ULURU 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended: September 30, 2010

OR

[_] Transition Report Pursuant to 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.

(Exact Name of Registrant as Specified in its Charter)

Nevada	41-2118656
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

4452 Beltway Drive Addison, Texas	75001
(Address of Principal Executive Offices)	(Zip Code)

(214) 905-5145

(Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.    Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes  þ    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerate filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  þ

As of November 15, 2010, there were 82,117,230 shares of the registrant’s Common Stock, $0.001 par value per share, issued and outstanding.

ULURU Inc.

INDEX TO FORM 10-Q

For the Nine Months Ended SEPTEMBER 30, 2010

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.		3
	Condensed Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009 (audited)		3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2010 and 2009		4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2010 and 2009		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		29
Item 4.	Controls and Procedures.		29
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.		30
Item 1A.	Risk Factors.		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		30
Item 3.	Defaults Upon Senior Securities.		30
Item 4.	(Removed and Reserved).		30
Item 5.	Other Information.		30
Item 6.	Exhibits.		31
	Signatures		31

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements.

ULURU Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2010			December 31, 2009
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	1,320,021		$	1,934,177
Accounts receivable		72,873			218,256
Other receivable – current portion		369,574			---
Inventory		909,773			1,008,998
Prepaid expenses and deferred charges		231,820			383,419
Total Current Assets		2,904,061			3,544,850
Property, Equipment and Leasehold Improvements, net		1,452,504			1,631,557
Other Assets
Intangible assets, net		5,598,021			8,183,146
Other receivable, net of current portion		237,326			---
Deposits		18,069			20,819
Total Other Assets		5,853,416			8,203,965
TOTAL ASSETS	$	10,209,981		$	13,380,372
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	777,207		$	617,443
Accrued liabilities		265,580			215,431
Deferred revenue – current portion		106,555			96,897
Total Current Liabilities		1,149,342			929,771
Long Term Liabilities
Deferred revenue, net of current portion		1,461,902			1,272,843
TOTAL LIABILITIES		2,611,244			2,202,614
COMMITMENTS AND CONTINGENCIES		---			---
STOCKHOLDERS' EQUITY
Preferred 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;
82,117,230 and 76,813,886 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		82,117			76,814
Additional paid-in capital		48,075,763			46,923,499
Accumulated deficit		(40,559,143	)		(35,822,555	)
TOTAL STOCKHOLDERS’ EQUITY		7,598,737			11,177,758
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,209,981		$	13,380,372
The accompanying notes are an integral part of these consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2010			2009			2010			2009
REVENUES
License fees	$	4,370		$	22,979		$	150,283		$	72,555
Royalty income		23,104			61,727			132,473			204,830
Product sales, net		34,143			39,528			245,725			119,482
Other		---			6,000			---			38,190
Total Revenues		61,617			130,234			528,481			435,057
COSTS AND EXPENSES
Cost of goods sold		6,416			7,785			143,259			22,783
Research and development		295,781			376,191			948,960			2,006,070
Selling, general and administrative		666,205			981,212			2,405,123			5,041,318
Amortization of intangible assets		206,454			272,102			699,252			807,551
Depreciation		79,073			46,424			179,053			126,002
Total Costs and Expenses		1,253,929			1,683,714			4,375,647			8,003,724
OPERATING (LOSS)		( 1,192,312	)		( 1,553,480	)		(3,847,166	)		(7,568,667	)
Other Income (Expense)
Interest and miscellaneous income		4,840			6,676			5,555			42,296
Interest expense		(20,650	)		(1,926	)		(37,138	)		(1,926	)
Loss on sale of intangible asset		---			---			( 857,839	)		---
Loss on sale of equipment		---			---			---			(2,121	)
(LOSS) BEFORE INCOME TAXES		(1,208,122	)		( 1,548,730	)		(4,736,588	)		(7,530,418	)
Income taxes		---			---			---			---
NET (LOSS)	$	(1,208,122	)	$	(1,548,730	)	$	(4,736,588	)	$	(7,530,418	)
Basic and diluted net (loss) per common share	$	(0.01	)	$	(0.02	)	$	(0.06	)	$	(0.11	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		82,084,316			66,038,079			81,346,138			65,723,998
The accompanying notes are an integral part of these consolidated financial statements.

