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 March 2011. 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 November 9, 2009, the Company entered into an engagement letter (the "Engagement Letter") with Rodman & Renshaw, LLC (the "Placement Agent"), pursuant to which the Placement Agent agreed to act as exclusive placement agent on a reasonable best efforts basis for a proposed offering of our securities.

On November 11, 2009, we entered into a Securities Purchase Agreement with several institutional investors (the "Securities Purchase Agreement"). Pursuant to the Securities Purchase Agreement, we agreed to issue to those investors the following securities (the "Offering"):

§ 10,714,467 shares of our common stock, par value $0.001 per share; and § Warrants to purchase up to 5,357,233 shares of our common stock (the "Warrants");

The Warrants have an initial exercise price of $0.19 per share, and may be exercised at any time and from time to time on or after May 15, 2010 through and including May 15, 2015.

The closing of the Offering took place on November 16, 2009. The Placement Agent received a placement fee equal to 7% of the aggregate gross proceeds of the Offering as well as warrants to purchase up to an aggregate of 535,723 shares of our common stock at an exercise price equal to $0.238 per share.

The aggregate net proceeds from the Offering, after deducting the Placement Agents' fees and estimated offering expenses payable by us (and excluding any proceeds from exercise of the Warrants), were approximately $1.35 million.

We made the offering and sale of the above shares and warrants pursuant to a shelf registration statement on Form S-3 (Registration No. 333-160568) declared effective by the Securities and Exchange Commission on July 23, 2009, and a base prospectus dated as of the same date, as supplemented by a prospectus supplement filed with the Securities and Exchange Commission on November 13, 2009.

On September 16, 2009, the Company announced the results from the first completed randomized clinical trial for Altrazeal. The recently completed clinical study compared healing, pain and comfort of skin graft donor sites treated with either AltrazealTM or with a leading commercial sodium carboxymethylcellulose-silver ("CMC-Ag") dressing.

Major results from the study indicated that there was a significant difference in patient's pain scores, all favoring Altrazeal with lower pain scores at each time point (p<0.0001). When asked about the comfort of the wound dressing at the edges, these subjects found Altrazeal to be more comfortable (p<0.001) and less painful when the dressing came in contact with clothes or bedding (p<0.001). The study endpoints validated the hypothesis for time to healing for both dressings in this particular type of acute surgical wound.

The study was a single-center, prospective randomized trial in which each patient served as his/her own control. Each patient had at least two split-thickness donor sites of which one was dressed with AltrazealTM and the other one with the CMC-Ag dressing.

On July 23, 2009, the Company received a notice of effectiveness for the Company's registration statement on Form S-3, using a "shelf" registration process, from the Securities and Exchange Commission. Under this shelf registration process, we may from time to time sell common stock, preferred stock, debt securities or warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities, in one or more offerings up to a total dollar amount of $25,000,000. As discussed above, the Offering was made pursuant to this registration statement declared effective on July 23, 2009 and a base prospectus dated as of the same date, as supplemented by a prospectus supplement filed with the Securities and Exchange Commission on November 13, 2009.

In July 2009 the Company implemented a revised business plan in order to reduce operating expenses, optimize operations, and conserve cash while seeking strategic relationships for its products and fund raising to provide needed liquidity.

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 September 30, 2009 and 2008

Total Revenues

Revenues were $130,234 for the three months ended September 30, 2009, as compared to revenues of $125,437 for the three months ended September 30, 2008, and were comprised of licensing fees of approximately $23,000 for two OraDisc™ licensing agreements, $23,000 for domestic royalties from the sale of Aphthasol® by our distributor, $39,000 of foreign royalties from the sale of Zindaclin®, $6,000 for sponsored research associated with OraDisc™ technologies, and $40,000 of Altrazeal® product sales.

The third quarter 2009 revenues represent an overall increase of approximately $5,000 versus the comparative third quarter 2008 revenues, primarily due to an increase of $37,000 in Altrazeal revenues. This increase was partially offset by decreases of $18,000 in Zindaclin® royalties and licensing fees, $9,000 in sponsored research, and $2,000 in Aphthasol® royalties.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2009 was $7,785 and consisted of product costs for our Altrazeal® wound dressing. Cost of goods sold for the three months ended September 30, 2008 were only $484, as Altrazeal™ was initially launched in June 2008.

