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, 2007.





[_]
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:





Title of each
      class
            Name of exchange on
      which registeredCommon
      Stock, par value $0.001
            American
      Stock Exchange






-----------------------------





Securities
registered under Section 12(g) of the Exchange Act:





None








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 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 $1,465,744
 
 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.)   $56,398,590 as of March 12,
2008
 
 The
number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.   62,416,881asofMarch 12, 2008


Table of Contents
















DOCUMENTS
INCORPORATED BY REFERENCE





Portions
of the proxy statement for the 2008 Annual Meeting of Stockholders are
incorporated by reference in Part III, including, specifically, the Compensation
Committee Report to be included in that proxy statement.







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ULURU Inc.FORM
      10-KSBFOR
      THE YEAR ENDED DECEMBER 31, 2007TABLE OF CONTENTSItem
            
            PagePart I1.
            Description of Business
            42.
            Description of Property
            253.
            Legal Proceedings
            254.
            Submission of Matters to a Vote of Security
      Holders
            25Part II5.
            Market for Common Equity, Related Stockholder Matters, and
      Small Business Issuer Purchases of Equity Securities
            266.
            Management's Discussion and Analysis or Plan of
      Operation
            287.
            Financial Statements
            338.
            Changes In and Disagreements With Accountants on Accounting
      and Financial Disclosure
            338A.
            Controls and Procedures
            348B.
            Other Information
            34Part III9.
            Directors, Executive Officers, Promoters, Control Persons
      and Corporate Governance; Compliance with Section 16(a) of the Exchange
      Act
            3510.
            Executive Compensation
            3611.
            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
            3612.
            Certain Relationships and Related Transactions, and
      Director Independence
            3613.
            Exhibits
            3714.
            Principal Accountant Fees and Services
            37Signatures
            38Index to Financial Statements
            39Exhibit Index
            40








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Part I








FORWARD
LOOKING STATEMENTS





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 disclaim
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.






ITEM
1.                     DESCRIPTION
OF BUSINESS





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,
pursuant to which National Lighting Corp. became a wholly owned subsidiary of
the Company and on March 13, 2000 the shareholders of the Company approved an
amendment to the Articles of Incorporation and changed the Company name to VOIP
Technology Inc.





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
February 8, 2002, we sold all of the shares the Company held in National
Lighting Corp., our 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
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. would merge 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 has not
been, and 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 851,094 post-split
shares which include additional 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 such merger, the members of the ULURU Delaware Board of
Directors holding office immediately prior to such 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 such
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 yet diversified pharmaceutical company focused on advancing topical
drug delivery and engaged in the development of novel wound care, plastic
surgery, and 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 delivery technologies and intend to
make future acquisitions of technologies which offer the potential to improve
patient outcomes in our areas of focus.





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From our
three patented drug delivery technologies, we have three products which have
been approved for marketing in various global markets.





The three
drug delivery technologies are as follows:





OraDiscTMAn
      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
      AggregateNanoparticles
      which aggregate in the presence of body fluids, to form a permanent or
      partially 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.ResidermA
      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 have
commenced hiring a direct sales force and a sales and marketing organization to
commercialize the acute wound management, certain chronic wounds, and burn care
products. To achieve this objective, we plan on acquiring additional
complimentary wound management 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 U.S. 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 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.





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 Italy. Additionally,
approvals have been granted in numerous international markets where the product
has been launched.





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Products





We have
used our drug delivery technology platforms to develop the following products
and product candidates:





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 and 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, we
believe that 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. 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 2008.





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 is obligated
to 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 with
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 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 by Paladin Labs Inc., our Canadian partner.








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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®.


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 preclinical, clinical development, and 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.  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.  In Spain and Italy, Zindaclin® is licensed to Cantabria
SA.  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, we have
developed a novel, cost-effective, adhesive film product 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 as young as 12 years of age was
demonstrated. Patients in a 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, we
developed a novel erodible mucoadhesive film product. 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 Meldex International
PLC, formerly 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 moldedand 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 manufacturing 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
our proprietary technology, we have developed three separate development
platforms 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 which 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, we have formulated the powder with active pharmaceutical ingredients
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; and§
            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
elasticity 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 certain other commercial gel filler materials,
including silicone.





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.





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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.





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 for our inventions and
prospective products with the U.S. Patent and Trademark Office and, when
appropriate, with authorities in countries that are part of the Paris
Convention’s Patent Cooperation Treaty (“PCT”) (most major countries in Western
Europe and the Far East) and with other authorities in major markets not covered
by the PCT.





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 applications 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.





Five U.S.
patent applications and four PCT patent applications for our 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 and device 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 or medical device product may be
produced and marketed in the U.S. include preclinical tests, the filing of an
Investigational New Drug application ("IND") or an Investigational Device
Exemption (“IDE”) 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 New Drug Application
(“NDA”), a Product Marketing Authorization (“PMA”), or a 510(k) application
(“510(k)”) is also required 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 and IDE 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.  In the case of a pharmaceutical product, 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 and 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, PMA,
or 510(k) for approval to commence commercial sales.





The
process of performing the requisite testing, data collection, analysis and
compilation of an IND, IDE, NDA, PMA, or 510(k) 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, PMA, or 510(k) 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 areavailable 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 materially 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 a product developed
utilizing our Residerm® technology, competes with products including Benzamycin,
marketed by a subsidiary of Sanofi-Aventis; Cleocin-T and a generic topical
clindamycin marketed by Pfizer; 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
are 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 have
commenced hiring a direct sales force and a sales and marketing organization to
commercialize our product developments in the acute wound management, certain
chronic wounds, and burn care 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, 2007, we have 14 full-time employees and 1 part-time
employee .  Of
these employees, ten 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.





Executive
Officers and Key Employees





The
following table sets forth the executive officers and key employees of the
Company along with their respective ages and positions:





Name
            Age
            PositionKerry
      P. Gray
            54
            Chief
      Executive Officer, President, DirectorRenaat
      Van den Hooff
            48
            Executive
      Vice President – OperationsTerrance
      K. Wallberg
            53
            Vice
      President, Chief Financial Officer, Secretary,
TreasurerDaniel
      G. Moro
            61
            Vice
      President Polymer Drug DeliveryJohn
      V. St. John, Ph.D.
            36
            Vice
      President Material SciencesW.
      Eric Bowditch
            61
            Vice
      President Business Development.





The
following is a brief account of the business experience during the past five
years of each executive officer and key employee 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.





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Kerry P. Gray was the
President and CEO and a director of Access Pharmaceuticals, Inc. 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.





Renaat Van den Hooff led the
integration of the Johnson and Johnson (“J&J”) and Pfizer Consumer
Healthcare business for the Europe, Middle East and Africa
region.  Previously, from 2004 to 2006 Mr. Van den Hooff was President
of J&J Merck Consumer Pharmaceuticals and President of McNeil International,
having been President of J&J Merck from 2003 and Vice President for the U.S.
Joint Venture from 2001 to 2003.  Prior to that from 1997 to 2001, Mr.
Van den Hooff had been Managing Director United Kingdom and Ireland for J&J
MSD Consumer Pharmaceuticals.  From 1989 to 1996 Mr. Van den Hooff
held various positions at Janssen Pharmaceutica Belgium.  Prior to
joining the J&J family of companies, from 1983 to 1988 he held various
positions with IMS Belgium.





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.





Daniel G. Moro was previously
Vice President, Polymer Drug Delivery at Access Pharmaceuticals, Inc. 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. Johnwas
previously 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.
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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 from 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, amounts 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.





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.





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.





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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; and§
            third
      parties may market superior or equivalent
drugs.





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:





Amlexanox 5% paste and
      OraDiscTM ADiscus
      Dental Inc.
            ·
            United
      StatesProStrakan
      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;





OraDiscTM
      BMeldex
      International PLC
            ·
            Europe,
      CEE and CIS countries, and the Middle
East





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.










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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.





Amlexanox
5% paste was approved by regulatory authorities for sale in the United Kingdom,
Austria, Germany, Greece, Finland, Ireland, Luxembourg, The Netherlands, Norway,
Portugal and Sweden.  We licensed manufacturing rights to ProStrakan,
Zambon, and Esteve 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 (“UK”) and throughout most European Union
countries including new member states and several non-European
markets.  Zindaclin® is marketed in UK, France, Germany, Italy,
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
2008.





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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 a product approved for sale in the US (Aphthasol®);
      approved in the UK, Canada, and ten EU countries but not yet
      sold§
            Zindaclin®
      is a product approved for sale in the UK and extensively throughout
      European Union countries§
            OraDiscTM
      A is a product approved for sale in the U.S. as of September 2004; we are
      completing steps for manufacturing and sale of the product in
      2008§
            Our
      other OraDiscTM products are currently in the development
    phase§
            Nanoparticle
      aggregate product candidates are in the preclinical and clinical
      phase.





Due to the time consuming
and uncertain nature of the drug and device 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 and
medical device products. Government regulations may delay marketing of our
potential drugs or potential medical devices 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 or device candidates may
not receive FDA or other regulatory approvals on a timely basis or at all.
Moreover, if regulatory approval of a drug or device candidate is granted, such
approval may impose limitations on the indicated use for which such drug or
device may be marketed. Even if we obtain initial regulatory approvals for our
drug or device candidates, our drugs or devices and our manufacturing facilities
would be subject to continual review and periodic inspection, and later
discovery of previously unknown problems with a drug, device, manufacturer or
facility may result in restrictions on the marketing or manufacture of such drug
or device, including withdrawal of the drug or device 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.





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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.





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.








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Intensed 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, device, 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 may obtain 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.





Our ability to successfully
develop and commercialize our drug or device candidates will substantially
depend upon the availability of reimbursement funds for the costs of the
resulting drugs or devices and related treatments.





The
successful commercialization of, and the interest of potential collaborative
partners to invest in the development of our drug or device candidates, may
depend substantially upon the reimbursement at acceptable levels of the costs of
the resulting drugs or devices 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 or devices 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.





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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 pressure on medical products and services may limit our
ability to profitably sell any drugs or devices that we
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;
      and§
            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.





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 processes 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.


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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 within one year 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.





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 of 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.





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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, 2007, we did not own any real property.  We entered into
a lease on April 1, 2006 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 of $9,398,
which is inclusive of monthly operating expenses, continues for sixty four
months as of December 31, 2007.