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ULURU Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2010			2009
OPERATING ACTIVITIES :
Net (loss)	$	(4,736,588	)	$	(7,530,418	)
Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities:
Amortization of intangible assets		699,252			807,551
Depreciation		179,053			140,702
Share-based compensation for stock and options issued to employees		218,608			1,366,682
Share-based compensation for options issued to non-employees		80,979			84,668
Loss on sale of intangible asset		857,839			---
Loss on sale of equipment		---			2,121
Change in operating assets and liabilities:
Accounts receivable		145,383			82,944
Other receivable		(3,866	)		---
Inventory		99,225			33,041
Prepaid expenses and deferred charges		151,599			243,555
Deposits		2,750			---
Accounts payable		159,764			(1,012,140	)
Accrued liabilities		50,149			(252,772	)
Deferred revenue		198,717			(96,965	)
Royalty advance		---			(30,417	)
Total		2,839,452			1,368,970
Net Cash (Used in) Operating Activities		(1,897,136	)		(6,161,448	)
INVESTING ACTIVITIES :
Purchase of property and equipment		---			(14,177	)
Increase in notes receivable		---			(1,018,219	)
Proceeds from collection of notes receivable		---			1,018,219
Proceeds from sale of intangible asset		425,000			---
Proceeds from sale of equipment		---			7,150
Net Cash Provided by (Used in) Investing Activities		425,000			(7,027	)
FINANCING ACTIVITIES :
Proceeds from sale of common stock, net		857,980			---
Net Cash Provided by Financing Activities		857,980			---
Net Decrease in Cash		(614,156	)		(6,168,475	)
Cash,  beginning of period		1,934,177			7,567,588
Cash,  end of period	$	1,320,021		$	1,399,113
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	$	1,958		$	---
Non-cash investing and financing activities:
Sale of intangible asset included in Other receivable	$	603,034		$	---
The accompanying notes are an integral part of these consolidated financial statements.

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ULURU Inc.

NOTES TO

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the account of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2010 and the results of its opera tions for the three and nine months ended September 30, 2010 and 2009 and cash flows for the nine months ended September 30, 2010 and 2009 have been made.

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.

Operating results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 24, 2010, including the risk factors set forth therein.

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NOTE 2.                      SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2010 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on March 24, 2010.

NOTE 3.                      THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”).  ASU 2010-06 requires disclosing the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and to describe the reasons for the transfers.  The disclosures were effective for reporting periods beginning after December 15, 2009.  Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in Level 3 fair value measurements will be required for fiscal years beginning after December 15, 2010. The Company adopted the provisions of ASU 2010-06 and it did not have a material effect on our consolidated results of operations, financial position or liquidity.

In April 2010, FASB issued ASU No. 2010-17, Milestone Method of Revenue Recognition (“ASU 2010-17”), which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions.  Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a study or achieving a specific result from the research or development efforts.  The amendments in this ASU provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate.  ASU 2010-17 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010, with early adoption permitted.  The Company does not expect the provisions of ASU 2010-17 to have a material effect on its consolidated results of operations, financial position or liquidity.

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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, four licensees for international activities, and our sales force for the domestic sale of Altrazeal®.

Revenues per geographic area for the three and nine months ended September 30 are summarized as follows:

	Three Months Ended September 30,										Nine Months Ended September 30,
Revenues	2010		%			2009		%			2010		%			2009		%
Domestic	$	57,247		93	%	$	68,246		52	%	$	303,247		57	%	$	191,084		44	%
International		4,370		7	%		61,988		48	%		225,234		43	%		243,973		56	%
Total	$	61,617		100	%	$	130,234		100	%	$	528,481		100	%	$	435,057		100	%

A significant portion of our revenues are derived from a few major customers.  Customers with greater than 10% of total revenues for the three and nine months ended September 30 are represented on the following table:

		Three Months Ended September 30,						Nine Months Ended September 30,
Customers	Product	2010			2009			2010			2009
Discus Dental, Inc.	Aphthasol®		38	%		17	%		37	%		15	%
Meldex International	OraDisc™ B		*			18	%		*			16	%
ProStrakan, Ltd.	Zindaclin®		---			28	%		33	%		32	%
Total			38	%		63	%		70	%		63	%
* Revenue from this customer was less than 10% of total revenues for the period reported.

