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: March 31,
2009





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 oNon-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





The
number of outstanding shares of our common stock on May 15, 2008 was
65,582,532.





Table of Contents





ULURU Inc.





INDEX
TO FORM 10-Q





For
the Three Months Ended MARCH 31, 2009











PagePART I
            FINANCIAL INFORMATIONItem 1.
            Financial Statements
            3Condensed Consolidated Balance Sheets as of March 31, 2009
      (unaudited) and December 31, 2008
            3Condensed Consolidated Statements of Operations
      (unaudited) for the three months ended March 31, 2009 and
      2008
            4Condensed Consolidated Statements of Cash Flows
      (unaudited) for the three months ended March 31, 2009 and
      2008
            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
            22Item 4.
            Controls and Procedures
            22PART II
            OTHER INFORMATIONItem 1.
            Legal Proceedings
            23Item 1A.
            Risk Factors
            23Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            23Item 3.
            Defaults Upon Senior Securities
            23Item 4.
            Submission of Matters to a Vote of Security
      Holders
            23Item 5.
            Other Information
            23Item 6.
            Exhibits
            24Signatures
            24


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PART 1 – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS








ULURU Inc.


CONDENSED
CONSOLIDATED BALANCE SHEETS








March
      31, 2009
                  
                  
                  December
      31, 2008(Unaudited)
                  
                  
                  (Audited)ASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  5,139,376
                  
                  
                  $
                  7,567,588Accounts
      receivable
                  
                  
                  232,285
                  
                  
                  
                  195,562Inventory
                  
                  
                  1,073,789
                  
                  
                  
                  1,080,266Prepaid
      expenses and deferred charges
                  
                  
                  351,485
                  
                  
                  
                  468,625Total
      Current Assets
                  
                  
                  6,796,935
                  
                  
                  
                  9,312,041Property
      and Equipment, net
                  
                  
                  1,791,380
                  
                  
                  
                  1,828,040Other
      AssetsPatents,
      net
                  
                  
                  9,702,468
                  
                  
                  
                  9,965,169Deposits
                  
                  
                  20,819
                  
                  
                  
                  20,819Total
      Other Assets
                  
                  
                  9,723,287
                  
                  
                  
                  9,985,988TOTAL
      ASSETS
                  
                  $
                  18,311,602
                  
                  
                  $
                  21,126,069LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  1,118,033
                  
                  
                  $
                  1,441,986Accrued
      liabilities
                  
                  
                  546,591
                  
                  
                  
                  648,546Deferred
      revenue – current portion
                  
                  
                  99,974
                  
                  
                  
                  122,164Royalty
      advance
                  
                  
                  9,254
                  
                  
                  
                  30,417Total
      Current Liabilities
                  
                  
                  1,773,852
                  
                  
                  
                  2,243,113Long
      Term LiabilitiesDeferred
      revenue, net – less current portion
                  
                  
                  1,331,875
                  
                  
                  
                  1,356,526TOTAL
      LIABILITIES
                  
                  
                  3,105,727
                  
                  
                  
                  3,599,639COMMITMENTS
      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;65,582,532
      and 65,509,481 shares issued and outstanding at March 31, 2009 and
      December 31, 2008, respectively
                  
                  
                  65,583
                  
                  
                  
                  65,510Additional
      paid-in capital
                  
                  
                  44,858,798
                  
                  
                  
                  44,057,757Accumulated  (deficit)
                  
                  
                  (29,718,506
                  )
                  
                  
                  (26,596,837
                  )TOTAL
      STOCKHOLDERS’ EQUITY
                  
                  
                  15,205,875
                  
                  
                  
                  17,526,430TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  18,311,602
                  
                  
                  $
                  21,126,069The
      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 31,2009
                              
                              
                              2008REVENUESLicense
      fees
                              
                              $
                              24,651
                              
                              
                              $
                              13,771Royalty
      income
                              
                              
                              79,245
                              
                              
                              
                              75,574Product
      sales
                              
                              
                              32,643
                              
                              
                              
                              166,473Other
                              
                              
                              32,190
                              
                              
                              
                              ---Total
      Revenues
                              
                              
                              168,729
                              
                              
                              
                              255,818COSTS
      AND EXPENSESCost
      of goods sold
                              
                              
                              6,077
                              
                              
                              
                              137,614Research
      and development
                              
                              
                              775,418
                              
                              
                              
                              875,216Selling,
      general and administrative
                              
                              
                              2,224,619
                              
                              
                              
                              893,235Amortization
                              
                              
                              266,267
                              
                              
                              
                              269,185Depreciation
                              
                              
                              32,571
                              
                              
                              
                              20,272Total
      Costs and Expenses
                              
                              
                              3,304,952
                              
                              
                              
                              2,195,522OPERATING
      (LOSS)
                              
                              
                              (3,136,223
                              )
                              
                              
                              (1,939,704
                              )Other
      Income (Expense)Interest
      and miscellaneous income
                              
                              
                              14,554
                              
                              
                              
                              125,045Interest
      expense
                              
                              
                              ---
                              
                              
                              
