**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-KSB**
 
 [X]
        ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934
 For
        the
        fiscal year ended December 31, 2006.
 
 [_]
        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.**
 (Name
        of
        small business issuer in its charter)
 
 **Nevada**
              **41-2118656**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)
 
 **4452
        Beltway Dr.**
 **Addison,
        Texas 75001**
 (Address
        of principal executive offices) (Zip Code)
 
 Issuer's
        telephone number: **(214)
        905-5145**
 
 Securities
        registered under Section 12(b) of the Exchange Act:
 None
 
 --------------------
 
 Title
        of
        each class Name of each exchange on which registered
 None
 
 Securities
        registered under Section 12(g) of the Exchange Act:
 Common
        Stock, par value $0.001
 
 
 Check
        whether the issuer is not required to file reports pursuant to Section 13
        or
        15(d) of the Exchange Act. o
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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. [X]Yes [] No
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not contained in this form, and no disclosure will be
        contained, to the best of registrant's knowledge, in definitive proxy or
        information statements incorporated by reference in Part III of this Form
        10-KSB
        or any amendment to this Form 10-KSB. o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). [ ] Yes [X] No
 
 The
        issuer's revenues for its most recent fiscal year were $1,534,453
 
 The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        sold, or the average bid and asked price of such common equity, as of a
        specified date within the past 60 days. (See definition of affiliate in Rule
        12b-2 of the Exchange Act.) $71,216,691
        as of March 16, 2007
 
 The
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date. 61,407,876
        as of March 16, 2007
 
 
 
 **DOCUMENTS
        INCORPORATED BY REFERENCE**
 
 Portions
        of the proxy statement for the 2007 Annual Meeting of Stockholders are
        incorporated by reference in Part III, including, specifically, the Compensation
        Committee Report to be included in that proxy statement.
  *Table
            of Contents*
  
 
 **ULURU
                  Inc.**FORM
                  10-KSBFOR
                  THE YEAR ENDED DECEMBER 31, 2006**TABLE
                  OF CONTENTS****Item**
              
              **Page****Part
                  I**1.
              Description
                  of Business
              32.
              Description
                  of Property
              223.
              Legal
                  Proceedings
              234.
              Submission
                  of Matters to a Vote of Security
                  Holders
              23**Part
                  II**5.
              Market
                  for Registrant's Common Equity, Related Stockholder
                  Matters, and Small Business Issuer Purchases of Equity
                  Securities
              236.
              Management's
                  Discussion and Analysis or Plan of
                  Operation
              257.
              Financial
                  Statements
              358.
              Changes
                  in and Disagreements with Accountants on Accounting
                  and Financial Disclosure
              358A.
              Controls
                  and Procedures
              368B
              Other
                  Information
              36**Part
                  III**9.
              Directors,
                  Executive Officers, Promoters, Control Persons
                  and Corporate Governance; Compliance with Section 16(a) of the
                  Exchange
                  Act
              3710.
              Executive
                  Compensation
              4011.
              Security
                  Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              4112.
              Certain
                  Relationships and Related Transactions; Director
                  Independence
              4313.
              Exhibits
              4414.
              Principal
                  Accountant Fees and Services
              45Signatures
              46Index
                  to Financial Statements
              47Exhibit
                  Index
              48
 
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  **Part
        I**
 
 **ITEM
        1.****DESCRIPTION
        OF BUSINESS**
 
 When
        used
        in this Form 10-KSB, the words “expects”, “anticipates”, “estimates”, and
        similar expressions are intended to identify forward-looking statements.
        Such
        statements are subject to risks and uncertainties, including those set out
        below
        under “Risk Factors” that could cause actual results to differ materially from
        those projected. These forward-looking statements speak only as of the date
        hereof. We expressly disclaims any obligation or undertaking to release publicly
        any updates or revisions to any forward-looking statements contained herein
        to
        reflect any change in our expectations with regard thereto or any change
        in
        events, conditions or circumstances on which any statement is based. This
        discussion should be read together with the financial statements and other
        financial information included in this Form 10-KSB.
 
 **Organizational
        History**
 
 ULURU
        Inc. (hereinafter “we”, “our”, “us”, or the “Company”), was incorporated on
        September 17, 1987 under the laws of the State of Nevada, under the name
        Casinos
        of the World, Inc.
 
 On
        April
        16, 1993, the shareholders of the Company approved an amendment to the Articles
        of Incorporation, changing our name to Clean Way Corporation.
 
 On
        August
        19, 1999, the shareholders of the Company approved an amendment to the Articles
        of Incorporation, changing our name to Trader Secrets.com, Inc.
 
 On
        February 2, 2000, we entered into a Stock Acquisition Agreement with National
        Lighting Corp, an Internet company incorporated in British Columbia, Canada.
        National Lighting Corp. became a wholly owned subsidiary of the Company and
        changed its name to VOIP Technology Inc.
 
 On
        March
        13, 2000, the shareholders of the Company approved an amendment to the Articles
        of Incorporation, changing the name of the Company to VOIP Technology, Inc.
 
 On
        February 8, 2002, we sold all of the shares the Company held in its wholly
        owned
        subsidiary. Our charter was suspended (subject to reinstatement) by the State
        of
        Nevada in September 2001 for inactivity and failure to pay annual fees and
        costs. Its active status was reinstated on January 30, 2002, upon payment
        of all
        past due fees and costs.
 
 On
        January 30, 2002, the shareholders of the Company approved an amendment to
        the
        Articles of Incorporation, changing our name to Oxford Ventures, Inc.
 
 On
        December 2, 2003, we issued 8,625,000 shares pursuant to an Asset Purchase
        Agreement. On December 5, 2003, we declared a 2.25 stock dividend which
        increased the issued and outstanding shares from 10,528,276 common shares
        to
        34,216,897 common shares.
 
 On
        March
        1, 2004, we affected a 4 to 1 forward split, increasing our outstanding shares
        to 136,867,588.
 
 In
        2005,
        we relocated our principal executive offices from Mesa, Arizona to Omaha,
        Nebraska.
 
 On
        October 12, 2005, we entered into a merger agreement with ULURU Inc., a Delaware
        corporation ("ULURU Delaware") and Uluru Acquisition Corp., a wholly-owned
        Delaware subsidiary of ours formed on September 29, 2005. Under the terms
        of the
        agreement, Uluru Acquisition Corp. merged into ULURU Delaware, after ULURU
        Delaware had acquired the net assets of the topical component of Access
        Pharmaceuticals, Inc., under Section 368 (a) (1) (A) of the Internal Revenue
        Code.
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 As
        a
        result of the merger, we acquired all of the issued and outstanding shares
        of
        ULURU Delaware under a stock exchange transaction, and ULURU Delaware became
        a
        wholly-owned subsidiary of the Company, its legal parent. However, for financial
        accounting and reporting purposes, ULURU Delaware is treated as the acquirer
        and
        is consolidated with its legal parent, similar to the accounting treatment
        given
        in a recapitalization. For accounting presentation purposes only, our net
        assets
        are treated as being acquired by ULURU Delaware at fair value as of the date
        of
        the stock exchange transaction, and the financial reporting thereafter will
        not
        be that of a development stage enterprise, since ULURU Delaware had substantial
        earned revenues from planned operations. Both companies have a December 31
        year
        end.
 
 On
        March
        29, 2006, we filed a Certificate of Amendment to the Articles of Incorporation
        in Nevada. This Certificate of Amendment authorized a 400:1 reverse stock
        split
        to occur so that in exchange for every 400 outstanding shares of common stock
        that each shareholder had at the close of business on March 29, 2006, the
        shareholder would receive one share of common stock. As a result of this
        reverse
        stock split, our issued and outstanding common stock was reduced from
        340,396,081 pre-split shares of common stock to 851,011 post-split shares
        which
        includes an additional 21 shares for fractional interests.  The Certificate
        of Amendment also authorized a decrease in authorized shares of common stock
        from 400,000,000 shares, par value $.001 each, to 200,000,000, par value
        $.001
        each, and authorized up to 20,000 shares of Preferred Stock, par value
        $.001.
 
 On
        March
        31, 2006, we filed a Certificate of Amendment to the Articles of Incorporation
        in Nevada to change our name from "Oxford Ventures, Inc." to "ULURU
        Inc." On the
        same date, we moved our executive offices to Addison, Texas.
 
 On
        March
        31, 2006, we acquired, through our wholly-owned subsidiary (Uluru Acquisition
        Corp.) a 100% ownership interest in ULURU Delaware through a merger of ULURU
        Delaware into Uluru Acquisition Corp. We acquired ULURU Delaware in exchange
        for
        11,000,000 shares of our common stock. As a result of this merger, the former
        shareholders of ULURU Delaware owned an aggregate of 92.8% of the issued
        and
        outstanding shares of our common stock and the pre-merger shareholders of
        ours
        owned an aggregate of 7.2% of the issued and outstanding shares of our common
        stock.
 
 At
        the
        effective time of the Merger, the members of the ULURU Delaware Board of
        Directors holding office immediately prior to the merger became our directors,
        and all persons holding offices of ULURU Delaware at the effective time
        continued to hold the same offices of the surviving corporation. Simultaneously,
        ULURU Inc.'s directors and officers immediately prior to the closing of the
        Merger resigned from all of their respective positions with us.
 
 On
        May
        31, 2006, ULURU Delaware filed a Certificate of Amendment to its Certificate
        of
        Incorporation in Delaware to change its name from "Uluru Inc." to "ULURU
        Delaware Inc."
 
 **Our
        Business**
 
 We
        are an
        emerging pharmaceutical company focused on advancing topical drug delivery.
        We
        are a diversified pharmaceutical company engaged in the development of novel
        topically applied therapeutics based primarily on the adaptation of existing
        therapeutic agents using our proprietary drug delivery platforms.
 
 It
        is our
        objective to establish a market leadership position in the development of
        wound
        management, plastic surgery, and oral care products by utilizing innovative
        drug
        delivery solutions to improve the clinical outcome of patients and provide
        a
        pharmacoeconomic benefit to healthcare providers. To achieve this objective,
        we
        have acquired three patented topical delivery technologies and intend to
        make
        future acquisitions of technologies which offer the potential to improve
        patient
        outcomes in our areas of focus.
 
 From
        our
        three patented drug delivery technologies, we have three products which have
        been approved for marketing in various global markets.
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 The
        three
        drug delivery technologies are as follows:
 
 OraDiscTM
              *
              An
                  adhesive erodible film technology, for the delivery of medication
                  into the
                  oral cavity, onto the oral mucosal surfaces, onto the surface of
                  teeth or
                  to deliver drug into the systemic circulation through the mucosal
                  tissue.Nanoparticle
                  Aggregate
              *
              Nanoparticles
                  which aggregate in the presence of body fluids, to form a permanent
                  or
                  semi-permanent device which can be used as a wound or burn care
                  dressing
                  with or without a drug, in plastic surgery as a dermal filler and
                  implant
                  material and for ocular drug delivery.Residerm
              *
              A
                  technology for enhancing the penetration of drug into the skin
                  and forming
                  a drug reservoir to locally treat skin disorders and reduce the
                  systemic
                  absorption and side effects of the
                  drug.
 
 The
        three
        drug delivery technologies were purchased from Access Pharmaceuticals, Inc.
        in
        October 2005. The Asset Purchase Agreement provided for the assumption of
        all
        assets of the topical drug delivery business including inventories, capital
        equipment and intellectual property specifically identified with the purchased
        technologies.
 
 We
        plan
        to establish a sales and marketing organization to commercialize the acute
        wound
        management, burn care, and plastic surgery products. To achieve this objective,
        we plan on acquiring additional complimentary wound management and plastic
        surgery products. We plan to add additional products to our existing portfolio
        through the incorporation of numerous wound management compounds in our
        nanoparticle aggregate dressing.
 
 In
        addition to the three acquired drug delivery technologies, we have also
        purchased the patent for the use of amlexanox for the treatment of oral diseases
        including canker sores, and skin disorders.
 
 Discus
        Dental Inc., our United States licensee is currently marketing amlexanox
        5%
        paste in the United States, the first Food and Drug Administration (FDA)
        approved product for the treatment of canker sores, under the trade name
        Aphthasol®. In September 2001, ProStrakan Limited, our U.K. partner, received
        marketing authorization to market amlexanox 5% paste in the United Kingdom
        under
        the trade name Aptheal®. We have received marketing approval in 10 European
        Union countries following completion of the Mutual Recognition Procedure
        (MRP).
        Approval to market was granted in Austria, Germany, Greece, Finland, Ireland,
        Luxembourg, The Netherlands, Norway, Portugal and Sweden where marketing
        has yet
        to commence. We have developed a new formulation and delivery form for
        amlexanox. In 2004, we received approval of our new drug application for
        OraDiscTM A from the United States Food and Drug Administration (FDA). The
        OraDiscTM technology is a proprietary mucoadhesive patch that gradually erodes
        and releases an active ingredient when applied to the inside of the
        mouth.
 
 In
        addition, ProStrakan has used our patented Residerm® technology to develop a
        zinc clindamycin formulation for the treatment of acne. ProStrakan began
        marketing zinc clindamycin in the United Kingdom under the trade name Zindaclin
        in March 2002. The process to achieve marketing authorization for Zindaclin
        throughout Europe has now been completed, with approvals granted in most
        European Union countries including the new member states, where marketing
        activities are ongoing in the major markets including France, Germany, Spain
        and
        the product has been recently launched in Italy. Additionally, approvals
        have
        been granted in numerous international markets where the product has been
        launched and we anticipate that in the next twelve months approvals will
        be
        obtained in additional countries.
 
 **Products**
 
 We
        have
        used our drug delivery technology platforms to develop the following products
        and product candidates:
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 **Marketed
        Products**
 
 **Aphthasol®
        and Aptheal® (Amlexanox 5% Paste)**
 
 Amlexanox
        5% paste is the first drug approved by the FDA for the treatment of canker
        sores. A Phase IV clinical study conducted in Northern Ireland was completed
        in
        November 2000 to determine if the application of amlexanox 5% paste at the
        first
        sign or symptom of canker sores can abort ulcer formation or further accelerate
        healing. The results confirmed that amlexanox 5% paste was effective in
        preventing the formation of an ulcer when used at the first sign or symptom
        of
        the disease. If this label extension is approved by regulatory authorities,
        it
        would provide a major marketing opportunity to expand use of the product
        and to
        attract sufferers of canker sores to contact medical practitioners to request
        the product.
 
 The
        exclusive United States rights for the sale and marketing of Amlexanox 5%
        paste
        for the treatment of canker sores is licensed to Discus Dental Inc., a specialty
        dental company, who has assumed the marketing of the product. Recently, a
        direct
        to consumer television advertising campaign was initiated by Discus Dental
        to
        generate consumer awareness of the product. In addition to the paste product,
        the mucoadhesive erodible film, OraDiscTM A, which is approved by the FDA is also
        licensed to Discus Dental and is planned to be launched in late
        2007.
 
 The
        exclusive United Kingdom and Ireland rights for the sale and marketing of
        amlexanox 5% paste are licensed to ProStrakan. Under the terms of this license,
        ProStrakan was responsible for and assumed all costs associated with the
        regulatory approval process, including product registration, for amlexanox
        in
        the United Kingdom and the European Union. Additionally, ProStrakan will
        make
        milestone payments to us on achievement of performance objectives and we
        will
        receive royalties on product sales of amlexanox.
 
 An
        international out licensing program for amlexanox is ongoing. In addition
        to our
        license agreement with ProStrakan, licensing agreements have been executed
        Meda
        AB for Scandinavia, the Baltic states and Iceland; Laboratories Esteve for
        Spain, Portugal and Greece; Paladin Labs Inc. for Canada, EpiTan, Ltd. for
        Australia and New Zealand, and Orient Europharma, Co., Ltd for Taiwan,
        Hong-Kong, Philippines, Thailand and Singapore. Currently, Contract
        Pharmaceuticals Ltd. Canada is our contract manufacturer for all markets
        including the United States.
 
 ProStrakan
        received marketing authorization for amlexanox 5% paste in the United Kingdom
        in
        September 2001. ProStrakan’s trade name for the product is Aptheal®. Approval to
        market was granted in Austria, Germany, Greece, Finland, Ireland, Luxembourg,
        The Netherlands, Norway, Portugal, and Sweden. We plan to reapply for approvals
        in such countries, where registration has not been received including France,
        Italy and Belgium.
 
 The
        therapeutic Products Programme, the Canadian equivalent of the FDA, has issued
        a
        notice of compliance permitting the sale of amlexanox 5% paste, called Apthera®,
        in Canada to Paladin Labs Inc., our Canadian partner.
 
 **Residerm®
        A gel - Zindaclin® (Zinc-Clindamycin)**
 
 The
        complexing of zinc to a drug has the effect of enhancing the penetration
        of the
        drug into the skin and the retention to the drug in the skin. This phenomenon
        is
        called the "reservoir effect," and it makes zinc potentially effective for
        the
        delivery of dermatological drugs. We have a broad patent covering the use
        of
        zinc for such purposes. This technology is called ResiDerm®.
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 We
        have
        developed, in conjunction with ProStrakan, zinc clindamycin for the treatment
        of
        acne which is marketed under the trade name Zindaclin®. Topical acne drugs
        constitute an approximately $750 million per year market and clindamycin
        is a
        widely prescribed drug for the treatment of acne. Clinical studies indicate
        that
        the addition of zinc results in Zindaclin® being as effective applied once daily
        as the market leading clindamycin product applied twice daily. The activity
        of
        zinc and clindamycin, the improved stability of the product and the potential
        for zinc to overcome certain bacterial resistance are other potential product
        benefits.
 
 Pursuant
        to a license agreement, the exclusive worldwide rights for the manufacturing,
        sales and marketing of zinc clindamycin were granted to ProStrakan. Under
        the
        terms of the license agreement, ProStrakan agreed to fund the development
        costs
        of zinc clindamycin and any additional compounds developed utilizing our
        zinc
        patent, including product registrations. We share equally in all milestone
        payments received from the sublicensing of the compound. In addition, we
        receive
        a royalty on sales of products utilizing this technology.
 
 ProStrakan
        has sub-licensed to Crawford Healthcare Limited the marketing of zinc
        clindamycin in the United Kingdom which is sold under the trade name Zindaclin®.
        The process to achieve marketing authorization for Zindaclin® throughout Europe
        has now been completed, with approvals granted in most European Union countries
        including the new member states and several non-European countries. We
        anticipate that in the next twelve months approvals will be obtained in
        additional countries. Additionally, in December 2006 ProStrakan signed a
        Licensing Agreement to extend Crawford Healthcare Limited’s territory to include
        all EU countries except Spain and Italy, the United States, and the CEE
        countries. Additional licenses and or distribution agreements have been signed
        in other countries with other companies.
 
 **OraDiscTM
        A**
 
 Treatment
        of oral conditions generally relies upon the use of medications formulated
        as
        gels and pastes that are applied to lesions in the mouth. The duration of
        effectiveness of these medications is typically short because the applied
        dose
        is worn away through the mechanical actions of speaking, eating, and tongue
        movement, and is washed away by saliva flow. To address these problems, a
        novel,
        cost-effective, adhesive film product has been developed that is bioerodible.
        This technology, known as OraDiscTM, comprises a multi-layered film having an
        adhesive layer, a pre-formed film layer, and a coated backing
        layer.
 
 OraDiscTM
        A was initially developed as a drug delivery system to treat canker sores
        with
        the same active ingredient (amlexanox) that is used in Aphthasol®. We anticipate
        that higher amlexanox concentrations will be achieved at the disease site,
        increasing the effectiveness of the product.
 
 OraDiscTM
        A was approved by the FDA in September 2004.
 
 This
        successful development is an important technology milestone which supports
        the
        development of the OraDiscTM range of products. To achieve OraDiscTM A approval,
        in addition to performing the necessary clinical studies to prove efficacy,
        an
        irritation study, a 28-day safety study and drug distribution studies were
        conducted. Additionally, safety in patients down to 12 years of age was
        demonstrated. Patients in the 700 patient clinical study and 28-day safety
        study
        completed a survey which produced very positive results with regard to perceived
        effectiveness, ease of application, ability of the disc to remain in place
        and
        purchase intent. These data give strong support to our overall development
        program. The survey data confirms market research studies which indicate
        a
        strong patient acceptance of this delivery device.
 
 Now
        that
        OraDiscTM A is approved as a prescription product, in conjunction with our
        strategic partner Discus Dental Inc., we intend to move this product to market
        as rapidly as possible. Ultimately, it is or objective to move this product
        from
        prescription status to an over-the-counter consumer product. Our license
        agreement with Discus Dental Inc. includes significant milestone payments
        on the
        achievement of commercial milestones as well as royalty payments on product
        sales.
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 **Drug
        Development Strategy**
 
 Our
        strategy is to initially focus on utilizing our technology in combination
        with
        approved drug substances to develop novel patentable formulations of existing
        therapeutic products. We believe that this will expedite product development,
        both preclinical and clinical, and ultimately product approval. Where the
        size
        of the necessary clinical studies and cost associated with the later clinical
        development phases are significant, we plan to out-license to, or co-develop
        with, marketing partners.
 
 We
        will
        continue to expand our internal core capabilities of chemistry, formulation,
        analytical methods development and project management to maximize product
        opportunities in a timely manner. We will, however, contract the manufacturing
        scaleup, certain preclinical testing and product production to research
        organizations, contract manufacturers and strategic partners. There will
        be some
        instances where there may be significant cost savings for us to do some
        manufacturing scaleup (such as the OraDiscTM program). We will evaluate those
        instances and may do the work ourselves in order to achieve cost
        savings.
 
 We
        expect
        to form strategic alliances for product development and to out license the
        commercial rights to development partners for a number of our product
        development candidates. By forming strategic alliances with pharmaceutical
        companies, we believe that our technology can be more rapidly developed and
        successfully introduced into the marketplace.
 
 **Core
        Drug Delivery Technology Platforms**
 
 Our
        current drug delivery technology platforms for use in topical and oral disease
        are:
 
 §
              Mucoadhesive
                  Disc Technology;§
              Hydrogel
                  Nanoparticle Aggregate Technology; and§
              Residerm®
                  Topical Delivery Technology.
 
 **Mucoadhesive
        Disc Technology**
 
 Treatment
        of oral conditions generally relies upon the use of medications formulated
        as
        gels and pastes, which are applied to lesions in the mouth. The duration
        of
        effectiveness of these medications is typically short because the applied
        dose
        is worn away through the mechanical actions of speaking, eating, and tongue
        movement, and is washed away by saliva flow. To address these problems a
        novel
        erodible mucoadhesive film product was developed. This technology, known
        as
        OraDiscTM, comprises a multi-layered film having an adhesive layer, a pre-formed
        film layer, and a coated backing layer. Depending upon the intended application,
        a pharmaceutically active compound can be formulated within any of these
        layers,
        providing for a wide range of potential applications. The disc stays in place
        eroding over a period of time, so that subsequent removal is unnecessary.
        The
        disc delivers the drug over a period of time pre-determined by the rate of
        erosion of the disc, which is in turn controlled by the formulation of the
        backing layer.
 
 The
        adhesive film technology has multiple applications, including the localized
        delivery of drug to a mucosal site, use as a transmucosal delivery device
        for
        delivering drugs into the systemic circulation, and incorporating the drug
        in
        the outer layer for delivery into the oral cavity. The adhesive film will
        adhere
        to any wet mucosal surface, including the vagina, where this technology
        represents an opportunity to improve the delivery of drugs for female healthcare
        applications. Additionally, the adhesive film has been formulated to adhere
        to
        the surface of teeth for the delivery of dental health and cosmetic dental
        products.
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 OraDiscTM
        was initially developed as a drug delivery system to treat canker sores with
        the
        same active ingredient (amlexanox) that is used in Aphthasol®. We have continued
        to develop the OraDiscTM technology and we have generated or are exploring
        additional prototype drug delivery products, including those for pain palliation
        in the oral cavity, gingivitis, cough and cold treatment, breath freshener,
        tooth whitening and other dental applications. In addition, we plan to develop
        a
        range of prescription supportive care products including products for nausea
        and
        vomiting, pain and migraine.
 
 In
        addition, we have entered into a development agreement with BioProgress PLC
        to
        co-develop a product for the treatment of nausea and vomiting utilizing the
        mucoadhesive disc technology. Transmucosal delivery of a nausea product is
        designed to accelerate the onset of action of the product and provide sustained
        drug delivery over an extended period of time.
 
 **Hydrogel
        Nanoparticle Aggregate Technology**
 
 Our
        hydrogel nanoparticle aggregate technology provides unique materials with
        a
        broad range of properties and potential applications. While a conventional
        bulk
        hydrogel is an "infinite" network of loosely cross-linked hydrophilic polymers
        that swells when placed in polar solvents, we have discovered that a variety
        of
        unique biomaterials can be formed through the aggregation of hydrogel nano
        or
        micro-particles. This concept takes advantage of the inherent biocompatibility
        of hydrogels while overcoming problems with local stress and strain, which
        cause
        bulk hydrogels to shear. Unlike bulk hydrogels, these hydrogel particle
        aggregates are shape retentive, can be extruded or molded **** and
        offer
        properties suitable for use in a variety of in vivo medical devices, and
        in
        novel drug delivery systems, by providing tailored regions of drug incorporation
        and release. The polymers used in the hydrogel nanoparticle aggregate technology
        have been extensively researched by the academic and scientific community
        and
        commercialized into several major medical products. They are generally accepted
        as safe, non-toxic and biocompatible.
 
 Our
        Hydrogel Nanoparticle Aggregate Technology system has at its core a system
        of
        hydrogel nanoparticles composed of a polymer used in contact lenses and other
        FDA-approved implants. These nanoparticles aggregate immediately and
        irreversibly upon contact with physiological fluid such as wound exudate
        or
        blood forming a flexible, nonresorbable material termed an
        aggregate.
 
 Utilizing
        the proprietary technology three separate development platforms have been
        developed from the system:
 
 §
              Nanoparticle
                  Powder§
              Nanoparticle
                  Gel§
              Nanoparticle
                  Injectable Liquid
 
 Each
        of
        the systems is composed of nanoparticles which are stabilized to prevent
        aggregation prior to application to a physiological environment. We can control
        the particle size and chemical composition to affect the rate of aggregation,
        the final material properties such as water content and strength of the
        resulting aggregate, and if desired, the drug delivery profile for actives
        trapped in the aggregate.
 
 Controlled
        Release
 
 A
        major
        advantage of our nanoparticle aggregate technology lies in the ability to
        incorporate active drugs, and provide controlled release. Drug molecules
        can be
        trapped within interstitial spaces between particles during aggregate
        formation.
 
 The
        spaces between nanoparticles, or holes in the lattice, can be tailored by
        varying the nanoparticle size. Varying the nanoparticle size controls the
        diffusion rate. Particle size directly affects the size of the holes and
        channels in the aggregate lattice, which slow down or speed up the movement
        of a
        compound as it is released. By choosing specific nanoparticles and formulating
        these with a given active, we can tailor a drug delivery profile to a given
        application.
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 Nanoparticle
        Powder
 
 Our
        Nanoparticle Powder is composed of hydrogel nanoparticles that aggregate
        immediately and irreversibly upon contact with physiological fluid such as
        wound
        exudate forming a flexible, nonresorbable film. The film can be used to cover
        and protect a wound surface and can also be applied to provide specific drug
        delivery profiles to a wound or skin surface.
 