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NOTE 5.                      OTHER RECEIVABLE

On June 25, 2010, the Company entered into an acquisition and license agreement (the “Agreement”) with Strakan International Limited and Zindaclin Limited, a subsidiary of Crawford Healthcare Limited, a pharmaceutical company based in England.  Under the terms of the Agreement, Zindaclin Limited will pay up to $5.1 million for the exclusive product rights to Zindaclin®, a zinc clindamycin for the treatment of acne, which consideration will be shared equally by Strakan International Limited and ULURU.  Guaranteed payments of $1,050,000 are scheduled to be received by the Company, of which $300,000 occurred in June 2010, $125,000 occurred in September 2010, $375,000 will occur in the next 12 months, and $250,000 will occur in the following year.  The receipt of the full purchase price will b e dependent on product approval in the United States.

Other receivables consisted of the following at September 30, 2010:

Payment obligation due:	Gross Receivable		Imputed  Interest		Net Receivable
2010	$	125,000	$	---	$	125,000
2011		250,000		5,426		244,574
Subtotal		375,000		5,426		369,574
2012		250,000		12,674		237,326
Total	$	625,000	$	18,100	$	606,900

NOTE 6.                      INVENTORY

As of September 30, 2010, our inventory was comprised of raw materials, manufacturing costs incurred in the production of Altrazeal®, and Altrazeal® finished goods.  Inventories are stated at the lower of cost (first-in, first-out method) or market.  Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.  Inventory consisted of the following at September 30, 2010 and December 31, 2009:

Inventory	September 30, 2010		December 31, 2009
Raw materials	$	77,547	$	112,002
Work-in-progress		367,084		375,228
Finished goods		465,142		521,768
Total	$	909,773	$	1,008,998

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NOTE 7.                      PROPERTY, EQUIPMENT and LEASHOLD IMPROVEMENTS

Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2010 and December 31, 2009:

Property, equipment and leasehold improvements	September 30, 2010			December 31, 2009
Laboratory equipment	$	424,888		$	424,888
Manufacturing equipment		1,483,223			1,483,223
Computers, office equipment, and furniture		140,360			140,360
Computer software		4,108			4,108
Leasehold improvements		95,841			95,841
		2,148,420			2,148,420
Less: accumulated depreciation and amortization		( 695,916	)		( 516,863	)
Property, equipment and leasehold improvements, net	$	1,452,504		$	1,631,557

Depreciation expense on property, equipment and leasehold improvements was $79,073 and $46,424 for the three months ended September 30, 2010 and 2009, respectively, and was $179,053 and $126,002 for the nine months ended September 30, 2010 and 2009, respectively.

NOTE 8.                      INTANGIBLE ASSETS

Intangible assets are comprised of patents acquired in October, 2005.  Intangible assets, net consisted of the following at September 30, 2010 and December 31, 2009:

Intangible assets	September 30, 2010			December 31, 2009
Patent - Zindaclin®	$	---		$	3,729,000
Patent - Amlexanox (Aphthasol®)		2,090,000			2,090,000
Patent - Amlexanox (OraDisc™ A)		6,873,080			6,873,080
Patent - OraDisc™		73,000			73,000
Patent - Hydrogel nanoparticle aggregate		589,858			589,858
		9,625,938			13,354,938
Less: accumulated amortization		( 4,027,917	)		( 4,455,159	)
Less: impairment charge		---			( 716,633	)
Intangible assets, net	$	5,598,021		$	8,183,146

Amortization expense for intangible assets was $206,454 and $272,102 for the three months ended September 30, 2010 and 2009, respectively, and was $699,252 and $807,551 for the nine months ended September 30, 2010 and 2009, respectively.  The future aggregate amortization expense for intangible assets, remaining as of September 30, 2010, is as follows:

Calendar Years	Future Amortization Expense
2010 (Three months)	$	206,454
2011		769,132
2012		476,450
2013		475,148
2014		475,148
2015 & Beyond		3,195,689
Total	$	5,598,021

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NOTE 9.                      ACCRUED LIABILITIES

Accrued liabilities consisted of the following at September 30, 2010 and December 31, 2009:

Accrued Liabilities	September 30, 2010		December 31, 2009
Accrued taxes – payroll	$	106,299	$	106,299
Accrued compensation/benefits		65,355		56,837
Accrued insurance payable		87,037		52,295
Product rebates/returns		52		---
Other		6,837		---
Total accrued liabilities	$	265,580	$	215,431

NOTE 10.                      STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2010, the Company had 82,117,230 shares of common stock issued and outstanding.  The Company issued 75,703 shares of common stock during the three months ended September 30, 2010 pursuant to the vesting of certain restricted stock awards.