We
believe that our existing leased facilities are suitable for the conduct of our
business and adequate to meet our growth requirements.








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
2007.








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Part II








ITEM
5.                   MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES





Market for Common
Equity





Our
common stock began trading on the American Stock Exchange under the symbol “ULU”
on July 26, 2007. From March 31, 2006 to July 25, 2007 our common stock was
quoted on the OTC Bulletin Board under the symbol “ULUR.OB”.  Prior to
March 31, 2006 our common stock was listed as Oxford Ventures, Inc. and was
quoted on the OTC Bulletin Board under the symbol “OXFV.OB”.





The
following table sets forth, on a quarterly basis, the high and low per share
closing prices of our common stock as reported on the American Stock Exchange
from July 26, 2007 through December 31, 2007 and the high and low per share
closing prices of our common stock as reported on the OTC Bulletin Board from
January 1, 2006 through July 25, 2007:








Year Ended December
      31, 2006
            
            High
            
            
            LowFirst
      Quarter (a)
            
            $
            2.12
            
            
            $
            1.24Second
      Quarter
            
            $
            2.01
            
            
            $
            0.80Third
      Quarter
            
            $
            1.59
            
            
            $
            0.90Fourth
      Quarter
            
            $
            2.50
            
            
            $
            0.81Year Ended December
      31, 2007First
      Quarter
            
            $
            5.25
            
            
            $
            3.00Second
      Quarter
            
            $
            5.05
            
            
            $
            4.00Third
      Quarter
            
            $
            4.90
            
            
            $
            4.22Fourth
      Quarter
            
            $
            4.65
            
            
            $
            2.65





(a)
            The
      high and low closing prices for the quarter ended March 31, 2006 have been
      restated to give effect to the 400 to 1 reverse stock split that occurred
      on March 29, 2006.








Record
Holders





As at
March 12, 2008, there are approximately 131 shareholders of record holding our
common stock.  On March 12, 2008, the closing price of our common
stock was $2.50 and there were 62,416,881 shares of our common stock issued and
outstanding.





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.





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Securities Authorized for
Issuance Under Equity Compensation Plans





We
adopted our 2006 Equity Incentive Plan (“Incentive Plan”) on March 27, 2006
authorizing 2,000,000 shares under the Incentive Plan. At our May 8, 2007 annual
meeting of shareholders our stockholders approved an amendment to the Incentive
Plan to increase the total number of shares issuable thereunder to
6,000,000.  We have issued under the Incentive Plan stock options or
rights exercisable for an aggregate of 2,230,000 shares of common stock, of
which 5,000 shares have been issued as a result of option
exercises.  We have also issued an aggregate of 55,195 shares of
restricted common stock under the Incentive Plan.  The remaining
number of shares issuable under the Incentive Plan as of December 31, 2007 is
3,714,805.





The
following table sets forth the outstanding stock options or rights that have
been authorized under equity compensation plans as of December 31,
2007.





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
            
            
            2,225,000
            
            
            $
            2.54
            
            
            
            3,714,805Equity
      compensation plans not approved by security holders
            
            
            -0-
            
            
            
            n/a
            
            
            
            -0-Total
            
            
            2,225,000
            
            
            $
            2.54
            
            
            
            3,714,805








Recent Sales of Unregistered
Securities and Use of Proceeds From Registered
Securities





During
the three month period ended December 31, 2007, we issued 140,000 shares of
common stock upon the exercise of warrants held by two assignees of Blue Trading
Inc., at a per share price of $0.95 and received $133,000 in cash proceeds from
the exercise of such warrants.  All of such shares of common stock
were issued pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933,
as amended.








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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 our 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 our 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.





Recent
Developments





We are
preparing for the launch of AltrazealTM our first wound care product, which is
currently scheduled to occur in the second quarter of 2008.  To
support the product launch, we are conducting numerous market research studies.
The first study was completed by targeted burn specialists, emergency room and
trauma doctors, doctors from wound care clinics, and nurses from these
specialized areas. The primary objectives of the market research were to
evaluate the positioning of the product relative to the present standard of
care, to determine the most important sales message and receive feedback on
pricing, packaging and other launch information. The results of this study
indicated that the product concept is very favorably received with positive
responses related to the ease of use, less frequent dressing changes, no need
for a secondary dressing and the ability of AltrazealTM to seal and conform to
the wound. The market study also revealed that improved patient and provider
compliance is also considered an important issue, as these are keys to the
effective treatment of a wound. AltrazealTM was considered a highly innovative
product offering a unique selling proposition. Importantly AltrazealTM also
scored very highly on intent to use.





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Additionally,
we are conducting a comprehensive market research study to finalize AltrazealTM’s
pricing. This market research is not only analyzing competitive pricing
structures but also evaluating the impact on pricing of the numerous healthcare
providers that service the acute and chronic wound care markets.





To
support the AltrazealTM launch we intend to expand the clinical trial programs to
include additional clinical centers and wound types. Expanding the number of
centers conducting smaller clinical studies comparing AltrazealTM to the standard
of care in that center is expected to provide additional support for our launch
activities. To date the focus of our clinical program has been acute wounds and
burns. We have now expanded our clinical program to include chronic wounds such
as pressure sores.





In
preparation for the AltrazealTM launch the company has commenced hiring a direct
sales force and the sales and marketing administration to support
commercialization activities. Additionally, we are evaluating strategic
alternatives to further support the sales and marketing activities for
AltrazealTM.





The
development of our next generation AltrazealTM product, which contains silver in
the base powder dressing, has advanced to commercial scale evaluation studies.
We plan to file in 2008 a 510(k) application for approval by the FDA, with a
launch planned for 2009. Marketing a silver containing product is important
especially in certain wound types where infection is a major
concern.  These products are extensively used in such conditions as
control of infection is essential for wound healing.





In
December 2007 we announced that Meldex International PLC (previously BioProgress
PLC) has filed the regulatory dossier for approval of ULURU’s proprietary
product OraDiscTM B in Europe.  Under the terms of our agreement with
Meldex International PLC, this filing triggered an obligation to pay a $600,000
milestone payment,  which was payable to the Company on the later to
occur of a registration filing or the first anniversary of the signing of the
agreement.





We also
announced in December 2007 that we have received a Notice of Allowance from the
United States Patent and Trademark Office for our nanoparticle aggregate patent
which covers the underlying science behind our nanoparticle aggregate
technology.  To further secure our patent position we have filed
additional patents to protect our wound care, breast implant and dermal filler
applications of the nanoparticle aggregate technology.  Upon issuance,
this patent will expire in 2022.  The subsequently filed patent
applications, which broaden our patent position, could extend the patent life
for the wound care and breast implant product portfolios until the end of
2026.





On
October 30, 2007 our Board of Directors approved a voluntary Odd-Lot Buy Back
Offer, whereby the Company offered to purchase shares from shareholders who own
less than 100 shares of common stock.  The Odd-Lot Buy Back Offer ran
from November 1, 2007 through December 14, 2007.  Upon the conclusion
of the Odd-Lot Buy Back offer, we repurchased 147 shares of common stock at a
per share price of $3.24, which was a per share price equal to the average of
the closing market prices of the shares as reported by the American Stock
Exchange during the offer period.








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LIQUIDITY AND CAPITAL
RESOURCES
 
 We have
funded our operations primarily through the private sales of convertible
debentures and common stock.  Contract research, product 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, 2007 our cash and cash equivalents
were $13,979,828 which is a decrease of $2,938,179 as compared to our cash and
cash equivalents at December 31, 2006 of $16,918,007.  Our working
capital (current assets less current liabilities) was $14,146,157 at December
31, 2007 as compared to our working capital at December 31, 2006 of
$16,474,472.


Net cash
used in operating activities was $2,182,993 for the year ended December 31, 2007
which is a decrease of $2,514,968 as compared to the net cash used in operating
activities for the year ended December 31, 2006 of $4,697,960.  This
decrease was due to several factors; a decrease in our net loss due to
non-recurring prior year expenses for commitment fees, repayment fees associated
with our debenture retirement, a loss on early extinguishment of debt, and
decreased interest expense.  Additional factors affecting the decrease
in net cash used in operating activities were an increase in accounts payable
and the receipt of a milestone payment thereby increasing deferred revenues.
These positive factors were partially offset by an increase in accounts
receivable and inventory.





Net cash
used in investing activities increased to $927,650 for the year ended December
31, 2007 from $638,781 for the year ended December 31, 2006.  This
increase is due to the ongoing purchases of manufacturing equipment for the
commercial scale-up of our OraDiscTM products.





Net cash
provided by financing activities totaled $172,464 for the year ended December
31, 2007 compared to $20,644,391 for the year ended December 31,
2006.  The net cash provided by financing activities for the year
ended December 31, 2007 was comprised of $522,939 from the exercise of stock
options and warrants to purchase common stock less the $350,000 repayment of our
asset purchase obligation to Access Pharmaceuticals, Inc. and $476 for the
repurchase of common stock.  The net cash provided by financing
activities for 2006 included approximately $38,500,000 for the sale of common
stock less approximately $3,200,000 of stock offering costs and $2,700,000 of
proceeds from the exchange of debentures.  These larger amounts in
2006 were partially offset by the $13,000,000 redemption of all of our
debentures and the approximately $4,600,000 repayment of our asset purchase
obligation to Access Pharmaceuticals, Inc.





During
the year ended December 31, 2007 we issued 948,933 shares of common stock
pursuant to the exercise of warrants and stock options.  We also
issued 1,571,073 shares of common stock pursuant to the cashless exercise of
warrants to purchase 1,589,400 shares of common stock.





As of
December 31, 2007 our 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 products.  We believe that our financial
results for 2008 and beyond will be affected positively by our commercialization
of additional products, 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








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RESULTS OF
OPERATIONS





Fluctuations in Operating
Results





Our
results of operations have fluctuated significantly from period to period in the
past and are likely to continue to do so in the future. We anticipate that our
quarterly and annual results of operations will be impacted for the foreseeable
future by several factors, including the timing and amount of payments received
pursuant to our current and future collaborations, and the progress and timing
of expenditures related to our development and commercialization efforts. Due to
these fluctuations, we believe that the period-to-period comparisons of our
operating results may not be a good indication of our future
performance.








