of AltrazealTM and Aphthasol® of
approximately $169,000 that occurred in 2008 with no associated product sales
occurring in 2007.





Costs and
Expenses





Cost
of Goods Sold





Cost of
goods sold for the nine months ended September 30, 2008 was $138,218 and
consisted of costs associated with the manufacture of AltrazealTM and
Aphthasol®.  We did not sell any finished goods in the nine months
ended September 30, 2007; therefore we had no direct cost of sales.





Research
and Development





Research
and development expenses totaled $2,644,104 for the nine months ended September
30, 2008, including $119,321 in share-based compensation, compared to $1,574,148
for the nine months ended September 30, 2007, including $96,572 in share-based
compensation.  The increase of approximately $1,070,000 in research
and development expenses was due primarily to increases in direct research costs
of $367,000, clinical testing expenses for our wound care technologies of
$130,000, regulatory consulting and expenses of $167,000, and additional
scientific personnel costs of approximately $412,000.  The direct
research and development expenses for the nine months ended September 30, 2008
and 2007 were as follows:





Nine
      months ended
                    September
      30,Technology
                  
                  2008
                  
                  
                  2007Wound care & nanoparticle
                  
                  $
                  572,843
                  
                  
                  $
                  274,487OraDiscTM
                  
                  
                  328,608
                  
                  
                  
                  252,242Aphthasol® & other technologies
                  
                  
                  32,713
                  
                  
                  
                  40,223Total
                  
                  $
                  934,164
                  
                  
                  $
                  566,952





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Selling,
General and Administrative





Selling,
general and administrative expenses totaled $3,966,347 for the nine months ended
September 30, 2008, including $629,790 in share-based compensation, compared to
$2,109,589 for the nine months ended September 30, 2007, including $264,926 in
share-based compensation.  The increase of approximately $1,857,000 in
selling, general and administrative expenses was due primarily to increased
administration salary and benefit expenses of approximately $741,000, which
included the recognition of additional share-based compensation of $435,000, 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 $1,143,000 for the ramp-up of
our sales and marketing efforts, which included expenses for compensation and
benefits of $534,000, brand marketing expenses of $370,000, sales expenses of
$189,000 and distribution related expenses of $50,000.





We also
incurred increases in our insurance costs of $49,000, additional travel expenses
of $52,000, due diligence costs of $53,000 for potential borrowing activities,
outside consultants of $11,000, legal expenses of $10,000 associated with merger
and acquisition activities, and operating/occupancy expenses of
$27,000.  Each of these factors was partially offset by a decrease of
$32,000 in expenses associated with accounting and auditing services, decreased
shareholder costs of $91,000, decreased legal cost associated with our patents
of $6,000, and a decrease in expense of $100,000 for Director
compensation.





Amortization





Amortization
expense totaled $810,469 for the nine months ended September 30, 2008 as
compared to $806,256 for the nine months ended September 30,
2007.  The expense for each period consists primarily of amortization
associated with our patents.  There were no additional purchases of
patents during the nine months ended September 30, 2008.





Depreciation





Depreciation
expense totaled $81,703 for the nine months ended September 30, 2008 as compared
to $52,892 for the nine months ended September 30, 2007.  The increase
of approximately $29,000 is attributable to our purchase of additional
equipment, primarily manufacturing items, during 2008.





Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $269,801 for the nine months ended September
30, 2008 as compared to $616,733 for the nine months ended September 30,
2007.  The decrease of approximately $347,000 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 nine months ended September 30, 2008 as compared to
the expense of $1,574 for the nine months ended September 30,
2007.  The interest expense for the nine months ended September 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 September 30, 2008 our cash and cash equivalents
were $9,532,621 which is a decrease of $4,447,207 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 $8,898,826 at September
30, 2008 as compared to our working capital at December 31, 2007 of
$14,146,157.





Consolidated
Cash Flow Data


Nine
      Months Ended September 30,Net Cash Provided by (Used
    in)
                        
                        2008
                        
                        
                        2007Operating activities
                        
                        $
                        (3,906,259
                        )
                        
                        $
                        (1,158,999
                        )Investing activities
                        
                        
                        (588,448
                        )
                        
                        
                        (
      537,198
                        )Financing activities
                        
                        
                        47,500
                        
                        
                        
                        39,940Net (Decrease) in cash and cash equivalents
                        
                        $
                        (4,447,207
                        )
                        
                        $
                        (1,656,257
                        )





Operating
Activities





For the
nine months ended September 30, 2008, net cash used in operating activities was
$3,906,259.  The principal component of net cash used for the nine
months ended September 30, 2008 stems from our net loss of approximately
$6,894,000.  This net loss for the nine months ended September 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 $1,651,000.