 The
        particles are applied as a dry material and immediately hydrate and form
        a
        uniform, intact film with adhesion to the moist wound interface. In addition,
        active pharmaceutical ingredients have been formulated with the powder to
        provide specific release profiles to wound surfaces. We intend to develop
        a
        range of products utilizing the nanoparticle powder in wound care
        including:
 
 §
              Powder
                  dressings for the coverage and protection of acute and chronic
                  wounds§
              Silver
                  containing dressings with antimicrobial properties§
              Hemostatic
                  agent containing dressings for acute trauma with blood
                  loss§
              Antibiotic
                  containing dressings for treatment of infection§
              Growth
                  factor containing dressings for management of chronic
                  wounds
 
 Nanoparticle
        Gel
 
 Our
        Nanoparticle Gel Technology is composed of hydrated hydrogel nanoparticles
        that
        are concentrated into a viscoelastic gel. The gel fills the shape of a container
        or envelope and the physical properties such as firmness or weight can be
        varied
        by changing the nanoparticle composition and concentrations. If the gel is
        exposed to physiological fluid such as a body cavity, the nanoparticles will
        aggregate immediately and irreversibly forming a flexible, nonresorbable
        hydrogel aggregate. This technology is currently under development as an
        advanced breast implant filler material inside of elastomeric shells. The
        application of the gel technology allows tuned aesthetic properties specific
        for
        patient needs, however the ability to form a bulk hydrogel aggregate in the
        event of a shell rupture provides a safer alternative to other commercial
        gel
        filler materials.
 
 Nanoparticle
        Injectable Liquid
 
 Our
        family of dermal fillers and facial sculpting products has three major
        components that form the injectable materials:
 
 §
              Hyaluronic
                  acid§
              Hydrogel
                  nanoparticles§
              Water
 
 Hyaluronic
        acid is a nonspecies-specific hydrophilic coiled polysaccharide that is present
        in all connective tissue. In dermal and sub-dermal tissue hyaluronic acid
        binds
        with water and provides volume and elasticity. As a dermal filler, hyaluronic
        acid provides superb biocompatibility, but applications of this material
        can be
        limiting because the material is resorbed in a four to six month period
        requiring repeat injections. Our dermal filler and sub-dermal filler can
        be
        composed of between 1 and 3% hyaluronic acid with several choices of molecular
        weight. Materials for facial sculpting containing a lower component of
        hyaluronic acid result in a higher degree of permanence.
 
 The
        nanoparticles immediately and irreversibly aggregate when injected into tissue
        and the porous matrix which forms provides the basis for cellular infiltration
        and acts as the anchor for collagen attachment. The resulting non-migrating
        porous scaffold is projected to have a residence time significantly greater
        than
        currently available commercial products.
 
 The
        nanoparticles aggregate within the hyaluronic acid matrix as the physiological
        pH and ionic strength serum saturates the material. As the hyaluronic acid
        is
        resorbed, the nanoparticle framework becomes the scaffold for cellular
        infiltration and collagen attachment providing a longer lasting filler
        architecture.
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 The
        nanoparticle aggregate system has been studied extensively for safety and
        for
        applications as a dermal filler and is under development to provide a family
        of
        soft tissue filler materials with different degrees of permanence provided
        by
        the biocompatible nanoparticle aggregate technology.
 
 **Residerm®
        Topical Delivery Technology**
 
 We
        have
        granted a license to ProStrakan for the development of compounds that utilize
        our zinc technology. The use of zinc ions to formulate topical products produces
        a reservoir of drug in the skin to increase the effectiveness of topically
        applied products and to reduce toxicity. There are many localized disease
        conditions, which are effectively treated by topical application of suitable
        pharmaceutical agents. In order for such treatments to be maximally effective,
        it is necessary that as much of the active agent as possible be absorbed
        into
        the skin where it can make contact with the disease condition in the dermal
        tissue without being lost by rubbing off on clothing or evaporation. At the
        same
        time, the agent must not penetrate so effectively through the skin that it
        is
        absorbed into the systematic circulation. This latter factor is especially
        important in order to minimize unwanted side effects of the pharmacologically
        active agent. The ideal vehicle for topically applied pharmaceuticals is
        one
        that can rapidly penetrate the skin and produce a "reservoir effect" in the
        skin
        or mucous membranes. Such a reservoir effect can be produced by complexing
        of
        suitable pharmaceutical agents with zinc ions, by an as yet unknown mechanism.
        This "reservoir effect" is defined as an enhancement of the skin or membrane’s
        ability to both absorb and retain pharmacological agents that is:
 
 §
              To
                  increase skin or membrane residence time;§
              To
                  decrease drug transit time; and§
              To
                  reduce transdermal flux.
 
 A
        number
        of compounds are known to enhance the ability of pharmacologically active
        agents
        to penetrate the skin, but have the disadvantage of allowing rapid systemic
        dispersion away from the site of disease. Many topical agents, such as the
        retinoids used in the treatment of acne, and methotrexate, used in the treatment
        of psoriases, are systemically toxic. There is, therefore, a need for a method
        of enhancing the ability of such agents to penetrate the skin so that a lesser
        total dosage may be used, while at the same time their ability to move from
        the
        skin to the systemic circulation is minimized.
 
 **Patents**
 
 We
        believe that the value of technology both to us and to our potential corporate
        partners is established and enhanced by our broad intellectual property
        positions. Consequently, we have already been issued and seek to obtain
        additional U.S. and foreign patent protection for products under development
        and
        for new discoveries. Patent applications are filed with the U.S. Patent and
        Trademark Office and, when appropriate, with the Paris Convention’s Patent
        Cooperation Treaty (PCT) Countries (most major countries in Western Europe
        and
        the Far East) for our inventions and prospective products.
 
 One
        U.S.
        and two European patents have been issued and one European patent is pending
        for
        the use of zinc as a pharmaceutical vehicle for enhancing the penetration
        and
        retention of drug in the skin. The patents and patent application cover the
        method of inducing a reservoir effect in skin and mucous membranes to enhance
        penetration and retention of topically applied therapeutic and cosmetic
        pharmacologically active agents. The patents and patent application also
        relate
        to topical treatment methods including such reservoir effect enhancers and
        to
        pharmaceutical compositions containing them.
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 We
        have
        one U.S. patent and have filed two U.S. and two European patent application
        for
        our OraDiscTM technology. This oral delivery vehicle potentially overcomes the
        difficulties encountered in using conventional paste and gel formulations
        for
        conditions in the mouth. Utilizing this technology, we anticipate that higher
        drug concentrations will be achieved at the disease site increasing the
        effectiveness of the product. Our
        patent applications cover the delivery of drugs through or into any mucosal
        surface and onto the surface of teeth. The patent and patent applications
        cover
        our ability to control the erosion time of the adhesive film and the subsequent
        drug release by adjusting the ratio of hydrophobic to hydrophilic polymers
        in
        the outer layer of the adhesive film.
 
 Four
        U.S.
        patent applications and four European patent applications for the hydrogel
        nanoparticle aggregate technology have been filed. The patent applications
        have
        a variety of potential applications, such as wound management, burn care,
        dermal
        fillers, breast implants, in-dwelling medicated catheters, medicated stents,
        artificial discs and tissue scaffold. In December 2006 we acquired
        from Access Pharmaceuticals Inc. all patent rights and all intellectual
        properties associated with the Nanoparticle Aggregate technology. We then
        licensed to Access certain specific applications of the Nanoparticle Aggregate
        technology which include use in intraperotinial, intratumoral, subscutaneous
        or
        intramuscular drug delivery implants, excluding dermal or facial
        fillers.
 
 We
        also
        have a patent for amlexanox and the worldwide rights, excluding Japan, for
        the
        use of amlexanox for oral and dermatological use.
 
 We
        have a
        strategy of maintaining an ongoing line of patent continuation applications
        for
        each major category of patentable carrier and delivery technology. By this
        approach, we are extending the intellectual property protection of our basic
        technology to cover additional specific carriers and agents, some of which
        are
        anticipated to carry the priority dates of the original
        applications.
 
 **Government
        Regulation**
 
 We
        are
        subject to extensive regulation by the federal government, principally by
        the
        FDA, and, to a lesser extent, by other federal and state agencies as well
        as
        comparable agencies in foreign countries where registration of products will
        be
        pursued. Although a number of our formulations incorporate extensively tested
        drug substances, because the resulting formulations make claims of enhanced
        efficacy and/or improved side effect profiles, they are expected to be
        classified as new drugs by the FDA.
 
 The
        Federal Food, Drug and Cosmetic Act and other federal, state and foreign
        statues
        and regulations govern the testing, manufacturing, safety, labeling, storage,
        shipping, and record keeping of our products. The FDA has the authority to
        approve or not approve new drug applications and inspect research, clinical
        and
        manufacturing records and facilities.
 
 Among
        the
        requirements for drug approval and testing is that the prospective
        manufacturer’s facilities and methods conform to the FDA’s Code of Good
        Manufacturing Practices regulations, which establish the minimum requirements
        for methods to be used in, and the facilities or controls to be used during,
        the
        production process. Such facilities are subject to ongoing FDA inspection
        to
        insure compliance.
 
 The
        steps
        required before a pharmaceutical product may be produced and marketed in
        the
        U.S. include preclinical tests, the filing of an Investigational New Drug
        application ("IND") with the FDA, which must become effective pursuant to
        FDA
        regulations before human clinical trials may commence, numerous phases of
        clinical testing and the FDA approval of a NDA prior to commercial
        sale.
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 Preclinical
        tests are conducted in the laboratory, usually involving animals, to evaluate
        the safety and efficacy of the potential product. The results of preclinical
        tests are submitted as part of the IND application and are fully reviewed
        by the
        FDA prior to granting the sponsor permission to commence clinical trials
        in
        humans. All trials are conducted under International Conference on
        Harmonization, or ICH, good clinical practice guidelines. All investigator
        sites
        and sponsor facilities are subject to FDA inspection to insure compliance.
        Clinical trials typically involve a three-phase process. Phase I, the initial
        clinical evaluations, consists of administering the drug and testing for
        safety
        and tolerated dosages. Phase II, involves a study to evaluate the effectiveness
        of the drug for a particular indication and to determine optimal dosage and
        dose
        interval and to identify possible adverse side effects and risks in a larger
        patient group. When a product is found safe, an initial efficacy is established
        in Phase II, it is then evaluated in Phase III clinical trials. Phase III
        trials
        consist of expanded multi-location testing for efficacy and safety to evaluate
        the overall benefit to risk index of the investigational drug in relationship
        to
        the disease treated. The results of preclinical and human clinical testing
        are
        submitted to the FDA in the form of an NDA for approval to commence commercial
        sales.
 
 The
        process of performing the requisite testing, data collection, analysis and
        compilation of an IND and an NDA is labor intensive and costly and may take
        a
        protracted time period. In some cases, tests may have to be redone or new
        tests
        instituted to comply with FDA requests. Review by the FDA may also take
        considerable time and there is no guarantee that an NDA will be approved.
        Therefore, we cannot estimate with any certainty the length of the approval
        cycle.
 
 We
        are
        also governed by other federal, state and local laws of general applicability,
        such as laws regulating working conditions, employment practices, as well
        as
        environmental protection.
 
 **Competition**
 
 The
        pharmaceutical industry is characterized by intense competition, rapid product
        development and technological change. Competition is intense among manufacturers
        of prescription pharmaceuticals and other product areas where we may develop
        and
        market products in the future. Most of our potential competitors are large,
        well
        established pharmaceutical, chemical or healthcare companies with considerably
        greater financial, marketing, sales and technical resources than are **** available
        to us. Additionally, many of our potential competitors have research and
        development capabilities that may allow such competitors to develop new or
        improved products that may compete with our product lines. Our potential
        products could be rendered obsolete or made uneconomical by the development
        of
        new products to treat the conditions to be addressed by our developments,
        technological advances affecting the cost of production, or marketing or
        pricing
        actions by one or more of our potential competitors. Our business, financial
        condition and results of operation could be materially adversely affected
        by any
        one or more of such developments. We cannot assure you that we will be able
        to
        compete successfully against current or future competitors or that competition
        will not have a material adverse effect on our business, financial condition
        and
        results of operations. Academic institutions, governmental agencies and other
        public and private research organizations are also conducting research
        activities and seeking patent protection and may commercialize products on
        their
        own or with the assistance of major health care companies in areas where
        we are
        developing product candidates. We are aware of certain developmental projects
        for products to treat or prevent certain disease targeted by us, the existence
        of these potential products or other products or treatments of which we are
        not
        aware, or products or treatments that may be developed in the future, may
        adversely affect the marketability of products developed by us.
 
 Products
        developed from our Residerm® technology will compete for a share of the existing
        market with numerous products which have become standard treatments recommended
        or prescribed by dermatologists. Zindaclin®, which is the first product
        developed utilizing our Residerm® technology, will compete with products
        including Benzamycin, marketed by a subsidiary of Sanofi-Aventis; Cleocin-T
        and
        a generic topical clindamycin, marketed by Pharmacia; Benzac, marketed by
        a
        subsidiary of L’Oreal; and Triaz, marketed by Medicis Pharmaceutical
        Corp.
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 Aphthasol®
        is the only clinically proven product to accelerate the healing of canker
        sores.
        There are numerous products, including prescription steroids such as Kenalog
        in
        OraBase, and many over-the-counter pain relief formulations that incorporate
        a
        local anesthetic used for the treatment of this condition.
 
 In
        the
        area of wound management, burn care, breast implants, and dermal fillers,
        which
        is the focus of our development activities, a number of companies are developing
        or evaluating new technology approaches. We expect that technological
        developments will occur at a rapid rate and that competition is likely to
        intensify as various alternative technologies achieve similar if not identical
        advantages.
  Even
        if
        our products are fully developed and receive the required regulatory approval,
        of which there can be no assurance, we believe that our products that require
        extensive sales efforts directed both at the consumer and the general
        practitioner can only compete successfully if marketed by a company having
        expertise and a strong presence in the therapeutic area or in direct to consumer
        marketing. Consequently, our business model is to form strategic alliances
        with
        major or regional pharmaceutical companies for products to compete in these
        markets. Management believes that our development risks should be minimized
        and
        that the technology potentially could be more rapidly developed and successfully
        introduced into the marketplace by adopting this strategy.
 
 We
        plan
        to establish a sales and marketing organization to commercialize our product
        developments in the acute wound management, burn care and plastic surgery
        market
        segments. Management believes that a small dedicated sales and marketing
        organization can effectively commercialize products in these specialized
        areas.
 
 **Employees**
 
 As
        of
        December 31, 2006, we have 11 full-time and 1 part-time employees. Of these
        employees, eight are directly engaged in or directly support research and
        development activities of which five have advanced scientific degrees, two
        directly support commercial and business development activities and two are
        in
        administrative positions. Our employees are not represented by a labor union
        and
        are not covered by a collective bargaining agreement. Management believes
        that
        we maintain good relations with our personnel. We compliment our internal
        expertise with external scientific consultants, university research laboratories
        and contract manufacturing organizations that specialize in various aspects
        of
        drug development including clinical development, regulatory affairs, toxicology,
        preclinical testing and process scale-up.
 
 **RISKS
        ASSOCIATED WITH OUR BUSINESS**
 
 ***We
        do not have significant operating revenue and we may never attain
        profitability.***
 
 Our
        ability to achieve significant revenue or profitability depends upon our
        ability
        to successfully complete the development of drug candidates, to develop and
        obtain patent protection and regulatory approvals for our drug candidates
        and to
        manufacture and commercialize the resulting drugs. We may not generate
        significant revenues or profits from the sale of these products in the future.
        Furthermore, we may not be able to ever successfully identify, develop,
        commercialize, patent, manufacture, obtain required regulatory approvals
        and
        market any additional products. Moreover, even if we do identify, develop,
        commercialize, patent, manufacture, and obtain required regulatory approvals
        to
        market additional products, we may not generate revenues or royalties form
        commercial sales of these products for a significant number of years, if
        at all.
        Therefore, our proposed operations are subject to all the risks inherent
        in the
        establishment of a new business enterprise. In the next few years, our revenues
        may be limited to minimal product sales and royalties, any amount that we
        receive under strategic partnerships and research or drug development
        collaborations that we may establish and, as a result, we may be unable to
        achieve or maintain profitability in the future or to achieve significant
        revenues to fund our operations.
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 ***A
        failure to obtain necessary additional capital in the future could jeopardize
        our operations.***
 
 We
        may
        not be able to obtain additional financing on terms acceptable to us, if
        at all.
        If we raise additional funds by selling equity securities, the relative equity
        ownership of our existing investors would be diluted and the new investors
        could
        obtain terms more favorable than previous investors. A failure to obtain
        additional funding to support our working capital and operating requirements
        could prevent us from making expenditures that are needed to allow us to
        maintain our operations.
 
 ***Our
        financial condition may limit our ability to borrow additional funds or to
        raise
        additional equity as may be required to fund our future operations.***
 
 Our
        ability to borrow funds or raise additional equity may be limited by our
        financial condition. Additionally, events such as our inability to continue
        to
        reduce our loss from continuing operations, could adversely affect our liquidity
        and our ability to attract additional funding as required.
 
 ***We
        may not successfully commercialize our drug
        candidates.***
 
 Our
        drug
        candidates are subject to the risks of failure inherent in the development
        of
        pharmaceuticals based on new technologies and our failure to develop safe,
        commercially viable drugs would severely limit our ability to become profitable
        or to achieve significant revenues. We may be unable to successfully
        commercialize our drug candidates because:
 
 §
              some
                  or all of our drug candidates may be found to be unsafe or ineffective
                  or
                  otherwise fail to meet applicable regulatory standards or receive
                  necessary regulatory clearances§
              our
                  drug candidates, if safe and effective, may be too difficult to
                  develop
                  into commercially viable drugs§
              it
                  may be difficult to manufacture or market our drug candidates in
                  a large
                  scale§
              proprietary
                  rights of third parties may preclude us from marketing our drug
                  candidates§
              third
                  parties may market superior or equivalent
                  drugs
 
 ***The
        success of our research and development activities, upon which we primarily
        focus, is uncertain.***
 
 Our
        primary focus is on our research and development activities and the
        commercialization of compounds covered by proprietary biopharmaceutical patents
        and applications. Research and development activities, by their nature, preclude
        definitive statements as to the time required and costs involved in reaching
        certain objectives. Actual research and development costs, therefore, could
        exceed budgeted amounts and estimated time frames may require extension.
        Cost
        overruns, unanticipated regulatory delays or demands, unexpected adverse
        side
        effects or insufficient therapeutic efficacy will prevent or substantially
        slow
        our research and development effort and our business could ultimately suffer.
 
 ***We
        may be unable to successfully develop, market, or commercialize our products
        or
        our product candidates without establishing new relationships and maintaining
        current relationships.***
 
 Our
        strategy for the research, development and commercialization of our potential
        pharmaceutical products may require us to enter into various arrangements
        with
        corporate and academic collaborators, licensors, licensees and others, in
        addition to our existing relationships with other parties. Specifically,
        we may
        need to joint venture, sublicense or enter other marketing arrangements with
        parties that have an established marketing capability or we may choose to
        pursue
        the commercialization of such products. Furthermore, if we maintain and
        establish arrangements or relationships with third parties, our business
        may
        depend upon the successful performance by these third parties of their
        responsibilities under those arrangements and relationships. For our
        commercialized products we currently rely upon the following relationships
        in
        the following marketing territories for sales, manufacturing and/or regulatory
        approval efforts:
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 Amlexanox
                  5% paste and OraDiscTMProStrakan
                  Ltd
              ·
              United
                  Kingdom and Ireland manufacturing marketing rights and regulatory
                  approval;Laboratories
                  Dr. Esteve SA
              ·
              Spain,
                  Portugal, and Greece manufacturing and marketing
                  rights;Meda,
                  AB
              ·
              Scandinavia,
                  the Baltic states and Iceland marketing rights;Paladin
                  Labs, Inc.
              ·
              Canada
                  manufacturing and marketing rights;EpiTan,
                  Ltd.
              ·
              Australia
                  and New Zealand for marketing rights;Orient
                  Europharma, Co., Ltd.
              ·
              Taiwan,
                  Hong-Kong, Malaysia, Philippines, Thailand and Singapore for marketing
                  rights;
 
 Zindaclin®
                  and Residerm®ProStrakan
                  Ltd.
              ·
              worldwide
                  manufacturing, marketing and regulatory approval
                  rights;Crawford
              ·
              sublicensed
                  United Kingdom, Ireland, continental Europe, and CEE countries
                  marketing
                  rights;Cantabria
              ·
              sublicensed
                  Italy and Spain marketing rights;EpiTan,
                  Ltd.
              ·
              sublicensed
                  Australia and New Zealand marketing rights;Hyundai
              ·
              sublicensed
                  Korea marketing rights;Taro
              ·
              sublicensed
                  Israel marketing rights;Biosintetica
              ·
              sublicensed
                  Brazil marketing rights;Five
                  companies for nine other smaller countries with sublicensed marketing
                  rights.
 
 Our
        ability to successfully commercialize, and market our products and product
        candidates could be limited if a number of these existing relationships were
        terminated.
 
 ***We
        may be unable to successfully manufacture our products and our product
        candidates in clinical quantities or for commercial purposes without the
        assistance of contract manufacturers, which may be difficult for us to obtain
        and maintain.***
 
 We
        have
        limited experience in the manufacture of pharmaceutical products in clinical
        quantities or for commercial purposes, and we may not be able to manufacture
        any
        new pharmaceutical products that we may develop. As a result, we have
        established, and in the future intend to establish, arrangements with contract
        manufacturers to supply sufficient quantities of products to conduct clinical
        trials and for the manufacture, packaging, labeling, and distribution of
        finished pharmaceutical products. If we are unable to contract for a sufficient
        supply of our pharmaceutical products on acceptable terms, our preclinical
        and
        human clinical testing schedule may be delayed, resulting in the delay of
        our
        clinical programs and submission of product candidates for regulatory approval,
        which could cause our business to suffer. Our business could suffer if there
        are
        delays or difficulties in establishing relationships with manufacturers to
        produce, package, label and distribute our finished pharmaceutical or other
        medical products, if any, and the market introduction and subsequent sales
        of
        such products. Moreover, contract manufacturers that we may use must adhere
        to
        current Good Manufacturing Practices, as required by FDA. In this regard,
        the
        FDA will not issue a pre-market approval or product and establishment licenses,
        where applicable, to a manufacturing facility for the products until the
        manufacturing facility passes a pre-approval plant inspection. If we are
        unable
        to obtain or retain third party manufacturing on commercially acceptable
        terms,
        we may not be able to commercialize our products as planned. Our potential
        dependence upon third parties for the manufacture of our products may adversely
        affect our ability to generate profits or acceptable profit margins and our
        ability to develop and deliver such products on a timely and competitive
        basis.
 
 Our
        amlexanox 5% paste is marketed in the United States as Aphthasol®. We selected
        Contract Pharmaceuticals Ltd. Canada as our manufacturer of amlexanox 5%
        paste
        and they manufactured product for the U.S. market and initial qualifying
        batches
        of the product for Europe.
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 Amlexanox
        5% paste was approved by regulatory authorities for sale in the United Kingdom.
        Approval to market was granted in Austria, Germany, Greece, Finland, Ireland,
        Luxembourg, The Netherlands, Norway, Portugal and Sweden. We licensed
        manufacturing rights to ProStrakan, Zambon, Esteve and Mipharm for specific
        countries in Europe. Contract Pharmaceuticals Ltd. Canada has also been selected
        as our European supplier of amlexanox 5% paste and this facility has been
        approved for European supply.
 
 We
        licensed our patents for worldwide manufacturing and marketing for Zindaclin®
and the ResiDerm® technology to ProStrakan Ltd. for the period of the patents.
        We receive a share of the licensing revenues and royalty on the sales of
        the
        product. ProStrakan has a contract manufacturer for Zindaclin® which is a
        European Union approved facility. Zindaclin® was approved in the United Kingdom
        and throughout most European Union countries including new member states
        and
        several non-European markets. Zindaclin® is marketed in UK, France, Germany,
        Ireland, Belgium, Cyprus, Israel, Australia, New Zealand, Spain, and Korea.
        Zindaclin® is under review in other markets including Brazil, Italy, and others.
 
 We
        received regulatory approval from the FDA to manufacture and sell OraDiscTM A in
        September 2004 and are proceeding with our manufacturing and marketing plans
        for
        2007.
 
 ***We
        are subject to extensive governmental regulation which increases our cost
        of
        doing business and may affect our ability to commercialize any new products
        that
        we may develop.***
 
 The
        FDA
        and comparable agencies in foreign countries impose substantial requirements
        upon the introduction of pharmaceutical products through lengthy and detailed
        laboratory, preclinical and clinical testing procedures and other costly
        and
        time-consuming procedures to establish their safety and efficacy. Some of
        our
        drugs and drug candidates require receipt and maintenance of governmental
        approvals for commercialization. Preclinical and clinical trials and
        manufacturing of our drug candidates will be subject to the rigorous testing
        and
        approval processes of the FDA and corresponding foreign regulatory authorities.
        Satisfaction of these requirements typically takes a significant number of
        years
        and can vary substantially based upon the type, complexity and novelty of
        the
        product. The status of our principal products are as follows:
 
 §
              5%
                  amlexanox paste is an approved product for sale in the US (Aphthasol®);
                  approved in the UK, Canada, and ten EU countries but not yet
                  sold§
              Zindaclin®
                  is an approved product for sale in the UK and extensively throughout
                  European Union countries; in the approval process in other markets§
              OraDiscTM
                  A is an approved product for sale in the U.S. as of September 2004;
                  we are
                  completing steps for manufacturing and sale of the product in 2007§
              Our
                  other OraDiscTM products are currently in the development phase§
              Nanoparticle
                  aggregate product candidates are in the preclinical
                  phase.
 
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 ***Due
        to the time consuming and uncertain nature of the drug candidate development
        process and the governmental approval process described above, we cannot
        assure
        you when we, independently or with our collaborative partners, might submit
        a
        New Drug Application (“NDA”), or a 510(K), for FDA or other regulatory
        review.***
 
 Government
        regulation also affects the manufacturing and marketing of pharmaceutical
        products. Government regulations may delay marketing of our potential drugs
        for
        a considerable or indefinite period of time, impose costly procedural
        requirements upon our activities and furnish a competitive advantage to larger
        companies or companies more experienced in regulatory affairs. Delays in
        obtaining governmental regulatory approval could adversely affect our marketing
        as well as our ability to generate significant revenues from commercial sales.
        Our drug candidates may not receive FDA or other regulatory approvals on
        a
        timely basis or at all. Moreover, if regulatory approval of a drug candidate
        is
        granted, such approval may impose limitations on the indicated use for which
        such drug may be marketed. Even if we obtain initial regulatory approvals
        for
        our drug candidates, our drugs and our manufacturing facilities would be
        subject
        to continual review and periodic inspection, and later discovery of previously
        unknown problems with a drug, manufacturer or facility may result in
        restrictions on the marketing or manufacture of such drug, including withdrawal
        of the drug from the market. The FDA and other regulatory authorities
        stringently apply regulatory standards and failure to comply with regulatory
        standards can, among other things, result in fines, denial or withdrawal
        of
        regulatory approvals, product recalls or seizures, operating restrictions
        and
        criminal prosecution.
 
 ***The
        uncertainty associated with preclinical and clinical testing may affect our
        ability to successfully commercialize new
        products.***
 
 Before
        we
        can obtain regulatory approvals for the commercial sale of our potential
        drugs,
        the drug candidates will be subject to extensive preclinical and clinical
        trials
        to demonstrate their safety and efficacy in humans. In this regard, for example,
        adverse side effects can occur during the clinical testing of a new drug
        on
        humans which may delay ultimate FDA approval or even lead us to terminate
        our
        efforts to develop the drug for commercial use. Companies in the biotechnology
        industry have suffered significant setbacks in advanced clinical trials,
        even
        after demonstrating promising results in earlier trials. The failure to
        adequately demonstrate the safety and efficacy of a drug candidate under
        development could delay or prevent regulatory approval of the drug candidate.
        A
        delay or failure to receive regulatory approval for any of our drug candidates
        could prevent us from successfully commercializing such candidates and we
        could
        incur substantial additional expenses in our attempts to further develop
        such
        candidates and obtain future regulatory approval.
 