FOR THE YEAR ENDED DECEMBER
31, 2007 COMPARED TO THE YEAR ENDED DECEMBER 31, 2006





Total
Revenues





Our
revenues totaled $1,465,744 for the year ended December 31, 2007, as compared to
revenues of $1,534,453 for the year ended December 31, 2006, and were comprised
of licensing fees of $909,252 for milestones associated with our Zindaclin® and
OraDiscTM B technologies, domestic royalties of $99,233 from the sale of
Aphthasol®, foreign royalties from the sale of Zindaclin® of $182,258, and
sponsored research of $275,001.





The year
ended December 31, 2007 revenues represent an overall decrease of $68,709 versus
the comparative 2006 revenues, primarily due to lower domestic royalties
associated with Aphthasol® along with the lack of Aphthasol® product sales to
our domestic distributor due to the timing of their product
orders.  These adverse factors were partially offset by an increase in
sponsored research projects associated with our OraDiscTM and hydrogel
nanoparticle technology.





Costs and
Expenses





Cost
of Goods Sold





We did
not sell any finished goods in the year ended December 31, 2007; therefore we
had no direct cost of sales.  Our cost of goods sold for the year
ended December 31, 2006 was $181,546 and included the production costs of
Aphthasol® for our domestic distributor.








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Research
and Development
 
 Research
and development expenses totaled $2,211,698 for the year ended December 31,
2007, including $135,881 in share-based compensation, compared to $1,950,376 for
the year ended December 31, 2006, including $2,868 in share-based
compensation.  The increase of approximately $261,000 in research and
development expenses was due primarily to increased costs of approximately
$164,000 for Aphthasol® regulatory fees, increased costs of $201,000 associated
with additional scientific personnel and share-based compensation, initial
clinical testing expenses of $32,000 for our wound care technology and increased
equipment repair costs of $13,000.  These increases were partially
offset by a decrease of $149,000 in direct research costs for our OraDiscTM
technology.


The
direct research and development expenses for the years ended December 31, 2007
and 2006 were as follows:




Years
      Ended December 31,Technology
            
            2007
            
            
            2006OraDiscTM
            
            $
            322,588
            
            
            $
            513,201Wound care & nanoparticle
            
            
            444,907
            
            
            
            409,124Aphthasol® & other technologies
            
            
            50,142
            
            
            
            44,546Total
            
            $
            817,637
            
            
            $
            966,871





General
and Administrative





General
and administrative expenses totaled $3,045,065 for the year ended December 31,
2007, including $446,797 in share-based compensation, compared to $1,878,067 for
the year ended December 31, 2006, including $13,544 in share-based
compensation.  The increase of $1,166,998 in general and
administrative expenses was due primarily to the following:





§
            Increased
      salary and benefit expenses of approximately $370,000 due to recognition
      of share-based compensation, initial compensation associated with the
      hiring of our new executive vice president, incentive accruals and
      associated employer costs therein, and inflationary increases for medical
      insurance costs;§
            Director
      fee expense increase of $286,000 as we incurred minimal director fee
      expense in 2006;§
            Increased
      legal expense associated with patent applications of
    $165,000;§
            Increased
      costs associated with our insurance programs of
  $108,000;§
            Increased
      legal expenses of $99,000 in part due to legal work associated with the
      filing of registration statements;§
            Expenses
      of $87,000 associated with our new listing on the American Stock
      Exchange;§
            Increased
      shareholder expenses of $100,000 for costs associated with our annual
      report, the annual meeting of shareholders, and for investor and public
      relations;§
            Increased
      corporate travel costs of $74,000;§
            Increased
      expenses for consulting of $73,000;§
            Increased
      occupancy costs of $35,000; and§
            Increased
      accounting and audit fees of
$22,000.





The
increase in general and administrative expenses was partially offset
by





§
            Lower
      royalty expense of $250,000 in 2007 as the prior year included a
      settlement of future milestones with Access Pharmaceuticals, Inc., which
      did not reoccur in 2007.





Amortization





Amortization
expense totaled $1,078,351 for the year ended December 31, 2007 as compared to
$1,052,395 for the year ended December 31, 2006.  The increase of
$25,956 is attributable to our purchase of an additional patent in December
2006.





Depreciation





Depreciation
expense totaled $72,942 for the year ended December 31, 2007 as compared to
$63,882 for the year ended December 31, 2006.  The increase of $9,060
is attributable to our purchase of additional equipment during
2007.





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Interest
and Miscellaneous Income





Interest
and miscellaneous income totaled $791,687 for the year ended December 31, 2007
as compared to $65,980 for the year ended December 31, 2006.  The
increase of $725,707 is attributable to an increase in interest income due to
higher cash balances in 2007.





Interest
Expense





Interest
expense totaled $2,006 for the year ended December 31, 2007 as compared to an
expense of $5,424,518 for the year ended December 31, 2006.  The
decrease in interest expense relates to our payoff of previously outstanding
secured convertible debentures in December 2006.





Other
Expenses





We did
not incur any other expense items for the year ended December 31, 2007 as
compared to the other expenses for the year ended December 31, 2006 of
$2,758,738, comprised of $1,787,940 for a commitment fee, $940,655 from losses
on two early extinguishments of debentures, and $30,143 from a loss on sale of
equipment.








ITEM
7.                   FINANCIAL
STATEMENTS





Our
audited consolidated financial statements at and for the fiscal years ended
December 31, 2007 and 2006, together with the related notes thereto, have been
included in this annual report on pages F-1 through F-26.  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





On
January 25, 2007, the Audit Committee of the Board of Directors of the Company
approved the engagement of Lane Gorman Trubitt, L.L.P. ("Lane Gorman") to
replace Braverman International, P.C. ("Braverman") as the Company's independent
registered public accounting firm to audit the Company's financial statements
for the year ending December 31, 2007 as well as to perform review services in
regards to the quarterly financial information of the Company included in our
Forms 10-QSB. On March 29, 2007, Lane Gorman formally advised the Company that
effective as of such date it was accepting the position as the Company's
independent registered public accounting firm.





During
the years ended December 31, 2006 and 2005, and the interim period through March
29, 2007, Lane Gorman has not been engaged as an independent registered public
accounting firm to audit either the financial statements of the Company or any
of its subsidiaries, nor has the Company or anyone acting on its behalf
consulted with Lane Gorman regarding: (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements;
or (ii) any matter that was the subject of a disagreement or event identified in
response to Item 304(a)(1)(iv) of Regulation S-B.





On March
29, 2007, we notified Braverman, that as of such date we dismissed it as our
independent registered public accounting firm.





Braverman
performed audits of the Company's consolidated financial statements for the
years ended December 31, 2006 and 2005.  Braverman's reports did not
contain an adverse opinion or disclaimer of opinion, and were not modified as to
uncertainty, audit scope or accounting principles.




During
the years ended December 31, 2006 and 2005, and the interim period through March
29, 2007, (i) there have been no disagreements with Braverman on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to Braverman's
satisfaction, would have caused Braverman to make reference to the subject
matter of the disagreement(s) in connection with its reports for such years, and
(ii) Braverman has not advised the Company regarding any of the matters
described in Item 304(a)(1)(iv)(B) of Regulation S-B.





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ITEM
8A.                     CONTROLS
AND PROCEDURES





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our management, including our principal
executive officer and principal financial officer, conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the
framework in Internal Control
- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.  Based on its evaluation
under the framework in Internal Control - Integrated Framework, our management
concluded that our internal control over financial reporting was effective as of
December 31, 2007.





Evaluation
of Disclosure Controls and Procedures





Based on
their evaluation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) as of December 31, 2007, our chief executive
officer and chief financial officer have concluded that our disclosure controls
and procedures are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms and is accumulated and communicated to the company's
management, as appropriate, to allow timely decisions regarding required
disclosure, and are operating in an effective manner.





Changes
in Internal Controls Over Financial Reporting





During
the fiscal quarter ended December 31, 2007, there were no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Management’s
Annual Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended.  The Company's
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures
that:





§
            Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;§
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with U.S. generally
      accepted accounting principles, and that our receipts and expenditures are
      being made only in accordance with authorizations of our management and
      directors; and§
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.





Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.  All internal control
systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
 
 Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. In making this assessment, our management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on this assessment, management believes that as of
December 31, 2007 our internal control over financial reporting is effective
based on those criteria.
 
 This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management's
report in this annual report.
 
 
 ITEM
8B.                     OTHER
INFORMATION
 
 None.


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Part III








ITEM
9.                     DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS, AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





Directors





The
information concerning our directors required under this Item is incorporated
herein by reference from our definitive proxy statement, to be filed pursuant to
Regulation 14A, related to our 2008 Annual Meeting of Stockholders to be held on
May 15, 2008 (our “2008 Proxy Statement”).





Information
concerning our Audit Committee and the independence of its members, along with
information about the financial expert serving on the Audit Committee, is set
forth in the Audit Committee segment of our 2008 Proxy Statement and is
incorporated herein by reference.





Executive
Officers





The
information concerning our executive officers is provided in Item 1 of Part I of
this Annual Report on Form 10-KSB under the caption “Executive
Officers”.





Corporate
Governance





Information
concerning certain corporate governance matters will appear in our 2008 Proxy
Statement under “Corporate Governance Matters”, “Meetings of the Board and
Certain Committees”, “Compensation Committee Discussion on Executive
Compensation”, and “Report of the Audit Committee”.  These portions of
our 2008 Proxy Statement are incorporated herein by reference.





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Section
16(a) Compliance





Information
concerning compliance with Section 16(a) of the Securities and Exchange Act of
1934 is set forth in the “Section 16(a) Beneficial Ownership Reporting
Compliance” segment of our 2008 Proxy Statement and is incorporated herein by
reference.





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.





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.








ITEM
10.                   EXECUTIVE
COMPENSATION





The
information concerning executive compensation for the Company required under
this Item is contained in our 2008 Proxy Statement and is incorporated herein by
reference.








ITEM
11.                SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS





The
information concerning security ownership of certain beneficial owners and
management required under this Item is contained in our 2008 Proxy Statement and
is incorporated herein by reference.








ITEM
12.                   CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





The
information concerning certain relationships and related transactions, and
director independence required under this Item is contained in our 2008 Proxy
Statement and is incorporated herein by reference.