                              ---(LOSS)
      BEFORE INCOME TAXES
                              
                              
                              (3,121,669
                              )
                              
                              
                              (1,814,659
                              )Income
      taxes
                              
                              
                              ---
                              
                              
                              
                              ---NET
      (LOSS)
                              
                              $
                              (3,121,669
                              )
                              
                              $
                              (1,814,659
                              )Basic
      and diluted net (loss) per common share
                              
                              $
                              (0.05
                              )
                              
                              $
                              (0.03
                              )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                              
                              
                              65,525,288
                              
                              
                              
                              62,429,586The
      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 31,2009
                            
                            
                            2008OPERATING
      ACTIVITIES :Net
      (loss)
                            
                            $
                            (3,121,669
                            )
                            
                            $
                            (1,814,659
                            )Adjustments
      to reconcile net (loss) to net cash (used in) provided by operating
      activities:Amortization
                            
                            
                            266,267
                            
                            
                            
                            269,185Depreciation
                            
                            
                            47,271
                            
                            
                            
                            20,272Share-based
      compensation for stock and options issued to employees
                            
                            
                            756,657
                            
                            
                            
                            167,147Share-based
      compensation for options issued to non-employees
                            
                            
                            44,457
                            
                            
                            
                            40,215Change
      in operating assets and liabilities:Accounts
      receivable
                            
                            
                            (36,723
                            )
                            
                            
                            (39,088
                            )Inventory
                            
                            
                            6,477
                            
                            
                            
                            90,501Prepaid
      expenses and deferred charges
                            
                            
                            117,141
                            
                            
                            
                            125,685Accounts
      payable
                            
                            
                            (323,953
                            )
                            
                            
                            172,538Accrued
      liabilities
                            
                            
                            (101,955
                            )
                            
                            
                            (78,647
                            )Deferred
      revenue
                            
                            
                            (46,841
                            )
                            
                            
                            586,229Royalty
      advance
                            
                            
                            (21,163
                            )
                            
                            
                            (20,526
                            )Total
                            
                            
                            707,634
                            
                            
                            
                            1,333,511Net
      Cash (Used in) Operating Activities
                            
                            
                            (2,414,035
                            )
                            
                            
                            (481,148
                            )INVESTING
      ACTIVITIES :Purchase
      of property and equipment
                            
                            
                            (14,177
                            )
                            
                            
                            (374,952
                            )Net
      Cash (Used in) Investing Activities
                            
                            
                            (14,177
                            )
                            
                            
                            (374,952
                            )FINANCING
      ACTIVITIES :Proceeds
      from stock option exercises
                            
                            
                            ---
                            
                            
                            
                            47,500Net
      Cash Provided by Financing Activities
                            
                            
                            ---
                            
                            
                            
                            47,500Net
      (Decrease) Increase in Cash
                            
                            
                            (2,428,212
                            )
                            
                            
                            (808,600
                            )Cash,  beginning
      of period
                            
                            
                            7,567,588
                            
                            
                            
                            13,979,828Cash,  end
      of period
                            
                            $
                            5,139,376
                            
                            
                            $
                            13,171,228Supplemental
      Schedule of Noncash Investing and Financing Activities :OTHER
      SUPPLEMENTAL INFORMATIONCash
      paid for interest
                            
                            $
                            ---
                            
                            
                            $
                            ---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 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
March 31, 2009 and the results of its operations for the three months ended
March 31, 2009 and 2008 and cash flows for the three months ended March 31, 2009
and 2008 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, 2009 are not necessarily indicative
of the results that may be expected for the year ending December 31,
2009.





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 30,
2009.





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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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NOTE
3.                      THE
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS





Recently Adopted Accounting
Standards





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, (“SFAS
No. 141R”).  SFAS No. 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, including goodwill, the liabilities
assumed and any non-controlling interest in the acquiree.  The
Statement also establishes disclosure requirements to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. SFAS No. 141R is effective for business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The impact of
adopting SFAS No. 141R will be dependent on the future business
combinations that the Company may pursue after its effective date.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of Accounting Research Bulletin
No. 51(“SFAS No. 160”), which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS No. 160 also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS
No. 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The adoption did not
have a material effect on our consolidated financial statements.





New Accounting Standards Not
Yet Adopted





In June
2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force
(“EITF”) 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities” (“FSP EITF 03-6-1”).  FSP EITF 03-6-1
clarifies that share-based payment awards that entitle their holders to receive
non-forfeitable dividends or dividend equivalents before vesting should be
considered participating securities.  The Company does not have grants
of restricted stock that contain non-forfeitable rights to
dividends.  FSP EITF 03-6-1 is effective for fiscal years beginning
after December 15, 2008 on a retrospective basis and the Company
anticipates adoption in the first quarter of fiscal 2010.  The Company
has not determined the potential impact, if any, the adoption of FSP EITF 03-6-1
could have on its calculation of EPS.