 ***We
        may incur substantial product liability expenses due to the use or misuse
        of our
        products for which we may be unable to obtain insurance
        coverage.***
 
 Our
        business exposes us to potential liability risks that are inherent in the
        testing, manufacturing and marketing of pharmaceutical products. These risks
        will expand with respect to our drug candidates, if any, that receive regulatory
        approval for commercial sale, and we may face substantial liability for damages
        in the event of adverse side effects or product defects identified with any
        of
        our products that are used in clinical tests or marketed to the public. We
        generally procure product liability insurance for drug candidates that are
        undergoing human clinical trials. Product liability insurance for the
        biotechnology industry is generally expensive, if available at all, and as
        a
        result, we may be unable to obtain insurance coverage at acceptable costs
        or in
        sufficient amount in the future, if at all.
 
 We
        may be
        unable to satisfy any claims for which we may be held liable as a result
        of the
        use or misuse of products which we have developed, manufactured or sold and
        any
        such product liability could adversely affect our business, operating results
        or
        financial condition.
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 ***We
        may incur significant liabilities if we fail to comply with stringent
        environmental regulations.***
 
 Our
        research and development processes involve the controlled use of hazardous
        materials. We are subject to a variety of federal, state and local governmental
        laws and regulations related to the use, manufacture, storage, handling,
        and
        disposal of such material and certain waste products. Although we believe
        that
        our activities and our safety procedures for storing, using, handling and
        disposing of such material comply with the standards prescribed by such laws
        and
        regulations, the risk of accidental contamination or injury from these materials
        cannot be completely eliminated. In the event of such accident, we could
        be held
        liable for any damages that result and any such liability could exceed our
        resources.
 
 ***Intense
        competition may limit our ability to successfully develop and market commercial
        products.***
 
 The
        biotechnology and pharmaceutical industries are intensely competitive and
        subject to rapid and significant technological change. Our competitors in
        the
        United States and elsewhere are numerous and include, among others, major
        multinational pharmaceutical and chemical companies, specialized biotechnology
        firms and universities and other research institutions.
 
 The
        following products may compete with Residerm® products:
 
 §
              Benzamycin,
                  marketed by a subsidiary of Sanofi-Aventis;§
              Cleocin-T
                  and a generic topical clindamycin, marketed by Pfizer;§
              Benzac,
                  marketed by Galderma; and§
              Triaz,
                  marketed by Medicis Pharmaceutical
                  Corp.
 
 Prescription
        steroids such as Kenalog in OraBase, developed by Bristol-Myers Squibb, may
        compete with our commercialized Aphthasol® product. OTC products including
        Orajel (Del Laboratories) and Anbesol (Wyeth Consumer Healthcare) also compete
        in the aphthous ulcer market.
 
 In
        the
        area of wound management, burn care, breast implants, and dermal fillers,
        which
        is the focus of our development activities, a number of companies are developing
        or evaluating new technology approaches. We expect that technological
        developments will occur at a rapid rate and that competition is likely to
        intensify as various alternative technologies achieve similar if not identical
        advantages.
 
 Many
        of
        these competitors have and employ greater financial and other resources,
        including larger research and development, marketing and manufacturing
        organizations. As a result, our competitors may successfully develop
        technologies and drugs that are more effective or less costly than any that
        we
        are developing or which would render our technology and future products obsolete
        and noncompetitive.
 
 In
        addition, some of our competitors have greater experience than we do in
        conducting preclinical and clinical trials and obtaining FDA and other
        regulatory approvals for drug candidates more rapidly than we do. Companies
        that
        complete clinical trials, obtain required regulatory agency approvals and
        commence commercial sale of their drugs before their competitors may achieve
        a
        significant competitive advantage. Drugs resulting from our research and
        development efforts or from our joint efforts with collaborative partners
        therefore may not be commercially competitive with our competitors’ existing
        products or products under development.
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 ***Our
        ability to successfully develop and commercialize our drug candidates will
        substantially depend upon the availability of reimbursement funds for the
        costs
        of the resulting drugs and related treatments.***
 
 The
        successful commercialization of, and the interest of potential collaborative
        partners to invest in the development of our drug candidates, may depend
        substantially upon the reimbursement at acceptable levels of the costs of
        the
        resulting drugs and related treatments from government authorities, private
        health insurers and other organizations, including health maintenance
        organizations, or HMOs. To date, the costs of our marketed products Aphthasol®
and Zindaclin® generally have been reimbursed at acceptable levels; however, the
        amount of such reimbursement in the United States or elsewhere may be decreased
        in the future or may be unavailable for any drugs that we may develop in
        the
        future. Limited reimbursement for the cost of any drugs or devices that we
        develop may reduce the demand for, or price of such drugs or devices, which
        would hamper our ability to obtain collaborative partners to commercialize
        our
        drugs or devices, or to obtain a sufficient financial return on our own
        manufacture and commercialization of any future drugs or devices.
 
 ***The
        market may not accept any pharmaceutical products that we successfully
        develop.***
 
 The
        drugs
        and devices that we are attempting to develop may compete with a number of
        well-established drugs and devices manufactured and marketed by major
        pharmaceutical companies. The degree of market acceptance of any drugs or
        devices developed by us will depend on a number of factors, including the
        establishment and demonstration of the clinical efficacy and safety of our
        drug
        candidates, the potential advantage of our drug candidates over existing
        therapies and the reimbursement policies of government and third-party payers.
        Physicians, patients or the medical community in general may not accept or
        use
        any drugs or devices that we may develop independently or with our collaborative
        partners and if they do not, our business could suffer.
 
 ***Trends
        toward managed health care and downward price pressured on medical products
        and
        services may limit our ability to profitably sell any drugs that we any
        develop.***
 
 Lower
        prices for pharmaceutical products may result from:
 
 §
              Third-party
                  payers’ increasing challenges to the prices charged for medical products
                  and services§
              The
                  trend toward managed health care in the Unites States and the concurrent
                  growth of HMOs and similar organizations that can control or significantly
                  influence the purchase of healthcare services and
                  products§
              Legislative
                  proposals to reform healthcare or reduce government insurance
                  programs
 
 The
        cost
        containment measures that healthcare providers are instituting, including
        practice protocols and guidelines and clinical pathways, and the effect of
        any
        healthcare reform, could limit our ability to profitably sell any drugs or
        devices that we may successfully develop. Moreover, any future legislation
        or
        regulation, if any, relating to the healthcare industry or third-party coverage
        and reimbursement, may cause our business to suffer.
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 ***We
        may not be successful in protecting our intellectual property and proprietary
        rights.***
 
 Our
        success depends, in part, on our ability to obtain U.S. and foreign patent
        protection for our drug and device candidates and processes, preserve our
        trade
        secrets and operate our business without infringing the proprietary rights
        of
        third parties. Legal standards relating to the validity of patents covering
        pharmaceutical and biotechnology inventions and the scope of claims made
        under
        such patents are still developing and there is no consistent policy regarding
        the breadth of claims allowed in biotechnology patents. The patent position
        of a
        biotechnology firm is highly uncertain and involves complex legal and factual
        questions. We cannot assure you that any existing or future patents issued
        to,
        or licensed by, us will not subsequently be challenged, infringed upon,
        invalidated or circumvented by others. As a result, although we, together
        with
        our subsidiaries, are the owner of U.S. patents and to U.S. patent applications
        now pending, and European patents and European patent applications, we cannot
        assure you that any additional patents will issue from any of the patent
        applications owned by us. Furthermore, any rights that we may have under
        issued
        patents may not provide us with significant protection against competitive
        products or otherwise be commercially viable.
 
 Our
        patents for the following technologies expire in the years and during the
        date
        ranges indicated below:
 
 §
              Zindaclin®
                  and Residerm® between 2007 and 2020§
              5%
                  amlexanox paste in 2011§
              Ora
                  DiscTM in 2021§
              Hydrogel
                  Nanoparticle Aggregate in 2022
 
 In
        addition, patents may have been granted to third parties or may be granted
        covering products or processed that are necessary or useful to the development
        of our drug candidates. If our drug candidates or processes are found to
        infringe upon the patents or otherwise impermissibly utilize the intellectual
        property of others, our development, manufacture and sale of such drug
        candidates could be severely restricted or prohibited. In such event, we
        may be
        required to obtain licenses from third parties to utilize the patents or
        proprietary rights of others. We cannot assure you that we will be able to
        obtain such licenses on acceptable terms, if at all. If we become involved
        in
        litigation regarding our intellectual property rights or the intellectual
        property rights of others, the potential cost of such litigation, regardless
        of
        the strength of our legal position, and the potential damages that we could
        be
        required to pay could be substantial.
 
 ***Our
        business could suffer if we lose the services of, or fail to attract, key
        personnel.***
 
 We
        are
        highly dependent upon the efforts of our senior management and scientific
        team,
        including our President and Chief Executive Officer, Kerry P. Gray. The loss
        of
        the services of one or more of these individuals could delay or prevent the
        achievement of our research, development, marketing, or product
        commercialization objectives. While we have an employment agreement with
        Mr.
        Gray his employment may be terminated at any time. Mr. Gray’s agreement expires
        in three years and is extendable each year thereafter on the anniversary
        date.
        We do not maintain any "key-man" insurance policies on any of our key employees
        and we do not intend to obtain such insurance. In addition, due to the
        specialized scientific nature of or business, we are highly dependent upon
        our
        ability to attract and retain qualified scientific and technical personnel.
        In
        view of the stage of our development and our research and development programs,
        we have restricted our hiring to research scientists and a small administrative
        staff and we have made only limited investments in manufacturing, production,
        sales or regulatory compliance resources. There is intense competition among
        major pharmaceutical and chemical companies, specialized biotechnology firms
        and
        universities and other research institutions for qualified personnel in the
        areas of our activities, however, and we may be unsuccessful in attracting
        and
        retaining these personnel.
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 ***Provisions
        of our charter documents could discourage an acquisition of our company that
        would benefit our stockholders and may have the effect of entrenching, and
        making it difficult to remove, management.***
 
 Provisions
        of our Certificate Incorporation and By-laws may make it more difficult for
        a
        third party to acquire control of our company, even if a change in control
        would
        benefit our stockholders. In particular, shares of our preferred stock may
        be
        issued in the future without further stockholder approval and upon such terms
        and conditions, and having such rights, privileges and preferences, as our
        Board
        of Directors may determine, including for example, rights to convert into
        our
        common stock. The rights of the holders of our common stock will be subject
        to,
        and may be adversely affected by, the rights of the holders of any of our
        preferred stock that may be issued in the future. The issuance of our preferred
        stock, while providing desirable flexibility in connection with possible
        acquisitions and other corporate purposes, could have the effect of making
        it
        more difficult for a third party to acquire control of us. This could limit
        the
        price that certain investors might be willing to pay in the future for shares
        of
        our common stock and discourage these investors from acquiring a majority
        of our
        common stock.
 
 ***Substantial
        sales of our common stock could lower our stock
        price.***
 
 The
        market price for our common stock could drop as a result of sales of a large
        number of our presently outstanding shares of common stock or shares that
        we may
        issue or be obligated to issue in the future.
 
 ***Failure
        to achieve and maintain effective internal controls could have a material
        adverse effect on our business.***
 
 Effective
        internal controls are necessary for us to provide reliable financial reports.
        If
        we cannot provide reliable financial reports, our operating results could
        be
        harmed. All internal control systems, no matter how well designed, have inherent
        limitations. Therefore, even those systems determined to be effective can
        only
        provide reasonable assurance with respect to financial preparation and
        presentation.
 
 While
        we
        continue to evaluate and improve our internal controls, we cannot be certain
        that these measures will ensure that we implement and maintain adequate controls
        over our financial processes and reporting in the future. Any failure to
        implement required new or improved controls, or difficulties encountered
        in
        their implantation, could harm our operating results or cause us to fail
        to meet
        our reporting obligations.
 
 If
        we
        fail to maintain the adequacy of our internal controls, as such standards
        are
        modified, supplemented or amended from time to time, we may not be able to
        ensure that we can conclude on an ongoing basis that we have effective internal
        control over financial reporting in accordance with Section 404 of the
        Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal
        control environment could cause investors to lose confidence in our reported
        financial information, which could have a material adverse effect on our
        stock
        price.
 
 
 **ITEM
        2.****DESCRIPTION
        OF PROPERTY**
 
 As
        of
        December 31, 2006, we did not own any real property. Effective April 1, 2006,
        we
        entered into a lease for approximately 9,000 square feet of administrative
        offices and laboratories in Addison, Texas. The Lease Agreement expires in
        April
        2013. Additional space is available in the complex for future expansion which
        we
        believe would accommodate growth for the foreseeable future. The
        minimum monthly lease obligation, which is exclusive of monthly operating
        expenses, of $9,034.53 continues for seventy four months as of December 31,
        2006.
 
 We
        believe that our existing leased facilities are suitable for the conduct
        of our
        business and adequate to meet our growth requirements.
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 **ITEM
        3.****LEGAL
        PROCEEDINGS**
 
 We
        are
        aware of neither any pending nor threatened legal proceeding that, if adversely
        determined, would have a material adverse effect on us nor of any proceeding
        that a government agency is initiating against us.
 
 **ITEM
        4.****SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 No
        matter
        was submitted to a vote of our shareholders during the fourth quarter of
        2006.
 
 
 **Part
        II**
 
 
 **ITEM
        5.****MARKET
        FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND REGISTRANT’S
        PURCHASES OF EQUITY SECURITIES**
 
 Market
        for Common Equity
 
 Our
        common stock is quoted on the Over-the-Counter Bulletin Board operated by
        the
        National Association of Securities Dealers, Inc. Our shares are listed under
        the
        symbol "ULUR".
 
 The
        following table sets forth, for the fiscal quarters indicated, the high and
        low
        closing prices per share of our common stock as reported on the Over-the-Counter
        Bulletin Board. The quotations reflect inter dealer prices, without retail
        mark-up, mark-down or commissions and may not represent actual
        transactions.
 
 **Year
                  Ended December 31, 2005 (a)**
              
              **High**
              
              **Low**First Quarter
              
              $
              12.80
              
              $
              1.60Second Quarter
              
              $
              2.00
              
              $
              0.12Third Quarter
              
              $
              9.60
              
              $
              0.04Fourth Quarter
              
              $
              4.60
              
              $
              0.40**Year
                  Ended December 31, 2006**First Quarter
              
              $
              2.12
              
              $
              1.24Second Quarter
              
              $
              2.01
              
              $
              0.80Third Quarter
              
              $
              1.59
              
              $
              0.90Fourth Quarter
              
              $
              2.50
              
              $
              0.81
 
 (a)
              The
                  high and low closing prices for the year ended December 31, 2005
                  have been
                  restated to give effect of the 400 to 1 reverse stock split that
                  occurred
                  on March 29, 2006.
 
 
 Record
        Holders
 
 As
        at
        March 16, 2007, there are approximately 144 shareholders of record holding
        our
        common stock. On March 16, 2007, the closing price of our common stock was
        $5.05
        and there were 61,407,896 shares of our common stock issued and
        outstanding.
 
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 Dividend
        Policy
 
 To
        date,
        we have not declared or paid any cash dividends on our preferred stock or
        common
        stock and we do not anticipate paying any cash dividends on them in the
        foreseeable future. The payment of dividends, if any, in the future is within
        the discretion of our Board of Directors and will depend on our earnings,
        capital requirements, and financial condition and other relevant facts. We
        currently intend to retain all future earnings, if any, to finance the
        development and growth of our business.
 
 
 Securities
        Authorized for Issuance Under Equity Compensation Plans
 
 See
        Item
        11 for certain information with respect to the Company’s equity compensation
        plans in effect. at December 31, 2006.
 
 
 Recent
        Sales of Unregistered Securities and Use of Proceeds From Registered
        Securities
 
 On
        December 6, 2006, we issued the following shares of common stock without
        registration under the Securities Act of 1933, as amended:
 
 **Name
                  of Stockholder**
              
              **Number
                  of Shares**Brencourt Advisors LLC (1)
              
              
              7,894,736Chilton Investment Company, LLC (2)
              
              
              3,157,895Cornell Capital Partners, LP
              
              
              1,263,157Invus Public Equities L.P.
              
              
              1,052,631JANA Piranha Master Fund, Ltd.
              
              
              7,368,421Oscar S. Schafer & Partners I, LP
              
              
              414,782Oscar S. Schafer & Partners II, LP
              
              
              4,533,603OSS Overseas LTD
              
              
              5,577,930Pequot Capital Management, Inc. (3)
              
              
              7,368,421Prenox, LLC
              
              
              5,263,15
                  7Tudor Investment Corporation (4)
              
              
              3,157,895Total:
              
              
              47,052,628
 
 (1)
              Shares
                  are owned directly by Brencourt Multi Strategy Master LTD (4,342,106
                  shares), Man Mac Shreckhorn 14B LTD (1,421,052 shares), Partners
                  Group
                  Alternative Strategies PCC LTD - Yellow Kappa Cellis (710,526 shares)
                  and
                  Diadem IAM LTD (1,421,052 shares). Brencourt Advisors LLC is the
                  investment manager of each such entity.(2)
              Shares
                  are owned directly by Chilton Private Equity Partners I, LLC (526,316
                  shares), Chilton Small Cap International, LP (1,357,797 shares),
                  and
                  Chilton Small Cap Partners, LP (1,273,782 shares). All investment
                  decisions of, and control of, these entities are held by Chilton
                  Investment Company, LLC.(3)
              Pequot
                  Capital Management, Inc. is the investment advisor or investment
                  manager
                  of certain funds that holds shares of the Company’s common stock. Shares
                  are owned directly by Pequot Diversified Master Fund, Ltd (447,315
                  shares), Pequot Healthcare Fund, L.P. (3,243,625 shares), Pequot
                  Healthcare Institutional Fund, L.P. (601,698 shares), Pequot Healthcare
                  Offshore Funds, Inc. (2,502,587 shares), and Premium Series PCC
                  Limited -
                  Cell 32 (573,196 shares).(4)
              Shares
                  are owned directly by Tudor Proprietary Trading, L.L.C. (220,105
                  shares),
                  The Tudor BVI Global Portfolio Ltd. (408,768 shares) and Witches
                  Rock
                  Portfolio Ltd. (2,529,022 shares). Tudor Investment Corporation
                  provides
                  investment advisory services to each such
                  entity.
 
 
 The
        shares were issued pursuant to a Common Stock Purchase Agreement (“Purchase
        Agreement”), dated December 6, 2006, with certain institutional accredited
        investors. Pursuant to the Purchase Agreement, we sold to the investors an
        aggregate of 47,052,628 shares of our common stock, at a per share price
        of
        $0.95 for an aggregate purchase price of $44,699,998.85. Of the aggregate
        purchase price, $38,499,998.85 was paid in cash and $6,200,000 was paid via
        cancellation of existing secured convertible debentures held by Cornell and
        Prenox.
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 We
        incurred a total of $4,229,989 for costs and expenses related to the offering,
        of which $3,229,846 was paid in cash. After deducting the cash offering expenses
        from the cash proceeds of the stock sale, the net cash proceeds to us from
        the
        offering were approximately $35,270,000. Of this amount, we used $13,000,000
        to
        fully redeem our secured convertible debentures and $4,900,000 to reduce
        our
        Asset Purchase obligation to $350,000 which left approximately $17,370,000
        for
        general working capital purposes.
 
 We
        relied
        upon Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933,
        as
        amended (the "Act"), for the issuance of the Shares.
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into an Investor Rights Agreement with the Investors. Under this
        agreement, we were obligated to register the Shares under the Act for resale
        by
        the Investors. On February 13, 2007, we received notice from the Securities
        and
        Exchange Commission that our registration statement on Form SB-2 (Registration
        No. 333-139417), originally filed December 15, 2006 and subsequently amended
        on
        February 9, 2007, was declared effective, thereby fulfilling our initial
        obligations under the Investor Rights Agreement.
 
 
 **ITEM
        6.****MANAGEMENT'S
        DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
 
 *The
        following discussion and other information in this Form 10-KSB contains
        forward-looking statements that are subject to significant risks and
        uncertainties. There are several important factors that could cause actual
        results to differ materially from historical results and percentages and
        results
        anticipated by the forward-looking statements. We have sought to identify
        the
        most significant risks to its business, but cannot predict whether or to
        what
        extent any of such risks may be realized nor can there be any assurance that
        we
        have identified all possible risks that might arise. Investors should carefully
        consider all of such risks before making an investment decision with respect
        to
        our stock.*
 
 *The
        following contains certain statements that are forward-looking within the
        meaning of Section 27a of the Securities Act of 1933, as amended, and Section
        21E of the Securities and Exchange Act of 1934, as amended, and that involve
        risks and uncertainties, including, but not limited to penetration rates,
        the
        uncertainties associated with research and development activities, clinical
        trials, the timing of and our ability to achieve regulatory approvals,
        dependence on others to market our licensed products, collaborations, future
        cash flow, the timing and receipt of licensing and milestone revenues, our
        ability to achieve licensing and milestone revenues, the future success of
        our
        marketed products and products in development, and other risks described
        below
        as well as those discussed elsewhere in this Form 10-KSB, documents incorporated
        by reference and other documents and reports that we file periodically with
        the
        Securities and Exchange Commission.*
 
 Business
 
 ULURU
        Inc. (“ULURU”) is a Nevada corporation formed on September 17, 1987. We have
        changed our name numerous times since our original formation, but as of March
        31, 2006 our name is ULURU Inc. We are an emerging pharmaceutical company
        focused on establishing a market leadership position in the development of
        wound
        management, plastic surgery and oral care products utilizing innovative drug
        delivery solutions to improve the clinical outcome of patients and provide
        a
        pharmacoeconomic benefit to healthcare providers. The first step in achieving
        this objective was the acquisition of the topical business component of Access
        Pharmaceuticals, Inc. which was completed on October 12, 2005. This acquisition
        resulted in us acquiring Aphthasol®, Zindaclin® and the Mucoadhesive Film
        technology and a fully paid exclusive worldwide license to the Nanoparticle
        Aggregate technology for all applications excluding injectable drug delivery
        devices. Utilizing this technology, three products have been approved for
        marketing in various global markets. In addition, numerous products are under
        development utilizing our Mucoadhesive Film and Nanoparticle Aggregate
        technologies.
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 Recent
        Developments
 
 On
        February 8, 2007, we entered into a strategic partnership with BioProgress
        PLC
        to market OraDiscTM B in the European Union, Commonwealth of Independent States,
        and Middle Eastern markets.
 
 OraDiscTM
        B is a product developed from our adhesive film technology which incorporates
        15
        milligrams of benzocaine for the treatment of oral pain. The product is designed
        to adhere to the mucosal surface and selectively deliver pain relief to a
        localized area. Compared with currently marketed gel products, OraDiscTM B
        provides a significantly greater period of pain relief as the adhesive film
        is
        designed to erode over a 1 - 1.5 hour period. The market for oral pain relief
        in
        the United Kingdom alone is estimated at approximately $60 million. Based
        upon
        similar product launches, BioProgress expects penetration rates in core EU,
        CIS
        and Middle Eastern markets to reach approximately 12% within the first 3
        years
        of product launch.
 
 As
        part
        of the ten year agreement, BioProgress made an upfront payment, future milestone
        payments, both success and time related, which will all be recognized ratably
        over the life of the agreement, and they will purchase the OraDiscTM B product
        from us.
 
 On
        December 8, 2006, we entered into an Amendment to Asset Sale Agreement (the
        "Amendment") with Access Pharmaceuticals, Inc. (“Access”), pursuant to which, we
        agreed to pay Access $5,250,000, in two payments, $4,900,000 which was paid
        on
        December 8, 2006 and $350,000 which is due on April 8, 2007, without interest,
        in settlement of the following obligations to Access:
  §
                a
                    payment of $3,700,000 that was due on October 11, 2006;§
                a
                    payment of $1,000,000 due on October 11, 2007, or on the date
                    of the first
                    launch of an OraDiscTM product; and§
                certain
                    future milestones which total
                    $2,625,000.
  As
        part
        of the transaction, we agreed to increase a remaining milestone from $750,000
        to
        $875,000 for the achievement of cumulative sales of 100 million dollars for
        the
        products sold from the acquired topical technology. We also acquired from
        Access
        all patent rights and all intellectual properties associated with the
        Nanoparticle Aggregate technology. We then licensed to Access certain specific
        applications of the Nanoparticle Aggregate technology which include use in
        intraperotinial, intratumoral, subscutaneous or intramuscular drug delivery
        implants, excluding dermal or facial fillers.
 
 We
        also
        entered into a mutual release with Access whereby both parties released and
        discharged each other from all claims through December 8, 2006.
 
 On
        December 6, 2006, we entered into a Common Stock Purchase Agreement (the
        "Purchase Agreement") with certain institutional accredited investors (the
        "Investors"). Pursuant to the Purchase Agreement, we sold to the Investors
        an
        aggregate of 47,052,628 shares (the "Shares") of our common stock, at an
        aggregate purchase price of $44,699,998. The purchase price paid per Share
        was
        $0.95. Of the aggregate purchase price, $38,499,998 was paid in cash and
        $6,200,000 was paid via cancellation of existing secured convertible debentures
        (the "Debentures") held by Cornell Capital Partners, LP and Prenox, LLC (the
        "Noteholders").
 
 We
        relied
        upon Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933,
        as
        amended (the "Act"), for the issuance of the Shares.
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into an Investor Rights Agreement with the Investors. Under this
        agreement, we are obligated to register and maintain the registration of
        the
        Shares under the Act for resale by the Investors. On February 13, 2007, we
        received notice from the Securities and Exchange Commission that our
        registration statement was declared effective, thereby fulfilling our obligation
        under the Investor Rights Agreement.
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 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into a Repayment Agreement with the Noteholders. Under this agreement
        and in full satisfaction of all obligations owed under the Debentures and
        the
        transaction documents entered into in connection herewith, (i) we agreed
        to pay
        the Noteholders an aggregate of $13,000,000 plus interest accrued on the
        Debentures since December 1, 2006, (ii) we accepted the Noteholders'
        subscriptions for Shares upon cancellation of an aggregate of $6,200,000 original
        principal amount of the Debentures and (iii) the purchase agreement pursuant
        to
        which the Noteholders purchased the Debentures and the security agreement,
        collateral assignment, guarantor security agreement, escrow agreement, transfer
        agent instructions, guaranty agreement and registration rights agreement
        entered
        into in connection therewith were terminated.
  Employees
 
 As
        of
        December 31, we have 11 full-time and 1 part-time employees. Of these employees,
        8 are directly engaged in or directly support research and development
        activities of which 5 have advanced scientific degrees, two directly support
        commercial and business development activities and 2 are in administrative
        positions. Our employees are not represented by a labor union and are not
        covered by a collective bargaining agreement. Management believes that we
        maintain good relations with our personnel. We compliment our internal expertise
        with external scientific consultants, university research laboratories and
        contract manufacturing organizations that specialize in various aspects of
        drug
        development including clinical development, regulatory affairs, toxicology,
        preclinical testing and process scale-up.
 