Research and Development

Research and development expenses totaled $376,191 for the three months ended September 30, 2009, including $31,103 in share-based compensation, compared to $901,344 for the three months ended September 30, 2008, including $43,365 in share-based compensation. The decrease of approximately $525,000 in research and development expenses was due primarily to a decrease in direct research costs of $248,000, a decrease in regulatory consulting costs of $44,000 along with savings of $258,000 due to the Company's compensation reduction plan that was initiated in July 2009. These decreases were partially offset by an increase in clinical testing expenses associated with our wound care technologies of $27,000.

The direct research and development expenses for the three months ended September 30, 2009 and 2008 were as follows:

                                      Three Months Ended
                                         September 30,
Technology                               2009          2008
  Wound care & nanoparticle         $   4,636     $ 140,393
  OraDisc™                              4,200       138,945
  Aphthasol® & other technologies      28,617         6,132
  Total                             $  37,453     $ 285,470

Selling, General and Administrative

Selling, general and administrative expenses totaled $981,212 for the three months ended
September 30, 2009, including $126,448 in share-based compensation, compared to $1,731,877 for the three months ended September 30, 2008, including $237,789 in share-based compensation. The decrease of approximately $751,000 in selling, general and administrative expenses was due primarily to reduced costs for marketing and selling expenses of $509,000, savings of $158,000 due to the Company's compensation reduction plan, decreased corporate travel expenses of $37,000, decreased investor relations costs of $14,000, lower patent-related legal fees of $9,000, decreased administrative operating expenses of $12,000, and savings of $48,000 in Director fees.

These decreases were partially offset by an increase of $27,000 in legal and consulting fees, along with an increase of $6,000 in insurance costs.

Amortization

Amortization expense totaled $272,102 for the three months ended September 30, 2009, which is the same amount of amortization expense for the three months ended September 30, 2008. The expense for each period consisted primarily of amortization associated with our patents. There were no additional purchases of patents during the three months ended September 30, 2009.

Depreciation

Depreciation expense totaled $46,424 for the three months ended September 30, 2009 as compared to $31,229 for the three months ended September 30, 2008. The increase of approximately $15,000 is attributable to our purchase of additional equipment, primarily manufacturing items, during 2009.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled $6,676 for the three months ended September 30, 2009 as compared to $65,868 for the three months ended September 30, 2008. The decrease of approximately $59,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2009.

Comparison of the nine months ended September 30, 2009 and 2008

Total Revenues

Revenues were $435,057 for the nine months ended September 30, 2009, as compared to revenues of $476,954 for the nine months ended September 30, 2008, and were comprised of licensing fees of $74,775 from two OraDisc™ licensing agreements, domestic royalties of $65,601 from the sale of Aphthasol® by our distributor, foreign royalties of $137,009 from the sale of Zindaclin®, OraDisc™ related sponsored research program fees of $38,190, and Altrazeal® product sales of $119,482.

The nine months ended September 30, 2009 revenues represent an overall decrease of approximately $42,000 versus the comparative nine months ended September 30, 2008 revenues, primarily due to a decrease of $166,000 in Aphthasol® product sales, which was non-recurring revenue from the prior year, and a decrease of $34,000 in Zindaclin® royalties. These decreases were partially offset by an increase of $116,000 in Altrazeal™ product sales, increased licensing fees of $6,000 for OraDisc technologies, and increased Ora Disc™ related sponsored research program fees of $37,000.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2009 was $22,783 and consisted entirely of costs associated with the manufacture of Altrazeal®, whereas the cost of goods sold for the nine months ended September 30, 2008 was comprised of $137,615 in costs associated with the manufacture of Aphthasol® and $603 for costs associated with the manufacture of Altrazeal®.