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





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





Revenues
                    
                    2009
                    
                    
                    %
                    
                    
                    2008
                    
                    
                    %Domestic
                    
                    $
                    53,807
                    
                    
                    
                    32
                    %
                    
                    $
                    187,000
                    
                    
                    
                    73
                    %International
                    
                    
                    114,922
                    
                    
                    
                    68
                    %
                    
                    
                    68,818
                    
                    
                    
                    27
                    %Total
                    
                    $
                    168,729
                    
                    
                    
                    100
                    %
                    
                    $
                    255,818
                    
                    
                    
                    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
                        
                        2009
                        
                        
                        2008Discus Dental, Inc.
                        Aphthasol®
                        
                        
                        13
                        %
                        
                        
                        73
                        %ProStrakan, Ltd.
                        Zindaclin®
                        
                        
                        34
                        %
                        
                        
                        22
                        %Hoffmann-LaRoche
                        OraDiscTM
                        
                        
                        19
                        %
                        
                        
                        *Meldex International
                        OraDiscTM B
                        
                        
                        14
                        %
                        
                        
                        *Total
                        
                        
                        
                        80
                        %
                        
                        
                        95
                        %*
      Sales from these customers were less than 10% of total sales for the
      period reported.








NOTE
5.                      INVENTORY





As of
March 31, 2009, 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, 2009 and
December 31, 2008:





Inventory
                        
                        March
      31, 2009
                        
                        
                        December
      31, 2008Raw materials
                        
                        $
                        112,002
                        
                        
                        $
                        113,916Work-in-progress
                        
                        
                        360,603
                        
                        
                        
                        344,921Finished goods
                        
                        
                        601,184
                        
                        
                        
                        621,429Total
                        
                        $
                        1,073,789
                        
                        
                        $
                        1,080,266





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NOTE
6.                      PROPERTY
AND EQUIPMENT





Property
and equipment, net, consisted of the following at March 31, 2009 and December
31, 2008:





Property and equipment
                  
                  March
      31, 2009
                  
                  
                  December
      31, 2008Laboratory equipment
                  
                  $
                  427,888
                  
                  
                  $
                  427,888Manufacturing equipment
                  
                  
                  1,483,223
                  
                  
                  
                  1,469,046Computers, office equipment, and furniture
                  
                  
                  150,589
                  
                  
                  
                  150,589Computer software
                  
                  
                  4,108
                  
                  
                  
                  4,108Leasehold improvements
                  
                  
                  95,841
                  
                  
                  
                  95,8412,161,649
                  
                  
                  
                  2,147,472Less: accumulated depreciation and amortization
                  
                  
                  (
      370,269
                  )
                  
                  
                  (
      319,432
                  )Property and equipment, net
                  
                  $
                  1,791,380
                  
                  
                  $
                  1,828,040





Depreciation
and amortization expense on property and equipment was $36,137 and $23,838 for
the three months ended March 31, 2009 and 2008, respectively.








NOTE
7.                      PATENTS





Patents,
net, consisted of the following at March 31, 2009 and December 31,
2008:





Patents
                  
                  March
      31, 2009
                  
                  
                  December
      31, 2008Patents
                  
                  $
                  13,354,938
                  
                  
                  $
                  13,354,938Less: accumulated amortization
                  
                  
                  (
      3,652,470
                  )
                  
                  
                  (
      3,389,769
                  )Patents, net
                  
                  $
                  9,702,468
                  
                  
                  $
                  9,965,169





Amortization
expense on patents was $262,701 and $265,619 for the three months ended March
31, 2009 and 2008, respectively.  The future aggregate amortization
expense for patent assets, remaining as of March 31, 2009, is as
follows:





Calendar
      Years
                    
                    Future
      Amortization
                      Expense2009 (Nine months)
                    
                    $
                    802,6892010
                    
                    
                    1,065,3902011
                    
                    
                    1,015,4362012
                    
                    
                    723,4282013
                    
                    
                    721,4522014 & Beyond
                    
                    
                    5,374,073Total
                    
                    $
                    9,702,468





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NOTE
8.                      STOCKHOLDERS’
EQUITY





Common
Stock





As of
March 31, 2009, the Company had 65,582,532 shares of common stock issued and
outstanding.  The Company issued 73,051 shares of common stock during
the three months ended March 31, 2009 pursuant to the vesting of restricted
stock awards.





Warrants





The
following table summarizes the warrants outstanding and the number of shares of
common stock subject to exercise as of March 31, 2009 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, 2008
                    
                    
                    2,795,000
                    
                    
                    $
                    1.07Warrants
      issued
                    
                    
                    ---
                    
                    
                    
                    ---Warrants
      exercised
                    
                    
                    ---
                    
                    
                    
                    ---Warrants
      cancelled
                    
                    
                    ---
                    
                    
                    
                    ---Balance
      as of March 31, 2009
                    
                    
                    2,795,000
                    
                    
                    $
                    1.07





Of the
warrant shares subject to exercise as of March 31, 2009, 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








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.