 Web
        Availability
 
 We
        make
        available free of charge through our web site, www.uluruinc.com ,
        our
        annual reports on Form 10-KSB and other reports required under the Securities
        and Exchange Act of 1934, as amended, as soon as reasonably practicable after
        such reports are filed with, or furnished to, the Securities and Exchange
        Commission as well as certain of our corporate governance policies, including
        the charters for the Board of Director's corporate governance committees
        and our
        code of ethics, corporate governance guidelines and whistleblower policy.
        We
        will provide to any person without charge, upon request, a copy of any of
        the
        foregoing materials. Any such request must be made in writing to ULURU Inc.,
        4452 Beltway Drive, Addison, TX 75001, Attn: Investor
        Relations.
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  LIQUIDITY
        AND CAPITAL RESOURCES
 
 We
        have
        funded our operations primarily through the private sales of convertible
        debentures and common stock. Our principal source of liquidity is cash and
        cash
        equivalents. Contract research, products sales, royalty payments, licensing
        fees
        and milestone payments from our corporate alliances have, and are expected
        in
        the future to, also provide funding for operations. As of December 31, 2006
        our
        cash and cash equivalents and short-term investments were $16,918,007 and
        our
        working capital (current assets less current liabilities) was $16,474,473.
        Our
        positive working capital at year end is attributed primarily to our sale
        of
        common stock that occurred in December 2006. We used a major portion of the
        proceeds from the stock sale to retire all of our long-term debt, which included
        the payment of a redemption premium of $2,600,000, as well as significantly
        reduce our Asset Purchase obligation to Access Pharmaceuticals, Inc. As of
        December 31, 2006 the Company’s available cash is expected to be sufficient to
        fund operations for the next three years.
 
 We
        continue to expend funds to advance the development of our products, license
        additional products, and establish a sales and marketing operation to
        commercialize our wound care and OraDiscTM products. We believe that our
        financial results for 2007 will be affected positively by our commercialization
        of additional products during the last half of 2007, thereby increasing our
        revenues and improving our working capital.
 
 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·
              Successful
                  regulatory filings
 
 
 Private
        sale of common stock
 
 On
        December 6, 2006, we entered into a Common Stock Purchase Agreement (“Purchase
        Agreement”) with certain institutional accredited investors (“Investors”).
        Pursuant to the Purchase Agreement, we sold to the Investors an aggregate
        of
        47,052,628 shares of our common stock, at a per share price of $0.95 for
        an
        aggregate purchase price of $44,699,998.85. Of the aggregate purchase price,
        $38,499,998.85 was paid in cash and $6,200,000 was paid via cancellation
        of
        existing secured convertible debentures held by Cornell and Prenox. On December
        5, 2006 the closing price for our common stock was $0.90 per share.
 
 We
        relied
        upon Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933,
        as
        amended (the "Act"), for the issuance of the Shares.
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into an Investor Rights Agreement with the Investors. Under this
        agreement, we were obligated to register the Shares under the Act for resale
        by
        the Investors. On February 13, 2007, we received notice from the Security
        and
        Exchange Commission that our registration statement, originally filed December
        15, 2006 and subsequently amended on February 9, 2007, was declared effective,
        thereby fulfilling our initial obligation under the Investor Rights
        Agreement.
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 Repayment
        of Long-term debt
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into a Repayment Agreement with Cornell
        and Prenox (the "Noteholders") .
        Under
        this agreement and in full satisfaction of all obligations owed under our existing
        secured convertible debentures (the "Debentures") held
        by
        the Noteholders and the transaction documents entered into in connection
        therewith, (i) we agreed to pay the Noteholders an aggregate of $13,000,000
        plus
        a redemption premium of $2,600,000 and interest accrued on the Debentures
        since
        December 1, 2006, (ii) we accepted the Noteholders' subscriptions for Shares
        upon cancellation of an aggregate of $6,200,000 original
        principal amount of the Debentures and (iii) the purchase agreement pursuant
        to
        which the Noteholders purchased the Debentures and the security agreement,
        collateral assignment, guarantor security agreement, escrow agreement, transfer
        agent instructions, guaranty agreement and registration rights agreement
        entered
        into in connection therewith were terminated.
 
 Asset
        Purchase obligations
 
 On
        December 8, 2006, we entered into an Amendment to Asset Sale Agreement (the
        "Amendment") with Access Pharmaceuticals, Inc. (“Access”). Pursuant to the
        Amendment, the Company agreed to pay Access $5,250,000, in two payments,
        $4,900,000 which was paid on December 8, 2006 and $350,000 which is due on
        April
        8, 2007, without interest, in settlement of the following obligations to
        Access:
  ·
                a
                    payment of $3,700,000 that was due on October 11, 2006;·
                a
                    payment of $1,000,000 due on October 11, 2007, or on the date
                    of the first
                    launch of an OraDiscTM product; and·
                certain
                    future milestones which total
                    $2,625,000.
  As
        part
        of the transaction, we agreed to increase a remaining milestone from $750,000
        to
        $875,000 for the achievement of cumulative sales of 100 million dollars for
        the
        product sold from the acquired topical technology. We also acquired from
        Access
        all patent rights and all intellectual properties associated with the
        Nanoparticle Aggregate technology. We then licensed to Access certain specific
        applications of the Nanoparticle Aggregate technology which include use in
        intraperotinial, intratumoral, subscutaneous or intramuscular drug delivery
        implants, excluding dermal or facial fillers.
 
 Termination
        of Standby Equity Distribution Agreement
 
 On
        October 12, 2005 we entered into a Standby Equity Distribution Agreement
        (the
        "SEDA") with Cornell. Under the SEDA, Cornell committed to purchase over
        the
        course of two years from the date of the effectiveness of a registration
        statement up to $30,000,000 of common stock in increments of up to $1,000,000.
        We elected to terminate the SEDA on December 6, 2006.
 
 
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  RESULTS
        OF OPERATIONS
 
 ULURU
        Inc. FOR THE YEAR ENDED DECEMBER 31, 2006 COMPARED TO
 ULURU
        DELAWARE INC. AND THE TOPICAL BUSINESS COMPONENT FOR 2005
 
 *The
        comparison of operating results is based upon the audited financial statements
        of operations and cash flows for us for the year ended December 31, 2006
        versus
        the combination of the audited financial statements of operations and cash
        flow
        for ULURU DELAWARE INC. for the period of September 7, 2005 (Inception) to
        December 31, 2005 (“the period ended December 31, 2005”) and the predecessor
        audited financial statements of operations and cash flows for the Topical
        Component for the period from January 1, 2005 through October 12, 2005 (“the
        period ended October 12, 2005”). The predecessor transactions for the Topical
        Component include the results of operations and cash flows based on the
        historical cost basis of all of the assets and liabilities of that Component,
        some of which were not acquired by ULURU on October 12, 2005, and therefore
        their results do not apply to the period subsequent to October 12, 2005.
        The
        combined financial results for 2005 may not be necessarily comparative to
        our
        results of operations and cash flows for 2006.*
 
 Total
        Revenues
 
 Revenues
        were $1,534,453 for the year ended December 31, 2006, as compared to the
        Topical
        Component's revenues of $799,854 for the period ended October 12, 2005 and
        to
        Uluru Delaware Inc.’s revenues of $199,199 for the period ended December 31,
        2005. Revenues for the year ended December 31, 2006 were comprised of domestic
        royalties of $249,788 from the sale of Aphthasol®, foreign royalties from the
        sale of Zindaclin® of $124,057, foreign market licensing fees from Zindaclin® of
        $891,576, sponsored wound care research of $63,824, a non-recurring development
        fee of $50,000 associated with our OraDiscTM technology, and $155,208 for the
        sale of Aphthasol® to our domestic distributor.
 
 The
        increase in revenues for the year ended December 31, 2006 as compared to
        the
        Topical/Uluru Delaware combined revenues for 2005 was $535,400 and is primarily
        attributable to foreign licensing fees for Zindaclin® resulting from milestones
        earned for product launches during 2006 in certain countries and for a new
        territory agreement with Crawford Healthcare, our current sub-licensee for
        the
        UK and Ireland. Additional revenue increases of $102,160 occurred in Sponsored
        Research due to specific non-recurring research projects completed in 2006.
        These two revenue increases for 2006 versus 2005 were partially offset by
        lower
        net revenues associated with our shift from a full-markup direct product
        sales
        approach for Aphthasol® domestically in 2005 to a royalty-based approach by our
        new domestic third party distributor for 2006.
 
 Costs
        and Expenses
 
 Cost
        of Goods Sold
 
 Cost
        of
        goods sold as a percentage of product sales was 117 percent for 2006, as
        compared to 40 percent for 2005 a reduction of 77 percent. The negative change
        was due to lower sales volume in 2006 as the Topical Component was selling
        the
        Aphthasol® product on a full retail markup basis in 2005 but receiving only
        limited royalties on the sale of Aphthasol®. We have since shifted to a limited
        retail mark-up basis for 2006 product sales but are receiving an enhanced
        royalty percentage based on gross revenues sold by our new domestic third-party
        distributor.
 
 During
        2006 we agreed to manufacture Aphthasol for our domestic distributor on a
“fixed
        cost basis”. Unfortunately, we experienced problems with the manufacturing
        process during the year which increased our production costs beyond our
        expectations and our agreed to fixed cost basis. This resulting in our product
        cost of sales exceeding our product revenues. The manufacturing problems
        have
        since been corrected.
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 General
        and Administrative
 
 General
        and administrative expenses increased approximately $731,905 due primarily
        to
        the following:
 
 ·
              Increased
                  salary and benefit expenses of approximately $542,000 as the President
                  and
                  Chief Financial Officer's compensation in the Topical Component's
                  comparative 2005 was only partially allocated to Topical Component
                  whereas
                  their compensation is fully allocated for the year ended December
                  31,
                  2006;·
              Increased
                  expenses for external consultants of $45,000;·
              Increased
                  travel for business development purposes and the related costs
                  of
                  $41,000;·
              Increased
                  legal fees of $39,000 for costs associated with patent applications
                  and
                  filings;·
              Increased
                  insurance costs of $10,000;·
              Relocation
                  costs for our new office space in Addison, Texas of $11,000; and·
              Cost
                  of $250,000 associated with the December 2006 settlement of future
                  milestones with Access Pharmaceuticals,
                  Inc.
 
 The
        increase in general and administrative expenses is partially offset
        by
 
 ·
              Lower
                  legal fees of $82,000 as we were not involved in any litigation
                  in 2006
                  whereas the Topical Component incurred legal expense of $196,000
                  in 2005
                  for litigation, general corporate matters, and for licensing
                  agreements;·
              Lower
                  directors fee expense of $59,000;·
              Lower
                  shareholder expenses of $40,000; and·
              Decrease
                  in professional fees of $21,000 as Uluru Delaware Inc. incurred
                  corporate
                  formation costs in October 2005.
 
 
 Amortization
 
 Amortization
        expense was $1,052,395, an increase, as compared to the combined Topical
        Component/Uluru Delaware amortization expense, of $364,376 for 2005. This
        increase resulted mainly from our purchase of three patents and one licensing
        agreement from Access Pharmaceuticals on October 12, 2005, which increased
        the
        cost basis of the assets to fair market value under purchase accounting at
        that
        date at which time we began amortizing them over their remaining lives since
        such lives were not considered indefinite.
 
 Depreciation
 
 The
        $16,048 increase in depreciation expense for 2006 versus 2005 was due to
        the
        Company’s acquisition of laboratory, computer, and office equipment from Access
        Pharmaceuticals on October 12, 2005. These assets were capitalized at their
        fair
        market value on the date of acquisition, thereby causing an overall increase
        in
        subsequent depreciation expense. Many items acquired from Access were fully
        depreciated, whereas values assigned by us to them resulted in added
        depreciation expense during 2006. Alternatively, many other items had historic
        costs which were reduced by us at the time of their acquisition due to age
        and
        relatively lower replacement costs.
 
 Interest
        Expense
 
 Interest
        expense increased by almost 5 million dollars during, 2006, as compared to
        2005
        as a result of significant secured convertible debt financing obtained during
        the latter part of 2005, which debt was subsequently refinanced and increased
        during 2006, and the existing aforementioned obligations incurred in connection
        with the asset acquisition from Access Pharmaceuticals in 2005. Interest
        expense
        in 2006 also included $2,600,000 for a redemption premium paid at the time
        the
        secured convertible debt instruments were paid off in 2006.
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 Commitment
        Fee
 
 We
        agreed
        to issue, at the time of the completion of the recapitalization and merger
        which
        occurred on March 30, 2006, 993,300 shares of our common stock as a commitment
        fee in connection with the SEDA for $30 million dollars provided by Cornell
        Capital. Those shares had a market value of $1.80 per share on March 31,
        2006,
        for a total of $1,787,940. There was no commitment fee expense incurred in
        2005
        for the combined Topical Component/Uluru Delaware.
 
 Liquidated
        Damages
 
 As
        part
        of the December 2006 Repayment Agreement, Prenox, LLC and Cornell Capital
        Partners, LP agreed to cancel the liquidated damages of $1,885,000 incurred
        in
        August 2006 as a result of our failing to file a registration statement or
        to
        have a registration statement declared effective pursuant to the original
        Registration Rights Agreement.
 
 Loss
        from Early Extinguishment of Debenture
 
 We
        incurred two losses totaling $940,655 from the early extinguishment of our
        debentures during 2006, as follows:
 
 On
        December 6, 2006, we redeemed all of our outstanding debentures, which were
        held
        by Prenox, LLC and Cornell Capital Partners, LP. As part of the retirement
        of
        the debentures, we recorded a loss from the early extinguishment of the
        debentures, which consisted of the write-off of the remaining balance of
        deferred financing costs of $383,121.
 
 On
        August
        30, 2006, we had issued to Prenox a new secured convertible debenture in
        the
        amount of $13,000,000 in exchange for its original $10,000,000 convertible
        debenture. As part of the retirement of the original debenture, we recorded
        a
        loss from the early extinguishment of the Prenox secured convertible debenture,
        which consisted of the write-off of the remaining balance of deferred financing
        costs of $557,534.
 
 Loss
        on Sale of Equipment
 
 On
        July
        9, 2006, we sold some of our underutilized laboratory equipment, located
        at our
        Canadian manufacturing supplier, for $17,500. As part of the conveyance,
        we
        eliminated the net book values of the equipment and recognized a loss of
        $30,143
        on the sale.
 
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  ULURU
        DELAWARE INC. AND THE TOPICAL BUSINESS COMPONENT FOR 2005
 COMPARED
        TO THE TOPICAL BUSINESS COMPONENT FOR 2004
 
 
 Basis
        of Comparison for Years Ended December 31, 2005 and 2004
 
 The
        comparison of operating results is based upon the combination of the audited
        financial statements of operations and cash flow for ULURU DELAWARE INC.
        for the
        period of September 7, 2005 (Inception) to December 31, 2005 and the predecessor
        audited financial statements of operations and cash flows for the Topical
        Component for the period from January 1, 2005 through October 12, 2005 (“2005”)
        versus the predecessor audited financial statements of operations and cash
        flows
        for the Topical Component for the year ended December 31, 2004 (“2004”). The
        predecessor transactions for the Topical Component include the results of
        operations and cash flows based on the historical cost basis of all of the
        assets and liabilities of that Component, some of which were not acquired
        by
        ULURU on October 12, 2005, and therefore their results do not apply to the
        period subsequent to October 12, 2005. The combined financial results for
        2005
        may not be necessarily comparative to the Topical Component results of
        operations and cash flows for 2004.
 
 Revenues
 
 Total
        revenues in 2005 were $999,053 as compared to $586,874 in 2004, an increase
        of
        $412,179. This increase in revenue was primarily the result of licensing
        revenues, which increased by $161,460 to $303,603. Licensing revenues are
        recognized over the period of the performance obligation under our licensing
        agreements. Licensing revenue recognized in both 2005 and 2004 were from
        several
        agreements; primarily agreements related to Zindaclin® and numerous smaller
        agreements for the marketing of the Amlexanox products.
 
 Product
        sales of Aphthasol®, the product for the treatment of canker sores, totaled
        $577,685 in 2005 as compared to product sales of $350,575 in 2004. Sales
        in 2004
        were limited due to a supply interruption of the product in the first three
        quarters of 2004. Supplies were ultimately manufactured in the third quarter
        of
        2004 and sales resumed in late September 2004 and throughout 2005.
 
 Sponsored
        research income for 2005 was $11,664. This was comprised of a wound care
        research program initiated in December 2005. There was no sponsored research
        income in 2004.
 
 Cost
        of Products Sold
 
 The
        Cost
        of Products Sold was $232,948 in 2005, as compared to $239,276 in 2004, a
        decrease of $6,328. The Cost of Products sold in 2004 was adversely impacted
        by
        the supply interruption that occurred through August 2004. The 2004 Product
        cost
        included approximately $54,000 of monthly expenses from January 2004 to August
        2004 for logistics management even though there were no Aphthasol® product sales
        during that period as well as increased expenses in 2004 for Food and Drug
        Administration fees of approximately $80,000.
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 General
        and Administrative
 
 General
        and Administrative expenses were $1,146,162 in 2005, a decrease of $470,702
        from
        2004. The decrease in total General and Administrative expense was primarily
        due
        to:
 
 §
              Lower
                  compensation costs of $186,000 due to a reduction in administrative
                  personnel and lower salary and benefit expenses;§
              A
                  reduction of patent expense of $138,000 due to the international
                  filing
                  and registration expenses of the OraDiscTM patent occurring in
                  2004;§
              A
                  reduction in legal expenses in 2005 of $133,000 due to the completion
                  of
                  outstanding litigation with third parties;§
              Shareholder
                  expenses were lower by approximately $52,000 in 2005 due to savings
                  in
                  public relations services and a 2004 business evaluation report
                  that did
                  not occur in 2005;§
              A
                  reduction of approximately $ 28,000 in outside consulting expenses;
                  and§
              A
                  decrease in expenses for Director & Officer insurance of approximately
                  $16,000.
 
 These
        decreases in General and Administrative expenses for 2005 were partially
        offset
        by increases in the following General and Administrative expenses:
 
 §
              Increased
                  expenses for accounting services of approximately $57,000 for Sarbanes
                  Oxley compliance, as allocated to the Topical
                  Component;§
              The
                  expense of $22,000 for the uncollectible accounts receivable associated
                  with sales of Aphthasol® by the Topical Component’s domestic distributor;
                  and§
              An
                  increase of $5,000 in the annual premium cost for product liability
                  coverage.
 
 
 Research
        and Development
  
 Expenses
        for Research and Development were $1,925,590 in 2005, an increase of $310,519
        from 2004. These research and development increases were due to:
 
 §
              Increased
                  development and production scale-up expenses associated with the
                  OraDisc
                  range of products of $342,000;§
              Expenses
                  of approximately $197,000 for the approval of OraDiscATM by the Food and
                  Drug Administration;§
              Increased
                  compensation costs of $16,000 for laboratory staffing to support
                  the
                  continued development of the OraDiscTM range of
                  products;§
              Increased
                  rental costs for laboratory space of approximately
                  $10,000;§
              Increase
                  expenses of $8,000 for laboratory equipment maintenance;
                  and§
              Increased
                  development expenses for the nanoparticle wound care technology
                  of
                  approximately $9,000.
 
 These
        increases in Research and Development expenses for 2005 were partially offset
        by
        decreases in the following Research and Development expenses:
 
 §
              A
                  decrease in production scale-up expense and process validation
                  for
                  Aphthasol® at the new contract manufacturer of $252,000;
                  and§
              Reduced
                  travel and entertainment expenses of approximately
                  $21,000.
 
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 Depreciation
 
 The
        Depreciation expense for 2005 was $47,833, an increase of $5,866 from 2004.
        The
        2005 increase in depreciation relates mostly to ULURU Delaware’s purchase of
        laboratory, computer, and office equipment from Access Pharmaceuticals on
        October 12, 2005. These assets were capitalized at their fair market value
        on
        the date of acquisition, thereby causing an overall increase in subsequent
        depreciation expense. Many items acquired from Access were fully depreciated,
        whereas values assigned by ULURU Delaware to the equipment resulted in added
        depreciation expense during 2005. Alternatively, many other equipment items
        had
        historic costs which were reduced by ULURU Delaware due to age and relatively
        lower replacement costs.
 
 Amortization
 
 The
        Amortization expense for 2005 was $364,376, an increase of $194,782 from
        2004.
        The 2006 increase in amortization expense relates to ULURU Delaware’s purchase
        of three patents and one licensing agreement from Access Pharmaceuticals
        on
        October 12, 2005. These patent and licensing rights assets were capitalized
        at
        their fair market value on the date of acquisition, thereby causing an increase
        in subsequent amortization expense.
 
 Other
        Income
 
 Other
        Income for 2005 was $94,105, an increase of $55,214. The increase is attributed
        to foreign currency gains relating to deferred revenues for European licensing
        fees by the Topical Component.
 
 Interest
        Expense
 
 Interest
        expense for 2005 was $445,690, an increase of $327,370. The total interest
        expense for 2005 after the acquisition of the Access assets was $328,777,
        of
        which $237,778 relates to ULURU Delaware’s new note payable to ULURU Inc. of
        $10,700,000, effective October 12, 2005, and the balance related to the
        amortization of interest imputed on the asset purchase obligations to Access.
        The remainder of the 2005 interest expense of $116,913 and the $118,320 for
        2004
        were interest amounts calculated on the funds invested by Access for the
        Topical
        Component net assets during those periods.
 
 Our
        Net
        Loss for 2005 was $3,069,440, a reduction of $105,887 from the 2004 Net Loss
        of
        $3,175,327.
 
 
 **ITEM
        7.****FINANCIAL
        STATEMENTS**
 
 Our
        audited consolidated financial statements at and for the fiscal years ended
        December 31, 2006 and 2005, together with the related notes thereto, have
        been
        included in this annual report on pages F-2 through F-25 We hereby incorporate
        by reference these financial statements in this annual report in response
        to
        this Item 7.
 
 
 **ITEM
        8.****CHANGES
        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 In
        connection with the audits of the most recent fiscal years and any interim
        period preceding resignation, no disagreements exist with any former accountant
        on any matter of accounting principles or procedure, which disagreements
        if not
        resolved to the satisfaction of the former accountant would have caused them
        to
        make reference in connection with their report to the subject matter of the
        disagreement(s).
 
 The
        principal accountant's report on the financial statements for any of the
        past
        two years contained no adverse opinion or a disclaimer of opinion nor was
        qualified as to uncertainty, audit scope or accounting
        principles.
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            of Contents*
  
 **ITEM
        8A.****CONTROLS
        AND PROCEDURES**
 
 Evaluation
        of Disclosure Controls
 
 We
        evaluated the effectiveness of our disclosure controls and procedures as
        of the
        end of the 2006 fiscal year. This evaluation was conducted by our Chief
        Executive Officer, Mr. Kerry P. Gray and our Chief Financial Officer, Mr.
        Terrance K. Wallberg.
 
 Disclosure
        controls are controls and other procedures that are designed to ensure that
        information that we are required to disclose in the reports we file pursuant
        to
        the Securities Exchange Act of 1934 is recorded, processed, summarized and
        reported.
 
 Limitations
        on the Effective of Controls
 
 Our
        management does not expect that our disclosure controls or our internal controls
        over financial reporting will prevent all error and fraud. A control system,
        no
        matter how well conceived and operated, can provide only reasonable, but
        no
        absolute, assurance that the objectives of a control system are met. Further,
        any control system reflects limitations on resources, and the benefits of
        a
        control system must be considered relative to its costs. These limitations
        also
        include the realities that judgments in decision-making can be faulty and
        that
        breakdowns can occur because of simple error or mistake. Additionally, controls
        can be circumvented by the individual acts of some persons, by collusion
        of two
        or more people or by management override of a control. The design of a control
        system is also based upon certain assumptions about potential future conditions;
        over time, controls may become inadequate because of changes in conditions,
        or
        the degree of compliance with the policies or procedures may deteriorate.
        Because of the inherent limitations in a cost-effective control system,
        misstatements due to error or fraud may occur and may not be detected.
 
 Conclusions
 
 Based
        upon his evaluation of our controls, our Chief Executive Officer and Chief
        Financial Officer have concluded that, subject to the limitations noted above,
        the disclosure controls are effective in providing reasonable assurance that
        material information relating to us is made known to management on a timely
        basis during the period when our reports are being prepared. There were no
        changes in our internal controls that occurred during the quarter covered
        by
        this report that have materially affected, or are reasonably likely to
        materially affect our internal controls.
 
 **ITEM
        8B.****OTHER
        INFORMATION**
 
 None.
 
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            of Contents*
  
 **Part
        III**
 
 **ITEM
        9.****DIRECTORS,
        EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS, AND CORPORATE GOVERNANCE;
        COMPLIANCE WITH SECTION 16(a) OF THE ACT**
 
 
 The
        following table sets forth the Directors, Executive Officers, and Key Employees
        of the Company along with their respective ages and positions and is as
        follows:
 
 Name
              Age
              PositionKerry
                  P. Gray (1)(2)
              54
              Chief
                  Executive Officer, President, DirectorWilliam
                  W. Crouse (1)(5)(6)(7)
              64
              Chairman,
                  DirectorDavid
                  E. Reese, PhD. (1)(5)(6)(7)
              34
              DirectorJeffrey
                  B. Davis (1)(5)(6)(7)
              43
              DirectorTerrance
                  K. Wallberg (2)
              52
              Chief
                  Financial Officer, Vice PresidentDaniel
                  G. Moro (3)
              60
              Vice
                  President Polymer Drug DeliveryJohn
                  V. St. John, PhD. (3)
              35
              Vice
                  President Material SciencesW.
                  Eric Bowditch (4)
              59
              Vice
                  President Business Development.
 
 (1)
              Assumed
                  position as director on March 31, 2006.(2)
              Assumed
                  position as executive officer on March 31, 2006.(3)
              Assumed
                  position as key employee on March 31, 2006.(4)
              Assumed
                  position as key consultant on March 31, 2006.(5)
              Member
                  of Audit Committee(6)
              Member
                  of Compensation Committee(7)
              Member
                  of Nominating and Corporate Governance
                  Committee
 
 All
        directors hold office until the next annual meeting of stockholders and until
        their successors have been duly elected and qualified. There are no agreements
        with respect to the election of directors. We have compensated our directors
        for
        their service on the Board of Directors, or any committee thereof, with the
        issuance of stock options. As of the date hereof, no director has accrued
        any
        expenses or compensation. Officers are appointed annually by the Board of
        Directors and each officer serves at the discretion of the Board of Directors.
 
 No
        director, Officer, affiliate or promoter of ours has, within the past five
        years, filed any bankruptcy petition, been convicted in or been the subject
        of
        any pending criminal proceedings, or is any such person the subject or any
        order, judgment or decree involving the violation of any state or federal
        securities laws.
 
 The
        following is a brief account of the business experience during the past five
        years of each director and executive officer of the Company, including principal
        occupations and employment during that period and the name and principal
        business of any corporation or other organization in which such occupation
        and
        employment were carried on.
 
 **Kerry
        P. Gray** was the
        President and CEO of Access Pharmaceuticals and a director of Access
        Pharmaceuticals from June 1993 until May 2005. Previously, Mr. Gray served
        as
        Chief Financial Officer of PharmaScience, Inc., a company he co-founded to
        acquire technologies in the drug delivery area. From May 1990 to August 1991,
        Mr. Gray was Senior Vice President, Americas, Australia and New Zealand for
        Rhone-Poulenc Rorer, Inc. Prior to the Rhone-Poulenc Rorer merger, he had
        been
        Area Vice President Americas of Rorer International Pharmaceuticals. From
        1986
        to May 1988, he was Vice President, Finance of Rorer International
        Pharmaceuticals, having served the same capacity at Revlon Health Care Group
        of
        companies before the acquisition by Rorer Group. Between 1975 and 1985, he
        held
        various senior financial positions with the Revlon Health Care
        Group.
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            of Contents*
  
 **William
        W. Crouse** is
        Managing Director and General Partner of HealthCare Ventures LLC, one of
        the
        world's largest biotech venture capital firms. Mr. Crouse was former Worldwide
        President of Ortho Diagnostic Systems and Vice President of Johnson &
Johnson International. He also served as Division Director of DuPont
        Pharmaceuticals and as President of Revlon Health Care Group's companies
        in
        Latin America, Canada and Asia/Pacific. Currently, Mr. Crouse serves as a
        Director of The Medicines Company and several private biotechnology companies.
        Mr. Crouse formerly served as a Director of Imclone Systems, BioTransplant,
        Inc., Dendreon Corporation, OraSure Technologies, Inc., Human Genome Sciences,
        Raritan Bancorp, Inc., Allelix Biopharmaceuticals, Inc. and several private
        biotechnology companies. Mr. Crouse currently serves as Trustee of Lehigh
        University and as Trustee of the New York Blood Center. Mr. Crouse is a graduate
        of Lehigh University (Finance and Economics) and Pace University
        (M.B.A.).
 