Additional
uses of our net cash was an increase of approximately $300,000 in inventory due
to the work-in-progress manufacturing costs for AltrazealTM, an increase of
$91,000 for renewal fees with the Food & Drug Administration, and a decrease
of $67,000 in our royalty advance for Aphthasol® due to domestic sales by our
distributor.  These uses of net cash were partially offset by a
decrease of $613,000 in accounts receivable due to customer collections, an
increase of $350,000 in accounts payable due to costs for product manufacturing,
an increase in accrued liabilities of $225,000 due to timing, and an increase in
deferred revenues of $604,000 from the receipt of licensing agreements
associated with our OraDiscTM technologies.





For the
nine months ended September 30, 2007, net cash used in operating activities was
$1,158,999.  The principal use of net cash for the nine months ended
September 30, 2007 was our net loss of approximately $3,295,000, which included
$1,221,000 of non-cash charges.  Additional cash uses resulted from an
increase in inventory in the amount of $319,000, a decrease in accrued
liabilities of $161,000, and a decrease of $72,000 in our royalty advance for
Aphthasol®.  These cash uses were partially offset by a decrease of
$568,000 in accounts receivable, a decrease of $64,000 in prepaid expenses due
to expense amortization, an increase of $272,000 in accounts payable due to
timing, and an increase of $564,000 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 nine months ended September 30, 2008 was
$588,449 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 nine months of 2007, we purchased $537,198 of equipment, which was
comprised primarily of manufacturing equipment for the same two
products.





Financing
Activities





Net cash
provided by financing activities during the nine months ended September 30, 2008
was $47,500 from the exercise of stock options to purchase 50,000 shares of our
common stock.





For the
nine months ended September 30, 2007, the net cash provided by financing
activities was $39,939 and consisted of our receipt of $369,939 from the
exercise of warrants and $20,000 from the exercise of stock
options.  These increases were offset by a payment of $350,000 related
to an asset purchase in 2005.





The
agreement regarding our proposed acquisition of BioMed included a provision that
provided either ULURU or BioMed the right to provide written notice of
termination in the event that the merger was not consummated on or before August
31, 2008.  The agreement also stipulates that the consummation of the
BioMed 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.  To
date, neither ULURU nor BioMed has provided any written notice to terminate the
agreement and both parties continue in their discussions to consummate the
acquisition.  Moreover, ULURU may continue to pursue the requisite
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 had cash and cash equivalents totaling $9,532,621as of
September 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.


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Off-Balance
Sheet Arrangements





As of
September 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.








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.





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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, statements indicating that the Company has
cash and cash equivalents sufficient to fund our operations for the foreseeable
future, 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 September 30, 2008 and December 31, 2007 our cash and cash
equivalents totaled $9,532,621 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
September 30, 2008 and at December 31, 2007.  As of September 30,
2008, three customers exceeded the 5% threshold.  Two customers
exceeded the 5% threshold at December 31, 2007.  We believe that these
customer accounts are fully collectible as of September 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.





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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 September 30, 2008 that have materially affected, or are
reasonably likely to material affect, our internal controls over financial
reporting.







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.  The agreement provides
that either party may provide written notice of termination of the agreement in
the event that the merger was not consummated on or before August 31,
2008.






Although we expect that the
proposed 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 proposed 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.


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ITEM 2
- UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
PROCEEDS





During
the three month period ended September 30, 2008, we issued an aggregate of
3,042,600 shares of common stock upon the exercise, at a per share price of
$0.01, on a cashless basis, of two warrants held by Prenox, LLC to purchase
3,066,667 shares of common stock.  All of such shares of common stock
were issued pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933,
as amended.








ITEM 3 -
DEFAULTS UPON SENIOR SECURITIES





None.








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





None.








ITEM 5:
OTHER INFORMATION





None.





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ITEM 6:
EXHIBITS





Exhibit
      Number
              Description31.1
              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:  November 7,
      2008
            
            By:
            /s/
      Kerry P. GrayKerry
      P. GrayChief
      Executive Officer and President(Principal
      Executive Officer)Date:  November 7,
      2008
            
            By:
            /s/
      Terrance K. WallbergTerrance
      K. WallbergChief
      Financial Officer and Vice President(Principal
      Financial and Accounting Officer)









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