Research and Development

Research and development expenses totaled $2,006,070 for the nine months ended September 30, 2009, including $286,160 in share-based compensation, compared to $2,644,104 for the nine months ended September 30, 2008, including $119,321 in share-based compensation. The decrease of approximately $638,000 in research and development expenses was due primarily to decreases in direct research costs of $682,000 relating to our wound care and OraDisc™ technologies and savings of $133,000 due to the Company's compensation reduction plan. These decreases were partially offset by increased clinical testing expenses for our wound care technologies of $38,000 and increased regulatory consulting and expenses of $141,000.

The direct research and development expenses for the nine months ended September 30, 2009 and 2008 were as follows:

                                       Nine Months Ended
                                         September 30,
Technology                               2009          2008
  Wound care & nanoparticle         $  54,421     $ 572,843
  OraDisc™                            163,326       328,608
  Aphthasol® & other technologies      34,710        32,713
  Total                             $ 252,457     $ 934,164

Selling, General and Administrative

Selling, general and administrative expenses totaled $5,041,318 for the nine months ended September 30, 2009, including $1,165,190 in share-based compensation, compared to $3,966,347 for the nine months ended September 30, 2008, including $629,790 in share-based compensation.

The increase of approximately $1,075,000 in selling, general and administrative expenses was due primarily to additional costs of approximately $602,000 for the ramp-up of our sales and marketing efforts, distribution services of $140,000 and a net increase of administrative compensation costs of $244,000. The net increase in administrative compensation costs includes approximately $454,000 of share based compensation increases relating to the Company's compensation reduction plan in September 2009 and costs of $47,000 associated with the Separation Agreement with our former chief executive officer; which are offset by a decrease of $263,000 in accruals for incentives.

We also incurred increases in legal services associated with our patent filings of $33,000, increases of $8,000 in accounting fees, and legal fees of $309,000 associated with filings made with the Securities and Exchange Commission, financing activities, and the proposed York Pharma acquisition.

Each of these factors were partially offset by a decrease of $73,000 in corporate travel expenses, lower consulting fees of $23,000, a decrease in investor relations expenses of $19,000, lower shareholder expenses of $24,000 due to having the Company's annual shareholder meeting at a later date than in prior years, decreased director compensation of $60,000, and lower due diligence costs of $64,000 associated with financing activities.

Amortization

Amortization expense totaled $807,551 for the nine months ended September 30, 2009 as compared to $810,469 for the nine months ended September 30, 2008. The expense for each period consists primarily of amortization associated with our patents. There were no additional purchases of patents during the nine months ended September 30, 2009.

Depreciation

Depreciation expense totaled $126,002 for the nine months ended September 30, 2009 as compared to $81,703 for the nine months ended September 30, 2008. The increase of approximately $44,000 is attributable to our purchase of additional equipment, primarily manufacturing items, during 2009.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled $42,296 for the nine months ended September 30, 2009 as compared to $269,801 for the nine months ended September 30, 2008. The decrease of approximately $228,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2009.

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 partial funding for operations. As of September 30, 2009 our cash and cash equivalents were $1,399,113 which is a decrease of $6,168,475 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 $1,857,118 at September 30, 2009 as compared to our working capital at December 31, 2008 of $7,068,928.

Consolidated Cash Flow Data
                                                  Nine Months Ended September 30,
Net Cash Provided by (Used in)                              2009                2008
  Operating activities                          $     (6,161,448 )     $  (3,906,259 )
  Investing activities                                    (7,027 )          (588,448 )
  Financing activities                                       ---              47,500
  Net (Decrease) in cash and cash equivalents   $     (6,168,475 )     $  (4,447,207 )

Operating Activities

For the nine months ended September 30, 2009, net cash used in operating activities was $6,161,448. The principal component of net cash used for the nine months ended September 30, 2009 stems from our net loss of approximately $7,530,000. This net loss for the nine months ended September 30, 2009 included substantial non-cash charges in the form of share-based compensation, amortization of patents, and depreciation. These non-cash charges totaled approximately $2,400,000.

