You should read the following discussion and analysis together with all financial and non-financial information appearing elsewhere in this report and with our consolidated financial statements and related notes included in our 2008 Annual Report on Form 10-K, referred to as our 2008 Form 10-K, which has been previously filed with the Securities and Exchange Commission. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties, including the statement that our cash and cash equivalents are sufficient to fund our operations through September 2009. Our actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2008 Form 10-K under "Risks Associated with our Business".

Business Overview

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

Our strategy is threefold:

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

Recent Developments

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

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

Effective March 9, 2009, Kerry P. Gray resigned as the President and Chief Executive Officer of the Company. Renaat Van den Hooff, the Company's Executive Vice President Operations, has been appointed to serve as President and Chief Executive Officer. Mr. Gray will remain with the Company as a member of the Board of Directors and consultant, as described below. In connection with Mr. Gray's departure, the Company and Mr. Gray entered into a Separation Agreement (the "Agreement"). Pursuant to the Agreement, the Company will provide certain benefits to Mr. Gray, including: (i) payments totaling $400,000 during the initial 12 month period following Mr. Gray's resignation; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, the Company will pay to Mr. Gray a payment of $12,500 per month; (iii) full acceleration of all vesting schedules for all outstanding Company stock options and shares of restricted stock of the Company held by Mr. Gray, with all such Company stock options remaining exercisable by Mr. Gray until March 1, 2012, provided that Mr. Gray has forfeited 300,000 stock options previously held by him; and (iv) for a period of twenty-four (24) months following Mr. Gray's resignation the Company will maintain and provide coverage under Mr. Gray's existing health coverage plan. Certain of such payments are secured by a security interest in favor of Mr. Gray in our intellectual property relating to Zindaclin®. The Agreement also provides that Mr. Gray will serve as a consultant to the Company for up to two full days per month through August 31, 2009. Mr. Gray will not be paid for the performance of such consulting services. The Agreement contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions. The Agreement also provides that Mr. Gray will continue as a director of the Company.

RESULTS OF OPERATIONS

Fluctuations in Operating Results

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

Comparison of the three months ended March 31, 2009 and 2008

Total Revenues

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

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

Costs and Expenses

Cost of Goods Sold

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

Research and Development

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

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

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

General and Administrative

General and administrative expenses totaled $2,224,619 for the three months ended March 31, 2009, including $759,313 in share-based compensation, compared to $893,235 for the three months ended March 31, 2008, which included $171,575 in share-based compensation. The increase of $1,331,384 in general and administrative expenses was due primarily to costs associated with our sales and marketing efforts of approximately $603,000, distribution services of approximately $120,000, and a net increase of approximately $458,000 in compensation costs. The net increase in compensation cost includes approximately $598,000 of share-based compensation expense after giving effect to certain vesting accelerations of stock options and restricted stock which were partially offset by certain stock option forfeitures and by savings of $77,000 relating to benefit forfeitures pursuant to the Separation Agreement with our former chief executive officer. Other factors affecting the cost increase were additional expenses of $82,000 for legal services associated with our patent filings and $70,000 for legal expense associated with SEC filings, employment matters, and trademark filings.

Amortization

Amortization expense totaled $266,267 for the three months ended March 31, 2009 as compared to $269,185 for the three months ended March 31, 2008. The expense for each period consists primarily of amortization associated with our patents. There were no additional purchases of patents during the three months ended March 31, 2009.

Depreciation

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

Interest and Miscellaneous Income

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

Interest Expense

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

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the private sales of convertible debentures and common stock. Product sales, royalty payments, contract research, licensing fees and milestone payments from our corporate alliances have provided, and are expected in the future to provide funding for operations. Our principal source of liquidity is cash and cash equivalents. As of March 31, 2009 our cash and cash equivalents were $5,139,376 which is a decrease of $2,428,212 as compared to our cash and cash equivalents at December 31, 2008 of $7,567,588. Our working capital (current assets less current liabilities) was $5,023,082 at March 31, 2009 as compared to our working capital at December 31, 2008 of $7,068,927.

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

Operating Activities

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

The aforementioned net cash used for the three months ended March 31, 2009 was partially offset by a decrease in prepaid expenses of $117,000 due to expense amortization and a decrease in inventory of $6,000.

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

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2009 was $14,177 for the purchase of manufacturing equipment for Altrazeal™. For the first quarter of 2008, we purchased $374,952 for manufacturing equipment for our Altrazeal™ and OraDisc™ products.

Financing Activities

For the three months ended March 31, 2009, there were no financing activities. Net cash provided by financing activities during the first quarter of 2008 was $47,500 from the exercise of stock options to purchase 50,000 shares of our common stock.

Liquidity

As discussed above, we had cash and cash equivalents totaling $5,139,376 as of March 31, 2009. We expect to use our cash, cash equivalents, and investments on working capital and general corporate purposes, products, product rights, technologies, property and equipment, the payment of contractual obligations, and regulatory or sales milestones that may become due. We also expect to use up to $1 million of cash related to our funding of the line of credit advanced to York Pharma plc. Our long-term liquidity will depend to a great extent on our ability to fully commercialize our Altrazeal™ and OraDisc™ technologies; therefore we are continuing to search both domestically and internationally for opportunities that will enable us to continue to expand our business. At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth during 2009 and beyond, such as the degree of market acceptance, patent protection and exclusivity of our products, the impact of competition, the effectiveness of our sales and marketing efforts, and the outcome of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.

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

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

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

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

Note Purchase Agreement

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

Contractual Obligations

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

                                                              Payments Due By Period
                                                       Less Than         2-3           4-5         After 5
Contractual Obligations                   Total          1 Year         Years         Years         Years
  Operating lease                      $   453,668     $  110,740     $ 226,834     $ 116,094     $      ---
  Separation agreement                     945,833        358,333       300,000       287,500            ---
  Total contractual cash obligations   $ 1,399,501     $  469,073     $ 526,834     $ 403,594     $      ---

Off-Balance Sheet Arrangements

As of March 31, 2009, we did not have any off balance sheet arrangements.

Impact of Inflation

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as "should", "expect", "anticipate", "estimate", "target", "may", "project", "guidance", "intend", "plan", "believe" and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements include, among other things, statements regarding the Company's expected cash and cash equivalents and working capital being sufficient until September 2009, and other statements, including the Company's goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years. The Company has included important factors in the cautionary statements included in its 2008 Annual Report on Form 10-K, particularly under "Risk Associated with our Business", as well as in Part II, Item 1A under "Risk Factors" in this Quarterly Report on Form 10-Q, that the Company believes could cause actual results to differ materially from any forward-looking statement.

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