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Shares
used in calculating basic and diluted net loss per common share exclude these
potential common shares as of March 31, 2009 and December 31, 2008:





March
      31, 2009
                    
                    
                    December
      31, 2008Antidilutive
      warrants to purchase common stock
                    
                    
                    2,795,000
                    
                    
                    
                    2,795,000Antidilutive
      options to purchase common stock
                    
                    
                    3,321,000
                    
                    
                    
                    3,706,000Restricted
      vesting common stock
                    
                    
                    952,429
                    
                    
                    
                    154,918Total
                    
                    
                    7,068,429
                    
                    
                    
                    6,655,918








NOTE
10.                      SHARE
BASED COMPENSATION





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





We follow
the fair value recognition provisions of SFAS 123R, Share-Based Payments ("SFAS
No. 123(R)"), which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees, consultants, and
directors based on estimated fair values.  We use the Black-Scholes
option-pricing model to estimate the fair value of share-based awards with the
following weighted average assumptions for the three months ended March
31:





2009
                              
                              
                              2008Incentive Stock
      OptionsExpected
      volatility  (1)
                              
                              
                              ---
                              
                              
                              
                              67.1
                              %Risk-free
      interest rate %  (2)
                              
                              
                              ---
                              
                              
                              
                              2.70
                              %Expected
      term (in years)
                              
                              
                              ---
                              
                              
                              
                              5.0Dividend
      yield  (3)
                              
                              
                              ---
                              
                              
                              
                              0.0
                              %Forfeiture
      rate
                              
                              
                              ---
                              
                              
                              
                              3.8
                              %Nonstatutory Stock
      OptionsExpected
      volatility  (1)
                              
                              
                              73.7
                              %
                              
                              
                              67.1
                              %Risk-free
      interest rate %  (2)
                              
                              
                              1.79
                              %
                              
                              
                              2.71
                              %Expected
      term (in years)
                              
                              
                              3.0
                              
                              
                              
                              4.4Dividend
      yield  (3)
                              
                              
                              0.0
                              %
                              
                              
                              0.0
                              %Forfeiture
      rate
                              
                              
                              0.0
                              %
                              
                              
                              0.0
                              %





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





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





2009
                            
                            
                            2008Incentive Stock
      OptionsQuantity
                            
                            
                            ---
                            
                            
                            
                            1,255,000Weighted
      average fair value per share
                            
                            
                            ---
                            
                            
                            $
                            1.30Fair
      value
                            
                            
                            ---
                            
                            
                            $
                            1,631,404Nonstatutory Stock
      OptionsQuantity
                            
                            
                            75,000
                            
                            
                            
                            85,000Weighted
      average fair value per share
                            
                            $
                            0.14
                            
                            
                            $
                            1.25Fair
      value
                            
                            $
                            10,672
                            
                            
                            $
                            106,649








Stock Options (Incentive and
Nonstatutory)





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





2009
                    
                    
                    2008Research
      and development
                    
                    $
                    35,690
                    
                    
                    $
                    32,129Selling,
      general and administrative
                    
                    
                    594,141
                    
                    
                    
                    160,606Total
      share-based compensation expense
                    
                    $
                    629,831
                    
                    
                    $
                    192,735





At March
31, 2009, 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 $1,559,493.  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, 2008
                  
                  
                  3,706,000
                  
                  
                  $
                  2.37Granted
                  
                  
                  75,000
                  
                  
                  
                  0.29Forfeited/cancelled
                  
                  
                  (460,000
                  )
                  
                  
                  2.29Exercised
                  
                  
                  ---
                  
                  
                  
                  ---Outstanding
      as of March 31, 2009
                  
                  
                  3,321,000
                  
                  
                  $
                  2.33





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The
following table presents the stock option grants outstanding and exercisable as
of March 31, 2009:





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 Share955,000
                      
                      
                      $
                      0.89
                      
                      
                      
                      8.2
                      
                      
                      
                      365,624
                      
                      
                      $
                      0.95615,000
                      
                      
                      
                      1.57
                      
                      
                      
                      8.3
                      
                      
                      
                      350,000
                      
                      
                      
                      1.65931,000
                      
                      
                      
                      2.43
                      
                      
                      
                      6.2
                      
                      
                      
                      252,145
                      
                      
                      
                      2.43820,000
                      
                      
                      
                      4.47
                      
                      
                      
                      8.4
                      
                      
                      
                      424,062
                      
                      
                      
                      4.443,321,000
                      
                      
                      $
                      2.33
                      
                      
                      
                      7.7
                      
                      
                      
                      1,391,831
                      
                      
                      $
                      2.46








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 months ended March 31:





2009
                    
                    
                    2008Research
      and development
                    
                    $
                    6,111
                    
                    
                    $
                    3,658General
      and administrative
                    
                    
                    165,172
                    
                    
                    
                    10,969Total
      share-based compensation expense
                    
                    $
                    171,283
                    
                    
                    $
                    14,627





At March
31, 2009, 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 $265,835.





