UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





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





For the quarterly period ended: March 31, 2010





OR





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





For the transition period from: ___ to ___.





Commission File Number: 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)
(Zip Code)





(214) 905-5145


Registrant's Telephone Number, including Area Code





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes  þ    No  o





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





Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company þ








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





As of May 14, 2010, there were 81,946,657 shares of the registrant’s Common Stock, $0.001 par value per share, issued and outstanding.








ULURU Inc.





INDEX TO FORM 10-Q





For the Three Months Ended MARCH 31, 2010











PagePART I
FINANCIAL INFORMATIONItem 1.
Financial Statements
3Condensed Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009 (audited)
3Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2010 and 2009
4Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2010 and 2009
5Notes to Condensed Consolidated Financial Statements (unaudited)
6Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26Item 4.
Controls and Procedures
26PART II
OTHER INFORMATIONItem 1.
Legal Proceedings
27Item 1A.
Risk Factors
27Item 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
28Item 5.
Other Information
28Item 6.
Exhibits
28Signatures
28


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PART 1 – FINANCIAL INFORMATION





ITEM 1.  FINANCIAL STATEMENTS








ULURU Inc.


CONDENSED CONSOLIDATED BALANCE SHEETS





March 31, 2010


December 31, 2009(Unaudited)


(Audited)ASSETSCurrent AssetsCash and cash equivalents

$
2,202,801


$
1,934,177Accounts receivable


195,338



218,256Inventory


950,147



1,008,998Prepaid expenses and deferred charges


316,987



383,419Total Current Assets


3,665,273



3,544,850Property, Equipment and Leasehold Improvements, net


1,581,567



1,631,557Other AssetsIntangible assets, net


7,936,630



8,183,146Deposits


18,069



20,819Total Other Assets


7,954,699



8,203,965TOTAL ASSETS

$
13,201,539


$
13,380,372LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable

$
784,864


$
617,443Accrued liabilities


182,910



215,431Deferred revenue – current portion


98,183



96,897Total Current Liabilities


1,065,957



929,771Long Term LiabilitiesDeferred revenue, net – less current portion


1,248,311



1,272,843TOTAL LIABILITIES


2,314,268



2,202,614COMMITMENTS 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;81,946,657 and 76,813,886 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively


81,947



76,814Additional paid-in capital


47,930,378



46,923,499Accumulated  (deficit)


(37,125,054
)


(35,822,555
)TOTAL STOCKHOLDERS’ EQUITY


10,887,271



11,177,758TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
13,201,539


$
13,380,372The accompanying notes are an integral part of these consolidated financial statements.





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ULURU Inc.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)








Three Months Ended March 31,2010


2009REVENUESLicense fees

$
22,383


$
24,651Royalty income


53,061



79,245Product sales


159,786



32,643Other


---



32,190Total Revenues


235,230



168,729COSTS AND EXPENSESCost of goods sold


130,683



6,077Research and development


285,784



775,418Selling, general and administrative


816,888



2,224,619Amortization of intangible assets


246,516



266,267Depreciation


49,990



32,571Total Costs and Expenses


1,529,861



3,304,952OPERATING (LOSS)


(1,294,631
)


(3,136,223
)Other Income (Expense)Interest and miscellaneous income


121



14,554Interest expense


(7,988
)


---(LOSS) BEFORE INCOME TAXES


(1,302,498
)


(3,121,669
)Income taxes


---



---NET (LOSS)

$
(1,302,498
)

$
(3,121,669
)Basic and diluted net (loss) per common share

$
(0.02
)

$
(0.05
)WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING


79,955,904



65,525,288The accompanying notes are an integral part of these consolidated financial statements.


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ULURU Inc.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months Ended March 31,2010


2009OPERATING ACTIVITIES :Net (loss)

$
(1,302,498
)

$
(3,121,669
)Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities:Amortization of intangible assets


246,516



266,267Depreciation


49,990



47,271Share-based compensation for stock and options issued to employees


146,081



756,657Share-based compensation for options issued to non-employees


7,951



44,457Change in operating assets and liabilities:Accounts receivable


22,918



(36,723
)Inventory


58,851



6,477Prepaid expenses and deferred charges


66,431



117,140Deposits


2,750



---Accounts payable


167,421



(323,953
)Accrued liabilities


(32,521
)


(101,955
)Deferred revenue


(23,246
)


(46,841
)Royalty advance


---



(21,163
)Total


713,142



707,634Net Cash (Used in) Operating Activities


(589,356
)


(2,414,035
)INVESTING ACTIVITIES :Purchase of property and equipment


---



(14,177
)Net Cash (Used in) Investing Activities


---



(14,177
)FINANCING ACTIVITIES :Proceeds from sale of common stock, net


857,980



---Net Cash Provided by Financing Activities


857,980



---Net Increase (Decrease) in Cash


268,624



(2,428,212
)Cash,  beginning of period


1,934,177



7,567,588Cash,  end of period

$
2,202,801


$
5,139,376Supplemental Schedule of Noncash Investing and Financing Activities :OTHER SUPPLEMENTAL INFORMATIONCash paid for interest

$
488


$
---The accompanying notes are an integral part of these consolidated financial statements.