Additional uses of our net cash included a decrease of $1,012,000 in accounts payable due to timing of vendor payments, a decrease of $253,000 in accrued liabilities for employee benefits and incentives, the amortization of deferred revenues of $97,000, and a decrease of $30,000 in our royalty advance for Aphthasol® due to sales by our distributor. These uses of net cash were partially offset by a decrease of $244,000 in prepaid expenses due to expense amortization, a decrease of $83,000 in accounts receivable, and a decrease of $33,000 in inventory due to Altrazeal™ product sales.

For the comparable nine months of 2008, net cash used in operating activities was $3,906,259. The principal component of net cash used for the nine months ended September 30, 2008 stems from our net loss of approximately $6,894,000 which included $1,651,000 of non-cash charges in the form of share-based compensation, amortization of patents, and depreciation.

Additional uses of our net cash included an increase of approximately $300,000 in inventory due to the work-in-progress manufacturing costs for Altrazeal™, an increase of $91,000 for renewal fees with the Food & Drug Administration, and a decrease of $67,000 in our royalty advance for Aphthasol® due to domestic sales by our distributor. These uses of net cash were partially offset by a decrease of $613,000 in accounts receivable due to customer collections, an increase of $350,000 in accounts payable due to costs for product manufacturing, an increase in accrued liabilities of $225,000 due to timing, and an increase in deferred revenues of $604,000 from the receipt of licensing agreements associated with our OraDisc™ technologies.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2009 was $7,027. The investing activities include approximately $1,018,000 in notes receivable associated with the loan to York Pharma in April 2009, the subsequent collection of the York loan in July 2009, and a decrease of $14,000 associated with the purchase of Altrazeal™ manufacturing equipment. The uses of net cash were partially offset by $7,000 of proceeds from the sale of laboratory equipment.

For the comparable nine months of 2008, net cash used in investing activities was $588,448 and consisted primarily of manufacturing equipment purchases for our Altrazeal™ and OraDisc™ products along with $142,650 for the buy-back of OraDisc™ licensing rights previously held by Zambon S.p.A.

Financing Activities

There were no financing activities during the nine months ended September 30, 2009.

Net cash provided by financing activities during the nine months ended September 30, 2008 was $47,500 from the exercise of stock options to purchase 50,000 shares of our common stock.

Liquidity

In July 2009, the Company restructured its operations in efforts reduce operating expenses, optimize operations and to conserve the necessary cash to further the Company's revised business plan. Currently, a core management group is being supplemented by a small selection of external consultants to support the Company's primary business activities. Selling efforts for Altrazeal™ are continuing through a network of independent sales representatives throughout the country.

On November 11, 2009, we entered into a Securities Purchase Agreement with several institutional investors (the "Securities Purchase Agreement"). Pursuant to the Securities Purchase Agreement, we agreed to issue to those investors the following securities (the "Offering"):

§ 10,714,467 shares of our common stock, par value $0.001 per share; and § Warrants to purchase up to 5,357,233 shares of our common stock (the "Warrants");

The Warrants have an initial exercise price of $0.19 per share, and may be exercised at any time and from time to time on or after May 15, 2010 through and including May 15, 2015.

The closing of the Offering took place on November 16, 2009. Rodman and Renshaw, LLC, acting as our placement agent, received a placement fee equal to 7% of the aggregate gross proceeds of the Offering as well as warrants to purchase up to an aggregate of 535,723 shares of our common stock at an exercise price equal to $0.238 per share.

The aggregate net proceeds from the Offering, after deducting the Placement Agents' fees and estimated offering expenses payable by us (and excluding any proceeds from exercise of the Warrants), were approximately $1.35 million.

The Company continues to seek a strategic relationship whereby the Company can more effectively maximize the revenue potential of Altrazeal™ as well as continuing, with the assistance of an investment bank, to explore future fund raising using the Company's effective registration statement on Form S-3 or through the sale of assets.

As of November 1, 2009, we had cash and cash equivalents of approximately $1,177,000. 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 are continuing to search both domestically and internationally for opportunities that will enable us to continue 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 the proceeds from the closing of our Offering, our existing liquidity, the expected level of operating expenses, 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 March 2011. We do not expect any material changes in our capital expenditure spending during the remainder of 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 . . .