The
activity of our non-vested restricted stock awards is summarized as
follows:





Restricted
      stock
                  
                  
                  Weighted
      Average Grant Date Fair ValueOutstanding
      as of December 31, 2008
                  
                  
                  154,918
                  
                  
                  $
                  2.70Shares
      granted
                  
                  
                  871,530
                  
                  
                  
                  0.19Shares
      forfeited/cancelled
                  
                  
                  (968
                  )
                  
                  
                  2.31Shares
      exercised/issued
                  
                  
                  (73,051
                  )
                  
                  
                  3.37Outstanding
      as of March 31, 2009
                  
                  
                  952,429
                  
                  
                  $
                  0.35





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Summary of
Plans





2006
Equity Incentive Plan





In March
2006 our board of directors (“Board”) adopted and our stockholders approved our
2006 Equity Incentive Plan (“Incentive Plan”), which initially provided for the
issuance of up to 2 million shares of our Common Stock pursuant to stock option
and other equity awards.  At the annual meeting of the stockholders
held on May 8, 2007, our stockholders approved an amendment to the Incentive
Plan to increase from 2 million shares to 6 million shares the total number of
shares of Common Stock issuable under the Incentive Plan pursuant to stock
option and other equity awards.  As of March 31, 2009, we had granted
options to purchase 4,210,000 shares of Common Stock since the inception of the
Incentive Plan, of which 3,321,000 were outstanding at a weighted average
exercise price of $2.33 per share and we had granted awards for 1,029,242 shares
of restricted stock since the inception of the Incentive Plan, of which 952,429
were outstanding.  As of March 31, 2009, there were 1,598,520 shares
that remained 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.                      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, 2009:





Calendar
      Years
                  
                  Future
      Lease Expense2009 (Nine
      months)
                  
                  $
                  83,0552010
                  
                  
                  110,7402011
                  
                  
                  114,7552012
                  
                  
                  116,0942013
                  
                  
                  29,024Total
                  
                  $
                  453,668





Rent
expense for our operating lease amounted to $27,415 and $27,924 for the three
months ended March 31, 2009 and 2008, respectively.


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Employment
Agreements





As of
March 31, 2009 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 Mssrs. 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





On March
9, 2009 the Company entered into a separation agreement (the “Agreement”) with
Kerry P. Gray, the Company’s former Chief Executive Officer, whereby the Company
will provide certain benefits to Mr. Gray, including: (i) payments totaling
$400,000 during the initial 12 month period following the date of the Agreement;
(ii) commencing March 1, 2010 and continuing for a period of forty-eight (48)
months, the Company will 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 the date of
the Agreement the Company will 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 Agreement also provides that Mr. Gray
will serve as a consultant to the Company for up to two full days per month
through August 31, 2009.  Mr. Gray will not be paid for the
performance of such consulting services.  The Agreement contains a
mutual release of claims, certain stock lock-up provisions, and other standard
provisions. The Agreement also provides that Mr. Gray will continue as a
director of the Company.





Note Purchase
Agreement





On March
31, 2009, the Company entered into a Note Purchase Agreement with York Pharma,
plc, a public limited company incorporated under the laws of England and Wales
(“York”).  The Note Purchase Agreement provides for a secured
revolving credit facility of up to $1,000,000 (the “Facility”).  The
Facility is repayable, along with accrued interest, upon the earlier of (i) six
(6) months from the date of the first drawdown under the Agreement and (ii)
thirty (30) days after the termination of discussions with York regarding a
potential strategic transaction.  After the initial drawdown of
$500,000 which was made on April 2, 2009, any subsequent draw-downs under the
Facility will be at the sole and absolute discretion of the
Company.  All loans made to York by the Company pursuant to the Note
Purchase Agreement are secured by substantially all of the assets of York,
including York’s intellectual property.




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, 2009, 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
12.                      SUBSEQUENT
EVENTS





On April
6, 2009, the Company signed a non-binding offer to acquire all of the issued
share capital of York Pharma, plc (“York”), a public limited company
incorporated under the laws of England and Wales.  York is a skin care
company with operations or distribution networks throughout Europe with an
established revenue base.  A condition to the Company’s offer is that
the outstanding debt of York (currently being U.S. $6 million of unsecured
Convertible Loan Notes due in 2014, together with accrued interest thereon)
shall be converted into ordinary shares of York prior to the closing of any
offer by ULURU.  Under the indicative terms set out in the non-binding
offer letter, the Company would issue approximately 19.9 million shares of its
common stock to York shareholders and York shareholders (as enlarged by the
conversion of the outstanding debt) would own approximately 23% of the combined
company (subject to dilution if the Company were to issue additional shares of
common stock prior to a closing).














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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 2008 Annual
Report on Form 10-K, referred to as our 2008 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 September 2009.  Our actual results could
differ materially from those anticipated by such forward-looking information due
to competitive factors and other risks discussed in our 2008 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.





Recent
Developments





On April
6, 2009, the Company signed a non-binding offer to acquire all of the issued
share capital of York Pharma, plc, a public limited company incorporated under
the laws of England and Wales.  York is a skin care company with
operations or distribution networks throughout Europe with an established
revenue base.  A condition to the Company’s offer is that the
outstanding debt of York (currently being U.S. $6 million of unsecured
Convertible Loan Notes due in 2014, together with accrued interest thereon)
shall be converted into ordinary shares of York prior to the closing of any
offer by ULURU.  Under the indicative terms set out in the non-binding
offer letter, the Company would issue approximately 19.9 million shares of its
common stock to York shareholders and York shareholders (as enlarged by the
conversion of the outstanding debt) would own approximately 23% of the combined
company (subject to dilution if the Company were to issue additional shares of
common stock prior to a closing).




