The following discussion and other information in this Form 10-K 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-K, documents incorporated by reference and other documents and reports that we file periodically with the Securities and Exchange Commission.

Business

ULURU Inc. (hereinafter "we", "our", "us", "ULURU", or the "Company") is a Nevada corporation. We are a diversified specialty pharmaceutical company focused on establishing a market leadership position in the development of wound management, plastic surgery and oral care products utilizing innovative drug delivery solutions to improve the clinical outcome of patients and provide a pharmacoeconomic benefit to healthcare providers. Utilizing our technologies, four of our products have been approved for marketing in various global markets. In addition, numerous additional products are under development utilizing our Mucoadhesive Film and Nanoparticle Aggregate technologies. Altrazeal™, the first product developed from our Nanoparticle Aggregate technology, was launched in the United States in June 2008.

Recent Developments

On March 9, 2009, Kerry P. Gray resigned as President and Chief Executive Officer of the Company. Renaat Van den Hooff, the Company's Executive Vice President Operations, was appointed to serve as President and Chief Executive Officer.

In connection with Mr. Gray's departure, the Company and Mr. Gray entered into a Separation Agreement (the "Agreement"), dated March 9, 2009. Pursuant to the Agreement, the Company will provide certain benefits to Mr. Gray, including: (i) $400,000 during the initial 12 months; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, the Company will pay to Mr. Gray a payment of $12,500 per month; (iii) full acceleration of all vesting schedules for all outstanding Company stock options and shares of restricted stock of the Company held by Mr. Gray, with all such Company stock options remaining exercisable by Mr. Gray until March 1, 2012, provided that Mr. Gray has forfeited stock options with respect to 300,000 shares of common stock previously held by him; and (iv) for a period of twenty-four (24) months the Company will maintain and provide coverage under Mr. Gray's existing health coverage plan. The Agreement also provides that Mr. Gray will serve as a consultant to the Company for up to two full days per month through August 31, 2009. Mr. Gray will not be paid for the performance of such consulting services. The Agreement contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions. The Agreement also provides that Mr. Gray will continue as a director of the Company.

On January 5, 2009, the Company received a notice of termination from Bio Med Sciences, Inc., of that certain Agreement and Plan Merger, dated as of July 9, 2008, among the Company, BioMed Sciences, Inc., Cardinia Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company, and the members of a certain Holders Representative Committee referenced therein.

On November 17, 2008, the Company executed a License Agreement with Meda AB ("MEDA") to market Amlexanox 5% paste and OraDisc™ A throughout the European Union, Eastern Europe and the Commonwealth of Independent States excluding Spain, Portugal and Greece. Amlexanox 5% paste and OraDisc™ A were both developed for the treatment of canker sores. Under the terms of the agreement, MEDA made an upfront payment of € 525,000 (approximately $680,000), will make future milestone payments, both event and success related, of a maximum of € 4,775,000 (approximately $6.2 million), and will purchase both products from the Company.

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, 2008 our cash and cash equivalents were $7,567,588 which is a decrease of $6,412,240 as compared to our cash and cash equivalents at December 31, 2007 of $13,979,828. Our working capital (current assets less current liabilities) was $7,068,927 at December 31, 2008 as compared to our working capital at December 31, 2007 of $14,146,157.

Consolidated Cash Flow Data
                                                   Year Ended December 31,
Net Cash Provided by (Used in)                          2008             2007
  Operating activities                          $ (6,012,026 )   $ (2,182,993 )
  Investing activities                              (447,714 )      ( 927,650 )
  Financing activities                                47,500          172,464
  Net (Decrease) in cash and cash equivalents   $ (6,412,240 )   $ (2,938,179 )

Operating Activities

For the year ended December 31, 2008, net cash used in operating activities was $6,012,026. The principal component of net cash used for the year ended December 31, 2008 stems from our net loss of approximately $9,783,000. This net loss for the year ended December 31, 2008 included substantial non-cash charges in the form of share-based compensation, amortization of patents, and depreciation. These non-cash charges totaled approximately $2,245,000.