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ULURU Inc.





NOTES TO


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








NOTE 1.                      COMPANY OVERVIEW AND BASIS OF PRESENTATION





Company Overview





ULURU Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada corporation.  We are a diversified specialty pharmaceutical company committed to developing and commercializing a broad range of innovative wound care and muco-adhesive film products based on our patented NanoflexTM and OraDiscTM drug delivery technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.





Basis of Presentation





In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the 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 March 31, 2010 and the results of its operations for the three months ended March 31, 2010 and 2009 and cash flows for the three months ended March 31, 2010 and 2009 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 months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.





These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 24, 2010.


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NOTE 2.                      SIGNIFICANT ACCOUNTING POLICIES





The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2010 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on March 24, 2010.






NOTE 3.                      THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS





New Accounting Standards Not Yet Adopted





In March 2010, the Financial Accounting Standards Board Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 08-9, Milestone Method of Revenue Recognition (“EITF 08-9”).  EITF 08-9 provides guidance on applying the milestone method to milestone payments for achieving specified performance measures when those payments are related to uncertain future events.  Under the Consensus, entities can make an accounting policy election to recognize arrangement consideration received for achieving specified performance measures during the period in which the milestones are achieved, provided certain criteria are met.  The scope of this Issue is limited to transactions involving research or development.  EITF 08-9 is effective for interim and annual periods beginning on or after June 15, 2010 with early adoption permitted.  The impact of this EITF is not expected to be material to the consolidated financial statements of the Company.






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, four licensees for international activities, and our sales force for the domestic sale of AltrazealTM.





Revenues per geographic area for the three months ended March 31 are summarized as follows:





Revenues

2010


%


2009


%Domestic

$
167,031



71
%

$
53,807



32
%International


68,199



29
%


114,922



68
%Total

$
235,230



100
%

$
168,729



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 months ended March 31 are represented on the following table:





Customers
Product

2010


2009Discus Dental, Inc.
Aphthasol®


62
%


13
%ProStrakan, Ltd.
Zindaclin®


19
%


34
%Hoffmann-LaRoche
OraDiscTM


*



19
%Meldex International
OraDiscTM B


*



14
%Total



81
%


80
%* Sales from these customers were less than 10% of total sales for the period reported.








NOTE 5.                      INVENTORY





As of March 31, 2010, our inventory was comprised of raw materials, manufacturing costs incurred in the production of AltrazealTM, and AltrazealTM finished goods.  Inventory consisted of the following at March 31, 2010 and December 31, 2009:





Inventory

March 31, 2010


December 31, 2009Raw materials

$
77,761


$
112,002Work-in-progress


372,390



375,228Finished goods


499,996



521,768Total

$
950,147


$
1,008,998








NOTE 6.                      PROPERTY, EQUIPMENT and LEASHOLD IMPROVEMENTS





Property, equipment and leasehold improvements, net, consisted of the following at March 31, 2010 and December 31, 2009:





Property, equipment and leasehold improvements

March 31, 2010


December 31, 2009Laboratory equipment

$
424,888


$
424,888Manufacturing equipment


1,483,223



1,483,223Computers, office equipment, and furniture


140,360



140,360Computer software


4,108



4,108Leasehold improvements


95,841



95,8412,148,420



2,148,420Less: accumulated depreciation and amortization


( 566,853
)


( 516,863
)Property, equipment and leasehold improvements, net

$
1,581,567


$
1,631,557





Depreciation expense on property, equipment and leasehold improvements was $49,990 and $32,571 for the three months ended March 31, 2010 and 2009, respectively.