On March
31, 2009, the Company entered into a Note Purchase Agreement with York Pharma,
plc, a public limited company incorporated under the laws of England and
Wales.  The Note Purchase Agreement provides for a secured revolving
credit facility of up to $1,000,000.  The Facility is repayable, along
with accrued interest, upon the earlier of (i) six (6) months from the date of
the first drawdown under the Agreement and (ii) thirty (30) days after the
termination of discussions with York regarding a potential strategic
transaction.  After the initial drawdown of $500,000 which was made on
April 2, 2009, any subsequent draw-downs under the Facility will be at the sole
and absolute discretion of the Company.  All loans made to York by the
Company pursuant to the Note Purchase Agreement are secured by substantially all
of the assets of York, including York’s intellectual property.





Effective
March 9, 2009, Kerry P. Gray resigned as the President and Chief Executive
Officer of the Company.  Renaat Van den Hooff, the Company’s Executive
Vice President Operations, has been appointed to serve as President and Chief
Executive Officer.  Mr. Gray will remain with the Company as a member
of the Board of Directors and consultant, as described below.  In
connection with Mr. Gray’s departure, the Company and Mr. Gray entered into a
Separation Agreement (the “Agreement”).  Pursuant to the Agreement,
the Company will provide certain benefits to Mr. Gray, including: (i) payments
totaling $400,000 during the initial 12 month period following Mr. Gray’s
resignation; (ii) commencing March 1, 2010 and continuing for a period of
forty-eight (48) months, the Company will 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 Mr. Gray’s resignation the Company will 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 Agreement also
provides that Mr. Gray will serve as a consultant to the Company for up to two
full days per month through August 31, 2009.  Mr. Gray will not be
paid for the performance of such consulting services.  The Agreement
contains a mutual release of claims, certain stock lock-up provisions, and other
standard provisions.  The Agreement also provides that Mr. Gray will
continue as a director of the Company.





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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, 2009 and 2008





Total
Revenues





Revenues
were $168,729 for the three months ended March 31, 2009, as compared to revenues
of $255,818 for the three months ended March 31, 2008, and were comprised of
licensing fees of approximately $25,000 for two OraDiscTM licensing agreements,
$21,000 for domestic royalties from the sale of Aphthasol® by our distributor,
$58,000 of foreign royalties from the sale of Zindaclin®, $32,000 of sponsored
research projects, and product sales of approximately $33,000 for
AltrazealTM.





The first
quarter 2009 revenues represent an overall decrease of approximately $87,000
versus the comparative first quarter 2008 revenues, due primarily to a decrease
of $167,000 in Aphthasol® product sales as we did not sell any finished product
to our domestic distributor during the first quarter of 2009.  This
decrease was partially offset by increases in OraDiscTM related licensing fees of
$11,000, sponsored research of $32,000, and AltrazealTM product sales of
$33,000.





Costs and
Expenses





Cost
of Goods Sold





Cost of
goods sold for the three months ended March 31, 2009 was $6,077 and was
comprised entirely of costs associated with AltrazealTM.  The cost of
goods sold for the three months ended March 31, 2008 of $137,614 consisted
entirely of costs associated with the manufacture of Aphthasol® for our domestic
distributor.





Research
and Development





Research
and development expenses totaled $775,418 for the three months ended March 31,
2009, including $41,801 in share-based compensation, compared to $875,216 for
the three months ended March 31, 2008, which included $35,787 in share-based
compensation.  The decrease of $99,798 in research and development
expenses was due primarily to decreases in direct research costs of $169,000 and
clinical testing expenses for our wound care technologies of
$10,000.  These decreases were partially offset by an increase in
regulatory expense of $88,000 associated with consultants engaged for our
regulatory filings for AltrazealTM related products.


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The
direct research and development expenses for the three months ended March 31,
2009 and 2008 were as follows:





Three
      Months Ended March 31,Technology
                  
                  2009
                  
                  
                  2008Wound care & nanoparticle
                  
                  $
                  31,383
                  
                  
                  $
                  238,316OraDiscTM
                  
                  
                  153,725
                  
                  
                  
                  99,349Aphthasol® & other technologies
                  
                  
                  1,924
                  
                  
                  
                  18,294Total
                  
                  $
                  187,032
                  
                  
                  $
                  355,959





General
and Administrative





General
and administrative expenses totaled $2,224,619 for the three months ended March
31, 2009, including $759,313 in share-based compensation, compared to $893,235
for the three months ended March 31, 2008, which included $171,575 in
share-based compensation.  The increase of $1,331,384 in general and
administrative expenses was due primarily to costs associated with our sales and
marketing efforts of approximately $603,000, distribution services of
approximately $120,000, and a net increase of approximately $458,000 in
compensation costs.  The net increase in compensation cost includes
approximately $598,000 of share-based compensation expense 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 Separation Agreement
with our former chief executive officer.  Other factors affecting the
cost increase were additional expenses of $82,000 for legal services associated
with our patent filings and $70,000 for legal expense associated with SEC
filings, employment matters, and trademark filings.