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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
      Document3.1
            
            Restated
      Articles of Incorporation dated November 5, 2007 (8)3.2
            
            Amended
      and Restated Bylaws dated November 5, 2007 (8)10.1
            
            Warrant
      issued by the Registrant to Prenox, LLC, dated October 12, 2005.
      (1)10.2
            
            Agreement
      and Plan of Merger and Reorganization dated October 12, 2005 by and among
      the Registrant, Uluru Acquisition Corp., and ULURU Delaware Inc.
      (1)10.3
            
            Asset
      Sale Agreement dated October 12, 2005 by and between ULURU Delaware Inc.
      and Access Pharmaceuticals, Inc. (3)10.4
            
            Patent
      Assignment Agreement dated October 12, 2005 by and between ULURU Delaware
      Inc. and Access Pharmaceuticals, Inc. (3)10.5
            
            License
      Agreement dated October 12, 2005 by and between ULURU Delaware Inc. and
      Access Pharmaceuticals, Inc. (3)10.6
            
            Lease
      Agreement dated January 31, 2006 by and between ULURU Delaware Inc. and
      Addison Park Ltd. (3)10.7
            
            License
      Agreement dated August 14, 1998 by and between ULURU Delaware Inc. and
      Strakan Ltd. (3)10.8
            
            License
      and Supply Agreement dated April 15, 2005 by and between ULURU Delaware
      Inc. and Discus Dental. (3)10.9
            
            Amendment
      to License and Supply Agreement dated November 18, 2005 by and between
      ULURU Delaware Inc. and Discus Dental. (3)10.10
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Kerry P. Gray. (3)10.11
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Terrance K. Wallberg. (3)10.12
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Daniel G. Moro. (3)10.13
            
            Warrant
      to Purchase Common Stock of Uluru Inc. issued to Prenox, LLC, dated August
      20, 2006. (4)10.14
            
            Agreement
      dated August 30, 2006 by and between Uluru Inc. and ULURU Delaware Inc.
      (4)10.15
            *
            Uluru
      Inc. 2006 Equity Incentive Plan (2)10.16
            
            Agreement
      dated December 6, 2006 by and among the Registrant, ULURU Delaware Inc.,
      Prenox, LLC, and Cornell Capital, LP. (5)10.17
            
            Common
      Stock Purchase Agreement dated December 6, 2006 by and among the
      Registrant and the purchasers party thereto. (5)10.18
            
            Investor
      Rights Agreement dated December 6, 2006 by and among the Registrant and
      the purchasers party thereto. (5)10.19
            
            Amendment
      to Asset Sale Agreement dated December 8, 2006 by and between ULURU
      Delaware Inc. and Access Pharmaceuticals, Inc. (5)10.20
            *
            Employment
      Agreement dated December 1, 2006 by and between ULURU Delaware Inc. and
      John V. St. John, PhD. (6)10.21
            
            License
      and Supply Agreement dated February 6, 2007 by and between DexoBiopharm
      LTD and Uluru Inc. (7)10.22
            *
            Employment
      Agreement dated September 25, 2007 by and between ULURU Delaware Inc. and
      Renaat Van den Hooff. (9)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 Current Report on Form 8-K filed on October
      18, 2005.(2)
            
            Incorporated
      by reference to the Company’s Definitive Schedule 14C filed on March 1,
      2006.(3)
            
            Incorporated
      by reference to the Company’s Form 8-K filed on March 31,
    2006(4)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on November 20,
      2006(5)
            
            Incorporated
      by reference to the Company’s Form SB-2 Registration Statement filed on
      December 15, 2006(6)
            
            Incorporated
      by reference to the Company’s Form SB-2/A Registration Statement filed on
      February 9, 2007(7)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on May 15,
      2007(8)
            
            Incorporated
      by reference to the Company’s Form 8-K filed on November 6,
      2007(9)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on November 13,
      2007*
            Management
      contract or compensation plan arrangements.**
            Filed
      herewith.








ITEM
14.                     PRINCIPAL
ACCOUNTANT FEES AND SERVICES





The
information concerning principal accountant fees and services required under
this Item is contained in our 2008 Proxy Statement and is incorporated herein by
reference.








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SIGNATURESPursuant
      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
  authorizedULURU
      Inc.Date:
      March 28, 2008
            By
            /s/ Kerry
      P. GrayKerry
      P. GrayChief
      Executive Officer, DirectorPrincipal
      Executive OfficerDate:
      March 28, 2008
            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 26, 2008
            /s/
      William W. CrouseWilliam
      W. Crouse, DirectorDate:
      March 26, 2008
            /s/
      Jeffrey B. DavisJeffrey
      B. Davis, DirectorDate:
      March 26, 2008
            /s/
      David E. Reese, Ph.D.David
      E. Reese, Ph.D., DirectorDate:
      March 26, 2008
            /s/
      W. Anthony VernonW.
      Anthony Vernon, Director








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ULURU Inc.CONSOLIDATED
      FINANCIAL STATEMENTSDECEMBER
      31, 2007TABLE
      OF CONTENTSPageReport of Independent Registered Public Accounting
      Firm
            F-1Report of Independent Registered Public Accounting
      Firm
            F-2Consolidated Balance Sheets as of December 31, 2007 and
      2006
            F-3Consolidated Statements of Operations for the years ended
      December 31, 2007 and 2006
            F-4Consolidated Statements of Stockholders’ Equity for the
      years ended December 31, 2007 and 2006
            F-5Consolidated Statements of Cash Flows for the years
      ended December 31, 2007 and 2006
            F-6Notes to Consolidated Financial
    Statements
            F-7








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REPORT OFINDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM






To the
Board of Directors and Stockholders


ULURU
Inc.


Addison,
Texas




We have
audited the consolidated balance sheet of ULURU Inc. (a Nevada corporation) as
of December 31, 2007, 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.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also
includes 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, 2007, 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.




We were
not engaged to examine management’s assertion about the effectiveness of ULURU
Inc.’s internal control over financial reporting as of December 31, 2007
included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting and, accordingly, we do not express an opinion
thereon.






/s/
Lane Gorman Trubitt, L.L.P.


Lane
Gorman Trubitt, L.L.P.


Dallas,
TX




March 21,
2008

















F -
1
 Table of Contents












REPORT OFINDEPENDENT
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








ULURU Inc.


CONSOLIDATED
BALANCE SHEETS








December
      31,2007
            
            
            2006ASSETSCurrent
      AssetsCash
      and cash equivalents
            
            $
            13,979,828
            
            
            $
            16,918,007Accounts
      receivable
            
            
            836,075
            
            
            
            672,534Inventory
            
            
            319,413
            
            
            
            ---Prepaid
      expenses and deferred charges
            
            
            400,830
            
            
            
            265,935Total
      Current Assets
            
            
            15,536,146
            
            
            
            17,856,476Property
      and Equipment, net
            
            
            1,532,881
            
            
            
            691,132Other
      AssetsPatents,
      net
            
            
            11,033,477
            
            
            
            12,098,869Deposits
            
            
            20,499
            
            
            
            20,749Total
      Other Assets
            
            
            11,053,976
            
            
            
            12,119,618TOTAL
      ASSETS
            
            $
            28,123,003
            
            
            $
            30,667,226LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
            
            $
            790,412
            
            
            $
            273,534Accrued
      liabilities
            
            
            422,911
            
            
            
            475,218Accrued
      liabilities – related party
            
            
            1,484
            
            
            
            63,984Deferred
      revenue – current portion
            
            
            55,147
            
            
            
            ---Royalty
      advance
            
            
            120,035
            
            
            
            219,268Asset
      purchase obligation
            
            
            ---
            
            
            
            350,000Total
      Current Liabilities
            
            
            1,389,989
            
            
            
            1,382,004Long
      Term LiabilitiesDeferred
      revenue, net – less current portion
            
            
            495,281
            
            
            
            ---TOTAL
      LIABILITIES
            
            
            1,885,270
            
            
            
            1,382,004COMMITMENTS
      AND CONTINGENCIES
            
            
            ---
            
            
            
            ---STOCKHOLDERS'
      EQUITYPreferred
      stock – $0.001 par value; 20,000 shares authorized;no
      shares issued and outstanding
            
            
            ---
            
            
            
            ---Common
      Stock – $ 0.001 par value; 200,000,000 shares authorized;62,416,881
      and 59,897,022 shares issued and outstanding at December 31, 2007 and
      December 31, 2006, respectively
            
            
            62,417
            
            
            
            59,897Additional
      paid-in capital
            
            
            42,989,518
            
            
            
            41,886,896Accumulated  (deficit)
            
            
            (16,814,202
            )
            
            
            (12,661,571
            )TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            26,237,733
            
            
            
            29,285,222TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            28,123,003
            
            
            $
            30,667,226The
      accompanying notes are an integral part of these consolidated financial
      statements.








F -
3
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ULURU Inc.


CONSOLIDATED
STATEMENTS OF OPERATIONS








Years
      Ended December 31,2007
            
            
            2006REVENUESLicense
      fees
            
            $
            909,252
            
            
            $
            891,576Royalty
      income
            
            
            281,491
            
            
            
            373,845Product
      sales
            
            
            ---
            
            
            
            155,208Other
            
            
            275,001
            
            
            
            113,824Total
      Revenues
            
            
            1,465,744
            
            
            
            1,534,453COSTS
      AND EXPENSESCost
      of goods sold
            
            
            ---
            
            
            
            181,546Research
      and development
            
            
            2,211,698
            
            
            
            1,950,376General
      and administrative
            
            
            3,045,065
            
            
            
            1,878,067Amortization
            
            
            1,078,351
            
            
            
            1,052,395Depreciation
            
            
            72,942
            
            
            
            63,882Total
      Costs and Expenses
            
            
            6,408,056
            
            
            
            5,126,266OPERATING
      (LOSS)
            
            
            (4,942,312
            )
            
            
            (3,591,813
            )Other
      Income (Expense)Interest
      and miscellaneous income
            
            
            791,687
            
            
            
            65,980Interest
      expense
            
            
            (2,006
            )
            
            
            (5,424,518
            )Commitment
      fee – Standby Equity Agreement
            
            
            ---
            
            
            
            (1,787,940
            )Loss
      from early extinguishment of debenture
            
            
            ---
            
            
            
            (940,655
            )Loss
      on sale of equipment
            
            
            ---
            
            
            
            (30,143
            )(Loss)
      Before Income Taxes
            
            
            (4,152,631
            )
            
            
            (11,709,089
            )Income
      taxes
            
            
            ---
            
            
            
            ---NET
      (LOSS)
            
            $
            (4,152,631
            )
            
            $
            (11,709,089
            )Basic
      and diluted net (loss) per common share
            
            $
            (0.07
            )
            
            $
            (0.71
            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
            
            
            61,798,882
            
            
            
            16,457,978The
      accompanying notes are an integral part of these consolidated financial
      statements.