 **Dr.
        David E. Reese** is a
        biotechnology consultant for both the healthcare and financial industries.
        The
        founder of Alexea Consulting, Dr. Reese has advised biotechnology companies
        on
        issues of strategic alliances and capital acquisition. As a sell-side analyst,
        Dr. Reese advises hedge funds on drug candidates, scientific due diligence
        and
        pipeline valuations. Dr. Reese’s most recent sell-side position was as Biotech
        Analyst for Saturn DKR Management where he built a 125 million dollar
        biotechnology portfolio. Dr. Reese obtained his Bachelors of Science in
        Microbiology from Arizona State University. He performed his Doctoral research
        at Vanderbilt University in the School of Medicine. Dr. Reese conducted research
        fellowships at the University of Texas Southwestern Medical Center, and Cornell
        University. Dr. Reese has numerous publications and has contributed to multiple
        academic reviews as well as a book chapter in a medical textbook. His specific
        research areas included diabetes, cardiovascular disease, congenital
        abnormalities and cancer **.**
 
 **Jeffrey
        B. Davis** has
        extensive experience in investment banking, and corporate development and
        financing for development stage, life sciences companies. Mr. Davis is currently
        President of SCO Financial Group LLC, and President and Financial Principal
        of
        SCO Securities LLC, SCO's NASD-member broker-dealer. Additionally, Mr. Davis
        has
        served on many boards of directors for life sciences companies, and currently
        sits on the boards of Virium Pharmaceuticals, Inc., Access Pharmaceuticals,
        Inc., and Somanta Pharmaceuticals, Inc. Previously, Mr. Davis served as Chief
        Financial Officer of a publicly traded, NASDAQ-NM healthcare company. Prior
        to
        that, Mr. Davis was Vice President, Corporate Finance, at Deutsche Bank AG
        and
        Deutsche Morgan Grenfell, both in the U.S. and Europe. Mr. Davis also served
        in
        senior marketing and product management positions at AT&T Bell Laboratories,
        where he was also a member of the technical staff. Prior to that, Mr. Davis
        was
        involved in marketing and product management at Philips Medical Systems North
        America. Mr. Davis has an M.B.A. from the Wharton School of Business, University
        of Pennsylvania, and a B.S. in Biomedical Engineering from the College of
        Engineering, Boston University.
 
 **Terrance
        K. Wallberg,** a
        Certified Public Accountant, possesses an extensive and diverse background
        with
        over 30 years of experience with entrepreneurial/start-up companies. Prior
        to
        joining ULURU Inc., Mr. Wallberg was Chief Financial Officer with Alliance
        Hospitality Management and previous to that was CFO for DCB Investments,
        Inc., a
        Dallas, Texas based diversified real estate holding company. During his five
        year tenure at DCB Investments, Mr. Wallberg acquired valuable experience
        with
        several successful start-up businesses and dealing with the external financial
        community. Prior to DCB Investments, Mr. Wallberg spent 22 years with Metro
        Hotels, Inc., serving in several finance/accounting capacities and culminating
        his tenure as Chief Financial Officer. Mr. Wallberg is a member of the American
        Society and the Texas Society of Certified Public Accountants and is a graduate
        of the University of Arkansas.
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            38
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 *Table
            of Contents*
  
 **Daniel
        G. Moro** was Vice
        President, Polymer Drug Delivery at Access Pharmaceuticals from September
        2000
        until October 2005. He managed various drug delivery projects related to
        Hydrogel polymers. He invented the mucoadhesive erodible drug delivery
        technology (OraDiscTM) for the controlled administration of actives and is the
        co-inventor of our hydrogel nanoparticle aggregate technology. Previously,
        Mr.
        Moro served as Vice President, Operations for a Division of National Patent
        Development Corporation (NPDC) which developed the soft contact lens. Prior
        to
        his operational experience, Mr. Moro spent 20 years at the NPDC as a senior
        research scientist and invented and commercialized several technologies,
        including a hydrogel burn and wound dressing and a subcutaneous retrievable
        drug
        delivery implant to treat prostate cancer. Mr. Moro has over twenty five
        years
        experience of pharmaceutical development and holds nine patents related to
        drug
        delivery applications, four of which have been commercialized.
 
 **Dr.
        John V. St. John** was
        a
        Senior Scientist at Access Pharmaceuticals, Inc. from March 2000 until October
        2005. He served as team leader during the early identification of Access
        Pharmaceuticals’ oncology drug, AP5346. Dr. St. John served as team leader for
        the hydrogel team from January 2002 to October 2005 during the development
        of
        the Hydrogel Nanoparticle Aggregate Technology and is the co-inventor of
        this
        technology. He holds one patent. Dr. St. John has served as an adjunct faculty
        member in the Department of Biomedical Engineering at the University of Texas
        Southwestern Medical School while at Access Pharmaceuticals. Previously,
        Dr. St.
        John served as a Dreyfus Fellow and Assistant Professor in the Department
        of
        Chemistry of Southern Methodist University from August 1998 to March 2000.
        He
        has earned a graduate certificate in Marketing from the SMU Cox School of
        Business. Dr. St. John served as the elected Chair of the Dallas Fort Worth
        American Chemical Society Section for 2005 and is a current member in the
        American Chemical Society, the Materials Research Society, and the Controlled
        Release Society.
 
 **W.
        Eric Bowditch** is a
        senior international pharmaceutical executive with over 30 years experience
        in
        global business development, licensing, marketing and strategic planning.
        He
        serves as President, IntaPro LLC, a company focused on corporate business
        development, licensing and partnering. Prior to this he was President & CEO,
        Strakan Life Sciences, Inc. between 1998 and 2002. Between 1996 and 1998,
        he was
        Vice President Business Development, Access Pharmaceuticals, Inc. From 1992
        to
        1996, he was Head of Worldwide Business Development, Ohmeda Pharmaceuticals
        before the acquisition by Baxter International. From 1984-1991, he was Worldwide
        Director, Business Development & Strategic Marketing, Rhone-Poulenc Rorer.
        W. Eric Bowditch has an MBA from the University London, a Postgraduate Diploma
        in Marketing and a Postgraduate Diploma in Management Studies.
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended (The "Exchange Act"),
        requires the Registrant's officers and directors, and persons who own more
        than
        10% of a registered class of the Registrant's equity securities, to file
        reports
        of ownership and changes in ownership of equity securities of the Registrant
        with the Securities and Exchange Commission and NASDAQ. Officers, directors
        and
        greater-than 10% shareholders are required by the Securities and Exchange
        Commission regulation to furnish the Registrant with copies of all Section
        16(a)
        that they file.
 
 **Code
        of Business Conduct and Ethics**
 
 On
        March
        31, 2006 we adopted a written Code of Business Conduct and Ethics for Employees,
        Executive Officers and Directors, applicable to all employees, management,
        and
        directors, designed to deter wrongdoing and promote honest and ethical conduct,
        full, fair and accurate disclosure, compliance with laws, prompt internal
        reporting and accountability to adherence to the Code of Business Conduct
        and
        Ethics.
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            of Contents*
  
 **Board
        Committees and Corporate Governance**
 
 The
        standing committees of the Board of Directors are the Audit Committee, the
        Compensation Committee and the Nominating and Corporate Governance
        Committee.
  At
        a
        meeting of the Board of Directors on June 15, 2006, the Board nominated and
        elected the three independent Directors of the Company to comprise the
        committees for Audit, Compensation, and Nominating and Corporate Governance.
        Each committee is presently composed of three Directors, William W. Crouse,
        Jeffrey B. Davis, and David E. Reese, PhD., all determined by the Board to
        be
        independent under applicable SEC and NASDAQ rules and regulations.
  The
        Audit
        Committee is governed by a charter, which is available on our website at www.uluruinc.com under
        the heading "Investor Relations" and delegates to the Audit Committee, among
        other things, the responsibility to engage the independent auditors, review
        the
        audit fees, supervise matters relating to audit functions and review and
        set
        internal policies and procedure regarding audits, accounting and other financial
        controls. At least one member of the Audit Committee is an "Audit Committee
        Financial Expert". The Board of Directors has determined that Jeffrey B.
        Davis
        meets the definition of an "Audit Committee Financial Expert" and is independent
        under applicable SEC and NASDAQ rules and regulations.
  The
        Compensation Committee has responsibility for approval of remuneration
        arrangements for executive officers of the Company, review and approval of
        compensation plans relating to executive officers and directors, including
        grants of stock options under our Incentive Plan and other benefits and general
        review of our employee compensation policies. The charter of the Compensation
        Committee is available on our website at www.uluruinc.com under
        the heading "Investor Relations."
  The
        Nominating and Corporate Governance Committee is responsible for, among other
        things, considering potential Board members, making recommendations to the
        full
        Board as to nominees for election to the Board, assessing the effectiveness
        of
        the Board and implementing the Company's corporate governance guidelines.
        The
        charter of the Nominating and Corporate Governance Committee is available
        on the
        Company's website at www.uluruinc.com under
        the heading "Investor Relations.
  
 **ITEM
        10.****EXECUTIVE
        COMPENSATION**
 
 This
        information is contained in our definitive proxy statement for the 2007 Annual
        Meeting of Stockholders under the heading “Compensation of Directors and
        Executive Officers”. Such information is incorporated herein by
        reference.
 
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            40
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 **ITEM
        11.****SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
        MATTERS**
  The
        following table presents information known to us, as of December 31, 2006,
        relating to the beneficial ownership of common stock by:
 
 ●
              each
                  person who is known by us to be the beneficial holder of more than
                  5% of
                  our outstanding common stock;●
              each
                  of our named executive officers and directors; and●
              our
                  directors and executive officers as a
                  group.
 
 We
        believe that all persons named in the table have sole voting and investment
        power with respect to all shares beneficially owned by them, except as noted.
        Unless otherwise indicated, the address of each stockholder listed in the
        table
        is 4452 Beltway Drive, Addison, Texas 75001.
 
 Percentage
        ownership in the following table is based on 61,407,876 shares of common
        stock
        outstanding as of March 16, 2007. A person is deemed to be the beneficial
        owner
        of securities that can be acquired by that person within 60 days from March
        16,
        2007 upon the exercise of options, warrants or convertible securities. Each
        beneficial owner's percentage ownership is determined by dividing the number
        of
        shares beneficially owned by that person by the base number of outstanding
        shares, increased to reflect the shares underlying options, warrants or other
        convertible securities included in that person's holdings, but not those
        underlying shares held by any other person.
 
 **Name
                  and Address of Beneficial Owner**
              
              **Number
                  of Shares**
                **Beneficially
                  Owned**
              
              **%
                  of Class*****5%
                  or Greater Stockholders:***Kerry P. Gray
              
              
              9,939,000
              
              
              16.2
              %Entities affiliated with Brencourt Advisors LLC (1)
              
              
              7,894,736
              
              
              12.9
              %William L. Collins (2)
              
              
              359,062
              
              
              0.6
              %Cornell Capital Partners, LP (3)
              
              
              3,172,885
              
              
              5.1
              %JANA Partners LLC (4)
              
              
              6,118,421
              
              
              10.0
              %Oscar S. Schafer & Partners I, LP (5)
              
              
              414,782
              
              
              0.7
              %Oscar S. Schafer & Partners II, LP (5)
              
              
              4,533,603
              
              
              7.4
              %OSS Overseas LTD (5)
              
              
              5,577,930
              
              
              9.1
              %Pequot Capital Management, Inc. (6)
              
              
              8,023,421
              
              
              13.1
              %Prenox, LLC (7)
              
              
              4,357,158
              
              
              7.1
              %Entities affiliated with Tudor Investment Corporation (8)
              
              
              3,157,895
              
              
              5.1
              %***Directors
                  and Named Executive Officers:***Kerry P. Gray, President, Chief Executive Officer,
                  Director
              
              
              9,939,000
              
              
              16.2
              %Terrance K. Wallberg, Chief Financial Officer, Treasurer
              
              
              245,511
              
              
              *William W. Crouse, Chairman, Director
              
              
              50,000
              
              
              *David E. Reese, Director
              
              
              -0-Jeffrey B. Davis, Director
              
              
              -0-Directors and Executive Officers as a Group (5 persons)
              
              
              10,234,511
              
              
              16.7
              %** Less than 1% of the total outstanding common stock.*
 
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 (1)
              The
                  address for Brencourt Advisors LLC is 600 Lexington Avenue, New
                  York, NY
                  10022. Shares are owned directly by Brencourt Multi Strategy Master
                  LTD
                  (4,342,106 shares), Man Mac Shreckhorn 14B LTD (1,421,052 shares),
                  Partners Group Alternative Strategies PCC LTD - Yellow Kappa Cellis
                  (710,526 shares) and Diadem IAM LTD (1,421,052 shares). Brencourt
                  Advisors
                  LLC is the investment manager of each such entity.(2)
              The
                  address for William L. Collins is c/o Brencourt Advisors LLC, 600
                  Lexington Avenue, New York, NY 10022. Shares are owned directly
                  by Mr.
                  Collins. Mr. Collins is the Chairman and CEO of Brencourt Advisors
                  LLC and
                  makes investment decisions on behalf of Brencourt Advisors, LLC.
                  Mr.
                  Collins expressly disclaims beneficial interest in shares owned
                  and
                  controlled by Brencourt Advisors LLC.(3)
              The
                  address for Cornell Capital Partners, LP is 101 Hudson Street,
                  Suite 3700,
                  Jersey City, NJ 07302. Shares beneficially owned by Cornell Capital
                  Partners, LP represents 2,402,505 shares of common stock and 418,933
                  shares of common stock upon exercise of currently outstanding warrant
                  owned directly by Cornell Capital Partners, LP and 351,447 shares
                  of
                  common stock owned by Highgate House Funds, Ltd. The shares available
                  for
                  exercise of the warrant owned by Cornell are limited as the terms of
                  the warrant prohibit exercise if the aggregate number of shares
                  of common
                  stock to be held by Cornell or Highgate after such exercise would
                  exceed
                  4.99% of the issued and outstanding common stock. House Funds,
                  Ltd. and
                  Cornell Capital Partners, LP are affiliated as Highgate is a wholly
                  owned
                  subsidiary of, and controlled by, Cornell Capital Partners, LP,
                  a Cayman
                  Island limited partnership. Highgate and Cornell are managed by
                  the same
                  investment manager, Yorkville Advisors, LLC, located at 101 Hudson
                  Street,
                  Suite 3700, Jersey City, NY 07302. Investment decisions for Yorkville
                  Advisors are made by Mark Angelo, its portfolio
                  manager.(4)
              The
                  address for JANA Partners LLC is 200 Park Avenue, Suite 3300, New
                  York, NY
                  10166. JANA Partners LLC is the investment manager for JANA Piranha
                  Master
                  Fund, Ltd.(5)
              The
                  address for Oscar S. Schafer & Partners I, LP ("OSS I"), Oscar S.
                  Schafer & Partners II, LP ("OSS II") and OSS Overseas LTD (“OSS
                  Overseas”) is 598 Madison Avenue, 10th Floor, New York, NY 10022. OSS I,
                  OSS II are holders of common stock. All investment decisions of,
                  and
                  control of, OSS I and OSS II are held by its general partner, O.S.S.
                  Advisors LLC. Oscar S. Schafer and Andrew J. Goffe are the managing
                  members of O.S.S. Advisors LLC. All investment decisions of, and
                  control
                  of, OSS Overseas are held by its investment manager, O.S.S. Capital
                  Management LP. Schafer Brothers LLC is the general partner of O.S.S.
                  Capital Management LP. Oscar S. Schafer and Andrew J. Goffe are
                  the
                  managing members of Schafer Brothers LLC. Each of Messrs. Schafer
                  and
                  Goffe disclaims beneficial ownership of the shares held by OSS
                  I, OSS II
                  and OSS Overseas except to the extent of his pecuniary interest
                  therein.(6)
              The
                  address for Pequot Capital Management, Inc., 500 Nyala Farm Road,
                  Westport, CT 06880. Shares beneficially owned by Pequot Capital
                  Management, Inc. represent 8,023,421 shares of Common Stock. Pequot
                  Capital Management, Inc., which is the Investment Manager/Advisor
                  (as
                  applicable) to certain investment funds that are holders of record,
                  exercises sole dispositive, investment and voting power for all
                  the
                  shares, except that Pequot Capital Management, Inc. does not hold
                  voting
                  power over 576,596 shares held of record by Premium Series PCC
                  Limited-Cell 32. Arthur J. Samberg is the controlling shareholder
                  of
                  Pequot Capital Management, Inc. and disclaims beneficial ownership
                  of the
                  shares except for his pecuniary interest.(7)
              The
                  address for Prenox, LLC is 623 Fifth Avenue, 32ndFloor, New York, NY 10022. Shares of common stock are owned directly
                  be
                  Prenox, LLC and the foregoing does not include any shares of common
                  stock
                  issuable upon exercise of warrants that are held by Prenox, LLC,
                  the terms
                  of which prohibit exercise if the aggregate number of shares of
                  common
                  stock to be held by Prenox after such exercise would exceed 4.99%
                  of the
                  issued and outstanding common stock. Prentice Capital Management,
                  LP is
                  the manager of Prenox, LLC and exercises voting and investment
                  power over
                  such shares. Prentice Capital Management, LP expressly disclaims
                  beneficial ownership of the shares(8)
              The
                  address for Tudor Investment Corporation ("TIC") is 50 Rowes Wharf,
                  6th
                  Floor, Boston, MA 02110. Shares are owned directly by Tudor Proprietary
                  Trading, L.L.C. ("TPT") (220,105 shares), The Tudor BVI Global
                  Portfolio
                  Ltd. ("BVI Portfolio") (408,768 shares) and Witches Rock Portfolio
                  Ltd.
                  ("Witches Rock") (2,529,022 shares). Because TIC provides investment
                  advisory services to BVI Portfolio and Witches Rock, it may be
                  deemed to
                  beneficially own the shares held by BVI Portfolio and Witches Rock.
                  TIC
                  expressly disclaims such beneficial ownership. Because Paul Tudor
                  Jones,
                  II is the Chairman and indirect majority equity holder of TPT,
                  Mr. Jones
                  may be deemed to beneficially own the shares deemed beneficially
                  owned by
                  TIC and TPT. Mr. Jones expressly disclaims such beneficial ownership.
                  Because James J. Pallotta is the Vice-Chairman of TPT and makes
                  investment
                  decisions with respect to the Company's common stock, Mr. Pallotta
                  may be
                  deemed to beneficially own the shares deemed beneficially owned
                  by TIC and
                  TPT. Mr. Pallotta expressly disclaims such beneficial
                  ownership.
 
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 *Securities
        authorized for issuance under equity compensation*
 
 We
        adopted our 2006 Equity Incentive Plan on March 27, 2006 authorizing 2,000,000
        shares under the plan. We have issued 1,350,000 options or rights under this
        plan. The balance of the options outstanding as of December 31, 2006 is
        650,000.
 
 The
        following table sets forth the securities that have been authorized under
        equity
        compensation plans as of December 31, 2006.
 
 Plan Category
              
              Number of securities to
                be issued upon exercise
                of outstanding options,
                warrants and rights
              
              Weighted-average
                exercise price of
                outstanding options,
                warrants and rights
              
              Number of securities
                remaining available for
                future issuance under
                equity compensation
                plans (excluding
                securities reflected in
                column (a))(a)
              
              (b)
              
              (c)Equity
                  compensation plans approved by security holders2006
                  Stock Option Plan
              
              
              1,350,000
              
              $
              1.29
              
              
              650,000Equity
                  compensation plans not approved by security holders
              
              
              -0-
              
              
              n/a
              
              
              -0-Total
              
              
              1,350,000
              
              $
              1.29
              
              
              650,000
 
 
 **ITEM
        12.****CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 We
        have
        entered into employment agreements with Kerry P. Gray, President and Chief
        Executive Officer, and Terrance K. Wallberg, Vice President and Chief Financial
        Officer. The term of Mr. Gray's agreement is three years from January 1,
        2006
        and automatically renews annually unless 6 month notice is provided by us.
        The
        agreement with Mr. Wallberg is for an initial term of one year from January
        1,
        2006 automatically renews annually unless 6 month notice of non-renewal is
        provided by us. Additional information regarding these agreements is included
        in
        the “Management” section of this Form 10-KSB.
 
 In
        September 2006 we reimbursed Mr. Gray $213,593 for funds advanced to us for
        working capital in July and August, 2006 in the amount of $178,000 and for
        professional fees of $35,593 paid by Mr. Gray on behalf of our wholly owned
        subsidiary, Uluru Delaware Inc., in September 2005.
 
  -
            43
            -
 *Table
            of Contents*
  
 **ITEM
        13.****EXHIBITS**
 
 The
        exhibits listed below are required by Item 601 of Regulation S-K. Each
        management contract or compensatory plan or arrangement required to be filed
        as
        an exhibit to this Form 10-KSB has been identified.
 
 **Exhibit**
                **Number**
              ****
              **Description
                  of Document**3.1.1
              
              Articles
                  of Incorporation dated September 17, 1987 (1)3.1.2
              
              Articles
                  of Amendment dated December 17, 1990 (1)3.1.3
              
              Articles
                  of Amendment dated April 16, 1993 (1)3.1.4
              
              Articles
                  of Amendment dated August 19, 1999 (1)3.1.5
              
              Articles
                  of Amendment dated March 13, 2000 (1)3.1.6
              
              Articles
                  of Amendment dated January 30, 2002 (1)3.1.7
              
              Articles
                  of Amendment dated March 29, 2006 (4)3.1.8
              
              Articles
                  of Amendment dated March 31, 2006 (4)3.2
              
              Bylaws
                  (1)10.1
              
              Securities
                  Purchase Agreement dated October 12, 2005 by and among the Registrant,
                  Highgate House Ltd., and Prenox, LLC. (2)10.2
              
              Security
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House Ltd., and Prenox, LLC. (2)10.3
              
              Collateral
                  Assignment dated October 12, 2005 by and among the Registrant,
                  Highgate
                  House Ltd., and Prenox, LLC. (2)10.4
              
              Guaranty
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House Ltd., and Prenox, LLC. (2)10.5
              
              Guarantor
                  Security Agreement dated October 12, 2005 by and among the Merger
                  Corp.,
                  Highgate House Ltd., and Prenox, LLC. (2)10.6
              
              Escrow
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House, Ltd., Prenox, LLC, and Gottbetter & Partners, LLP.
                  (2)10.7
              
              Escrow
                  Shares Escrow Agreement dated October 12, 2005 by and among the
                  Registrant, Highgate House Ltd., Prenox, LLC, and Gottbetter &
                  Partners. (2)10.8
              
              Investor
                  Registration Rights Agreement dated October 12, 2005 by and among
                  the
                  Registrant, Highgate House, Ltd. and Prenox, LLC. (2)10.9
              
              OXFV
                  Convertible Debenture for $3,000,000 issued by the Registrant and
                  Highgate
                  House, Ltd. dated October 12, 2005. (2)10.10
              
              OXFV
                  Convertible Debenture for $10,000,000 issued by the Registrant
                  and Prenox,
                  LLC dated October 12, 2005. (2)10.11
              
              Warrant
                  issued by the Registrant to Highgate House, Ltd., dated October
                  12, 2005.
                  (2)10.12
              
              Warrant
                  issued by the Registrant to Prenox, LLC, dated October 12, 2005.
                  (2)10.13
              
              Bridge
                  Loan and Control Share Pledge and Security Agreement dated October
                  12,
                  2005 by and among ULURU Delaware Inc., the Registrant, and Mr.
                  Kerry P.
                  Gray. (2)10.14
              
              Security
                  Agreement dated October 12, 2005 by and among ULURU Delaware Inc.,
                  the
                  Registrant, and Mr. Kerry P. Gray. (2)10.15
              
              Pledge
                  and Escrow Agreement dated October 12, 2005 by and among the Registrant,
                  ULURU Delaware Inc., Mr. Kerry P. Gray, and Gottbetter & Partners,
                  LLP. (2)10.16
              
              Convertible
                  Debenture for $10,700,000 issued by ULURU Delaware Inc. to the
                  Registrant,
                  dated October 12, 2005. (2)10.17
              
              Agreement
                  and Plan of Merger and Reorganization dated October 12, 2005 by
                  and among
                  the Registrant, Uluru Acquisition Corp., and ULURU Delaware Inc.
                  (2)10.18
              
              Indemnifying
                  Escrow Agreement dated October 12, 2005 by and among the Registrant,
                  Mr.
                  Kerry P. Gray and Gottbetter & Partners, LP. (2)10.19
              
              Standby
                  Equity Distribution Agreement dated October 12, 2005 by and between
                  the
                  Registrant and Cornell Capital Partners, LP. (2)10.20
              
              SEDA
                  Registration Rights Agreement dated October 12, 2005 by and between
                  the
                  Registrant and Cornell Capital Partners, LP. (2)10.21
              
              Placement
                  Agent Agreement dated October 12, 2005 by and among the Registrant,
                  Cornell Capital Partners, LP, and Newbridge Securities Corp.
                  (2)10.22
              
              Asset
                  Sale Agreement dated October 12, 2005 by and between ULURU Delaware
                  Inc.
                  and Access Pharmaceuticals, Inc. (4)10.23
              
              Patent
                  Assignment Agreement dated October 12, 2005 by and between ULURU
                  Delaware
                  Inc. and Access Pharmaceuticals, Inc. (4)10.24
              
              License
                  Agreement dated October 12, 2005 by and between ULURU Delaware
                  Inc. and
                  Access Pharmaceuticals, Inc. (4)10.25
              
              Lease
                  Agreement dated January 31, 2006 by and between ULURU Delaware
                  Inc. and
                  Addison Park Ltd. (4)10.26
              
              License
                  Agreement dated August 14, 1998 by and between ULURU Delaware Inc.
                  and
                  Strakan Ltd. (4)10.27
              
              License
                  and Supply Agreement dated April 15, 2005 by and between ULURU
                  Delaware
                  Inc. and Discus Dental. (4)10.28
              
              Amendment
                  to License and Supply Agreement dated November 18, 2005 by and
                  between
                  ULURU Delaware Inc. and Discus Dental. (4)10.29
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Kerry P. Gray. (4)10.30
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Terrance K. Wallberg. (4)10.31
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Daniel G. Moro. (4)10.32
              
              Secured
                  Convertible Debenture with Cornell Capital Partners, L.P., date
                  June 9,
                  2004 (5)10.33
              
              Standby
                  Equity Distribution Agreement, dated May 18, 2004, with Cornell
                  Capital
                  Partners, L.P. (5)10.33
              
              Security
                  Agreement, Dated May 18, 2004, with Cornell Capital Partners, L.P.
                  (5)10.34
              
              Warrant
                  to Purchase Common Stock of Uluru Inc. issued to Highgate House
                  Funds,
                  Ltd., dated October 12, 2005. (7)10.35
              
              Warrant
                  to Purchase Common Stock of Uluru Inc. issued to Prenox, LLC, dated
                  August
                  20, 2006. (6)10.36
              
              Agreement
                  dated August 30, 2006 by and between Uluru Inc. and ULURU Delaware
                  Inc.
                  (6)10.37
              *
              Uluru
                  Inc. 2006 Equity Incentive Plan (3)10.38
              
              Agreement
                  dated December 6, 2006 by and among the Registrant, ULURU Delaware
                  Inc.,
                  Prenox, LLC, and Cornell Capital, LP. (7)10.39
              
              Common
                  Stock Purchase Agreement dated December 6, 2006 by and among the
                  Registrant and the purchasers party thereto. (7)10.40
              
              Investor
                  Rights Agreement dated December 6, 2006 by and among the Registrant
                  and
                  the purchasers party thereto. (7)10.41
              
              Amendment
                  to Asset Sale Agreement dated December 8, 2006 by and between ULURU
                  Delaware Inc. and Access Pharmaceuticals, Inc. (7)10.42
              *
              Employment
                  Agreement dated December 1, 2006 by and between ULURU Delaware
                  Inc. and
                  John V. St. John, PhD. (8)19
              
              Notice
                  to Security Holders, dated February 27, 2006 (3)31.1
              **
              Certification
                  Pursuant to Rule 13a-14 and 15d-14 under
                  the Securities Exchange Act of 1934, as Amended31.2
              **
              Certification
                  Pursuant to Rule 13a-14 and 15d-14 under
                  the Securities Exchange Act of 1934, as Amended32.1
              **
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200232.2
              **
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act
                  of 2002-----------------------------------------(1)
              
              Incorporated
                  by reference to the Company’s registration statement on Form 10-SB filed
                  on March 8, 2002.(2)
              
              Incorporated
                  by reference to the Company’s Current Report on Form 8-K filed on October
                  18, 2005.(3)
              
              Incorporated
                  by reference to the Company’s Definitive Schedule 14C filed on March 1,
                  2006.(4)
              
              Incorporated
                  by reference to the Company’s Form 8-K filed on March 31,
                  2006(5)
              
              Incorporated
                  by reference to the Company’s registration statement on SB-2 filed on June
                  9, 2004.(6)
              
              Incorporated
                  by reference to the Company’s Form 10-QSB filed on November 20,
                  2006(7)
              
              Incorporated
                  by reference to the Company’s Form SB-2 Registration Statement filed on
                  December 15, 2006(8)
              
              Incorporated
                  by reference to the Company’s Form SB-2/A Registration Statement filed on
                  February 9, 2007*
              Management
                  contract or compensation plan arrangements.**
              Filed
                  herewith.
 