NOTE 7.                      INTANGIBLE ASSETS





Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at March 31, 2010 and December 31, 2009:





Intangible assets

March 31, 2010


December 31, 2009Patent - Zindaclin®

$
3,012,367


$
3,729,000Patent - Amlexanox (Aphthasol®)


2,090,000



2,090,000Patent - Amlexanox (OraDiscTM A)


6,873,080



6,873,080Patent - OraDiscTM


73,000



73,000Patent - Hydrogel nanoparticle aggregate


589,858



589,85812,638,305



13,354,938Less: accumulated amortization


( 4,701,675
)


( 4,455,159
)Less: impairment charge


---



( 716,633
)Intangible assets, net

$
7,936,630


$
8,183,146






Amortization expense for intangible assets was $246,516 and $266,267 for the three months ended March 31, 2010 and 2009, respectively.  The future aggregate amortization expense for intangible assets, remaining as of March 31, 2010, is as follows:





Calendar Years

Future Amortization

Expense2010 (Nine months)

$
753,2342011


949,7962012


657,6082013


655,8122014


655,8122015 & Beyond


4,264,368Total

$
7,936,630





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NOTE 8.                      ACCRUED LIABILITIES





Accrued liabilities consisted of the following at March 31, 2010 and December 31, 2009:





Accrued Liabilities

March 31, 2010


December 31, 2009Accrued taxes – payroll

$
106,299


$
106,299Accrued compensation/benefits


70,399



56,837Accrued insurance payable


---



52,295Product rebates/returns


149



---Other


6,063



---Total accrued liabilities

$
182,910


$
215,431









NOTE 9.                      EQUITY TRANSACTIONS





On February 2, 2010, we entered into a Securities Purchase Agreement with several institutional investors whereby we agreed to sell and issue to those investors 5,000,000 shares of our common stock, par value $0.001 per share (the “February Offering”).  On February 5, 2010, we closed the February Offering and received aggregate net proceeds of approximately $860,000, after deducting placement fees and offering expenses payable by us.





Rodman & Renshaw, LLC, acting as our exclusive placement agent, received a placement fee of $70,000 (equal to 7% of the aggregate gross proceeds of the February Offering) as well as compensation warrants to purchase up to an aggregate of 250,000 shares (equal to 5% of the aggregate number of shares sold in the February Offering) of our common stock at an exercise price of $0.25 per share (equal to 125% of the then public offering price per share).  The compensation warrants will expire on July 23, 2014 and will otherwise comply with Rule 5110 of the Financial Industry Regulatory Authority, Inc..





We completed the offering and sale of the above shares in the February Offering pursuant to a shelf registration statement on Form S-3 (Registration No. 333-160568) declared effective by the Securities and Exchange Commission on July 23, 2009, and a base prospectus dated as of the same date, as supplemented by a prospectus supplement filed with the Securities and Exchange Commission on February 4, 2010.







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NOTE 10.                      STOCKHOLDERS’ EQUITY





Common Stock





As of March 31, 2010, the Company had 81,946,657 shares of common stock issued and outstanding.  The Company issued 5,132,771 shares of common stock during the three months ended March 31, 2010 which consisted of 132,771 shares of common stock for the vesting of certain restricted stock awards and 5,000,000 shares of common stock in the February Offering described in Note 9 above.





Warrants





The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of March 31, 2010 and the changes therein during the three months then ended:





Number of Shares of Common Stock Subject to Exercise


Weighted – Average

Exercise PriceBalance as of December 31, 2009


8,687,956


$
0.48Warrants issued


250,000



0.25Warrants exercised


---



---Warrants cancelled


---



---Balance as of March 31, 2010


8,937,956


$
0.47








Of the warrant shares subject to exercise as of March 31, 2010, 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


1,670,000July 23, 2014


785,723May 15, 2015


5,357,233Total


8,937,956





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NOTE 11.                      EARNINGS PER SHARE





Basic and Diluted Net Loss Per Share





In accordance with ASC Topic 260, Earnings per Share, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, increased to include potential dilutive common shares.  The effect of outstanding stock options, restricted vesting common stock 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 March 31, 2010 and December 31, 2009:





March 31, 2010


December 31, 2009Antidilutive warrants to purchase common stock


8,937,956



8,687,956Antidilutive options to purchase common stock


3,226,000



3,306,000Restricted vesting common stock


273,111



405,882Total


12,437,067



12,399,838





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NOTE 12.                      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 account for share-based compensation under ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values of the award on the grant date.  We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions for the three months ended March 31:





2010


2009Incentive Stock OptionsExpected volatility  (1)


85.0
%


---Risk-free interest rate %  (2)


2.43
%


---Expected term (in years)


6.0



---Dividend yield  (3)


0.0
%


---Forfeiture rate


0.0
%


---Nonstatutory Stock OptionsExpected volatility  (1)


---



73.7
%Risk-free interest rate %  (2)


---



1.79
%Expected term (in years)


---



3.0Dividend yield  (3)