Warrants

The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of September 30, 2010 and the changes therein during the nine months then ended:

	Number of Shares of Common Stock Subject to Exercise		Weighted – Average Exercise Price
Balance as of December 31, 2009		8,687,956	$	0.48
Warrants issued		250,000		0.25
Warrants exercised		---		---
Warrants cancelled		---		---
Balance as of September 30, 2010		8,937,956	$	0.47

Of the warrant shares subject to exercise as of September 30, 2010, expiration of the right to exercise is as follows:

Date of expiration	Number of Warrant Shares of Common Stock Subject to Expiration
August 30, 2011		1,125,000
December 6, 2011		1,670,000
July 23, 2014		785,723
May 15, 2015		5,357,233
Total		8,937,956

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NOTE 11.                      EARNINGS PER SHARE

Basic and Diluted Net Loss Per Share

In accordance with ASC Topic 260, 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 as of September 30, 2010 and December 31, 2009:

	September 30, 2010		December 31, 2009
Antidilutive warrants to purchase common stock		8,937,956		8,687,956
Antidilutive options to purchase common stock		4,456,000		3,306,000
Restricted vesting common stock		95,038		405,882
Total		13,488,994		12,399,838

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NOTE 12.                      SHARE BASED COMPENSATION

The Company’s share-based compensation plan, the 2006 Equity Incentive Plan (“Incentive Plan”), is administered by the compensation committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

We account for share-based compensation under ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values of the award on the grant date.  We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards.  The Company did not award any share-based compensation for the three months ended September 30, 2010 and 2009.

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 three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2010		2009		2010		2009
Incentive Stock Options
Quantity		---		---		100,000		---
Weighted average fair value per share		---		---	$	0.12		---
Fair value		---		---	$	11,819		---
Nonstatutory Stock Options
Quantity		---		---		1,800,000		75,000
Weighted average fair value per share		---		---	$	0.13	$	0.14
Fair value		---		---	$	229,711	$	10,672

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Stock Options (Incentive and Nonstatutory)

The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2010		2009		2010		2009
Research and development	$	24,631	$	23,325	$	79,134	$	218,066
Selling, general and administrative		25,841		112,789		147,959		931,324
Total share-based compensation expense	$	50,472	$	136,114	$	227,093	$	1,149,390

At September 30, 2010, 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 $309,902.  The period over which the unearned share-based compensation is expected to be recognized is approximately three years.

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of September 30, 2010 and the changes therein during the nine months then ended:

	Stock Options			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2009		3,306,000		$	2.34
Granted		1,900,000			0.16
Forfeited/cancelled		(750,000	)		4.13
Exercised		---			---
Outstanding as of September 30, 2010		4,456,000		$	1.11

The following table presents the stock option grants outstanding and exercisable as of September 30, 2010:

Options Outstanding						Options Exercisable
Stock Options Outstanding		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life in Years		Stock Options Exercisable		Weighted Average Exercise Price per Share
	2,840,000	$	0.42		8.1		1,465,207	$	0.58
	565,000		1.58		6.8		565,000		1.58
	881,000		2.44		4.0		772,980		2.46
	170,000		4.40		6.5		170,000		4.40
	4,456,000	$	1.12		7.1		2,973,187	$	1.48

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Restricted Stock Awards

Restricted stock awards, which typically vest over a period of two to 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 three and nine months ended September 30:

	Three Months Ended  September 30,					Nine Months Ended  September 30,
	2010			2009		2010		2009
Research and development	$	7,778		$	7,778	$	24,972	$	68,094
Selling, general and administrative		(142	)		13,659		47,522		233,866
Total share-based compensation expense	$	7,636		$	21,437	$	72,494	$	301,960

At September 30, 2010, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is approximately $53,265.  The period over which the unearned share-based compensation related to restricted stock awards is expected to be recognized is approximately two years.