  -
            44
            -
 *Table
            of Contents*
  
 **ITEM
        14.****PRINCIPAL
        ACCOUNTANT FEES AND SERVICES**
 
 During
        fiscal 2006 and 2005, Braverman International, P.C., our independent registered
        public accounting firm, billed us $46,006 and $114,641, respectively, for
        audit
        fees. Audit fees relate to professional services rendered in connection with
        the
        audit of our annual financial statements, the quarterly review of unaudited
        interim financial statements included in our Forms 10-QSB, and services in
        connection with registration statements filed with the SEC, including the
        delivery of consents and “comfort letters”.
 
 Our
        Board's policy is to pre-approve all audit and permissible non-audit services
        performed by the independent accountants. These services may include audit
        services, audit-related services, tax services and other services. Under
        our
        Board's policy, pre-approval is generally provided for particular services
        or
        categories of services, including planned services, project based services
        and
        routine consultations. In addition, the Board may also pre-approve particular
        services on a case-by-case basis. Our Board approved all services that our
        independent accountants provided to us in the past two fiscal years.
  -
            45
            -
 *Table
            of Contents*
  
 
 **SIGNATURES**Pursuant
                  to the requirements of Section 13 or 15(d) 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:
                  March 19, 2007
              By
              /s/ Kerry
                  P. GrayKerry
                  P. GrayChief
                  Executive Officer, DirectorPrincipal
                  Executive OfficerDate:
                  March 19, 2007
              By
              /s/
                  Terrance K. WallbergTerrance
                  K. WallbergChief
                  Financial OfficerPrincipal
                  Accounting Officer
 
 
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on behalf of the registrant and in
        the
        capacities and on the dates indicated.
 
 Date:
                  March 19, 2007
              /s/
                  William W. CrouseWilliam
                  W. Crouse, DirectorDate:
                  March 19, 2007
              /s/
                  David E. ReeseDavid
                  E. Reese, DirectorDate:
                  March 19, 2007
              /s/
                  Jeffrey B. DavisJeffrey
                  B. Davis, Director
 
  
  -
            46
            -
 *Table
            of Contents*
  
 
 
 **ULURU
                  Inc.****CONSOLIDATED
                  FINANCIAL STATEMENTS****DECEMBER
                  31, 2006****TABLE
                  OF CONTENTS****Page**Report
                  of Independent Registered Public Accounting Firm
                  - ULURU Inc.
              F-2Report
                  of Independent Registered Public Accounting Firm
                  - ULURU Delaware Inc.
              F-3Consolidated
                  Balance Sheet as of December 31,
                  2006
              F-4Consolidated
                  Statements of Operations for the year ended
                  December 31, 2006 and for Uluru Delaware Inc. for the period from
                  September 7, 2005 (Inception) to December 31, 2005 and for the
                  Topical
                  Component for the period from January 1, 2005 to October 12,
                  2005
              F-5Consolidated
                  Statement of Stockholders’ Equity for the
                  year ended December 31, 2006
              F-6Consolidated
                  Statements of Cash Flows for the year
                  ended December 31, 2006 and for Uluru Delaware Inc. for the period
                  from
                  September 7, 2005 (Inception) to December 31, 2005 and for the
                  Topical
                  Component for the period from January 1, 2005 to October 12,
                  2005
              F-7Notes
                  to Consolidated Financial
                  Statements
              F-8
 
  -
            47
            -
 *Table
            of Contents*
  
  **REPORT
        OF********INDEPENDENT
        REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders
 ULURU
        Inc.
 Addison,
        Texas
 
 We
        have
        audited the accompanying consolidated balance sheet of ULURU Inc. (a Nevada
        corporation) as of December 31, 2006, and the related consolidated statements
        of
        operations, stockholders’ equity, and cash flows for the year then ended. These
        financial statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these consolidated financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company has determined
        that it
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also includes examining, on a test basis, evidence supporting the amounts
        and
        disclosures in the consolidated financial statements, assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall consolidated financial statement presentation.  We
        believe that our audit provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of ULURU Inc., as of December
        31, 2006, and the results of its operations and its cash flows for the year
        then
        ended, in conformity with accounting principles generally accepted in the
        United
        States of America.
 
 
 /s/
        Braverman International, P.C.
 Braverman
        International, P.C.
 Prescott,
        Arizona
 February
        2, 2007
 
 
 
 
  F-2
 *Table
            of Contents*
   
  **REPORT
        OF********INDEPENDENT
        REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders
 ULURU
        Delaware Inc.
 Addison,
        Texas
 
 We
        have
        audited the accompanying statements of operations, stockholders’ equity
        (deficit), and cash flows of ULURU Delaware Inc. (a Delaware corporation)
        for
        the period from September 7, 2005 to December 31, 2005, and the statements
        of
        operations and cash flows of the net assets of the Topical Business Component
        of
        Access Pharmaceuticals, Inc. and Subsidiaries (a Delaware corporation) for
        the
        period from January 1, 2005, to October 12, 2005. These financial statements
        are
        the responsibility of the Company’s management. Our responsibility is to express
        an opinion on these consolidated financial statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company has determined
        that it
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also includes examining, on a test basis, evidence supporting the amounts
        and
        disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, as well as evaluating
        the
        overall financial statement presentation.  We believe that our audit
        provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the results of operations and cash flows of ULURU Delaware
        Inc. for the period from September 7, 2005 to December 31, 2005, and the
        results
        of operations and cash flows of the net assets of the Topical Business Component
        of Access Pharmaceuticals, Inc. and Subsidiaries for the period from January
        1,
        2005, to October 12, 2005, in conformity with accounting principles generally
        accepted in the United States of America.
 
 
 /s/
        Braverman International, P.C.
 Braverman
        International, P.C.
 Prescott,
        Arizona
 June
        9,
        2006
 
 
 
 
 
 
 
  F-3
 *Table
            of Contents*
  
 **ULURU
        Inc.******
 **CONSOLIDATED
        BALANCE SHEET**
 **DECEMBER
        31, 2006**
 
 
 **ASSETS****Current
                  Assets**Cash
              
              $
              16,918,007Accounts receivable - trade
              
              
              672,534Prepaid expenses and deferred charges
              
              
              265,935Total Current Assets
              
              
              17,856,476**Property,
                  Plant & Equipment, net**
              
              
              691,132**Other
                  Assets**Patents, net
              
              
              12,098,869Deposits
              
              
              20,749Total Other Assets
              
              
              12,119,618**TOTAL
                  ASSETS**
              
              $
              30,667,226**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY****Current
                  Liabilities**Accounts payable
              
              $
              273,534Accrued liabilities
              
              
              475,218Accrued liabilities - related party
              
              
              63,984Royalty advance
              
              
              219,268Asset purchase obligation
              
              
              350,000Total Current Liabilities
              
              
              1,382,003**COMMITMENTS
                  AND CONTINGENCIES**
              
              
              ---**STOCKHOLDERS’
                  EQUITY**Preferred stock, $.001 par value, 20,000 sharesauthorized, none issued
              
              
              ---Common Stock: $ 0.001 par value, 200,000,000 shares
                  authorized;Issued and outstanding : 59,896,939
              
              
              59,897Additional paid-in capital
              
              
              41,886,896Accumulated (deficit)
              
              
              (12,661,571
              )Total Stockholders’ Equity
              
              
              29,285,223**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY**
              
              $
              30,667,226The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
 
  F-4
 *Table
            of Contents*
  
 **ULURU
        Inc.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 
 
 **ULURU
                  Inc.**
              
              
              
              **ULURU
                  DELAWARE INC.**
              
              **Topical
                  Component of Access Pharmaceuticals, Inc.****For
                  the Year Ended**
              
              
              
              **From
                  September 7, 2005 (Inception) to**
              
              **From
                  January 1, 2005 to****December
                  31, 2006**
              
              
              
              **December
                  31, 2005**
              
              **October
                  12, 2005****REVENUES**License fees
              
              $
              891,576
              
              
              
              $
              98,716
              
              $
              204,887Royalty income
              
              
              373,845
              
              
              
              
              30,425
              
              
              75,676Product sales
              
              
              155,208
              
              
              
              
              58,394
              
              
              519,291Other
              
              
              113,824
              
              
              
              
              11,664
              
              
              ---Total Revenues
              
              
              1,534,453
              
              
              
              
              199,199
              
              
              799,854**COSTS
                  AND EXPENSES**Cost of goods sold
              
              
              181,546
              
              
              
              
              23,767
              
              
              209,181Research and development
              
              
              1,950,376
              
              
              
              
              325,078
              
              
              1,600,512General and administrative
              
              
              1,878,067
              
              
              
              
              233,648
              
              
              912,514Amortization
              
              
              1,052,395
              
              
              
              
              228,599
              
              
              135,777Depreciation
              
              
              63,881
              
              
              
              
              14,449
              
              
              33,384Total
                  Costs and Expenses
              
              
              5,126,266
              
              
              
              
              825,540
              
              
              2,891,368**OPERATING
                  (LOSS)**
              
              
              (3,591,813
              )
              
              
              
              (626,341
              )
              
              (2,091,514
              )**Other
                  Income (Expense)**Interest and miscellaneous income
              
              
              65,980
              
              
              
              
              2,636
              
              
              91,469Interest expense
              
              
              (5,424,518
              )
              
              
              
              (328,777
              )
              
              (116,913
              )Commitment fee - Standby Equity Agreement
              
              
              (1,787,940
              )
              
              
              
              ---
              
              
              ---Loss on early extinguishment of debenture
              
              
              (940,655
              )
              
              
              
              ---
              
              
              ---Loss on sale of equipment
              
              
              (30,143
              )
              
              
              
              ---
              
              
              ---**NET
                  (LOSS)**
              
              $
              (11,709,089
              )
              
              
              $
              (952,482
              )
              $
              (2,116,958
              )Basic
                  and diluted net (loss) per common share
              
              $
              (.71
              )
              
              
              $
              (1.12
              )WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
              
              
              16,457,978
              
              
              
              
              850,499The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
  F-5
 *Table
            of Contents*
  
 **ULURU
                  Inc.****CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS’ EQUITY****Total****Common
                  Stock**
              
              **Paid-in**
              
              **Accumulated**
              
              **Stockholders’****Shares
                  Issued**
              
              **Amount**
              
              **Capital**
              
              **(Deficit)**
              
              **Equity
                  (Deficit)****Balance,
                  September 7, 2005 (Inception)**
              
              
              -0-
              
              $
              -0-
              
              $
              -0-
              
              $
              -0-
              
              $
              -0-Capitalization
              
              
              11,000,000
              
              
              11,000
              
              
              (10,978
              )
              
              -0-
              
              
              22Net
                  (loss) for the period
              
              
              ---
              
              
              ---
              
              
              ---
              
              
              (952,482
              )
              
              (952,482
              )**Balance,
                  December 31, 2005**
              
              
              11,000,000
              
              
              11,000
              
              
              (10,978
              )
              
              (952,482
              )
              
              (952,460
              )Recapitalization,
                  March 31, 2006
              
              
              851,011
              
              
              851
              
              
              (1,561,078
              )
              
              --
              
              
              (1,560,227
              )Shares
                  issued as commitment fee for SEDA agreement - March 31,
                  2006
              
              
              993,300
              
              
              993
              
              
              1,786,947
              
              
              --
              
              
              1,787,940Stock
                  warrant issued for 1,125,000 shares on August 30, 2006
              
              
              --
              
              
              --
              
              
              232,493
              
              
              --
              
              
              232,493Stock
                  warrant issued for 2,270,000 shares on December 8, 2006
              
              
              --
              
              
              --
              
              
              1,000,143
              
              
              --
              
              
              1,000,143Issuance
                  of common stock - 47,052,628 shares at $0.95 per share for cash
                  and debt
                  conversion on December 8, 2006
              
              
              47,052,628
              
              
              47,053
              
              
              44,652,946
              
              
              --
              
              
              44,699,999Stock
                  offering costs
              
              
              --
              
              
              --
              
              
              (4,229,989
              )
              
              --
              
              
              (4,229,989
              )Share-based
                  compensation of employees
              
              
              --
              
              
              --
              
              
              15,906
              
              
              --
              
              
              15,906Share-based
                  compensation of non-employees
              
              
              --
              
              
              --
              
              
              506
              
              
              --
              
              
              506Net
                  (loss) for the year
              
              
              --
              
              
              --
              
              
              --
              
              
              (11,709,089
              )
              
              (11,709,089
              )**Balance,
                  December 31, 2006**
              
              
              59,896,939
              
              $
              59,897
              
              $
              41,886,896
              
              $
              (12,661,571
              )
              $
              29,285,222The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
 
  F-6
 *Table
            of Contents*
  **ULURU
        Inc.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 
 **ULURU
                  Inc.**
              
              
              
              **ULURU
                  DELAWARE INC.**
              
              **Topical
                  Component of Access Pharmaceuticals, Inc.****For
                  the Year Ended**
              
              
              
              **From
                  September 7, 2005 (Inception) to**
              
              **From
                  January 1, 2005 to****December
                  31, 2006**
              
              
              
              **December
                  31, 2005**
              
              **October
                  12, 2005****OPERATING
                  ACTIVITIES :**Net (loss)
              
              $
              (11,709,089
              )
              
              
              $
              (952,482
              )
              $
              (2,116,958
              )**Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:**Amortization
              
              
              1,052,395
              
              
              
              
              228,599
              
              
              132,771Depreciation
              
              
              63,881
              
              
              
              
              14,449
              
              
              33,384Commitment fee - Standby Equity Agreement
              
              
              1,787,940
              
              
              
              
              --
              
              
              --Liquidated damages
              
              
              -0-
              
              
              
              
              --
              
              
              --Loss on early extinguishment of debenture
              
              
              940,655
              
              
              
              
              --
              
              
              --Loss on sale of equipment
              
              
              30,143
              
              
              
              
              --
              
              
              --Share based compensation of employees
              
              
              15,906
              
              
              
              
              --
              
              
              --Share based compensation of non-employees
              
              
              506
              
              
              
              
              --
              
              
              --Amortization of restricted stock grants
              
              
              --
              
              
              
              
              --
              
              
              26,137Interest - Financing costs
              
              
              371,947
              
              
              
              
              --
              
              
              --Interest - Imputed
              
              
              340,969
              
              
              
              
              90,999
              
              
              --Interest - Debt discount (warrant)
              
              
              232,493
              
              
              
              
              --
              
              
              --Interest - Repayment premium of debenture
              
              
              3,200,000
              
              
              
              
              --
              
              
              --Product costs acquired in asset acquisition
              
              
              -0-
              
              
              
              
              16,218
              
              
              --**Change
                  in operating assets and liabilities :**Accounts receivable
              
              
              (508,093
              )
              
              
              
              (143,269
              )
              
              (90,937
              )Inventory
              
              
              77,710
              
              
              
              
              (77,710
              )
              
              104,106Prepaid expenses and deferred charges
              
              
              21,129
              
              
              
              
              (275,516
              )
              
              351,572Deposits
              
              
              8,324
              
              
              
              
              --
              
              
              --Accounts payable
              
              
              (72,604
              )
              
              
              
              138,698
              
              
              231,656Accrued liabilities
              
              
              53,739
              
              
              
              
              377,679
              
              
              (159,028
              )Royalty advance
              
              
              (249,788
              )
              
              
              
              (30,944
              )
              
              --Accrued interest
              
              
              (356,124
              )
              
              
              
              --
              
              
              --Deferred revenues
              
              
              -0-
              
              
              
              
              237,778
              
              
              588,918Total Adjustments
              
              
              7,011,129
              
              
              
              
              576,981
              
              
              1,218,579Net Cash (Used) in Operating Activities
              
              
              (4,697,960
              )
              
              
              
              (375,501
              )
              
              (898,379
              )**INVESTING
                  ACTIVITIES :**Increase in property, plant, and equipment
              
              
              (424,545
              )
              
              
              
              (741
              )
              
              (19,674
              )Proceeds from sale of equipment
              
              
              14,500
              
              
              
              
              --
              
              
              --Increase in patent assets
              
              
              (356,780
              )
              
              
              
              --
              
              
              --Cash received in recapitalization of the Company
              
              
              128,045
              
              
              
              
              --
              
              
              --Cash paid to acquire net assets of Topical Component of Access
                  Pharmaceuticals, Inc.
              
              
              -0-
              
              
              
              
              (8,700,000
              )
              
              --Net Cash (Used) in Investing Activities
              
              
              (638,781
              )
              
              
              
              (8,700,741
              )
              
              (19,674
              )**FINANCING
                  ACTIVITIES :**Repayment of capital lease obligation
              
              
              (53,710
              )
              
              
              
              (13,401
              )
              
              (48,634
              )Proceeds from exchange of convertible debentures, net
              
              
              2,699,975
              
              
              
              
              --
              
              
              --Redemption of convertible debentures
              
              
              (13,000,000
              )
              
              
              
              --
              
              
              --Repayment of asset purchase obligation
              
              
              (4,622,048
              )
              
              
              
              --
              
              
              --Increase in asset purchase obligation, net
              
              
              350,000
              
              
              
              
              --
              
              
              --Proceeds from sale of common stock, net
              
              
              38,499,999
              
              
              
              
              --
              
              
              --Stock offering costs, net
              
              
              (3,229,846
              )
              
              
              
              --
              
              
              --Receipt of stock subscription receivable
              
              
              22
              
              
              
              
              --
              
              
              --Proceeds from notes payable
              
              
              -0-
              
              
              
              
              10,700,000
              
              
              --Financing provided by Access Pharmaceuticals, Inc.
              
              
              -0-
              
              
              
              
              --
              
              
              966,687Net Cash Provided by Financing Activities
              
              
              20,644,391
              
              
              
              
              10,686,599
              
              
              918,053**Net
                  Increase in Cash**
              
              
              15,307,650
              
              
              
              
              1,610,357
              
              
              -0-CASH,
                  beginning of period
              
              
              1,610,357
              
              
              
              
              --
              
              
              --CASH,
                  end of period
              
              $
              16,918,007
              
              
              
              $
              1,610,357
              
              $
              -0-**Supplemental
                  Schedule of Noncash **Investing
                  and Financing Activities :******ULURU
                  Inc.**Redemption
                  of convertible debentures on December 6, 2006Debenture - Prenox, LLC
              
              $
              13,000,000Debenture - Cornell Capital Partners, LP
              
              
              3,000,000Total Debentures
              
              
              16,000,000Redemption premium
              
              
              3,200,000Total Redemption amount
              
              
              19,200,000Less : Redemption in common stock
              
              
              (6,200,000
              )Total Redemption in cash
              
              $
              13,000,000Proceeds
                  from stock sale on December 6, 2006Common stock sold (47,052,628 shares @ $0.95)
              
              
              44,699,999Less : Common stock used to redeem debenture
              
              
              (6,200,000
              )Cash proceeds from stock sale
              
              $
              38,499,999Stock
                  offering costs associated with stock sale on December 6,
                  2006Total stock offering costs
              
              $
              4,229,989Less : warrant issued in lieu of cash for placement
                  commission
              
              
              (1,000,143
              )Total stock offering costs in cash
              
              $
              3,229,846Net
                  proceeds from exchange of convertible debenture on August 30,
                  2006Convertible
                  debenture issued
              
              $
              13,000,000Less
                  : redemption of convertible debenture
              
              
              (10,000,025
              )Less
                  : debenture issuance costs
              
              
              (300,000
              )Proceeds
                  from debenture exchange, net
              
              $
              2,699,975Non-monetary
                  net liabilities assumed in a recapitalization of the Company on
                  March 31,
                  2006Liabilities
                  assumed
              
              $
              13,694,962Less
                  : non-cash assets
              
              
              12,006,690Less
                  : cash received in recapitalization
              
              
              128,045Total
                  non-monetary net liabilities assumed
              
              $
              1,560,227**ULURU
                  DELAWARE INC.**Common
                  stock subscriptions for 2,200 shares
              
              
              
              
              
              
              $
              22Purchase
                  of net assets of Topical Component of Access Pharmaceuticals, Inc.
                  of
                  October 11, 2005*Assets
                  acquired*:Inventory of finished goods
              
              
              
              
              
              
              $
              16,218Property and equipment
              
              
              
              
              
              
              
              396,820Patents
              
              
              
              
              
              
              
              12,765,080Licensing rights
              
              
              
              
              
              
              
              250,000Total assets acquired
              
              
              
              
              
              
              $
              13,428,118*Obligations
                  issued and liabilities assumed:*Purchase obligations issued, net
              
              
              
              
              
              
              $
              4,190,080Capital lease obligations assumed
              
              
              
              
              
              
              
              38,038Advance royalty obligation assumed
              
              
              
              
              
              
              
              500,000Total obligations issued and liabilities assumed
              
              
              
              
              
              
              
              4,728,118Balance
                  of cash paid at closing
              
              
              
              
              
              
              
              8,700,000Total
                  consideration paid
              
              
              
              
              
              
              $
              13,428,118***OTHER
                  SUPPLEMENTAL INFORMATION***Cash
                  Paid for Interest
              
              $
              4,835,258
              
              
              
              $
              -0-The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
 
 
  F-7
 *Table
            of Contents*
  **ULURU
        Inc.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 
 **NOTE
        1.**  **BASIS
        OF PRESENTATION**
 
 History
 
 ULURU
        Inc. (“ULURU”, “we”, “our”, “us”, or the “Company”), formerly Oxford Ventures,
        Inc, Casinos of The World, Inc., Clean Way Corporation, Trader Secrets.Com,
        and
        VOIP Technology, Inc., was in the development stage as defined in Financial
        Accounting Standards Board Statement No. 7. It ceased being a development
        stage
        enterprise on March 31, 2006, as a result of the stock exchange transaction
        described below.
 
 On
        October 12, 2005, ULURU entered into a merger agreement with ULURU INC.,
        a
        Delaware corporation ("ULURU Delaware") and Uluru Acquisition Corp., a
        wholly-owned Delaware subsidiary of ULURU formed on September 29, 2005. On
        March
        31, 2006, under the terms of the agreement, Uluru Acquisition Corp. merged
        into
        ULURU Delaware, after ULURU Delaware had acquired the net assets of the topical
        component of Access Pharmaceuticals, Inc., under Section 368 (a) (1) (A)
        of the
        Internal Revenue Code, "a statutory merger or consolidation".
 
 ULURU
        Delaware was a privately held Delaware corporation, formed on September 7,
        2005.
        It is a diversified emerging pharmaceutical company focused on establishing
        a
        market leadership position in the development of wound management, plastic
        surgery and oral care products utilizing innovative drug delivery solutions
        to
        improve the clinical outcome of patients and provide a pharmacoeconomic benefit
        to healthcare providers.
 
 The
        first
        step in achieving this objective was the acquisition of the Topical Business
        Component of Access Pharmaceuticals, Inc. (“Access, Topical Component, or
        Business”) which was completed on October 12, 2005. This acquisition (also
        referred herein as the Business or Predecessor) resulted in ULURU Delaware
        acquiring Aphthasol®, Zindaclin® and the Mucoadhesive Film technology and a
        fully paid exclusive worldwide license to the Nanoparticle Aggregate technology
        for all applications excluding injectable drug delivery devices. Utilizing
        this
        technology, three products have been approved for marketing in various global
        markets. In addition, numerous products are under development utilizing our
        Mucoadhesive Film and Nanoparticle Aggregate technologies.
 
 The
        Topical Business’ customer base consists of numerous strategic alliances with
        partners throughout the world to manufacture and market our products. ULURU
        Delaware’s initial operations include a research and development facility in
        Addison, Texas, a third party distribution arrangement for the sale of a
        product
        in the United States and a network of strategic partners (licensees and sub
        licensees) globally.
 
 The
        Asset
        Purchase Agreement (the “Agreement”) with Access provided for ULURU Delaware to
        acquire the assets of the Topical Business Component of Access, consisting
        mainly of laboratory equipment, furniture and fixtures, and intellectual
        property consisting of three patents, a license to utilize a patented technology
        worldwide, and in process research and development. This acquisition, which
        was
        made under purchase accounting criteria, also included the assumption of
        three
        capital lease obligations associated with equipment used in the topical
        business, and the advance royalty paid by Discus Dental, effective December
        2005
        the Company’s sole distributor of Aphthasol® in the United
        States.
  F-8
 *Table
            of Contents*
  
 As
        a
        result of the merger, we acquired, for 11,000,000 shares of our common stock,
        all of the issued and outstanding shares of ULURU Delaware under a stock
        exchange transaction, and ULURU Delaware became a wholly-owned subsidiary
        of
        ULURU, its legal parent. However, for financial accounting and reporting
        purposes, ULURU Delaware is treated as the acquirer and is consolidated with
        its
        legal parent, similar to the accounting treatment given in a recapitalization.
        For accounting presentation purposes only, our net assets are treated as
        being
        acquired by ULURU Delaware at fair value as of the date of the stock exchange
        transaction, and the financial reporting as of March 31, 2006 will not be
        that
        of a development stage enterprise, since ULURU Delaware had substantial earned
        revenues from planned operations when acquired by us. Both companies have
        a
        December 31 year end.
 
 The
        historical financial information included in the accompanying consolidated
        financial statements of ULURU Inc. prior to March 31, 2006 are that of ULURU
        Delaware. The results of operations and cash flows for the Topical Business
        Component are presented for comparison purposes and are not included as part
        of
        the cumulative historical financial information of ULURU Inc.
 
 All
        intercompany transactions have been eliminated in the consolidated financial
        statements presented herewith.
 