Additional uses of our net cash related to an increase of approximately $761,000 in inventory of Altrazeal™ related products, an increase of $68,000 for renewal fees with the Food & Drug Administration, and a decrease of $90,000 in our royalty advance for Aphthasol® as a result of earned royalties from domestic sales by our Aphthasol® licensee. These uses of net cash were partially offset by a decrease of $641,000 in accounts receivable due to customer collections, an increase of $652,000 in accounts payable due to costs for product manufacturing, an increase in accrued liabilities of $224,000 due to timing, and an increase in deferred revenues of $928,000 from the receipt of licensing payments associated with our OraDisc™ technologies.

For the year ended December 31, 2007, net cash used in operating activities was $2,182,993. The principal use of net cash for the year ended December 31, 2007 was our net loss of approximately $4,153,000, which included $1,734,000 of non-cash charges. Additional cash uses resulted from an increase in inventory in the amount of $319,000, an increase in accounts receivable of $163,000, an increase in prepaid expense of $135,000, a decrease in accrued liabilities of $115,000, and a decrease of $99,000 in our royalty advance for Aphthasol®. These cash uses were partially offset by an increase of $517,000 in accounts payable due to timing, and an increase of $550,000 in deferred revenues associated with the receipt of a licensing payment related to the signing of a licensing agreement for OraDisc™B.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2008 was $447,714 and consisted primarily of manufacturing equipment purchases for our Altrazeal™ and OraDisc™ products.

For the year ended December 31, 2007, we purchased $927,650 of equipment, which was comprised primarily of manufacturing equipment for the same two products.

Net cash provided by financing activities during the year ended December 31, 2008 was $47,500 from the exercise of stock options to purchase 50,000 shares of our common stock.

For the year ended December 31, 2007, the net cash provided by financing activities was $172,464 and consisted of our receipt of $502,940 from the exercise of warrants and $20,000 from the exercise of stock options. These increases were offset by a payment of $350,000 related to an asset purchase obligation from 2005 and $476 for the buy-back of odd-lot shares.

On January 5, 2009, we received a notice of termination from Bio Med Sciences, Inc. ("BioMed"), of that certain Agreement and Plan Merger, dated as of July 9, 2008, among the Company, BioMed, Cardinia Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company, and the members of a certain Holders Representative Committee referenced therein.

Liquidity

As discussed above, we had cash and cash equivalents totaling $7,567,588 as of December 31, 2008. We expect to use our cash, cash equivalents, and investments on working capital and general corporate purposes, products, product rights, technologies, property and equipment, the payment of contractual obligations, and regulatory or sales milestones that may become due. Our long-term liquidity will depend to a great extent on our ability to fully commercialize our Altrazeal™ and OraDisc™ technologies; therefore we will continue to search both domestically and internationally for opportunities that will enable us to continue expanding our business. At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth in 2009 and beyond, such as the degree of market acceptance, patent protection and exclusivity of our products, the impact of competition, the effectiveness of our sales and marketing efforts and the outcome of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.

Based on our current level of operations, projected sales of our existing products and estimated sales from our product candidates, if approved, combined with other revenues and interest income, we believe that we will be able to meet our working capital and capital expenditure requirements in the near term. We do not expect any material changes in our capital expenditure spending during 2009. However, we cannot be sure that our anticipated revenue growth will be realized or that we will continue to generate significant positive cash flow from operations.

As we continue to expend funds to advance our business plan, there can be no assurance that changes in our research and development plans, capital expenditures and/or acquisitions of products or businesses, or other events affecting our operations will not result in the earlier depletion of our funds. In appropriate situations, we may seek financial assistance from other sources, including contribution by others to joint ventures and other collaborative or licensing arrangements for the development, testing, manufacturing and marketing of products under development. Additionally, we may explore alternative financing sources for our business activities, including the possibility of loans from banks and public and/or private offerings of debt and equity securities; however we cannot be certain that funding will be available on terms acceptable to us, or at all.