Amortization





Amortization
expense totaled $266,267 for the three months ended March 31, 2009 as compared
to $269,185 for the three months ended March 31, 2008.  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 March 31, 2009.





Depreciation





Depreciation
expense totaled $32,571 for the three months ended March 31, 2009 as compared to
$20,272 for the three months ended March 31, 2008.  The increase of
approximately $12,000 is attributable to our purchase of additional equipment
during 2009.





Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $14,554 for the three months ended March 31,
2009 as compared to $125,045 for the three months ended March 31,
2008.  The decrease of approximately $110,000 is attributable to a
decrease in interest income due to lower cash balances and interest yields in
2009.





Interest
Expense





There was
no interest expense for the three months ended March 31, 2009 and March 31,
2008, respectively.


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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 March 31, 2009 our cash and cash equivalents were
$5,139,376 which is a decrease of $2,428,212 as compared to our cash and cash
equivalents at December 31, 2008 of $7,567,588.  Our working capital
(current assets less current liabilities) was $5,023,082 at March 31, 2009 as
compared to our working capital at December 31, 2008 of $7,068,927.





Consolidated
Cash Flow Data


Three
      Months Ended March 31,Net Cash Provided by (Used
    in)
                    
                    2009
                    
                    
                    2008Operating
      activities
                    
                    $
                    (2,414,035
                    )
                    
                    $
                    (481,148
                    )Investing activities
                    
                    
                    (14,177
                    )
                    
                    
                    (374,952
                    )Financing activities
                    
                    
                    ---
                    
                    
                    
                    47,500Net (Decrease) Increase in cash and cash equivalents
                    
                    $
                    (2,428,212
                    )
                    
                    $
                    (808,600
                    )





Operating
Activities





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 to the ramp-up of 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 vesting
accelerations 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.





For the
three months ended March 31, 2008, net cash used in operating activities was
$481,148.  The principal components of net cash used for the three
months ended March 31, 2008 were our net loss of approximately $1,815,000, an
increase in accounts receivable due to timing of Aphthasol sales to our domestic
distributor, a decrease in our royalty advance for Aphthasol® due to sales by
our distributor, and a decrease in accrued liabilities.  Our net loss
for the three months ended March 31, 2008 included substantial non-cash charges
in the form of share-based compensation, amortization of patents, and
depreciation.  These non-cash charges totaled approximately
$497,000.  The aforementioned net cash uses during the first quarter
of 2008 were partially offset by an increase in deferred revenues associated
with a $600,000 milestone payment due from our distributor for OraDiscTM B, an
increase in accounts payable due to timing, and decreases in prepaid expenses
and inventory.


Investing
Activities
 
 Net cash
used in investing activities during the three months ended March 31, 2009 was
$14,177 for the purchase of manufacturing equipment for
AltrazealTM.  For the first quarter of 2008, we purchased $374,952 for
manufacturing equipment for our AltrazealTM and OraDiscTM products.
 
 Financing
Activities
 
 For the
three months ended March 31, 2009, there were no financing
activities.  Net cash provided by financing activities during the
first quarter of 2008 was $47,500 from the exercise of stock options to purchase
50,000 shares of our common stock.






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Liquidity





As
discussed above, we had cash and cash equivalents totaling $5,139,376 as of
March 31, 2009.  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.  We also expect to use up to $1 million of cash related to our
funding of the line of credit advanced to York Pharma plc.  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 to expand our business.  At this time,
we cannot accurately predict the effect of certain developments on the rate of
sales growth during 2009 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
our current level of operations, projected sales of our existing products and
estimated sales from our product candidates, if approved, 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 September
2009. We do not expect any material changes in our capital expenditure spending
during 2009. 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.
 
 Note
Purchase Agreement
 
 On March
31, 2009, the Company entered into a Note Purchase Agreement with York Pharma,
plc, a public limited company incorporated under the laws of England and
Wales.  The Note Purchase Agreement provides for a secured revolving
credit facility of up to $1,000,000.  The Facility is repayable, along
with accrued interest, upon the earlier of (i) six (6) months from the date of
the first drawdown under the Agreement and (ii) thirty (30) days after the
termination of discussions with York regarding a potential strategic
transaction.  After the initial drawdown of $500,000 which was made on
April 2, 2009, any subsequent draw-downs under the Facility will be at the sole
and absolute discretion of the Company.  All loans made to York by the
Company pursuant to the Note Purchase Agreement are secured by substantially all
of the assets of York, including York’s intellectual property.
 