 On
        March
        29, 2006, ULURU filed a Certificate of Amendment to the Articles of
        Incorporation in Nevada.  This Certificate of Amendment authorized a
        400:1 reverse stock split to occur so that in exchange for every 400 outstanding
        shares of common stock that each shareholder had at the close of business
        on
        March 29, 2006, the shareholder would receive one share of common stock. 
As a result of this reverse stock split, ULURU's issued and outstanding common
        stock was reduced from 340,396,081 pre-split shares of common stock to 851,011
        post-split shares which includes an additional 21 shares for fractional
        interests.  The Certificate of Amendment also authorized a decrease in
        authorized shares of common stock from 400,000,000 shares, par value $.001
        each,
        to 200,000,000, par value $.001 each, and authorized up to 20,000 shares
        of
        Preferred Stock, par value $.001.
 
 On
        March
        31, 2006, ULURU filed a Certificate of Amendment to the Articles of
        Incorporation in Nevada to change its name from "Oxford Ventures, Inc." to
        "ULURU Inc.".
 
 On
        March
        31, 2006, ULURU acquired, through its wholly-owned subsidiary (Uluru Acquisition
        Corporation) a 100% ownership interest in ULURU Delaware through a merger
        of
        ULURU Delaware into Uluru Acquisition Corporation. ULURU acquired ULURU Delaware
        in exchange for 11,000,000 shares of ULURU's common stock. All securities
        issued
        pursuant to the merger are "restricted" stock and were subject to a two year
        Lock-up Agreement as well as all applicable re-sale restrictions specified
        by
        federal and state securities laws. The shareholders of ULURU immediately
        prior
        to the merger retained 851,011 shares of common stock.
 
 The
        aggregate amount of shares of common stock issuable to the shareholders of
        ULURU
        Delaware pursuant to the merger represented 92.8% of the issued and outstanding
        shares of ULURU's common stock. Under the terms of the Agreement and Plan
        of
        Merger and Reorganization executed on October 12, 2005, the pre-merger
        stockholders of ULURU owned an aggregate of 7.2% of the issued and outstanding
        shares of ULURU's common stock immediately after the merger.
 
 At
        the
        effective time of the Merger, the members of the ULURU Delaware Board of
        Directors holding office immediately prior to the merger became ULURU's
        directors, and all persons holding offices of ULURU Delaware at the effective
        time, continue to hold the same offices of the surviving corporation.
        Simultaneously, ULURU's directors and officers immediately prior to the closing
        of the Merger resigned from all of their respective positions with
        ULURU.
 
 On
        May
        31, 2006, our wholly owned subsidiary, ULURU INC., a Delaware corporation,
        filed
        a Certificate of Amendment to the Articles of Incorporation, in Delaware,
        to
        change its name from "ULURU INC." to "ULURU Delaware Inc.".
  F-9
 *Table
            of Contents*
  
 
 **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 Use
        of
        Estimates in the Preparation of Consolidated Financial
        Statements
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities, the disclosure of contingent assets and liabilities
        at
        the date of the consolidated financial statements and the reported amounts
        of
        revenues and expenses during the reporting periods. Actual results could
        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.
 
 Basic
        and Diluted Net Loss Per Share
 
 In
        accordance with SFAS No. 128, Earnings per Share, basic and diluted net
        loss per share is computed using net loss divided by the weighted average
        number
        of shares of common stock outstanding for the period presented after giving
        effect to all stock splits including the 400 for 1 reverse stock split approved
        by our stockholders on March 29, 2006. Because we reported a net loss for
        each
        of the years ended December 31, 2006 and 2005, common stock equivalents
        consisting of options and warrants were anti-dilutive; therefore, the basic
        and
        diluted net loss per share for each of these periods were the same.
 
 Income
        Taxes
 
 We
        use
        the liability method of accounting for income taxes pursuant to Statement
        of
        Financial Accounting Standards Board Opinion No. 109. Under this method,
        deferred income taxes are recorded to reflect the tax consequences in future
        periods of temporary differences between the tax basis of assets and liabilities
        and their financial statement amounts at year-end.
 
 Revenue
        recognition
 
 We
        recognize revenue from license payments not tied to achieving a specific
        performance milestone ratably over 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 are earned
        when received from foreign sub-licensees as there is no control by us over
        the
        foreign sub-licensees and no performance criteria to which we are
        subject.
 
 We
        recognize revenue ratably from performance payments, 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.
 
 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.
  F-10
 *Table
            of Contents*
  
 Revenue
        in connection with license arrangements is recognized over the term of the
        arrangement and is limited to payments collected or due and reasonably assured
        of collection. 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.
 
 We
        recognize revenue and related costs from the sale of our products at the
        time
        the products are shipped to the customer.
 
 Sponsorship
        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 in advance of being recognized as revenue are deferred. Contract
        amounts are not recognized as revenue until the customer accepts or verifies
        the
        research results.
 
 Research
        and Development Expenses
 
 Pursuant
        to SFAS No. 2, *"Accounting
        for Research and Development Costs,"* our
        research and development costs are expensed as incurred. Research and
        development expenses include, but are not limited to, payroll and related
        expense, lab supplies, preclinical development cost, clinical trial expense,
        outside manufacturing and consulting expense. The cost of materials and
        equipment or facilities that are acquired for research and development
        activities and that have alternative future uses are capitalized when acquired.
        As of December 31, 2006, there were no such capitalized materials, equipment
        or
        facilities.
 
 Cash
        Equivalents
 
 For
        purposes of the accompanying financial statements, we consider all highly
        liquid
        investments with original maturities of three months or less when purchased
        to
        be cash equivalents.
 
 We
        invest
        cash in excess of immediate requirements in money market accounts, certificates
        of deposit, corporate securities with high quality ratings, and U.S. government
        securities taking into consideration the need for liquidity and capital
        preservation. These investments are not held for trading or other speculative
        purposes. We are exposed to credit risk in the event of default by high quality
        corporations and by financial institutions to the extent that cash balances
        with
        financial institutions are in excess of amounts that are insured by the Federal
        Deposit Insurance Corporation, generally $100,000 per account.
 
 Allowance
        for Doubtful Accounts
 
 We
        estimate the collectibility of our trade accounts receivable. In order to
        assess
        the collectibility of these receivables, we monitor the current creditworthiness
        of each customer and analyze the balances aged beyond the customer's credit
        terms. Theses evaluations may indicate a situation in which a certain customer
        cannot meet its financial obligations due to deterioration of its financial
        viability, credit ratings or bankruptcy. The allowance requirements are based
        on
        current facts and are reevaluated and adjusted as additional information
        is
        received. Trade accounts receivable are subject to an allowance for collection
        when it is probable that the balance will not be collected. As of December
        31,
        2006, no allowance for collectibility was needed and there were no accounts
        written off during the year as uncollectible.
 
 Inventory
 
 Inventories
        are stated at the lower of cost or market value. Raw material inventory cost
        is
        determined on the first-in, first-out method. Costs of finished goods are
        determined by an actual cost method. As of December 31, 2006, we did have
        approximately $49,000 of value associated with our raw materials inventory;
        however, no cost basis was assigned to the year end inventory as it was acquired
        at no cost.
  F-11
 *Table
            of Contents*
  
 Property
        and Equipment
 
 Property
        and equipment are recorded at cost. Depreciation is provided over the estimated
        useful lives of the related assets using the straight-line method. Estimated
        useful lives for property and equipment categories are as follows:
 
 Furniture , fixtures, and laboratory equipment
              7
                  yearsComputer and office equipment
              5
                  yearsComputer software
              3
                  yearsLeasehold improvements
              Lease
                  term
 
 Deferred
        Charge
 
 From
        time
        to time fees are payable to the Federal Food and Drug Administration in
        connection with new drug applications submitted by the Company and annual
        user
        drug prescription fees. Such fees are considered deferred charges since they
        are
        not recoverable. Such fees are being amortized ratably over the FDA’s prescribed
        fiscal period of 12 months ending September 2007.
 
 Patents
        and Applications
 
 We
        expense internal patent and application costs as incurred because, even though
        we believe the patents and underlying processes have continuing value, the
        amount of future benefits to be derived therefrom are uncertain. Purchased
        patents are capitalized and amortized over the life of the patent.
 
 Impairment
        of Assets
 
 In
        accordance with the provisions of Statement of Financial Accounting Standards
        No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
        our
        policy is to evaluate whether there has been a permanent impairment in the
        value
        of long-lived assets, certain identifiable intangibles and goodwill when
        certain
        events have taken place that indicate the remaining unamortized balance may
        not
        be recoverable. When factors indicate that the intangible assets should be
        evaluated for possible impairment, we use an estimate of related undiscounted
        cash flows. There has been no impairment losses determined or recorded for
        the
        year.
 
 Derivatives
 
 We
        occasionally issue financial instruments that contain an embedded instrument.
        At
        inception, we assesses whether the economic characteristics of the embedded
        derivative instrument are clearly and closely related to the economic
        characteristics of the financial instrument (host contract), whether the
        financial instrument that embodies both the embedded derivative instrument
        and
        the host contract is currently measured at fair value with changes in fair
        value
        reported in earnings, and whether a separate instrument with the same terms
        as
        the embedded instrument would meet the definition of a derivative
        instrument.
 
 If
        the
        embedded derivative instrument is determined not to be clearly and closely
        related to the host contract, is not currently measured at fair value with
        changes in fair value reported in earnings, and the embedded derivative
        instrument would qualify as a derivative instrument, the embedded derivative
        instrument is recorded apart from the host contract and carried at fair value
        with changes recorded in current-period earnings.
 
 We
        determined that all embedded items associated with financial instruments
        during
        2006 which qualify for derivative treatment, were properly separated from
        their
        host. As of December 31, 2006, we did not have any derivative
        instruments.
  F-12
 *Table
            of Contents*
  
 Concentrations
        of credit risk
 
 Financial
        instruments, consisting primarily of cash and cash equivalents, that potentially
        expose us to concentrations of credit risk due to the use of a limited number
        of
        banking institutions and due to maintaining cash balances in banks, which,
        at
        times, may exceed the limits of amounts insured by the Federal Deposit Insurance
        Corporation (FDIC). At December 31, 2006 our cash and cash equivalents totaled
        $16,918,007. However, because deposits are maintained at high quality financial
        institutions, we do not believe that there is a significant risk of loss
        of
        uninsured amounts.
 
 We
        also
        invest cash in excess of immediate requirements in corporate securities with
        high quality ratings. 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
        December 31, 2006. Two customers exceeded the 5% threshold, one with 87.3%
        and
        the other with 11.8%. We believe that these accounts are collectible as of
        December 31, 2006.
 
 **NOTE
        3.**  **THE
        EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS**
 
 *Recently
        Adopted Accounting Standards*
 
 In
        May 2005, the FASB issued Statement of Financial Accounting Standards
        No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS
        No. 154 requires retrospective application to prior-period financial
        statements of changes in accounting principles, unless a new accounting
        pronouncement provides specific transition provisions to the contrary or
        it is
        impracticable to determine either the period-specific effects or the cumulative
        effect of the change. SFAS No. 154 also redefines “restatement” as the
        revising of previously issued financial statements to reflect the correction
        of
        an error. We adopted the provision of SFAS No. 154 in the first fiscal
        quarter of 2006. The adoption did not have a material effect on our consolidated
        financial statements.
 
 Effective
        January 1, 2006, we adopted the fair value recognition provisions of SFAS
        123R, *Share-Based
        Payments* ("SFAS
        No. 123(R)"), which is a revision of SFAS No. 123.
 
 The
        value
        of each employee stock option granted is estimated on the grant date under
        the
        fair value method using the Black-Scholes option pricing model. For options
        granted after January 1, 2006, we amortize the fair value on a straight-line
        basis. All options are amortized over the requisite service period of the
        awards, which are generally the vesting periods. We did not have any unvested
        employee stock options prior to January 1, 2006.
 
 Stock-based
        awards issued to non-employees are accounted for using the fair value method
        and
        are remeasured to fair value at each period end until the earlier of the
        date
        that performance by the non-employee is complete or a performance commitment
        has
        been obtained. The fair value of each award to non-employees is estimated
        using
        the Black-Scholes option pricing model.
 
 *New
        Accounting Standards Not Yet Adopted*
 
 In
        February 2006, the FASB issued Statement of Financial Accounting Standards
        No. 155, Accounting for Certain Hybrid Financial Instruments — an amendment
        of FASB Statements No. 133 and 140 (SFAS No. 155). SFAS No. 155
        permits an entity to measure at fair value any financial instrument that
        contains an embedded derivative that otherwise would require bifurcation.
        This
        statement is effective for all financial instruments acquired, issued, or
        subject to a remeasurement event occurring after the beginning of an entity’s
        first fiscal year that begins after September 15, 2006. We do not expect
        the adoption of SFAS No. 155 to have a material impact on our consolidated
        financial statements.
  F-13
 *Table
            of Contents*
  
 In
        June 2006, the FASB issued Interpretation No. 48, Accounting for
        Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109
        (“FIN 48”), which prescribes a recognition threshold and measurement attribute
        for the financial statement recognition and measurement of a tax position
        taken
        or expected to be taken in a tax return. FIN 48 will be effective for fiscal
        years beginning after December 15, 2006. We are currently in the process of
        evaluating the potential impact of adopting FIN 48 on our consolidated financial
        statements.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No. 157, Fair Value Measurements (SFAS No. 157), which defines fair
        value, establishes a framework for measuring fair value under GAAP, and expands
        disclosures about fair value measurements. SFAS No. 157 will be effective
        for fiscal years beginning after November 15, 2007, which is the Company’s
        fiscal year 2008. We have not yet evaluated the potential impact of adopting
        SFAS No. 157 on our consolidated financial statements.
 
 
 **NOTE
        4.**  **SEGMENT
        INFORMATION**
 
 We
        operate in one business segment, the research, development and commercialization
        of pharmaceutical products that address unmet medical needs. Our entire business
        is managed by a single management team, which reports to the Chief Executive
        Officer.
 
 Our
        revenues are currently derived primarily from one licensee for domestic
        activities and from one licensee for international activities.
 
 Domestic
        revenues represented 34% of total revenues for the year ended December 31,
        2006,
        whereas International revenues were 66% for the year ended December 31, 2006.
        The following table summarizes our sources of revenues by geographic
        area:
 
 **ULURU
                  Inc.**
              
              **ULURU
                  DELAWARE INC.**
              
              **TOPICAL
                  COMPONENT OF ACCESS PHARMACEUTICALS, INC.****Year
                  Ended December 31,**
              
              **From
                  September 7, 2005 (Inception) to December 31,**
              
              **From
                  January 1, 2005 to October 12,****2006**
              
              **2005**
              
              **2005**Domestic
              
              $
              516,320
              
              $
              76,503
              
              $
              542,624International
              
              
              1,018,133
              
              
              122,696
              
              
              257,230Total Revenues
              
              $
              1,534,453
              
              $
              199,199
              
              $
              799,854
 
 
 **NOTE
        5.**  **PROPERTY,
        PLANT AND EQUIPMENT**
 
 A
        summary
        of property, plant and equipment as of December 31, 2006 follows:
 
 **Property,
                  Plant and Equiment**
              
              **Cost**
              
              **Accumulated
                  Depreciation and Amortization**
              
              **Net
                  Book Value**Furniture and laboratory equipment
              
              $
              637,776
              
              $
              62,087
              
              $
              575,689Computer and office equipment
              
              
              51,979
              
              
              9,745
              
              
              42,234Computer software
              
              
              4,108
              
              
              1,141
              
              
              2,967Leasehold improvements
              
              
              78,244
              
              
              8,002
              
              
              70,242Total Property, Plant and Equipment
              
              $
              772,107
              
              $
              80,975
              
              $
              691,132
 
  F-14
 *Table
            of Contents*
  **NOTE
        6.**  **PATENTS**
 
 A
        summary
        of patents as of December 31, 2006 follows:
 
 **Patents**
              
              **Cost**
              
              **Accumulated
                  Amortization**
              
              **Net
                  Book Value**Zindaclin
              
              $
              3,729,000
              
              $
              300,288
              
              $
              3,428,712Amlexanox (Aphthasol®)
              
              
              2,090,000
              
              
              419,321
              
              
              1,670,679Amlexanox (OraDiscTM A)
              
              
              6,873,080
              
              
              528,515
              
              
              6,344,565OraDiscTM
              
              
              73,000
              
              
              5,611
              
              
              67,389Hydrogel nanoparticle aggregate
              
              
              589,858
              
              
              2,334
              
              
              587,524Total Patents
              
              $
              13,354,938
              
              $
              1,256,069
              
              $
              12,098,869
 
 On
        December 8, 2006 we entered into an Amendment to the Asset Sale Agreement
        with
        Access Pharmaceuticals, Inc. As
        part
        of the transaction, we acquired from Access all patent rights and all
        intellectual properties associated with the Hydrogel Nanoparticle Aggregate
        technology. We then licensed to Access certain specific applications of the
        Hydrogel Nanoparticle Aggregate technology which include use in intraperotinial,
        intratumoral, subscutaneous or intramuscular drug delivery implants, excluding
        dermal or facial fillers.
 
 
 **NOTE
        7.**  **ACCRUED
        LIABILITIES**
 
 A
        summary
        of accrued liabilities as of December 31, 2006 follows:
 
 **Accrued
                  Liabilities**Accrued
                  taxes - payroll
              
              $
              106,302Accrued
                  benefits - employee
              
              
              298,040Accrued
                  insurance
              
              
              70,876Contract
                  research payable
              
              
              -0-Total accrued liabilities
              
              $
              475,218
 
 The
        accrued taxes- payroll relate to advances obtained by the former president
        of
        the Company, which were treated as the net amount of compensation paid to
        him in
        2005 since applicable withholding taxes were never paid at that time. The
        difference between the advances paid and the gross amount of the compensation
        relates to the unpaid taxes, interest and penalties accrued through December
        31,
        2006. Management is of the opinion that the advances and the payroll taxes
        reported as owed may be ultimately settled with the former president as further
        discussed in Note 12.
 
 **NOTE
        8.**  **ADVANCED
        ROYALTY**
 
 As
        part
        of the October 12, 2005 asset purchase from Access, we assumed the liability
        associated with an advanced royalty payment of $500,000 to Access by Discus
        Dental, our United States distributor for Aphthasol® paste. Royalties earned
        from the sale of Aphthasol by the distributor will first be offset against
        the
        advanced royalty.
 
 Royalty
                  Advance, April 2005
              
              $
              500,000Royalties earned - 2005
              
              
              30,944Royalties earned - 2006
              
              
              249,788Royalty
                  Advance, as of 12/31/06
              
              $
              219,268
 
  F-15
 *Table
            of Contents*
  
 **NOTE
        9.**  **ASSET
        PURCHASE OBLIGATIONS**
 
 On
        December 8, 2006, we entered into an Amendment to the Asset Sale Agreement
        with
        Access pursuant to which we agreed to pay Access $5,250,000, in two payments,
        $4,900,000 which was paid on December 8, 2006 and $350,000 which is due on
        April
        8, 2007, in settlement of the following obligations:
 §
                a
                    payment of $3,700,000 that was due on October 11, 2006;§
                a
                    payment of $1,000,000 due on October 11, 2007, or on the date
                    of the first
                    launch of an OraDiscTM product; and§
                certain
                    future milestones which total
                    $2,625,000.
  As
        part
        of the transaction, we agreed to increase a remaining milestone from $750,000
        to
        $875,000 for the achievement of cumulative sales of 100 million dollars for
        the
        product sold from the acquired topical technology. We also acquired from
        Access
        all patent rights and all intellectual properties associated with the
        Nanoparticle Aggregate technology. We then licensed to Access certain specific
        applications of the Nanoparticle Aggregate technology which include use in
        intraperotinial, intratumoral, subscutaneous or intramuscular drug delivery
        implants, excluding dermal or facial fillers.
 
 We
        also
        entered into a mutual release with Access whereby both parties released and
        discharged each other from all claims through December 8, 2006.
 
 **NOTE
        10.**  **DEBT
        AND EQUITY FINANCING**
 
 On
        December 6, 2006, we entered into a Common Stock Purchase Agreement (the
        "Purchase Agreement") with certain institutional accredited investors (the
        "Investors"). Pursuant to the Purchase Agreement, we sold to the Investors
        an
        aggregate of 47,052,628 shares (the "Shares") of our common stock, at an
        aggregate purchase price of $44,699,998.40. The purchase price paid per Share
        was $0.95. Of the aggregate purchase price, $38,499,998.40 was paid in cash
        and
        $6,200,000 was paid via cancellation of existing secured convertible debentures
        (the "Debentures") held by Prenox, LLC and Cornell Capital Partners, LP (the
        "Noteholders").
 
 The
        Registrant relied upon Section 4(2) and Rule 506 of Regulation D of the
        Securities Act of 1933, as amended (the "Act"), for the issuance of the
        Shares.
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into an Investor Rights Agreement with the Investors. Under this
        agreement we are obligated to register the Shares under the Act for resale
        by
        the Investors. Upon the occurrence of certain events set forth in the agreement
        (including, without limitation, a registration statement covering the Shares
        not
        being filed with, or being declared effective by, the Securities and Exchange
        Commission, in each case as set forth in the agreement), we could be required
        to
        pay the Investors cash penalties up to an aggregate of five percent (5%)
        of the
        aggregate purchase price paid by the Investors for Shares purchased under
        the
        Purchase Agreement.
 
 In
        connection with the transactions consummated by the Purchase Agreement, we
        also
        entered into a Repayment Agreement with the Noteholders. Under this agreement
        and in full satisfaction of all obligations owed under the Debentures and
        the
        transaction documents entered into in connection herewith, (i) we agreed
        to pay
        the Noteholders an aggregate of $13,000,000 plus interest accrued on the
        Debentures since December 1, 2006, (ii) we accepted the Noteholders'
        subscriptions for Shares upon cancellation of an aggregate of $6,200,000 original
        principal amount of the Debentures and (iii) the purchase agreement pursuant
        to
        which the Noteholders purchased the Debentures and the security agreement,
        collateral assignment, guarantor security agreement, escrow agreement, transfer
        agent instructions, guaranty agreement and registration rights agreement
        entered
        into in connection therewith were terminated.
 
 On
        August
        30, 2006, we completed an agreement with Prenox, LLC (“Prenox”) and Cornell
        Capital Partners, LP (“Cornell”) for the refinancing of its existing $13,000,000
        secured convertible debentures held by Prenox and Cornell.
  F-16
 *Table
            of Contents*
  
 Prenox
 As
        part
        of the refinancing, we issued to Prenox a new secured convertible debenture
        in
        the amount of $13,000,000 in exchange for its original $10,000,000 convertible
        debenture, which provided $2,700,000 of working capital to us after deducting
        financing costs of $300,000.
 
 Cornell
 Cornell
        was issued a new convertible debenture of like tenor in the amount of $3,000,000
        in exchange for its previous $3,000,000 convertible debenture, which had
        been
        assigned to it by Highgate House Fund.
 
 The
        new
        debentures were due December 31, 2007 and bear an interest rate of ten percent
        per annum. The Company was required to remit monthly interest-only payments
        on
        the debentures commencing on September 29, 2006. In connection with the
        transaction we issued a warrant to Prenox to purchase 1,125,000 shares of
        common
        stock at an exercise price of $1.25 per share. The sale of the debentures
        and
        issuance of the warrant was made under Section 4(2) and Rule 506 of the
        Securities Act of 1933. We repaid both debentures, in full, on December 6,
        2006
        as noted above.
 
 A
        summary
        of our interest expense for the year ended December 31, 2006
        follows:
 **Interest**
              
              **Redemption
                  Premium**
              
              **Financing
                  Cost Amortization**
              
              **Total**Prenox,
                  LLC
              
              $
              1,022,450
              
              $
              2,600,000
              
              $
              269,343
              
              $
              3,891,793Cornell
                  Capital Partners, LP
              
              
              217,445
              
              
              600,000
              
              
              102,604
              
              
              920,049Access
                  Pharmaceuticals, Inc.
              
              
              340,969
              
              
              -0-
              
              
              -0-
              
              
              340,969Uluru
                  Delaware Inc.(1)
              
              
              267,500
              
              
              -0-
              
              
              -0-
              
              
              267,500Other
              
              
              4,207
              
              
              -0-
              
              
              -0-
              
              
              4,207Total Interest Expense
              
              $
              1,852,571
              
              $
              3,200,000
              
              $
              371,947
              
              $
              5,424,518*(1)
                  Represent subsidiary pre-merger interest expense to parent from
                  January 1,
                  to March 31, 2006.*
 
 
 **NOTE
        11.**  **STOCKHOLDERS’
        EQUITY**
 
 Reverse
        Stock Split
 
 On
        March
        29, 2006, we amended our articles of incorporation to provide for the approval
        by the Shareholders and Board of Directors of a 400 for 1 reverse stock split,
        a
        decrease in the authorized shares of common stock to 200 million from 400
        million, and the authorization of up to 20,000 shares of Preferred stock,
        par
        value $.001 per share. Accordingly, all shares referred to in the accompanying
        consolidated financial statements and included in these Notes give retroactive
        effect to this authorization.
 
 Warrants
 
 The
        following table summaries the warrants outstanding and the number of shares
        of
        common stock subject to exercise as of December 31, 2006 and the changes
        therein
        during the year then ended:
 
 **Number
                  of Shares of Common Stock Subject to Exercise**
              
              **Weighted
                  - Average**
                **Exercise
                  Price**Warrants
                  outstanding - January 1, 2006
              
              
              5,000,000
              
              $
              0.01Warrants issued
              
              
              3,395,000
              
              
              1.05Warrants exercised
              
              
              -0-
              
              
              --Warrants cancelled
              
              
              -0-
              
              
              --Warrants
                  outstanding - December 31, 2006
              
              
              8,395,000
              
              $
              0.43
 
  F-17
 *Table
            of Contents*
  
 Of
        the
        shares of common stock subject to exercise as of December 31, 2006, expiration
        of the right to exercise is as follows:
 
 **Date
                  of expiration**
              
              **Number
                  of Shares of Common Stock Subject to Expiration**October 12, 2010
              
              
              5,000,000August 30, 2011
              
              
              1,125,000December 6, 2011
              
              
              2,270,000Total
              
              
              8,395,000
 
 
 **NOTE
        12.**  **COMMITMENTS
        AND CONTINGENCIES**
 
 Milestone
        Payments
 
 We
        were
        subject to paying Access for up to $4,750,000 in eleven enumerated milestones,
        if we achieved annual net sales volumes of 20 million dollars or 40 million
        dollars on any one product, and 20 million dollars on all products, and at
        levels of 50 million dollars and 100 million dollars for cumulative net sales
        and reached certain defined technology milestones including licensing agreements
        and advancing products to clinical development.
 
 On
        December 8, 2006, we entered into an Amendment to the Asset Sale Agreement
        with
        Access pursuant to which we agreed to a full settlement for six of the eleven
        future milestones, and added an increase to one milestone (cumulative sales
        of
        the products of 100 million dollars) from $750,000 to $875,000. We paid $250,000
        for the settlement of the six future milestones which, if achieved, would
        have
        totaled $2,625,000.
 
 As
        of
        December 31, 2006, our future milestone obligations, if achieved, now total
        $2,250,000; relating to milestones based on annual sales of 20 and 40 million
        dollars on sales of the products, 20 million dollars on sales of any one
        product, and 50 and 100 million dollars on cumulative sales of the products.
 
 Compensation
        claim
 
 We
        received written notice from Dan Leonard, former CEO of Oxford Ventures,
        Inc.,
        the predecessor Company name, claiming he is owed options to purchase 100,000
        shares of our common stock at a per share exercise price equal to $1.25.
 