F -
4
 Table of Contents








ULURU Inc.CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYYears
      Ended December 31, 2007 and 2006Common
      Stock
            
            
            Additional
      Paid-in
            
            
            Accumulated
            
            
            Stockholders’Shares
      Issued
            
            
            Amount
            
            
            Capital
            
            
            (Deficit)
            
            
            Equity
      (Deficit)Balance
      as of December 31, 2005
            
            
            11,000,000
            
            
            $
            11,000
            
            
            $
            (10,978
            )
            
            $
            (952,482
            )
            
            $
            (952,460
            )Recapitalization,
      March 31, 2006
            
            
            851,094
            
            
            
            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
      as of December 31, 2006
            
            
            59,897,022
            
            
            
            59,897
            
            
            
            41,886,896
            
            
            
            (12,661,571
            )
            
            
            29,285,222Issuance
      of common stock – 1,571,073 shares for cashless exercise of warrants
      (1,589,400 shares)
            
            
            1,571,073
            
            
            
            1,571
            
            
            
            (1,571
            )
            
            
            --
            
            
            
            --Issuance
      of common stock for exercises of warrants
            
            
            943,933
            
            
            
            944
            
            
            
            501,996
            
            
            
            --
            
            
            
            502,940Issuance
      of common stock for exercise of stock options
            
            
            5,000
            
            
            
            5
            
            
            
            19,995
            
            
            
            --
            
            
            
            20,000Repurchases
      of common stock
            
            
            (147
            )
            
            
            --
            
            
            
            (476
            )
            
            
            --
            
            
            
            (476
            )Share-based
      compensation of employees
            
            
            --
            
            
            
            --
            
            
            
            211,854
            
            
            
            --
            
            
            
            211,854Share-based
      compensation of non-employees
            
            
            --
            
            
            
            --
            
            
            
            370,824
            
            
            
            --
            
            
            
            370,824Net
      (loss) for the year
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (4,152,631
            )
            
            
            (4,152,631
            )Balance
      as of December 31, 2007
            
            
            62,416,881
            
            
            $
            62,417
            
            
            $
            42,989,518
            
            
            $
            (16,814,202
            )
            
            $
            26,237,733The
      accompanying notes are an integral part of these consolidated financial
      statements.








F -
5
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ULURU Inc.


CONSOLIDATED
STATEMENTS OF CASH FLOWS








Years
      Ended December 31,2007
            
            
            2006OPERATING
      ACTIVITIES :Net
      (loss)
            
            $
            (4,152,631
            )
            
            $
            (11,709,089
            )Adjustments
      to reconcile net (loss) to net cash used in operating
      activities:Amortization
            
            
            1,078,351
            
            
            
            1,052,395Depreciation
            
            
            72,942
            
            
            
            63,882Commitment fee – Standby Equity Agreement
            
            
            ---
            
            
            
            1,787,940Loss on early extinguishment of debenture
            
            
            ---
            
            
            
            940,655Loss on sale of equipment
            
            
            ---
            
            
            
            30,143Interest expense – Financing costs
            
            
            ---
            
            
            
            371,947Interest expense – Imputed
            
            
            ---
            
            
            
            340,969Interest expense – Debt discount (warrant)
            
            
            ---
            
            
            
            232,493Interest expense – Repayment premium of debenture
            
            
            ---
            
            
            
            3,200,000Share-based compensation for stock and options issued to
      employees
            
            
            211,854
            
            
            
            15,906Share-based compensation for options issued to
    non-employees
            
            
            370,824
            
            
            
            506Change
      in operating assets and liabilities:Accounts
      receivable
            
            
            (163,541
            )
            
            
            (508,093
            )Inventory
            
            
            (319,413
            )
            
            
            77,710Prepaid
      expenses and deferred charges
            
            
            (134,895
            )
            
            
            21,129Deposits
            
            
            250
            
            
            
            8,324Accounts
      payable
            
            
            516,878
            
            
            
            (72,604
            )Accrued
      liabilities
            
            
            (114,807
            )
            
            
            53,739Deferred
      revenue
            
            
            550,428
            
            
            
            ---Royalty
      advance
            
            
            (99,233
            )
            
            
            (249,788
            )Accrued
      interest
            
            
            ---
            
            
            
            (356,124
            )Total
            
            
            1,969,638
            
            
            
            7,011,129Net
      Cash (Used in) Operating Activities
            
            
            (2,182,993
            )
            
            
            (4,697,960
            )INVESTING
      ACTIVITIES :Purchase
      of property and equipment
            
            
            (927,650
            )
            
            
            (424,546
            )Proceeds
      from sale of equipment
            
            
            ---
            
            
            
            14,500Increase
      in patent assets
            
            
            ---
            
            
            
            (356,780
            )Cash
      received in recapitalization of the Company
            
            
            ---
            
            
            
            128,045Net
      Cash (Used in) Investing Activities
            
            
            (927,650
            )
            
            
            (638,781
            )FINANCING
      ACTIVITIES :Repayment
      of capital lease obligation
            
            
            ---
            
            
            
            (53,711
            )Payment
      of asset purchase obligation
            
            
            (350,000
            )
            
            
            (4,622,048
            )Proceeds
      from warrant exercises
            
            
            502,940
            
            
            
            ---Proceeds
      from stock option exercises
            
            
            20,000
            
            
            
            ---Repurchases
      of common stock
            
            
            (476
            )
            
            
            ---Proceeds
      from exchange of convertible debentures, net
            
            
            ---
            
            
            
            2,699,975Redemption
      of convertible debentures
            
            
            ---
            
            
            
            (13,000,000
            )Increase
      in asset purchase obligation, net
            
            
            ---
            
            
            
            350,000Proceeds
      from sale of common stock, net
            
            
            ---
            
            
            
            38,499,999Stock
      offering costs, net
            
            
            ---
            
            
            
            (3,229,846
            )Receipt
      of stock subscription receivable
            
            
            ---
            
            
            
            22Net
      Cash Provided by Financing Activities
            
            
            172,464
            
            
            
            20,644,391Net
      Increase (Decrease) in Cash
            
            
            (2,938,179
            )
            
            
            15,307,650Cash,  beginning
      of period
            
            
            16,918,007
            
            
            
            1,610,357Cash,  end
      of period
            
            $
            13,979,828
            
            
            $
            16,918,007Supplemental
      Schedule of Noncash Investing and Financing Activities :Issuance
      of 1,571,073 shares of common stock pursuant to  cashless
      exercise of warrants to purchase 1,589,400 shares of common
      stock
            
            $
            ---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
            
            
            
            
            
            
            (12,006,690
            )Less
      : Cash received in recapitalization
            
            
            
            
            
            
            (128,045
            )Total
      non-monetary net liabilities assumed
            
            
            
            
            
            $
            1,560,227OTHER
      SUPPLEMENTAL INFORMATIONCash
      paid for interest
            
            $
            2,006
            
            
            $
            4,835,258The
      accompanying notes are an integral part of these consolidated financial
      statements.








F -
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ULURU Inc.




NOTES
TO


CONSOLIDATED
FINANCIAL STATEMENTS














NOTE
1.                      COMPANY
OVERVIEW AND BASIS OF PRESENTATION








Company
Overview





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





History





ULURU
Inc., 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".  Also occurring on October 12, 2005 was Uluru
Delaware’s acquisition of the Topical Business Component of Access
Pharmaceuticals, Inc. (“Access, Topical Component, or Business”)





As a
result of the March 29, 2006 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.





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 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 851,094 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.





F -
7
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Basis of
Presentation





The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United State of America (“U.S.
GAAP”) and include the accounts of ULURU Inc., a Nevada corporation, and its
wholly-owned subsidiary, Uluru Delaware Inc., a Delaware
corporation.  Both companies have a December 31 fiscal year
end.





The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, as well as disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods.  Actual results
may differ from those estimates and assumptions.  These differences
are usually minor and are included in our consolidated financial statements as
soon as they are known.  Our estimates, judgments, and assumptions are
continually evaluated based on available information and experience. Because of
the use of estimates inherent in the financial reporting process, actual results
could differ from those estimates.





All
intercompany transactions and balances have been eliminated in
consolidation.








NOTE
2.                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements:





Cash and Cash
Equivalents





Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less.  The carrying value of these cash equivalents
approximates fair value.





We invest
cash in excess of immediate requirements in money market accounts, certificates
of deposit, corporate commercial paper with high quality ratings, and U.S.
government securities taking into consideration the need for liquidity and
capital preservation.  These investments are not held for trading or
other speculative purposes.





F -
8
 Table of Contents








Trade Accounts Receivable
and Allowance for Doubtful Accounts





Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest.  The Company estimates 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, 2007 and December 31,
2006, no allowance for collectibility was needed and there were no accounts
written off as uncollectible during the years ended December 31, 2007 and
2006.





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.





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





Prepaid Expenses and
Deferred Charges





From time
to time fees are payable to the Federal Food and Drug Administration (“FDA”) in
connection with new drug applications submitted by the Company and annual
prescription drug user fees. Such fees are being amortized ratably over the
FDA’s prescribed fiscal period of 12 months ending September 30th.





Additionally,
we amortize our insurance costs ratably over the term of each
policy.  Typically, our insurance policies are subject to renewal in
July and October of each year.





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 from them are uncertain. Purchased
patents are capitalized and amortized over the life of the patent.








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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
and certain identifiable intangibles when certain events have taken place, or at
least annually, 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 undiscounted cash
flows.  Considerable management judgment is necessary to estimate the
undiscounted cash flows.  Accordingly, actual results could vary
significantly from management’s estimates.


On
October 12, 2005, we acquired certain patents and intangible assets from Access
Pharmaceuticals, Inc.  As part of the asset purchase, we assigned
certain values to each intangible asset acquired from Access based upon expected
future earnings for each technology taking into consideration criteria such as
patent life, approved products for sale, the existence of marketing,
manufacturing, and distribution agreements, and development
costs.  The Company derived each asset value based on a discount rate
of 10% and a unique risk rate based on the difficulty of achieving the
forecasted net cash flows to arrive at the net present value of expected
discounted cash flows from each technology.