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

Off-Balance Sheet Arrangements

As of December 31, 2008, we did not have any off balance sheet arrangements.

Impact of Inflation

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

Contractual Obligations

The following table summarizes our outstanding contractual obligations as of
December 31, 2008, which consists primarily of a lease agreement for office and
laboratory space in Addison, Texas. The lease, which commenced on April 1, 2006
and continues until April 1, 2013, currently requires a monthly lease obligation
of $9,228 per month, which is inclusive of monthly operating expenses.


                                                             Payments Due By Period
                                                     Less Than         2-3           4-5         After 5
Contractual Obligations                  Total         1 Year         Years         Years         Years
  Operating leases                     $ 470,628     $  110,736     $ 221,472     $ 138,420     $      ---

  Total contractual cash obligations   $ 470,628     $  110,736     $ 221,472     $ 138,420     $      ---

Fluctuations in Operating Results

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

Comparison of the year ended December 31, 2008 and 2007

Total Revenues

Our revenues totaled $733,471 for the year ended December 31, 2008, as compared to revenues of $1,465,744 for the year ended December 31, 2007, and were comprised of licensing fees of approximately $84,000 for two OraDisc™ licensing agreements and $146,000 for Zindaclin®, domestic royalties of approximately $90,000 from the sale of Aphthasol® by our distributor, foreign royalties of approximately $197,000 from the sale of Zindaclin®, sponsored research programs of approximately $33,00, and product sales of approximately $184,000 for Aphthasol® and Altrazeal™.

The year ended December 31, 2008 revenues represent an overall decrease of approximately $732,000 versus the comparative 2007 revenues. Factors contributing to the decrease were lower Zindaclin licensing fees of $713,000, as 2007 included a one-time payment that did not reoccur, and lower sponsored research fees of $242,000, as 2007 included a one-time research program. These adverse factors were partially offset by an increase in licensing fees for OraDisc™ technologies of $35,000, and an increase in product sales of $184,000.

Costs and Expenses

Cost of Goods Sold

Our cost of goods sold for the year ended December 31, 2008 was $140,822 , which included $24,244 of depreciation associated with manufacturing equipment. We did not sell any finished goods in the year ended December 31, 2007; therefore we had no direct cost of sales

Research and Development

Research and development expenses totaled $3,503,638 for the year ended December 31, 2008, which included $161,779 of share-based compensation, compared to $2,211,698 for the year ended December 31, 2007, which included $135,881 of share-based compensation. The increase of approximately $1,292,000 in research and development expenses was due primarily to increases in direct research costs of $394,000, clinical testing expenses for our wound care technologies of $206,000, regulatory consulting and expenses of $280,000, and additional scientific personnel costs of approximately $420,000. The direct research and development expenses for the years ended December 31, 2008 and 2007 were as follows:

                                           Year Ended
                                           December 31,
Technology                                 2008          2007
  Wound care & nanoparticle         $   713,278     $ 444,907
  OraDisc™                              456,812       322,588
  Aphthasol® & other technologies        41,781        50,142
  Total                             $ 1,211,871     $ 817,637

Selling, general and administrative expenses totaled $5,992,097 for the year ended December 31, 2008, which included $862,053 of share-based compensation, compared to $3,045,065 for the year ended December 31, 2007, which included $446,797 in share-based compensation. The increase of approximately $2,947,000 in selling, general and administrative expenses was due primarily to increased administration salary and benefit expenses of approximately $749,000, which included the recognition of additional share-based compensation of $509,000 and an increase in executive personnel expenses due to hiring of our executive vice president of operations. Other factors affecting the increase were costs of approximately $2,309,000 for the ramp-up of our sales and marketing efforts. We also incurred increases in our insurance costs of $48,000, additional travel expenses of $33,000, due diligence costs of $40,000 for financing borrowing activities, and operating/occupancy expenses of $50,000.