The following table summarizes the non-vested restricted stock awards outstanding and the number of shares of common stock subject to potential issue as of September 30, 2010 and the changes therein during the nine months then ended:

	Restricted stock			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2009		405,882		$	0.51
Shares granted		---			---
Shares forfeited/cancelled		(7,500	)		0.85
Shares exercised/issued		(303,344	)		0.35
Outstanding as of September 30, 2010		95,038		$	0.95

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 meetings of the stockholders held on May 8, 2007, December 17, 2009, and on June 15, 2010, our stockholders approved amendments to the Incentive Plan to increase the total number of shares of Common Stock issuable under the Incentive Plan pursuant to stock options and other equity awards by 4 million shares, 3 million shares, and 3 million shares, respectively.

As of September 30, 2010, we had granted options to purchase 6,110,000 shares of Common Stock since the inception of the Incentive Plan, of which 4,456,000 were outstanding at a weighted average exercise price of $1.11 per share and we had granted awards for 1,029,242 shares of restricted stock since the inception of the Incentive Plan, of which 95,038 were outstanding.  As of September 30, 2010, there were 6,500,680 shares that remained available for future grant under our Incentive Plan.

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NOTE 13.                      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.

NOTE 14.                      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 $9,330 per month, which is inclusive of monthly operating expenses.  The future minimum lease payments are as follows as of September 30, 2010:

Calendar Years	Future Lease Expense
2010 (Three months)	$	27,989
2011		115,971
2012		117,310
2013		29,328
Total	$	290,598

Rent expense for our operating lease amounted to $28,106 and $27,415 for the three months ended September 30, 2010 and 2009, respectively, and was $90,456 and $81,140 for the nine months ended September 30, 2010 and 2009, respectively.

Indemnification

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

In accordance with our restated articles of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in their respective capacities. There have been no claims to date and we have a director and officer insurance policy that may enable us to recover a portion of any amounts paid for future potential claims. We have also entered into contractual indemnification agreements with each of our officers and directors.

Employment Agreements

As of September 30, 2010 the Company is party to employment agreements with its Vice President and Chief Financial Officer, Terrance K. Wallberg, as well as other key executives including Daniel G. Moro, Vice President – Polymer Drug Delivery and John V. St. John, Ph.D., Vice President - Research and Development.  The employment agreements with Messrs. Wallberg, Moro, and St. John each have a term of one year and include an automatic one-year term renewal for each year thereafter.  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 agreem ents also contain non-solicitation, confidentiality and non-competition covenants, and a requirement for the assignment of certain invention and intellectual property rights to the Company.

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Separation Agreements

On June 4, 2010 the Company entered into a separation agreement with Renaat Van den Hooff, the Company’s former Chief Executive Officer, whereby the Company will provide certain benefits to Mr. Van den Hooff, including: (i) payments of $12,500 per month for a period of eighteen (18) months; (ii) a non-statutory stock option to purchase up to 300,000 shares of the Company’s common stock, which option is immediately exercisable in full and at any time and from time to time through June 4, 2015 at a per share exercise price of $0.14 (the closing price of the Company’s common stock on June 4, 2010); (iii) full acceleration of all vesting schedules for all shares of restricted stock of the Company held by Mr. Van den Hooff; and (iv) for a period of eighteen (18) months following the date of the separation agreement the Com pany will maintain and provide coverage under Mr. Van den Hooff’s existing health coverage plan.  The separation agreement contains a mutual release of claims and other standard provisions.

As of September 30, 2010 the Company continues to be a party to a separation agreement with Kerry P. Gray, dated March 9, 2009.  Mr. Gray currently serves as the Company’s Chairman of the Board, Chief Executive Officer, and President.  Pursuant to the terms of the separation agreement, the Company provides or has provided, as applicable, certain benefits to Mr. Gray, including: (i) payments totaling $400,000 during the initial 12 month period following March 9, 2009; (ii) commencing March 1, 2010 and continuing for a period of forty-eight (48) months, the Company has and will continue to 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 s tock options remaining exercisable by Mr. Gray until March 1, 2012, provided that Mr. Gray forfeited 300,000 stock options previously held by him; and (iv) for a period of twenty-four (24) months following March 9, 2009 the Company is required to maintain and provide coverage under Mr. Gray’s existing health coverage plan.  The separation agreement, among other covenants, contains a mutual release of claims, certain stock lock-up provisions, and other standard provisions.