During
the year ended December 31, 2007, we performed an evaluation of our intangible
assets for purposes of determining possible impairment.  Upon
completion of the evaluation, the undiscounted cash flows of our intangible
assets exceeded the recorded remaining book value, therefore there were no
impairment losses determined or recorded for the year ended December 31,
2007.





Income
Taxes





We use
the liability method of accounting for income taxes pursuant to Statement of
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes.  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 and
Deferred Revenue





License
Fees





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





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





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








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


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





Product
Sales





We
recognize revenue and related costs from the sale of our products at the time
the products are shipped to the customer.





Sponsored Research
Income





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





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, salaries and benefits,
laboratory supplies, facilities expenses, preclinical development cost, clinical
trial and related clinical manufacturing expenses, contract services, consulting
fees and other outside expenses. 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. There were no such
capitalized materials, equipment or facilities for the years ended December 31,
2007 and 2006.





We may
enter into certain research agreements in which we share expenses with a
collaborator. We may also enter into other collaborations where we are
reimbursed for work performed on behalf of our collaborative
partners.  We record the expenses for such work as research and
development expenses. If the arrangement is a cost-sharing arrangement and there
is a period during which we receive payments from the collaborator, we record
payments by the collaborator for their share of the development effort as a
reduction of research and development expense. If the arrangement is a
reimbursement of research and development expenses, we record the reimbursement
as sponsored research income.








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


Shares
used in calculating basic and diluted net loss per common share exclude these
potential common shares for the years ended December 31:




2007
            
            
            2006Antidilutive
      warrants to purchase common stock
            
            
            5,861,667
            
            
            
            8,395,000Antidilutive
      options to purchase common stock
            
            
            2,225,000
            
            
            
            1,350,000Restricted
      vesting common stock
            
            
            55,195
            
            
            
            ---Total
            
            
            8,141,862
            
            
            
            9,745,000





Concentrations of Credit
Risk





Concentration
of credit risk with respect to 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, 2007 and December 31, 2006 our cash and cash
equivalents totaled $13,979,828 and $16,918,007,
respectively.  However, because deposits are maintained at high
quality financial institutions, we do not believe that there is a significant
risk of loss of uninsured amounts.





We also
invest cash in excess of immediate requirements in money market accounts,
certificates of deposit, corporate commercial paper with high quality ratings,
and U.S. government securities.  These investments are not held for
trading or other speculative purposes.  We are exposed to credit risk
in the event of default by these high quality corporations.





Concentration
of credit risk with respect to trade accounts receivable are customers with
balances that exceed 5% of total consolidated trade accounts receivable at
December 31, 2007 and at December 31, 2006.  As of December 31, 2007,
two customers exceeded the 5% threshold, one with 92% and the other with
7%.  Two customers exceeded the 5% threshold at December 31, 2006, one
with 87% and the other with 12%.  We believe that the customer
accounts are fully collectible as of December 31, 2007.





Fair Value of Financial
Instruments





In
accordance with SFAS No. 107 Disclosures about Fair Value of
Financial Instruments (“SFAS 107”), disclosure is required of the
estimated fair value of an entity’s financial instruments.  Such
disclosures, which pertain to our financial instruments, do not purport to
represent the aggregate net fair value of the Company.  The carrying
value of cash, accounts receivable, accounts payable, and accrued liabilities
are reflected in the consolidated financial statements at amounts which
approximate fair value, primarily because of the short-term maturity of these
instruments.





Derivatives





We
occasionally issue financial instruments that contain an embedded instrument. At
inception, we assess 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
2007 and 2006 which qualify for derivative treatment, were properly separated
from their host.  As of December 31, 2007 and 2006, we did not have
any derivative instruments.


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NOTE
3.                      THE
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS





Recently Adopted Accounting
Standards





In May
2005, the Financial Accounting Standards Board ("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 an 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.





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.  The
adoption did not have an effect on our consolidated financial
statements.





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 is effective for fiscal years
beginning after December 15, 2006.  The adoption did not have an
effect on our consolidated financial statements.





In
September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements
No. 87, 88, 106, and 132(R) (“SFAS 158”).  SFAS 158 requires an
employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its statement of financial position and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income. This
guidance is effective as of the end of the fiscal year for years ending after
December 15, 2006. The adoption did not have a material effect on our
consolidated financial statements.





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New Accounting Standards Not
Yet Adopted





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.





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





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





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





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of Accounting Research Bulletin
No. 51(“SFAS No. 160”), which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS No. 160 also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS
No. 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company is
currently evaluating the impact that the adoption of SFAS No. 160 will have
on its consolidated financial statements.





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NOTE
4.                      SEGMENT
INFORMATION





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





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





Revenues
per geographic area for the year ended December 31 are summarized as
follows:





Revenues
            
            2007
            
            %
            
            
            2006
            
            %Domestic
            
            $
            374,234
            
            
            26
            %
            
            $
            516,320
            
            
            34
            %International
            
            
            1,091,510
            
            
            74
            %
            
            
            1,018,133
            
            
            66
            %Total
            
            $
            1,465,744
            
            
            100
            %
            
            $
            1,534,453
            
            
            100
            %






A
significant portion of our revenues are derived from a few major
customers.  Customers with greater than 10% of total sales are
represented on the following table:





Customers
            Product
            
            2007
            
            
            2006ProStrakan, Ltd.
            Zindaclin®
            
            
            71.1
            %
            
            
            66.2
            %Wyeth Pharmaceuticals, Inc.
            Sponsored research
            
            
            12.3
            %
            
            
            *Discus Dental, Inc.
            Aphthasol®
            
            
            *
            
            
            
            26.4
            %Total
            
            
            
            83.4
            %
            
            
            92.6
            %* Sales from these customers were less than 10% of total sales for the
      period reported.








NOTE
5.                      INVENTORY





As of
December 31, 2007, our inventory was comprised of raw material, Amlexanox, the
active ingredient in Aphthasol®, and work-in-progress costs for the production
of Aphthasol®.  We also have approximately $49,000 of additional value
associated with our raw materials inventory; however, no cost basis was assigned
to this portion of the inventory as it was acquired at no
cost.  Inventory consisted of the following at December
31:





Inventory
            
            2007
            
            
            2006Raw materials (Amlexanox)
            
            $
            137,311
            
            
            $
            ---Work-in-progress (Aphthasol®)
            
            
            182,102
            
            
            
            ---Total
            
            $
            319,413
            
            
            $
            ---








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NOTE
6.                      PROPERTY
AND EQUIPMENT





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





Property and equipment
            
            2007
            
            
            2006Laboratory equipment
            
            $
            412,683
            
            
            $
            316,853Manufacturing equipment
            
            
            1,071,173
            
            
            
            269,000Computers, office equipment, and furniture
            
            
            115,953
            
            
            
            103,902Computer software
            
            
            4,108
            
            
            
            4,108Leasehold improvements
            
            
            95,841
            
            
            
            78,2441,699,758
            
            
            
            772,107Less: accumulated depreciation and amortization
            
            
            (
      166,877
            )
            
            
            (
      80,975
            )Property and equipment, net
            
            $
            1,532,881
            
            
            $
            691,132





Depreciation
and amortization expense on property and equipment was $85,902 and $71,884 for
the years ended December 31, 2007 and 2006, respectively.






NOTE
7.                      PATENTS





Patents,
net, consisted of the following at December 31:





Patents
              
              2007
              
              
              2006Zindaclin®
              
              $
              3,729,000
              
              
              $
              3,729,000Amlexanox (Aphthasol®)
              
              
              2,090,000
              
              
              
              2,090,000Amlexanox (OraDiscTM A)
              
              
              6,873,080
              
              
              
              6,873,080OraDiscTM
              
              
              73,000
              
              
              
              73,000Hydrogel nanoparticle aggregate
              
              
              589,858
              
              
              
              589,85813,354,938
              
              
              
              13,354,938Less: accumulated amortization
              
              
              (
      2,321,461
              )
              
              
              (
      1,256,069
              )Patents, net
              
              $
              11,033,477
              
              
              $
              12,098,869





Amortization
expense on patents was $1,065,392 and $1,044,392 for the years ended December
31, 2007 and 2006, respectively.  The future aggregate amortization
expense for patent assets, remaining as of December 31, 2007, is as
follows:





Calendar
      Years
            
            Future
      Amortization
              Expense2008
            
            $
            1,068,3082009
            
            
            1,065,3902010
            
            
            1,065,3902011
            
            
            1,015,4362012
            
            
            723,4282013 & Beyond
            
            
            6,095,525Total
            
            $
            11,033,477






NOTE
8.                      ACCRUED
LIABILITIES





Accrued
liabilities consisted of the following at December 31:





Accrued
      Liabilities
            
            2007
            
            
            2006Accrued taxes – payroll
            
            $
            106,299
            
            
            $
            106,302Accrued compensation/benefits
            
            
            276,612
            
            
            
            298,040Accrued insurance payable
            
            
            ---
            
            
            
            70,876Contract research payable
            
            
            40,000
            
            
            
            ---Total accrued liabilities
            
            $
            422,911
            
            
            $
            475,218








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NOTE
9.                      ADVANCE
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
            
            
            219,268Royalties earned - 2007
            
            
            99,233Royalty
      Advance as of 12/31/07
            
            $
            120,035








NOTE
10.                      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
was paid on April 9, 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
11.                      LOSS
ON EARLY EXTINGUISHMENT OF DEBENTURE





We
recognized two losses on the early extinguishment of debentures which total
$940,655 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.




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.





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NOTE
12.                      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 $44,699,999.  The purchase price
paid per Share was $0.95.  Of the aggregate purchase price,
$38,499,999 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").





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 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.





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.





Previously,
we had completed an agreement with Prenox, LLC (“Prenox”) and Cornell Capital
Partners, LP (“Cornell”) on August 30, 2006 for the refinancing of the then
existing $13,000,000 secured convertible debentures held by Prenox and
Cornell.  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
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 bore 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 this refinancing 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.  We repaid both debentures, in full, on December 6, 2006 as
noted above.








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NOTE
13.                      STOCKHOLDERS’
EQUITY





Common
Stock





The
Company had 62,416,881 shares of common stock issued and outstanding as of
December 31, 2007.  The Company issued 2,520,006 shares of common
stock for the year ended December 31, 2007 pursuant to the exercise of warrants
and stock options.  The Company cancelled 147 shares of common stock
as a result of their share buy-back program during November and December
2007.