---



0.0
%Forfeiture rate


---



0.0
%





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





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Our Board of Directors granted the following incentive stock option awards to executives or employees and nonstatutory stock option awards to directors or non-employees for the three months ended March 31:





2010


2009Incentive Stock OptionsQuantity


20,000



---Weighted average fair value per share

$
0.14



---Fair value

$
2,749



---Nonstatutory Stock OptionsQuantity


---



75,000Weighted average fair value per share


---


$
0.14Fair value


---


$
10,672








Stock Options (Incentive and Nonstatutory)





The following table summarizes share-based compensation related to stock options for the three months ended March 31:





2010


2009Research and development

$
23,475


$
35,690Selling, general and administrative


109,583



594,141Total share-based compensation expense

$
133,058


$
629,831





At March 31, 2010, 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 $799,349.  The period over which the unearned share-based compensation is expected to be recognized is approximately three years.





The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of March 31, 2010 and the changes therein during the three months then ended:





Stock Options


Weighted Average Exercise Price per ShareOutstanding as of December 31, 2009


3,306,000


$
2.34Granted


20,000



0.19Forfeited/cancelled


(100,000
)


2.84Exercised


---



---Outstanding as of March 31, 2010


3,226,000


$
2.31





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The following table presents the stock option grants outstanding and exercisable as of March 31, 2010:





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 Share960,000


$
0.88



7.3



766,457


$
0.88565,000



1.58



7.3



565,000



1.58931,000



2.43



4.7



760,897



2.46770,000



4.48



7.4



545,000



4.473,226,000


$
2.31



6.6



2,637,354


$
2.23








Restricted Stock Awards





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





The following table summarizes share-based compensation related to restricted stock awards for the three months ended March 31:





2010


2009Research and development

$
7,609


$
6,111General and administrative


13,365



165,172Total share-based compensation expense

$
20,974


$
171,283





At March 31, 2010, 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 $112,919.  The period over which the unearned share-based compensation related to restricted stock awards is expected to be recognized is approximately three years.





The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of common stock subject to potential issue as of March 31, 2010 and the changes therein during the three months then ended:





Restricted stock


Weighted Average Grant Date Fair ValueOutstanding as of December 31, 2009


405,882


$
0.51Shares granted


---



---Shares forfeited/cancelled


---



---Shares exercised/issued


(132,771
)


0.48Outstanding as of March 31, 2010


273,111


$
0.53





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Summary of Plans





2006 Equity Incentive Plan





In March 2006 our board of directors (“Board”) adopted and our stockholders approved our 2006 Equity Incentive Plan (“Incentive Plan”), which initially provided for the issuance of up to 2 million shares of our Common Stock pursuant to stock option and other equity awards.  At the annual meeting of the stockholders held on May 8, 2007 and on December 17, 2009, our stockholders approved amendments to the Incentive Plan to increase the total number of shares of Common Stock issuable under the Incentive Plan pursuant to stock options and other equity awards by 4 million shares and 3 million shares, respectively.





As of March 31, 2010, we had granted options to purchase 4,230,000 shares of Common Stock since the inception of the Incentive Plan, of which 3,226,000 were outstanding at a weighted average exercise price of $2.31 per share and we had granted awards for 1,029,242 shares of restricted stock since the inception of the Incentive Plan, of which 273,111 were outstanding.  As of March 31, 2010, there were 4,723,180 shares that remained available for future grant under our Incentive Plan.








NOTE 13.                      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 14.                      COMMITMENTS AND CONTINGENCIES





Operating Lease





On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas.  The lease, which commenced on April 1, 2006 and continues until April 1, 2013, currently requires a monthly lease obligation of $9,228 per month, which is inclusive of monthly operating expenses.  The future minimum lease payments are as follows as of March 31, 2010:





Calendar Years

Future Lease Expense2010(Nine months)

$
83,0562011


114,7552012


116,0942013


29,024Total

$
342,929





Rent expense for our operating lease amounted to $33,478 and $27,415 for the three months ended March 31, 2010 and 2009, respectively.





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Indemnification





In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.





In accordance with our restated articles of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in their respective capacities. There have been no claims to date and we have a director and officer insurance policy that enables us to recover a portion of any amounts paid for future potential claims. We have also entered into contractual indemnification agreements with each of our officers and directors.