 Contractual
Obligations
 
 The
following table summarizes our outstanding contractual cash obligations as of
March 31, 2009, 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
                    
                    $
                    453,668
                    
                    
                    $
                    110,740
                    
                    
                    $
                    226,834
                    
                    
                    $
                    116,094
                    
                    
                    $
                    ---Separation agreement
                    
                    
                    945,833
                    
                    
                    
                    358,333
                    
                    
                    
                    300,000
                    
                    
                    
                    287,500
                    
                    
                    
                    ---Total contractual cash obligations
                    
                    $
                    1,399,501
                    
                    
                    $
                    469,073
                    
                    
                    $
                    526,834
                    
                    
                    $
                    403,594
                    
                    
                    $
                    ---
 
 Off-Balance
Sheet Arrangements
 
 As of
March 31, 2009, 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.


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CRITICAL ACCOUNTING POLICIES
AND ESTIMATES





Management’s
Discussion and Analysis of Financial Condition and Results of Operations
addresses our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”) for
interim financial information. The preparation of our financial statements
requires that we make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis, we
evaluate these estimates and judgments. We base our estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.  Our critical
account policies are summarized in our Annual Report on Form 10-K for the year
ended December 31, 2008.  We had no significant changes in our
critical accounting policies since our last annual report.








SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS





This
quarterly report on Form 10-Q (including documents incorporated by reference)
and other written and oral statements the Company makes from time to time
contain certain “forward-looking” statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. You can identify these forward-looking statements by the fact they use
words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”,
“project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of
similar meaning and expression in connection with any discussion of future
operating or financial performance. One can also identify forward-looking
statements by the fact that they do not relate strictly to historical or current
facts.  Such forward-looking statements are based on current
expectations and involve inherent risks and uncertainties, including factors
that could delay, divert or change any of them, and could cause actual outcomes
to differ materially from current expectations. These statements include, among
other things, statements regarding the Company’s expected cash and cash
equivalents and working capital being sufficient until September 2009, 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 2008 Annual Report on Form 10-K, particularly under
“Risk Associated with our Business”, as well as in Part II, Item 1A under “Risk
Factors” in this Quarterly Report on Form 10-Q, 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, 2009 and December 31, 2008 our cash and cash equivalents totaled
$5,139,376 and $7,567,588, 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, 2009 and at December 31, 2008.  As of March 31, 2009, three
customers exceeded the 5% threshold.  Two customers exceeded the 5%
threshold at December 31, 2008.  We believe that these customer
accounts are fully collectible as of March 31, 2009.





Foreign
Currency Exchange Rate Risk





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





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






ITEM 4:
CONTROLS AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures.
 
 Our chief
executive officer and our chief financial officer, after evaluating the
effectiveness of our “disclosure controls and procedures” (as defined in Rules
13a-14(c) of the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”)) as of the end of the period covered by this quarterly report, concluded
that the Company’s disclosure controls and procedures were (1) designed to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s chief executive
officer and chief financial officer by others within the Company, particularly
during the period in which this report was being prepared, and (2) effective, in
that they provide reasonable assurance that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms.
 
 Changes
in internal controls.
 
 There
were no changes in our internal controls over financial reporting during the
quarter ended March 31, 2009 that have materially affected, or are reasonably
likely to material affect, our internal controls over financial
reporting.






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PART II: OTHER INFORMATION








ITEM 1 - LEGAL
PROCEEDINGS





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 has
been no material changes in our risk factors from those disclosed in our 2008
Annual Report on Form 10-K, filed on March 30, 2009, except as
follows:





We may not complete the
proposed acquisition of York Pharma plc.





The
proposed acquisition of York Pharma plc by ULURU is documented only by a
non-binding letter of intent, pursuant to which neither the Company nor York is
bound to consummate the transaction.  We cannot assure that the
currently proposed acquisition of York will occur.





Although we expect that the
proposed acquisition of York Pharma plc 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 York
will depend, in part, on our ability to integrate the business of York 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 York.  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.





Funds extended to York in
connection with the Facility may not be repaid.





There is
no certainty that York will be able to repay the $500,000 that we loaned to York
on April 2, 2009 in connection with the line of credit Facility established
under the Note Purchase Agreement that we have entered into with
York.  Moreover, it is uncertain that York will be able to repay any
further amounts that we may loan to York under the Facility (such as the
remaining $500,000 still available under the
Facility).  Notwithstanding our security interest in York’s assets, we
may experience difficulties in trying to require repayment by York of such
amounts.








ITEM 2
- UNREGISTERED SALE OF EQUITY SECURITIES





None.








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
                Description10.25**
                Separation Agreement dated March 9, 2009 by and
      between ULURU Inc. and Kerry P. Gray.10.26**
                Note Purchase Agreement dated March 31, 2009 by and
      between ULURU Inc. and York Pharma, plc.31.1
                Certification of Principal Executive Officer of ULURU
      Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities
      Exchange Act of 1934, as 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.**
                Filed
      herewith.











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 15,
      2009
            
            By:
            /s/ Renaat Van den
    HooffRenaat
      Van den HooffChief
      Executive Officer and President(Principal
      Executive Officer)Date:  May 15,
    2009
            
            By:
            /s/ Terrance K. WallbergTerrance
      K. WallbergChief
      Financial Officer and Vice President(Principal
      Financial and Accounting Officer)









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