 We
        believe that we are entitled to certain offsets from Mr. Leonard which may
        mitigate his compensation claim as further discussed in Note 7. The Company
        and
        Mr. Leonard are currently negotiating a resolution to each of their
        claims.
 
 
 **NOTE
        13.**  **LOSS
        ON EARLY EXTINGUISHMENT OF DEBENTURE**
 
 We
        recognized two losses on the early extinguishment of debentures which total
        $940,665 for the year ended December 31, 2006.
 
 On
        December 6, 2006 we retired the existing Debentures issued to Prenox ,
        LLC and
        Cornell Capital Partners, LP (collectively “Noteholders”) by remitting to the
        Noteholders an aggregate of $13,000,000 plus interest accrued on the Debentures
        since December 1, 2006 and we accepted the Noteholders' subscriptions for
        shares
        of common stock upon cancellation of an aggregate of $6,200,000 original
        principal amount of the Debentures. Upon
        retirement of the debentures, we recorded a loss from early extinguishment
        of
        the secured convertible debentures, which consisted of the write-off of the
        remaining balance of the deferred financing costs of $383,121.
  F-18
 *Table
            of Contents*
  
 As
        part
        of the August 30, 2006 refinancing with Prenox, we issued to Prenox a new
        secured convertible debenture in the amount of $13,000,000 in exchange for
        its
        original $10,000,000 convertible debenture. Upon retirement of the original
        debenture, we recorded a loss from early extinguishment of the Prenox secured
        convertible debenture, which consisted of the write-off of the remaining
        balance
        of the deferred financing costs of $557,534.
 
 
 **NOTE
        14.**  **SHARE
        BASED COMPENSATION**
 
 On
        January 1, 2006, we adopted the fair value recognition provisions of SFAS
        123R, *Share-Based
        Payments* ("SFAS
        No. 123(R)"), which requires the measurement and recognition of all
        share-based payment awards made to employees and directors including stock
        options based on estimated fair values.
 
 SFAS
        123(R) requires companies to estimate the fair value of share-based payment
        awards on the date of grant using an option-pricing model. We use the
        Black-Scholes option-pricing model as our method of valuation under SFAS
        123(R)
        and a single option award approach. The fair value is then amortized on a
        straight-line basis over the requisite service periods of the awards, which
        is
        generally the vesting period. Stock-based compensation expense recognized
        in our
        Statement of Operations for the year ended December 31, 2006 is based on
        awards
        ultimately expected to vest and has been reduced for estimated forfeitures,
        which currently is nil. SFAS 123(R) requires forfeitures to be estimated
        at the
        time of grant and revised, if necessary, in subsequent periods if actual
        forfeitures differ from those estimates.
 
 The
        fair
        value of share-based payment awards on the date of grant as determined by
        the
        Black-Scholes model is affected by our stock price as well as other assumptions.
        These assumptions include, but are not limited to the expected stock price
        volatility over the term of the awards, and actual and projected employee
        stock
        option exercise behaviors.
 
 The
        value
        of employee stock options granted during the year ended December 31, 2006
        was
        estimated using the Black-Scholes model with the following
        assumptions:
 
 Year
                  Ended December 31, 2006Expected
                  volatility
              
              
              51.4
              %Risk-fee
                  interest rate
              
              
              4.44%
                  - 4.54
              %Expected
                  dividends
              
              
              0.0
              %Expected
                  forfeitures
              
              
              0.0
              %Expected
                  term ( in years)
              
              
              1.0
                  - 4.0
 
 The
        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. The risk-free interest rate assumption is based upon
        U.S. Treasury bond interest rates appropriate for the term of the Company’s
        employee stock options. The dividend yield assumption is based on our history
        and expectation of dividend payments. The estimated expected term is based
        on
        employee exercise behavior.
 
 During
        the fourth quarter of 2006, the Board of Directors granted the following
        awards
        to certain directors, executives, and employees.
 
 Quantity
              
              Weighted
                  Average Fair Value Per Share
              
              Fair
                  ValueOptions
                  to Purchase Common Stock
              
              
              1,275,000
              
              $
              0.38
              
              $
              483,335
 
  F-19
 *Table
            of Contents*
  
 At
        December 31, 2006, the balance of unearned stock-based compensation to be
        expensed in future periods related to unvested share-based awards, as adjusted
        for expected forfeitures, is approximately $467,429. The period over which
        the
        unearned stock-based compensation is expected to be recognized is approximately
        four years. We anticipate that we will grant additional share-based awards
        to
        employees in the future, which will increase our stock-based compensation
        expense by the additional unearned compensation resulting from these grants.
        The
        fair value of these grants are not included in the amount above, because
        the
        impact of these grants cannot be predicted at this time due to the dependence
        on
        the number of share-based payments granted. In addition, if factors change
        and
        different assumption are used in the application of SFAS 123(R) in future
        periods, stock-based compensation expense recorded under SFAS 123(R) may
        differ
        significantly from what has been recorded in the current period.
 
 The
        following table summarizes stock-based compensation in accordance with SFAS
        123(R) for the year ended December 31, 2006, which was allocated as
        follows:
  Year
                  Ended December 31, 2006Research
                  and development
              
              $
              2,868General
                  and administrative
              
              
              13,038Stock-based compensation included in operating expenses
              
              $
              15,906Total stock-based compensation expense
              
              $
              15,906Tax
                  benefit
              
              
              ---Stock-based compensation expense, net of tax
              
              $
              15,906
 
 Stock-based
        awards issued to non-employees are accounted for using the fair value method
        and
        are remeasured to fair value at each reporting period and adjusted until
        the
        commitment date is reached; being either the date that a performance commitment
        is reached or the performance of the consultant is complete. The Company
        utilizes a Black-Scholes option pricing model to determine the fair value
        of
        such awards.
 
 The
        value
        of non-employee stock options granted during the year ended December 31,
        2006
        was estimated using the Black-Scholes model with the following
        assumptions:
 
 Year
                  Ended December 31, 2006Expected
                  volatility
              
              
              51.4
              %Risk-fee
                  interest rate
              
              
              4.44
              %Expected
                  dividends
              
              
              0.0
              %Expected
                  forfeitures
              
              
              0.0
              %Expected
                  term ( in years)
              
              
              4.0
 
 The
        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. The risk-free interest rate assumption is based upon
        U.S. Treasury bond interest rates appropriate for the term of the Company’s
        employee stock options. The dividend yield assumption is based on our history
        and expectation of dividend payments.
  F-20
 *Table
            of Contents*
  
 During
        the fourth quarter of 2006, the Board of Directors granted the following
        awards
        to non-employee consultants.
 
 Quantity
              
              Weighted
                  Average Fair Value Per Share
              
              Fair
                  ValueOptions
                  to Purchase Common Stock
              
              
              75,000
              
              $
              0.39
              
              $
              29,558
 
 At
        December 31, 2006, the balance of unearned stock-based compensation to be
        expensed in future periods is approximately $29,052.
 
 The
        following table summarizes stock-based compensation to non-employees for
        the
        year ended December 31, 2006, which was allocated as follows:
 
 Year
                  Ended December 31, 2006Research
                  and development
              
              $
              -0-General
                  and administrative
              
              
              506Stock-based compensation included in operating expenses
              
              $
              506
 
 
 The
        following table presents the activity for options for the year ended December
        31, 2006:
 
 Weighted
                  AverageOptions
              
              Exercise
                  price
              
              Remaining
                  life in yearsOutstanding,
                  beginning of year
              
              
              -0-
              
              $
              -0-
              
              
              ---Granted
              
              
              1,350,000
              
              
              1.29
              
              
              10Forfeited/cancelled
              
              
              -0-
              
              
              ---
              
              
              ---Exercised
              
              
              -0-
              
              
              ---
              
              
              ---Outstanding,
                  end of year
              
              
              1,350,000
              
              $
              1.29
              
              
              10
 
 
 The
        following table presents the stock option grants for the year ended December
        31,
        2006:
 
 Date
                  of Grant
              
              Options
                  Granted
              
              Exercise
                  Price
              
              Stock
                  Price on Date of GrantDecember 9, 2006
              
              
              700,000
              
              $
              0.95
              
              $
              0.91December 13, 2006
              
              
              650,000
              
              
              1.65
              
              
              1.65Total
                  grants
              
              
              1,350,000
 
 
 Summary
        of Plans
 
 *2006
        Equity Incentive Plan*
 
 Our
        board
        of directors adopted and our stockholders approved our 2006 Equity Incentive
        Plan (“Incentive Plan”) in March 2006, which provides for the granting and
        issuance of up to 2 million shares of our common stock which shares have
        been
        reserved for future issuance. As of December 31, 2006, we granted options
        to
        purchase 1,350,000 shares of common stock which were outstanding at a weighted
        average exercise price of $1.29 per share and 650,000 shares remained available
        for future grant.
  F-21
 *Table
            of Contents*
  
 Our
        board
        of directors administers our Incentive Plan, however, they may delegate this
        authority to a committee of one or more board members. Our board has delegated
        such authority nonexclusively to our compensation committee and certain grants
        may also be made by our special stock option committee. The board of directors
        or a committee of the board has the authority to construe, interpret, amend
        and
        modify our Incentive Plan as well as to determine the terms of an award.
        Our
        board of directors may amend or modify our Incentive Plan at any time. However,
        no amendment or modification shall adversely affect the rights and obligations
        with respect to outstanding awards unless the holder consents to that amendment
        or modification.
 
 Incentive
        Plan permits us to grant stock options, stock appreciation rights, restricted
        stock and other stock-based awards to our employees, directors and consultants.
        A stock option may be an incentive stock option within the meaning of Section
        422 of the Internal Revenue Code or a nonstatutory stock option.
 
 In
        general, the duration of a stock option granted under our Incentive Plan
        cannot
        exceed ten years. The exercise price of an incentive stock option cannot
        be less
        than 100% of the fair market value of the common stock on the date of grant.
        A
        nonstatutory stock option may be granted with an exercise price as determined
        by
        the Board or a special stock option committee. An incentive stock option
        may be
        transferred only on death, but a nonstatutory stock option may be transferred
        as
        permitted in an individual stock option agreement.
 
 Incentive
        stock options may be granted only to our employees. The aggregate fair market
        value, determined at the time of grant, of shares of our common stock with
        respect to which incentive stock options are exercisable for the first time
        by
        an optionholder during any calendar year under all of our stock Incentive
        Plans
        may not exceed $100,000. An incentive stock option granted to a person who
        at
        the time of grant owns or is deemed to own more than 10% of the total combined
        voting power of all classes of our outstanding stock or any of our affiliates
        must have a term of no more than five years and an exercise price that is
        at
        least 110% of fair market value at the time of grant.
 
 The
        Incentive Plan administrator determines the term of stock options granted
        under
        our Incentive Plan, up to a maximum of ten years, except in the case of certain
        incentive stock options, as described below. Unless the terms of an optionee's
        stock option agreement provide otherwise, if an optionee's relationship with
        us,
        or any of our affiliates, ceases for any reason other than disability or
        death,
        the optionee may exercise any vested options for a period of ninety days
        following the cessation of service. If an optionee's service relationship
        with
        us, or any of our affiliates, ceases due to disability or death, or an optionee
        dies within a certain period following cessation of service, the optionee
        or a
        beneficiary may exercise any vested options for a period of 12 months in
        the
        event of disability or death. The option term may be extended in the event
        that
        exercise of the option following termination of service is prohibited by
        applicable securities laws. In no event, however, may an option be exercised
        beyond the expiration of its term.
 
 Unless
        the Incentive Plan administrator provides otherwise, options generally are
        not
        transferable except by will, the laws of descent and distribution, or pursuant
        to a domestic relations order. An optionee may designate a beneficiary, however,
        who may exercise the option following the optionee's death.
 
 Stock
        appreciation rights ("SARs") granted under our Incentive Plan entitle the
        holder
        to receive, subject to the provisions of the Incentive Plan and an award
        agreement, a payment having an aggregate value equal to the product of (i)
        the
        excess of (A) the fair market value of a share of our common stock on the
        exercise date over (B) the base price per share specified in the award
        agreement, times (ii) the number of shares specified by the SAR, or portion
        thereof, which is exercised. Payment of the amount receivable by a holder
        upon
        any exercise of a SAR may be made by the delivery of shares of our common stock
        or cash, or any combination of shares and cash, as determined by the plan
        administrator. SARs are transferable only as provided in the award agreement.
        No
        SARs were granted or are outstanding as of December 31, 2006.
  F-22
 *Table
            of Contents*
  
 Restricted
        stock awards and stock unit awards granted under our Incentive Plan entitle
        the
        holder (i) in the case of restricted stock awards, to acquire shares of our
        common stock and (ii) in the case of stock unit awards, to be paid the fair
        market value of our common stock on the exercise date. Stock unit awards
        may be
        settled in shares of common stock, cash or a combination thereof, as determined
        by the Incentive Plan administrator. Restricted stock awards and stock unit
        awards are subject to vesting periods and other restrictions and conditions
        as
        the Incentive Plan administrator may include in an award agreement. Unvested
        restricted stock awards and stock units may not be transferred except as
        set
        forth in an award agreement. No restricted stock awards or stock unit awards
        were granted or are outstanding as of December 31, 2006.
 
 Award
        agreements for restricted stock awards specify the applicable restrictions
        on
        the shares of common stock subject to a given award, the duration of such
        restrictions and the times at which such restrictions lapse with respect
        to all
        or a specified number of shares. Notwithstanding the foregoing, the Incentive
        Plan administrator may reduce or shorten the duration of any restriction
        applicable to any shares of common stock awarded to any holder. A holder's
        rights as a shareholder with respect to the shares of restricted stock awarded
        are specified in an award agreement.
 
 Award
        agreements for stock unit awards specify the number and terms and conditions
        of
        such stock units, as well as the manner in which such stock units may be
        exercised and the holder's rights as a shareholder with respect to such stock
        units.
 
 
 **NOTE
        15.**  **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. Deferred tax assets
        as
        of December 31, 2006, of approximately $5,030,436 were reduced to zero, after
        considering the valuation allowance of $5,030,436, since there is no assurance
        of future taxable income. As of December 31, 2006 we have consolidated net
        operating loss carryovers for income tax purposes of $14,795,401, which is
        comprised of operating loss carryovers of $7,024,774 for the Company and
        $7,770,627 for Uluru Delaware, our wholly owned subsidiary. The operating
        loss
        carryovers will begin expiring as follows:
 
 Year
              Consolidated
                  Loss Carryovers2022
              
              $
              34,2482023
              
              
              95,6662024
              
              
              910,8002025
              
              
              1,687,5282026
              
              
              12,067,159Total
              
              $
              14,795,401
 
 The
        following is an analysis of deferred tax assets as of December 31, 2006:
 
 Deferred
              
              ValuationTax
                  Assets
              
              Allowance
              
              BalanceDeferred
                  tax assets at December 31, 2005
              
              $
              927,603
              
              $
              (
                  927,603
              )
              $
              -0-Additions
                  for the year:Uluru Inc.
              
              
              122,896
              
              
              (
                  122,896
              )
              
              -0-Uluru Delaware Inc.
              
              
              3,979,937
              
              
              (3,979,937
              )
              
              -0-Deferred
                  tax assets at December 31, 2006
              
              $
              5,030,436
              
              $
              (
                  5,030,436
              )
              $
              -0-
 
  F-23
 *Table
            of Contents*
  
 The
        following is reconciliation from the expected statutory federal income tax
        rate
        to our actual income tax rate for the year ended December 31:
 
 2006
              
              2005Expected
                  income tax (benefit) at federal statutory tax rate -34%
              
              $
              (
                  3,981,090
              )
              $
              (
                  323,845
              )Permanent
                  differences
              
              
              5,897
              
              
              47Amortization
                  of deferred start up costs
              
              
              (4,744
              )
              
              -0-Valuation
                  allowance
              
              $
              3,979,937
              
              $
              323,798Income tax expense
              
              $
              -0-
              
              $
              -0-
 
 Because
        of the significant share issuances in 2003 and 2006, the net operating loss
        carryforwards may be limited in their annual use when applied against taxable
        earnings in future periods pursuant to Section 382 of the Internal Revenue
        Code.
 
 **NOTE
        16.**  **RELATED
        PARTY TRANSACTIONS**
 
 
 We
        reimbursed $213,593 to Kerry P. Gray, Chief Executive Officer of the Company,
        in
        September 2006 for funds he advanced to the Company for working capital in
        July
        and August, 2006 in the amount of $178,000 and for professional fees of $35,593
        paid by him on behalf of the Company’s subsidiary, Uluru Delaware Inc., in
        September 2005. As of December 31, 2006 we owed Mr. Gray a balance of
        $62,500.
 
 
 **NOTE
        17.**  **STANDBY
        EQUITY DISTRIBUTION AGREEMENT**
 
 On
        October 12, 2005, we entered into a new Standby Equity Distribution Agreement
        with Cornell Capital Partners, LP. Under the SEDA, Cornell committed to purchase
        over the course of two years from the date of the effectiveness of a
        registration statement up to $30,000,000 of the Registrant's common stock.
        On
        December 6, 2006 we elected to terminate the Standby Equity Distribution
        Agreement with Cornell Capital Partners, LP as well as a Registration Rights
        Agreement and a Placement Agent Agreement.
 
 
 **NOTE
        18.**  **LEASE
        OBLIGATION**
 
 On
        January 31, 2006 we entered into a lease agreement for office and laboratory
        space in Addison, Texas. The minimum monthly lease obligation of $9,034.53,
        which is exclusive of monthly operating expenses, commenced on April 1, 2006
        and
        continues for eighty four (84) months.
 
 Calendar
                  Years
              
              Future
                  Lease Expense2007
              
              $
              108,4142008
              
              
              108,4142009
              
              
              108,4142010
              
              
              108,4142011 & Beyond
              
              
              243,934Total
              
              $
              677,590
 
 Our
        rent
        expense for the years’ ending December 31, 2006 and 2005 was $83,861 and
        $68,985, respectively
 
  F-24
 *Table
            of Contents*
  
 **NOTE
        19.**  **SUBSEQUENT
        EVENT**
 
 Agreement
        with BioProgress Plc
 
 On
        February 8, 2007, we announced a strategic partnership with BioProgress PLC
        to
        market OraDiscTM B in the European Union, Commonwealth of Independent States, and
        Middle Eastern markets upon completion of the product development.
 
 OraDiscTM
        B is a product being developed from our adhesive film technology which
        incorporates 15 milligrams of benzocaine for the treatment of oral pain.
        The
        product is designed to adhere to the mucosal surface and selectively deliver
        pain relief to a localized area
 
 As
        part
        of the ten year agreement, BioProgress made an upfront payment, future milestone
        payments, both success and time related, which will all be recognized ratably
        over the life of the agreement, and will purchase the OraDiscTM B product from
        us.
 
 Investor
        Rights Agreement
 
 On
        February 13, 2007, we received notice from the Security and Exchange Commission
        that the Company’s registration statement, originally filed December 15, 2006
        and subsequently amended on February 9, 2007, was declared effective, thereby
        fulfilling our initial obligation under the Investor Rights Agreement dated
        December 6, 2006.
 
  F-25
 *Table
            of Contents*
  
 
 **EXHIBIT
        INDEX**
 
 **Exhibit**
                **Number**
              
              **Description
                  of Document**3.1.1
              
              Articles
                  of Incorporation dated September 17, 1987 (1)3.1.2
              
              Articles
                  of Amendment dated December 17, 1990 (1)3.1.3
              
              Articles
                  of Amendment dated April 16, 1993 (1)3.1.4
              
              Articles
                  of Amendment dated August 19, 1999 (1)3.1.5
              
              Articles
                  of Amendment dated March 13, 2000 (1)3.1.6
              
              Articles
                  of Amendment dated January 30, 2002 (1)3.1.7
              
              Articles
                  of Amendment dated March 29, 2006 (4)3.1.8
              
              Articles
                  of Amendment dated March 31, 2006 (4)3.2
              
              Bylaws
                  (1)10.1
              
              Securities
                  Purchase Agreement dated October 12, 2005 by and among the Registrant,
                  Highgate House Ltd., and Prenox, LLC. (2)10.2
              
              Security
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House Ltd., and Prenox, LLC. (2)10.3
              
              Collateral
                  Assignment dated October 12, 2005 by and among the Registrant,
                  Highgate
                  House Ltd., and Prenox, LLC. (2)10.4
              
              Guaranty
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House Ltd., and Prenox, LLC. (2)10.5
              
              Guarantor
                  Security Agreement dated October 12, 2005 by and among the Merger
                  Corp.,
                  Highgate House Ltd., and Prenox, LLC. (2)10.6
              
              Escrow
                  Agreement dated October 12, 2005 by and among the Registrant, Highgate
                  House, Ltd., Prenox, LLC, and Gottbetter & Partners, LLP.
                  (2)10.7
              
              Escrow
                  Shares Escrow Agreement dated October 12, 2005 by and among the
                  Registrant, Highgate House Ltd., Prenox, LLC, and Gottbetter &
                  Partners. (2)10.8
              
              Investor
                  Registration Rights Agreement dated October 12, 2005 by and among
                  the
                  Registrant, Highgate House, Ltd. and Prenox, LLC. (2)10.9
              
              OXFV
                  Convertible Debenture for $3,000,000 issued by the Registrant and
                  Highgate
                  House, Ltd. dated October 12, 2005. (2)10.10
              
              OXFV
                  Convertible Debenture for $10,000,000 issued by the Registrant
                  and Prenox,
                  LLC dated October 12, 2005. (2)10.11
              
              Warrant
                  issued by the Registrant to Highgate House, Ltd., dated October
                  12, 2005.
                  (2)10.12
              
              Warrant
                  issued by the Registrant to Prenox, LLC, dated October 12, 2005.
                  (2)10.13
              
              Bridge
                  Loan and Control Share Pledge and Security Agreement dated October
                  12,
                  2005 by and among ULURU Delaware Inc., the Registrant, and Mr.
                  Kerry P.
                  Gray. (2)10.14
              
              Security
                  Agreement dated October 12, 2005 by and among ULURU Delaware Inc.,
                  the
                  Registrant, and Mr. Kerry P. Gray. (2)10.15
              
              Pledge
                  and Escrow Agreement dated October 12, 2005 by and among the Registrant,
                  ULURU Delaware Inc., Mr. Kerry P. Gray, and Gottbetter & Partners,
                  LLP. (2)10.16
              
              Convertible
                  Debenture for $10,700,000 issued by ULURU Delaware Inc. to the
                  Registrant,
                  dated October 12, 2005. (2)10.17
              
              Agreement
                  and Plan of Merger and Reorganization dated October 12, 2005 by
                  and among
                  the Registrant, Uluru Acquisition Corp., and ULURU Delaware Inc.
                  (2)10.18
              
              Indemnifying
                  Escrow Agreement dated October 12, 2005 by and among the Registrant,
                  Mr.
                  Kerry P. Gray and Gottbetter & Partners, LP. (2)10.19
              
              Standby
                  Equity Distribution Agreement dated October 12, 2005 by and between
                  the
                  Registrant and Cornell Capital Partners, LP. (2)10.20
              
              SEDA
                  Registration Rights Agreement dated October 12, 2005 by and between
                  the
                  Registrant and Cornell Capital Partners, LP. (2)10.21
              
              Placement
                  Agent Agreement dated October 12, 2005 by and among the Registrant,
                  Cornell Capital Partners, LP, and Newbridge Securities Corp.
                  (2)10.22
              
              Asset
                  Sale Agreement dated October 12, 2005 by and between ULURU Delaware
                  Inc.
                  and Access Pharmaceuticals, Inc. (4)10.23
              
              Patent
                  Assignment Agreement dated October 12, 2005 by and between ULURU
                  Delaware
                  Inc. and Access Pharmaceuticals, Inc. (4)10.24
              
              License
                  Agreement dated October 12, 2005 by and between ULURU Delaware
                  Inc. and
                  Access Pharmaceuticals, Inc. (4)10.25
              
              Lease
                  Agreement dated January 31, 2006 by and between ULURU Delaware
                  Inc. and
                  Addison Park Ltd. (4)10.26
              
              License
                  Agreement dated August 14, 1998 by and between ULURU Delaware Inc.
                  and
                  Strakan Ltd. (4)10.27
              
              License
                  and Supply Agreement dated April 15, 2005 by and between ULURU
                  Delaware
                  Inc. and Discus Dental. (4)10.28
              
              Amendment
                  to License and Supply Agreement dated November 18, 2005 by and
                  between
                  ULURU Delaware Inc. and Discus Dental. (4)10.29
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Kerry P. Gray. (4)10.30
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Terrance K. Wallberg. (4)10.31
              *
              Employment
                  Agreement dated January 1, 2006 by and between ULURU Delaware Inc.
                  and
                  Daniel G. Moro. (4)10.32
              
              Secured
                  Convertible Debenture with Cornell Capital Partners, L.P., date
                  June 9,
                  2004 (5)10.33
              
              Standby
                  Equity Distribution Agreement, dated May 18, 2004, with Cornell
                  Capital
                  Partners, L.P. (5)10.33
              
              Security
                  Agreement, Dated May 18, 2004, with Cornell Capital Partners, L.P.
                  (5)10.34
              
              Warrant
                  to Purchase Common Stock of Uluru Inc. issued to Highgate House
                  Funds,
                  Ltd., dated October 12, 2005. (7)10.35
              
              Warrant
                  to Purchase Common Stock of Uluru Inc. issued to Prenox, LLC, dated
                  August
                  20, 2006. (6)10.36
              
              Agreement
                  dated August 30, 2006 by and between Uluru Inc. and ULURU Delaware
                  Inc.
                  (6)10.37
              *
              Uluru
                  Inc. 2006 Equity Incentive Plan (3)10.38
              
              Agreement
                  dated December 6, 2006 by and among the Registrant, ULURU Delaware
                  Inc.,
                  Prenox, LLC, and Cornell Capital, LP. (7)10.39
              
              Common
                  Stock Purchase Agreement dated December 6, 2006 by and among the
                  Registrant and the purchasers party thereto. (7)10.40
              
              Investor
                  Rights Agreement dated December 6, 2006 by and among the Registrant
                  and
                  the purchasers party thereto. (7)10.41
              
              Amendment
                  to Asset Sale Agreement dated December 8, 2006 by and between ULURU
                  Delaware Inc. and Access Pharmaceuticals, Inc. (7)10.42
              *
              Employment
                  Agreement dated December 1, 2006 by and between ULURU Delaware
                  Inc. and
                  John V. St. John, PhD. (8)19
              
              Notice
                  to Security Holders, dated February 27, 2006 (3)31.1
              **
              Certification
                  Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange
                  Act of
                  1934, as Amended31.2
              **
              Certification
                  Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange
                  Act of
                  1934, as Amended32.1
              **
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 200232.2
              **
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002-----------------------------------------(1)
              
              Incorporated
                  by reference to the Company’s registration statement on Form 10-SB filed
                  on March 8, 2002.(2)
              
              Incorporated
                  by reference to the Company’s Current Report on Form 8-K filed on October
                  18, 2005.(3)
              
              Incorporated
                  by reference to the Company’s Definitive Schedule 14C filed on March 1,
                  2006.(4)
              
              Incorporated
                  by reference to the Company’s Form 8-K filed on March 31,
                  2006(5)
              
              Incorporated
                  by reference to the Company’s registration statement on SB-2 filed on June
                  9, 2004.(6)
              
              Incorporated
                  by reference to the Company’s Form 10-QSB filed on November 20,
                  2006(7)
              
              Incorporated
                  by reference to the Company’s Form SB-2 Registration Statement filed on
                  December 15, 2006(8)
              
              Incorporated
                  by reference to the Company’s Form SB-2/A Registration Statement filed on
                  February 9, 2007*
              Management
                  contract or compensation plan arrangements.**
              Filed
                  herewith.
 
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            48 -