Employment Agreements





As of March 31, 2010 the Company is party to employment agreements with its officers, which include Renaat Van den Hooff, President and Chief Executive Officer and Terrance K. Wallberg, Vice President and Chief Financial Officer, as well as other key executives including Daniel G. Moro, Vice President – Polymer Drug Delivery and John V. St. John, Ph.D., Vice President - Research and Development.  The employment agreement with Mr. Van den Hooff has an initial term of two years and includes an automatic one-year term renewal for each year thereafter.  The employment agreements with Messrs. Wallberg, Moro, and St. John each have a term of one year and include an automatic one-year term renewal for each year thereafter.  Each employment agreement provides for a base salary, bonus, stock options, stock grants, and eligibility for Company provided benefit programs.  Under certain circumstances, the employment agreements provide for certain severance benefits in the event of termination or a change in control.  The employment agreements also contain non-solicitation, confidentiality and non-competition covenants, and a requirement for the assignment of certain invention and intellectual property rights to the Company.





Separation Agreement





As of March 31, 2010 the Company is party to a separation agreement with Kerry P. Gray, the Company’s former Chief Executive Officer, whereby the Company provides or has provided, as applicable, certain benefits to Mr. Gray, including: (i) payments totaling $400,000 during the initial 12 month period following March 9, 2009; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, the Company has and will continue to pay to Mr. Gray a payment of $12,500 per month; (iii) full acceleration of all vesting schedules for all outstanding Company stock options and shares of restricted stock of the Company held by Mr. Gray, with all such Company stock options remaining exercisable by Mr. Gray until March 1, 2012, provided that Mr. Gray has forfeited 300,000 stock options previously held by him; and (iv) for a period of twenty-four (24) months following March 9, 2009 the Company is required to maintain and provide coverage under Mr. Gray’s existing health coverage plan.  Certain of such payments are secured by a security interest in favor of Mr. Gray in our intellectual property relating to Zindaclin®.  The separation agreement also provides that Mr. Gray was to serve as a consultant to the Company for up to two full days per month through August 31, 2009.  Mr. Gray was not paid for the performance of such consulting services.  The separation agreement contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions.


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Milestone Payments





We were subject to paying Access Pharmaceuticals, Inc. (“Access”) for certain milestones based on our achievement of certain annual net sales, cumulative net sales, and/or our having reached certain defined technology milestones including licensing agreements and advancing products to clinical development.  As of March 31, 2010, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.





On March 7, 2008, the Company terminated the license agreement with ProStrakan Ltd. for Amlexanox-related products in the United Kingdom and Ireland.  As part of the termination, the Company agreed to pay ProStrakan Ltd. a royalty of 30% on any future payments received by the Company from a new licensee in the United Kingdom and Ireland territories, up to a maximum of $1,400,000.  On November 17, 2008, the Company conveyed the Amlexanox-related product rights to the United Kingdom and Ireland territories to MEDA AB.








NOTE 15.                      LEGAL PROCEEDINGS





The Company was served in April 2009 with a complaint in an action in the Supreme Court for New York County, State of New York.  The plaintiff, R.C.C. Ventures, LLC, alleges that it is due a fee for its performance in procuring or arranging a loan for the Company.  The Company denies all allegations of the complaint and any liability to the plaintiff and will vigorously defend against this claim.  The Company has also made a counterclaim against R.C.C. Ventures, LLC for breach of contract and is seeking monetary damages.








NOTE 16.                      SUBSEQUENT EVENTS





We have evaluated, for potential recognition and disclosure, subsequent events that have occurred after the balance sheet date but before the financial statements were available to be issued, which the Company considers to be the date of filing with the Securities and Exchange Commission.

















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








You should read the following discussion and analysis together with all financial and non-financial information appearing elsewhere in this report and with our consolidated financial statements and related notes included in our 2009 Annual Report on Form 10-K, referred to as our 2009 Form 10-K, 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 through the third quarter of 2011.  Our actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2009 Form 10-K under “Risks Associated with our Business”.





Business Overview





ULURU Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada corporation.  We are a diversified specialty pharmaceutical company committed to developing and commercializing a broad range of innovative wound care and muco-adhesive film products based on our patented NanoflexTM and OraDiscTM drug delivery technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.





Our strategy is threefold:





§
Establish the foundation for a market leadership position in wound management by developing and commercializing a customer focused portfolio of innovative wound care products based on the NanoflexTM technology to treat the various phases of wound healing;§
Develop our oral-transmucosal technology (OraDiscTM) and generate revenues through multiple licensing agreements; and§
Develop our NanoflexTM technology for the medical aesthetics market and enter into one or more strategic partnerships to bring these products to market.
