Each of these adverse factors were partially offset by a decrease of $70,000 in expenses associated with accounting and auditing services, decreased shareholder costs of $93,000, and a decrease in expense of $144,000 for Director compensation.

Amortization

Amortization expense totaled $1,082,571 for the year ended December 31, 2008 as compared to $1,078,351 for the year ended December 31, 2007. The expense for each period consists primarily of amortization associated with our patents. There were no additional purchases of patents during the year ended December 31, 2008.

Depreciation

Depreciation expense totaled $114,048 for the year ended December 31, 2008 as compared to $72,942 for the year ended December 31, 2007. The increase of approximately $41,000 is attributable to our purchase of additional equipment, primarily manufacturing items for Altrazeal™ and OraDisc™, during 2008.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled $317,070 for the year ended December 31, 2008, as compared to $791,687 for the year ended December 31, 2007. The decrease of approximately $475,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2008.

Interest Expense

There was no interest expense for the year ended December 31, 2008 as compared to the expense of $2,006 for the year ended December 31, 2007. The interest expense for the year ended December 31, 2007 consisted of financing costs for our insurance policies.

The discussion and analysis of our financial condition and results of operations set forth herein are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate these estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We set forth below those material accounting policies that we believe are the most critical to an investor's understanding of our financial results and condition and which require complex management judgment.

Revenue Recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Securities and Exchange Commission's Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104), which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. We recognize revenue as products are shipped based on FOB shipping point terms when title passes to customers. We negotiate credit terms on a customer-by-customer basis and products are shipped at an agreed upon price. All product returns must be pre-approved.

We also generate revenue from license agreements and research collaborations and recognize this revenue when earned. In accordance with EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, for deliverables which contain multiple deliverables, we separate the deliverables into separate accounting units if they meet the following criteria: i) the delivered items have a stand-alone value to the customer; ii) the fair value of any undelivered items can be reliably determined; and iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit. Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily Staff Accounting Bulletin 104, Revenue Recognition.

We analyze the rate of historical returns when evaluating the adequacy of the allowance for sales returns. At December 31, 2008, this reserve was nil as we have not experienced historically any product returns. If the historical data we use to calculate these estimates does not properly reflect future returns, revenue could be overstated.

Accrued Expenses

As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves identifying services which have been performed on our behalf and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements.

In accruing service fees, we estimate the time period over which services will be provided and the level of effort in each period. If the actual timing of the provision of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. The majority of our service providers invoice us monthly in arrears for services performed. In the event that we do not identify costs that have begun to be incurred or we underestimate or overestimate the level of services performed or the costs of such services, our actual expenses could differ from such estimates. The date on which some services commence, the level of services performed on or before a given date and the cost of such services are often subjective determinations. We make judgments based upon facts and circumstances known to us in accordance with GAAP.

We primarily grant qualified stock options for a fixed number of shares to employees with an exercise price equal to the market value of the shares at the date of grant. Under the fair value recognition provisions of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, share based compensation cost is based on the value of the portion of share based awards that is ultimately expected to vest during the period. Share based compensation expense includes amounts related to the share based awards granted, based on the fair value on the grant date, estimated in accordance with the provisions of SFAS 123R.

We selected the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value for share based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of the share based awards. Determining the fair value of share based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. In accordance with SFAS 123R, we are required to estimate forfeitures at the grant date and recognize compensation costs for only those awards that are expected to vest. Judgment is required in estimating the amount of share based awards that are expected to be forfeited.

If factors change and we employ different assumptions in the application of SFAS 123R in future periods, the compensation expense that we record under SFAS 123R may differ significantly from what we have recorded in the current period. Therefore, we believe it is important for investors to be aware of the high degree of subjectivity involved when using option pricing models to estimate share-based compensation under SFAS 123R. There is risk that our estimates of the fair values of our share-based compensation awards on the grant dates may differ from the actual values realized upon the exercise, expiration, early termination or forfeiture of those share-based payments in the future. Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that is . . .