Warrants





The
following table summarizes the warrants outstanding and the number of shares of
common stock subject to exercise as of December 31, 2007 and the changes therein
during the three years then ended:





Number
      of Shares of Common Stock Subject to Exercise
            
            
            Weighted
      – Average
              Exercise
      PriceBalance
      as of December 31, 2004
            
            
            ---
            
            
            
            ---Warrants
      issued
            
            
            5,000,000
            
            
            $
            0.01Warrants
      exercised
            
            
            ---
            
            
            
            ---Warrants
      cancelled
            
            
            ---
            
            
            
            ---Balance
      as of December 31, 2005
            
            
            5,000,000
            
            
            $
            0.01Warrants
      issued
            
            
            3,395,000
            
            
            
            1.05Warrants
      exercised
            
            
            ---
            
            
            
            ---Warrants
      cancelled
            
            
            ---
            
            
            
            ---Balance
      as of December 31, 2006
            
            
            8,395,000
            
            
            $
            0.43Warrants
      issued
            
            
            ---
            
            
            
            ---Warrants
      exercised
            
            
            2,533,333
            
            
            
            0.23Warrants
      cancelled
            
            
            ---
            
            
            
            ---Balance
      as of December 31, 2007
            
            
            5,861,667
            
            
            $
            0.52








Of the
warrant shares subject to exercise as of December 31, 2007, expiration of the
right to exercise is as follows:




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











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NOTE
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.  Share-based compensation expense
recognized in our Statement of Operations for the years ended December 31, 2007
and 2006 is based on awards ultimately expected to vest and has been reduced for
estimated forfeitures.  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
weighted-average fair value of share-based payments was estimated using the
Black-Scholes option-pricing model with the following assumptions for the years
ended December 31:





2007
            
            
            2006Incentive Stock
      OptionsExpected
      volatility  (1)
            
            
            52.3
            %
            
            
            51.4
            %Risk-fee
      interest rate %  (2)
            
            
            4.27
            %
            
            
            4.30
            %Expected
      term (in years)
            
            
            5.0
            
            
            
            4.0Dividend
      yield  (3)
            
            
            0.0
            %
            
            
            0.0
            %Nonstatutory Stock
      OptionsExpected
      volatility  (1)
            
            
            49.9
            %
            
            
            51.3
            %Risk-fee
      interest rate %  (2)
            
            
            4.67
            %
            
            
            4.57
            %Expected
      term (in years)
            
            
            1.0
            
            
            
            1.0Dividend
      yield  (3)
            
            
            0.0
            %
            
            
            0.0
            %





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






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





2007
            
            
            2006Incentive Stock
      OptionsQuantity
            
            
            675,000
            
            
            
            625,000Weighted
      average fair value per share
            
            $
            2.22
            
            
            $
            0.39Fair
      value
            
            $
            1,497,195
            
            
            $
            246,315Nonstatutory Stock
      OptionsQuantity
            
            
            205,000
            
            
            
            725,000Weighted
      average fair value per share
            
            $
            0.96
            
            
            $
            0.37Fair
      value
            
            $
            196,576
            
            
            $
            266,578








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Stock Options (Incentive and
Nonstatutory)





The
following table summarizes share-based compensation related to stock options, in
accordance with SFAS 123(R), for the years ended December 31:





2007
            
            
            2006Research
      and development
            
            $
            123,208
            
            
            $
            2,868General
      and administrative
            
            
            414,811
            
            
            
            13,544Total
      share-based compensation expense
            
            
            538,019
            
            
            
            16,412Tax
      benefit
            
            
            ---
            
            
            
            ---Share-based
      compensation expense, net of tax
            
            $
            538,019
            
            
            $
            16,412





At
December 31, 2007, the balance of unearned share-based compensation to be
expensed in future periods related to unvested stock option awards, as adjusted
for expected forfeitures, is approximately $1,652,233.





The
period over which the unearned share-based compensation is expected to be
recognized is approximately four years.  We anticipate that we will
grant additional stock option awards in the future, which will increase our
share-based compensation expense by the additional unearned compensation
resulting from these grants.  The fair value of these future grants is
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,
share-based compensation expense recorded under SFAS 123(R) may differ
significantly from what has been recorded in the current period.





The
following table presents the activity for stock options for the two years ended
December 31, 2007:





Stock
      Options
            
            
            Weighted
      Average Exercise Price per ShareOutstanding
      as of December 31, 2005
            
            
            ---
            
            
            $
            ---Granted
            
            
            1,350,000
            
            
            
            1.29Forfeited/cancelled
            
            
            ---
            
            
            
            ---Exercised
            
            
            ---
            
            
            
            ---Outstanding
      as of December 31, 2006
            
            
            1,350,000
            
            
            
            1.29Granted
            
            
            880,000
            
            
            
            4.46Forfeited/cancelled
            
            
            ---
            
            
            
            ---Exercised
            
            
            5,000
            
            
            
            4.00Outstanding
      as of December 31, 2007
            
            
            2,225,000
            
            
            $
            2.54








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The
following table presents the stock option grants outstanding and exercisable as
of December 31, 2007:





Options
      Outstanding
            
            
            Options
      ExercisableStock
      Options Outstanding
            
            
            Weighted
      Average Exercise Price per Share
            
            
            Weighted
      Average Remaining Contractual Life in Years
            
            
            Stock
      Options Exercisable
            
            
            Weighted
      Average Exercise Price per Share700,000
            
            
            $
            0.95
            
            
            
            8.9
            
            
            
            175,000
            
            
            $
            0.95650,000
            
            
            
            1.65
            
            
            
            9.0
            
            
            
            650,000
            
            
            
            1.65105,000
            
            
            
            4.00
            
            
            
            9.0
            
            
            
            8,750
            
            
            
            4.00690,000
            
            
            
            4.48
            
            
            
            9.7
            
            
            
            ---
            
            
            
            ---80,000
            
            
            
            4.95
            
            
            
            9.4
            
            
            
            ---
            
            
            
            ---2,225,000
            
            
            $
            2.54
            
            
            
            9.2
            
            
            
            833,750
            
            
            $
            1.53








Restricted Stock
Awards





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





The
following table summarizes share-based compensation related to restricted stock
awards for the years ended December 31, 2007 and 2006, which were allocated as
follows:





2007
            
            
            2006Research
      and development
            
            $
            12,673
            
            
            $
            ---General
      and administrative
            
            
            31,986
            
            
            
            ---Total
      stock-based compensation expense
            
            $
            44,659
            
            
            $
            ---





At
December 31, 2007, the balance of unearned restricted share-based compensation
to be expensed in future periods is approximately $176,624.





The
following table presents the activity for non-vested restricted stock awards for
the two years ended December 31, 2007:





Restricted
      stock
            
            
            Weighted
      Average Grant Date Fair ValueOutstanding
      as of December 31, 2005
            
            
            ---
            
            
            $
            ---Granted
            
            
            ---
            
            
            
            ---Forfeited/cancelled
            
            
            ---
            
            
            
            ---Exercised
            
            
            ---
            
            
            
            ---Outstanding
      as of December 31, 2006
            
            
            ---
            
            
            
            ---Granted
            
            
            56,035
            
            
            
            4.00Forfeited/cancelled
            
            
            840
            
            
            
            4.00Exercised
            
            
            ---
            
            
            
            ---Outstanding
      as of December 31, 2007
            
            
            55,195
            
            
            $
            4.00








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Summary of
Plans





2006
Equity Incentive Plan





In March
2006 our board of directors (“Board”) adopted and our stockholders approved our
2006 Equity Incentive Plan (“Incentive Plan”), which initially provided for the
issuance of up to 2 million shares of our Common Stock pursuant to stock option
and other equity awards.  At the annual meeting of the stockholders
held on May 8, 2007, our stockholders approved an amendment to the Incentive
Plan to increase from 2 million shares to 6 million shares the total number of
shares of Common Stock issuable under the Incentive Plan pursuant to stock
option and other equity awards.  As of December 31, 2007, we granted
options to purchase 2,230,000 shares of Common Stock, of which 2,225,000 were
outstanding at a weighted average exercise price of $2.54 per share and 55,195
shares of restricted stock.  There are 3,714,805 shares that remain
available for future grant under our Incentive Plan.








NOTE
15.                      EMPLOYMENT
BENEFIT PLAN





The
Company maintains a defined contribution or 401(k) Plan for its qualified
employees.  Participants may contribute a percentage of their
compensation on a pre-tax basis, subject to a maximum annual contribution
imposed by the Internal Revenue Code.  The Company may make
discretionary matching contributions as well as discretionary profit-sharing
contributions to the 401(k) Plan.  The Company’s contributions to the
401(k) Plan vest immediately.  The Company contributed $47,932 and
$39,920 to the 401(k) Plan during the years ended December 31, 2007 and 2006,
respectively.








NOTE
16.                      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, 2007, of approximately $6,625,182 were reduced to zero, after
considering the valuation allowance of $6,625,182, since there is no assurance
of future taxable income.  As of December 31, 2007 we have
consolidated net operating loss carryforwards and research credit carryforwards
for income tax purposes of approximately $18,109,888 and $180,996,
respectively.





The
following are the consolidated operating loss carryforwards and research credit
carryforwards that will begin expiring as follows:






Year
              
              Consolidated
      Operating Loss Carryforwards
              
              
              Research
      Activities
                Carryforwards2021
              
              $
              34,248
              
              
              $
              ---2023
              
              
              95,666
              
              
              
              ---2024
              
              
              910,800
              
              
              
              13,5842025
              
              
              1,687,528
              
              
              
              21,5632026
              
              
              11,950,281
              
              
              
              60,7972027
              
              
              3,431,365
              
              
              
              85,052Total
              
              $
              18,109,888
              
              
              $
              180,996





F -
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An
analysis of the tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 2007 and 2006 are as follows:





2007
            
            
            2006Deferred
      tax assets:Net
      operating loss carryforwards
            
            $
            6,338,461
            
            
            $
            5,137,483Intangible
      assets
            
            
            130,016
            
            
            
            68,743Other
            
            
            186,964
            
            
            
            108,424Total
      gross deferred tax assets
            
            
            6,655,441
            
            
            
            5,314,650Deferred
      tax liabilities:Property
      and equipment
            
            
            30,258
            
            
            
            22,877Total
      gross deferred tax liabilities
            
            
            30,258
            
            
            
            22,877Net
      total of deferred assets and liabilities
            
            
            6,625,182
            
            
            
            5,291,773Valuation
      allowance
            
            
            (6,625,182
            )
            
            
            (5,291,773
            )Net
      deferred tax assets
            
            $
            ---
            
            
            $
            ---





The
valuation allowance increased by $1,333,409 and $261,337 in 2007 and 2006,
respectively.