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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 March 31, 2010 and 2009





Total Revenues





Revenues were $235,230 for the three months ended March 31, 2010, as compared to revenues of $168,729 for the three months ended March 31, 2009, and were comprised of licensing fees of approximately $23,000 for two OraDiscTM licensing agreements, $46,000 of foreign royalties from the sale of Zindaclin®, $7,000 of domestic royalties from the sale of Aphthasol® by our distributor, and product sales of approximately $138,000 for Aphthasol® and $21,000 for AltrazealTM.





The first quarter 2010 revenues represent an overall increase of approximately $66,000 versus the comparative first quarter 2009 revenues, due primarily to an increase of $138,000 in Aphthasol® product sales as we did not sell any Aphthasol® finished product to our domestic distributor during the first quarter of 2009.  This increase was partially offset by decreases in Zindaclin® related licensing and royalty fees of $13,000, Aphthasol® domestic royalties of $15,000, sponsored research of $32,000, and AltrazealTM product sales of $12,000.





Costs and Expenses





Cost of Goods Sold





Cost of goods sold for the three months ended March 31, 2010 was $130,683 and consisted of $126,622 in costs associated with Aphthasol® and $4,061 in costs associated with AltrazealTM.  Cost of goods sold for the three months ended March 31, 2009 was $6,077 and was comprised entirely of costs associated with AltrazealTM.


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Research and Development





Research and development expenses totaled $285,784 for the three months ended March 31, 2010, including $31,084 in share-based compensation, compared to $775,418 for the three months ended March 31, 2009, which included $41,801 in share-based compensation.  The decrease of approximately $490,000 in research and development expenses was primarily due to the Company’s restructured business plan continuing in 2010 which contributed to decreases in direct research costs of $148,000, scientific personnel costs of $210,000, clinical testing expenses for our wound care technologies of $58,000, regulatory consulting expenses of $56,000, and regulatory fees of $21,000.





The direct research and development expenses for the three months ended March 31, 2010 and 2009 were as follows:





Three Months Ended March 31,Technology

2010


2009Wound care & nanoparticle

$
7,500


$
31,383OraDiscTM


1,188



153,725Aphthasol® & other technologies


30,661



1,924Total

$
39,349


$
187,032








Selling, General and Administrative





Selling, general and administrative expenses totaled $816,888 for the three months ended March 31, 2010, including $122,948 in share-based compensation, compared to $2,224,619 for the three months ended March 31, 2009, which included $759,313 in share-based compensation.





The decrease of approximately $1,408,000 in selling, general and administrative expenses was primarily due to the Company’s restructured business plan continuing in 2010 which contributed to reduced costs associated with our sales and marketing efforts of approximately $636,000 due to lower head count and marketing expenses, a decrease of $635,000 in administrative compensation, lower consulting fees of $43,000, lower legal fees of $70,000, and decreased legal fees related to our patents of $56,000.  These expense decreases were partially offset by an increase in director fees of $16,000 and higher accounting fees of $14,000 related to the audit fees for 2009.





The net decrease in administrative compensation includes approximately $598,000 of share-based compensation expense that occurred in the first quarter of 2010 after giving effect to certain vesting accelerations of stock options and restricted stock, which were partially offset by certain stock option forfeitures and by savings of $77,000 relating to benefit forfeitures pursuant to the aforementioned separation agreement with our former chief executive officer.


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Amortization of Intangible Assets





Amortization of intangible assets expense totaled $246,516 for the three months ended March 31, 2010 as compared to $266,267 for the three months ended March 31, 2009.  The expense for each period consists primarily of amortization associated with our acquired patents.  There were no additional purchases of patents during the three months ended March 31, 2010 and 2009.





Depreciation





Depreciation expense totaled $49,990 for the three months ended March 31, 2010 as compared to $32,571 for the three months ended March 31, 2009.  The increase of approximately $17,000 is attributable to our purchase of additional equipment during 2009.





Interest and Miscellaneous Income





Interest and miscellaneous income totaled $121 for the three months ended March 31, 2010 as compared to $14,554 for the three months ended March 31, 2009.  The decrease of approximately $14,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2010.





Interest Expense





Interest expense totaled $7,988 for the three months ended March 31, 2010 and consisted of financing costs for our insurance policies.  There was no interest expense for the three months ended March 31, 2009.






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LIQUIDITY AND CAPITAL RESOURCES





We have funded our operations primarily through the public and private sales of convertible debentures and common stock.  Product sales, royalty payments, contract research, licensing fees and milestone payments from our corporate alliances have provided, and are expected in the future to provide, funding for operations. Our principal source of liquidity is cash and cash equivalents.  As of March 31, 2010 our cash and cash equivalents were $2,202,801 which is an increase of $268,624 as compared to our cash and cash equivalents at December 31, 2009 of $1,934,177.  Our working capital (current assets less current liabilities) was $2,599,316 at March 31, 2010 as compared to our working capital at December 31, 2009 of $2,615,079.





Consolidated Cash Flow Data


Three Months Ended March 31,Net Cash Provided by (Used in)

2010


2009Operating activities

$
(589,356
)

$
(2,414,035
)Investing activities


---



(14,177
)Financing activities


857,980



---Net (Decrease) Increase in cash and cash equivalents

$
268,624


$
(2,428,212
)






Operating Activities





For the three months ended March 31, 2010, net cash used in operating activities was $589,356.  The principal components of net cash used for the three months ended March 31, 2010 were our net loss of approximately $1,302,000, a decrease of $23,000 in deferred revenue due to amortization, and a decrease of $32,000 in accrued liabilities due primarily to the final installment payments on our insurance premium financing.  Our net loss for the three months ended March 31, 2010 included substantial non-cash charges of $451,000 in the form of share-based compensation, amortization of patents, and depreciation.  The aforementioned net cash used for the three months ended March 31, 2010 was partially offset by an increase in accounts payable of $167,000 due to timing of vendor payments, a decrease in prepaid expenses of $66,000 due to expense amortization, a decrease in inventory of $59,000 due to product sales, and a decrease in accounts receivable of $23,000 due to collection of a milestone due from ProStrakan.





For the three months ended March 31, 2009, net cash used in operating activities was $2,414,035.  The principal components of net cash used for the three months ended March 31, 2009 were our net loss of approximately $3,121,000, an increase in accounts receivable of $37,000 due an increase in AltrazealTM sales, a decrease of $21,000 in our royalty advance for Aphthasol® due to sales by our distributor, a decrease of $324,000 in accounts payable due to timing, a decrease of $47,000 in deferred revenue due to amortization, and a decrease of $102,000 in accrued liabilities primarily due to a $77,000 adjustment associated with the separation agreement with our former chief executive officer.  Our net loss for the three months ended March 31, 2009 included substantial non-cash charges in the form of share-based compensation, amortization of patents, and depreciation.  These non-cash charges totaled approximately $1,115,000, which included approximately $598,000 of share-based compensation expense after giving effect to certain accelerations of vesting of stock options and restricted stock which were partially offset by certain stock option forfeitures pursuant to the separation agreement with our former chief executive officer. The aforementioned net cash used for the three months ended March 31, 2009 was partially offset by a decrease in prepaid expenses of $117,000 due to expense amortization and a decrease in inventory of $6,000.





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Investing Activities





For the three months ended March 31, 2010, there were no investing activities.  For the first quarter of 2009, we purchased $14,177 of manufacturing equipment for AltrazealTM.





Financing Activities





Net cash provided by financing activities for the three months ended March 31, 2010 was $857,980 from the February Offering.  For the first quarter of 2009, there were no financing activities.





Liquidity





In July 2009, the Company restructured its operations in efforts to reduce operating expenses, optimize operations and to conserve the necessary cash to further the Company’s revised business plan.  These conservation efforts continue to be in effect as part of the Company’s strategic plan for 2010.





On February 2, 2010, we entered into a Securities Purchase Agreement with several institutional investors whereby we agreed to sell and issue to those investors 5,000,000 shares of our common stock, par value $0.001 per share.  On February 5, 2010, we closed the February Offering and received aggregate net proceeds of approximately $860,000, after deducting placement fees and offering expenses payable by us.





Rodman & Renshaw, LLC, acting as our exclusive placement agent, received a placement fee of $70,000 (equal to 7% of the aggregate gross proceeds of the February Offering) as well as compensation warrants to purchase up to an aggregate of 250,000 shares (equal to 5% of the aggregate number of shares sold in the February Offering) of our common stock at an exercise price of $0.25 per share (equal to 125% of the then public offering price per share).  The compensation warrants will expire on July 23, 2014 and will otherwise comply with Rule 5110 of the Financial Institutions Regulatory Authority.





The Company continues to seek a strategic relationship whereby the Company can more effectively maximize the revenue potential of AltrazealTM as well as continuing, with the assistance of an investment bank, to explore future fundraising using the Company’s effective shelf registration statement on Form S-3 or through the sale of non-core assets.





Under the Form S-3 shelf registration process, we may from time to time sell common stock, preferred stock, debt securities or warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities, in one or more offerings up to a total dollar amount of $25,000,000.