The
following is reconciliation from the expected statutory federal income tax rate
to our actual income tax rate for the year ended December 31:





2007
            
            
            2006Expected
      income tax (benefit) at federal statutory tax rate -35%
            
            $
            (
      1,406,041
            )
            
            $
            (
      4,098,181
            )Permanent
      differences
            
            
            205,063
            
            
            
            6,070Amortization
      of deferred start up costs
            
            
            (6,511
            )
            
            
            (4,884
            )Valuation
      allowance
            
            
            1,207,489
            
            
            
            4,096,995Income
      tax expense
            
            $
            ---
            
            
            $
            ---





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.








F -
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NOTE
17.                      COMMITMENTS
AND CONTINGENCIES





Operating
Lease





On
January 31, 2006 we entered into a lease agreement for office and laboratory
space in Addison, Texas.  The lease, which commenced on April 1, 2006
and continues until April 1, 2013, currently requires a monthly lease obligation
of $9,398 per month, which is inclusive of monthly operating
expenses.  The future minimum lease payments are as follows as of
December 31, 2007:





Calendar
      Years
            
            Future
      Lease Expense2008
            
            $
            112,7762009
            
            
            112,7762010
            
            
            112,7762011
            
            
            112,7762012
            
            
            112,7762013 & Beyond
            
            
            28,194Total
            
            $
            592,074





Rent
expense for our operating lease amounted to $112,529 and $83,861 for the years
ended December 31, 2007 and 2006, respectively.





Employment
Agreements





As of
December 31, 2007 the Company is party to employment agreements with its
officers, which include Kerry P. Gray, President and Chief Executive Officer,
Renaat Van den Hooff, Executive Vice President – Operations and Terrance K.
Wallberg, Vice President and Chief Financial Officer, as well as other key
executives to include Daniel G. Moro, Vice President – Polymer Drug Delivery and
John V. St. John, Vice President – Material Science.  The employment
agreements with Mssrs. Gray and Van den Hooff are for three and two years,
respectively, and include an automatic renewal of one year.  The
employment agreements with Mssrs. Wallberg, Moro, and St. John are for one year
and include an automatic renewal of one year.  Each employment
agreement provides for a base salary, bonus, stock options, stock grants, and
eligibility for Company provided benefit programs.  Under certain
circumstances, the employment agreements provide for certain severance benefits
in the event of termination or a change in control.  The employment
agreements also contain non-solicitation, confidentiality and non-competition
covenants, and a requirement for the assignment of all invention and
intellectual property rights to the Company.





Milestone
Payments





We were
subject to paying Access Pharmaceuticals, Inc. (“Access”) for up to $7,250,000
in eleven enumerated milestones, if we achieved certain annual net sales,
cumulative net sales, and/or 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 existing 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, 2007, we continue to be subject to paying Access future milestone
obligations which, if achieved, total $4,750,000; relating to milestones based
on total annual sales of 20 and 40 million dollars of the products, annual sales
of 20 million dollars of any one product, and cumulative sales of the products
of 50 and 100 million dollars.





F -
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Compensation
Claim





We
received written notice from Dan Leonard, former CEO of the Company, claiming he
is owed a warrant 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.








NOTE
18.                      RELATED
PARTY TRANSACTIONS





In
February 2007 we paid $62,500 to Kerry P. Gray, Chief Executive Officer of the
Company, for compensation that was owed to him for services provided to the
Company’s subsidiary, Uluru Delaware Inc., in the fourth quarter of
2005.








NOTE
19.                      SELECTED
QUARTERLY FINANCIAL DATA (UNAUDITED)





The
following table contains condensed information from the Company’s Consolidated
Statements of Operations for each quarter of the years ended December 31, 2007
and 2006. The Company has derived this data from its unaudited quarterly
financial statements. We believe that the following information reflects all
normal recurring adjustments necessary for a fair presentation of the
information for the periods presented. The operating results for any quarter are
not necessarily indicative of results for any future period.





First
      Quarter
            
            
            Second
      Quarter
            
            
            Third
      Quarter
            
            
            Fourth
      Quarter2007Revenues
            
            $
            383,511
            
            
            $
            118,788
            
            
            $
            129,906
            
            
            $
            833,539Costs
      and expenses
            
            
            1,442,893
            
            
            
            1,533,146
            
            
            
            1,566,846
            
            
            
            1,865,171Operating
      (loss)
            
            
            (1,059,382
            )
            
            
            (1,414,358
            )
            
            
            (1,436,940
            )
            
            
            (1,031,632
            )Other
      income (expense)
            
            
            212,231
            
            
            
            205,825
            
            
            
            197,104
            
            
            
            174,521Net
      (loss)
            
            $
            (847,151
            )
            
            $
            (1,208,533
            )
            
            $
            (1,239,836
            )
            
            $
            (857,111
            )Basic
      and diluted net (loss) per common share
            
            $
            (0.01
            )
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.01
            )2006Revenues
            
            $
            267,164
            
            
            $
            312,222
            
            
            $
            112,926
            
            
            $
            842,141Costs
      and expenses
            
            
            1,031,324
            
            
            
            1,316,846
            
            
            
            1,020,691
            
            
            
            1,757,405Operating
      (loss)
            
            
            (764,160
            )
            
            
            (1,004,624
            )
            
            
            (907,765
            )
            
            
            (915,264
            )Other
      income (expense)
            
            
            (2,153,563
            )
            
            
            (607,631
            )
            
            
            (3,086,010
            )
            
            
            (2,270,072
            )Net
      (loss)
            
            $
            (2,917,723
            )
            
            $
            (1,612,255
            )
            
            $
            (3,993,775
            )
            
            $
            (3,185,336
            )Basic
      and diluted net (loss) per common share
            
            $
            (0.26
            )
            
            $
            (0.13
            )
            
            $
            (0.31
            )
            
            $
            (0.11
            )








F -
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EXHIBIT INDEX


Exhibit
              Number
            
            Description of
      Document3.1
            
            Restated
      Articles of Incorporation dated November 5, 2007 (8)3.2
            
            Amended
      and Restated Bylaws dated November 5, 2007 (8)10.1
            
            Warrant
      issued by the Registrant to Prenox, LLC, dated October 12, 2005.
      (1)10.2
            
            Agreement
      and Plan of Merger and Reorganization dated October 12, 2005 by and among
      the Registrant, Uluru Acquisition Corp., and ULURU Delaware Inc.
      (1)10.3
            
            Asset
      Sale Agreement dated October 12, 2005 by and between ULURU Delaware Inc.
      and Access Pharmaceuticals, Inc. (3)10.4
            
            Patent
      Assignment Agreement dated October 12, 2005 by and between ULURU Delaware
      Inc. and Access Pharmaceuticals, Inc. (3)10.5
            
            License
      Agreement dated October 12, 2005 by and between ULURU Delaware Inc. and
      Access Pharmaceuticals, Inc. (3)10.6
            
            Lease
      Agreement dated January 31, 2006 by and between ULURU Delaware Inc. and
      Addison Park Ltd. (3)10.7
            
            License
      Agreement dated August 14, 1998 by and between ULURU Delaware Inc. and
      Strakan Ltd. (3)10.8
            
            License
      and Supply Agreement dated April 15, 2005 by and between ULURU Delaware
      Inc. and Discus Dental. (3)10.9
            
            Amendment
      to License and Supply Agreement dated November 18, 2005 by and between
      ULURU Delaware Inc. and Discus Dental. (3)10.10
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Kerry P. Gray. (3)10.11
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Terrance K. Wallberg. (3)10.12
            *
            Employment
      Agreement dated January 1, 2006 by and between ULURU Delaware Inc. and
      Daniel G. Moro. (3)10.13
            
            Warrant
      to Purchase Common Stock of Uluru Inc. issued to Prenox, LLC, dated August
      20, 2006. (4)10.14
            
            Agreement
      dated August 30, 2006 by and between Uluru Inc. and ULURU Delaware Inc.
      (4)10.15
            *
            Uluru
      Inc. 2006 Equity Incentive Plan (2)10.16
            
            Agreement
      dated December 6, 2006 by and among the Registrant, ULURU Delaware Inc.,
      Prenox, LLC, and Cornell Capital, LP. (5)10.17
            
            Common
      Stock Purchase Agreement dated December 6, 2006 by and among the
      Registrant and the purchasers party thereto. (5)10.18
            
            Investor
      Rights Agreement dated December 6, 2006 by and among the Registrant and
      the purchasers party thereto. (5)10.19
            
            Amendment
      to Asset Sale Agreement dated December 8, 2006 by and between ULURU
      Delaware Inc. and Access Pharmaceuticals, Inc. (5)10.20
            *
            Employment
      Agreement dated December 1, 2006 by and between ULURU Delaware Inc. and
      John V. St. John, PhD. (6)10.21
            
            License
      and Supply Agreement dated February 6, 2007 by and between DexoBiopharm
      LTD and Uluru Inc. (7)10.22
            *
            Employment
      Agreement dated September 25, 2007 by and between ULURU Delaware Inc. and
      Renaat Van den Hooff. (9)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 Current Report on Form 8-K filed on October
      18, 2005.(2)
            
            Incorporated
      by reference to the Company’s Definitive Schedule 14C filed on March 1,
      2006.(3)
            
            Incorporated
      by reference to the Company’s Form 8-K filed on March 31,
    2006(4)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on November 20,
      2006(5)
            
            Incorporated
      by reference to the Company’s Form SB-2 Registration Statement filed on
      December 15, 2006(6)
            
            Incorporated
      by reference to the Company’s Form SB-2/A Registration Statement filed on
      February 9, 2007(7)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on May 15,
      2007(8)
            
            Incorporated
      by reference to the Company’s Form 8-K filed on November 6,
      2007(9)
            
            Incorporated
      by reference to the Company’s Form 10-QSB filed on November 13,
      2007*
            Management
      contract or compensation plan arrangements.**
            Filed
      herewith.








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