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As of March 31, 2010, we had cash and cash equivalents of approximately $2,200,000.  We expect to use our cash, cash equivalents, and investments on working capital and general corporate purposes, products, product rights, technologies, property and equipment, the payment of contractual obligations, and regulatory or sales milestones that may become due.  Our long-term liquidity will depend to a great extent on our ability to fully commercialize our AltrazealTM and OraDiscTM technologies; therefore we are continuing to search both domestically and internationally for opportunities that will enable us to continue our business.  At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth, if any, during 2010 and beyond, such as the degree of market acceptance, patent protection and exclusivity of our products, the impact of competition, the effectiveness of our sales and marketing efforts, and the outcome of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.





Based on the proceeds from the closing of the February Offering, our existing liquidity, the expected level of operating expenses, projected sales of our approved products combined with other revenues and interest income, we believe that we will be able to meet our working capital and capital expenditure requirements at least through the third quarter of 2011.  We do not expect any material changes in our capital expenditure spending during 2010.  However, we cannot be sure that our anticipated revenue growth will be realized or that we will generate significant positive cash flow from operations.





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, or other events affecting our operations will not result in the earlier depletion of our funds.  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.  Additionally, we may explore alternative financing sources for our business activities, including the possibility of loans from banks and public and/or private offerings of debt and equity securities; however we cannot be certain that funding will be available on terms acceptable to us, or at all.





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





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





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Contractual Obligations





The following table summarizes our outstanding contractual cash obligations as of March 31, 2010, which consists of a lease agreement for office and laboratory space in Addison, Texas which commenced on April 1, 2006 and a separation agreement with our former chief executive officer which was effective on March 9, 2009.





Payments Due By PeriodContractual Obligations

Total


Less Than

1 Year


2-3

Years


4-5

Years


After 5

YearsOperating lease

$
342,928


$
110,740


$
232,188


$
---


$
---Separation agreement


587,500



150,000



300,000



137,500



---Total contractual cash obligations

$
930,428


$
260,740


$
532,188


$
137,500


$
---








Off-Balance Sheet Arrangements





As of March 31, 2010, we did not have any off balance sheet arrangements.








Impact of Inflation





We have experienced only moderate price increases over the last three fiscal years under our agreements with third-party manufacturers as a result of raw material and labor price increases.  However, there can be no assurance that possible future inflation would not impact our operations.








CRITICAL ACCOUNTING POLICIES AND ESTIMATES





Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  Our critical accounting policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on March 24, 2010.  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 include, among other things, statements regarding the Company’s expected cash and cash equivalents and working capital being sufficient to fund our operations through the third quarter of 2011, and other statements, including the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years. The Company has included important factors in the cautionary statements included in its 2009 Annual Report on Form 10-K, particularly under “Risk Associated with our Business” that the Company believes could cause actual results to differ materially from any forward-looking statement.




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


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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.  Currently, we utilize Bank of America and Bank of America Investment Services, Inc. as our banking institutions.  At March 31, 2010 and December 31, 2009 our cash and cash equivalents totaled $2,202,801 and $1,934,177, respectively.  However, because deposits are maintained at these two 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 March 31, 2010 and at December 31, 2009.  As of March 31, 2010, two customers exceeded the 5% threshold, one customer with 75% and the other customer with 20%.  Three customers exceeded the 5% threshold at December 31, 2009, each customer with 67%, 11%, and 10%, respectively.  We believe that the customer accounts are fully collectible as of March 31, 2010.





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 March 31, 2010 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





The Company was served in April 2009 with a compliant in an action in the Supreme Court for New York County, State of New York.  The plaintiff, R.C.C. Ventures, LLC, alleges that it is due a fee for its performance in procuring or arranging a loan for the Company.  The Company denies all allegations of the complaint and any liability to the plaintiff and will vigorously defend against this claim.  The Company has also made a counterclaim against R.C.C. Ventures, LLC for breach of contract and is seeking monetary damages.








ITEM 1A – RISK FACTORS





There have been no material changes in our risk factors from those disclosed in our 2009 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 24, 2010.








ITEM 2 - UNREGISTERED SALE OF EQUITY SECURITIES





None.








ITEM 3 - DEFAULTS UPON SENIOR SECURITIES





None.






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





None.








ITEM 5: OTHER INFORMATION





None.








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 Amended31.2
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 Amended32.1*
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 200232.2*
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:  May 14, 2010

By:
/s/ Renaat Van den HooffRenaat Van den HooffChief Executive Officer and President(Principal Executive Officer)Date:  May 14, 2010

By:
/s/ Terrance K. WallbergTerrance K. WallbergChief Financial Officer and Vice President(Principal Financial and Accounting Officer)









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