Milestone Payments

We are subject to paying Access Pharmaceuticals, Inc. (“Access”) for certain milestones based on our achievement of certain annual net sales, cumulative net sales, and/or our having reached certain defined technology milestones including licensing agreements and advancing products to clinical development.  As of September 30, 2010, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000.  Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars.

On March 7, 2008, the Company terminated the license agreement with ProStrakan Ltd. for Amlexanox-related products in the United Kingdom and Ireland.  As part of the termination, the Company agreed to pay ProStrakan Ltd. a royalty of 30% on any future payments received by the Company from a new licensee in the United Kingdom and Ireland territories, up to a maximum of $1,400,000.  On November 17, 2008, the Company entered into a licensing agreement for Amlexanox-related product rights to the United Kingdom and Ireland territories with MEDA AB.

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NOTE 15.                      LEGAL PROCEEDINGS

The Company was served in April 2009 with a complaint in an action in the Supreme Court for New York County, State of New York.  The plaintiff, R.C.C. Ventures, LLC, alleges that it is due a fee for its performance in procuring or arranging a loan for the Company.  The Company denies all allegations of the complaint and any liability to the plaintiff and will vigorously defend against this claim.  The Company has also made a counterclaim against R.C.C. Ventures, LLC for breach of contract and is seeking monetary damages.

NOTE 16.                      SUBSEQUENT EVENTS

We have evaluated, for potential recognition and disclosure, subsequent events that have occurred after the balance sheet date but before the financial statements were available to be issued, which the Company considers to be the date of filing with the Securities and Exchange Commission.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 2009 Annual Report on Form 10-K, referred to as our 2009 Form 10-K, which has been previously filed with the Securities and Exchange Commission on March 24, 2010, including the risk factors set forth therein.  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 and expected revenues and other payments are sufficient to fund our operations through the third quarter of 2011.  Our actual results could differ materially fr om those anticipated by such forward-looking information due to competitive factors and other risks discussed in our 2009 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 September 8, 2010, the Company entered into a worldwide distribution agreement appointing Novartis Animal Health, Inc. (“Novartis”) as the exclusive distributor of a veterinary version of Altrazeal® for marketing to the animal health sector.  Under the terms of the agreement the Company will supply Novartis with finished product for marketing in the global markets.  The agreement further states that other wound care products developed by the Company may also be covered by the agreement upon the mutual agreement of the parties.

On August 2, 2010, the Company received notice that Altrazeal® Transforming Powder Dressing was granted CE Mark Certification in all countries within the European Economic Area (“EEA”), which consists of 27 Member States of the EU and EFTA countries.  The CE Mark designation for Altrazeal® provides the Company with significant licensing and marketing opportunities throughout the EEA.  In addition, we believe that our having met the standards required for granting a CE Mark will allow us to more quickly gain approval for marketing Altrazeal® in Asia, South America, and other territories.  Receiving CE Mark Certification is mandatory for advanced wound dressings and is the necessary approval for marketing in the EEA.  With the granting of the CE Mark, the Company is evalu ating potential collaborations to launch Altrazeal® in the first European market.

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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.

Comparison of the three months ended September 30, 2010 and 2009

Total Revenues

Revenues were $61,617 for the three months ended September 30, 2010, as compared to revenues of $130,234 for the three months ended September 30, 2009, and were comprised of licensing fees of approximately $4,000 for two OraDisc™ licensing agreements, $23,000 of domestic royalties from the sale of Aphthasol® by our distributor, and product sales of approximately $34,000 for Altrazeal®.

The third quarter 2010 revenues represent an overall decrease of approximately $68,000 versus the comparative third quarter 2009 revenues, due primarily to a decrease of $25,000 in OraDisc™ licensing fees due to an adjustment in revenue amortization and the impact of the divestiture of Zindaclin® technologies in June 2010, which resulted in decreases of $2,000 in licensing and $39,000 in royalties.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold was $6,416 for the three months ended September 30, 2010, as compared to cost of goods of $7,785 for the three months ended September 30, 2009.  Cost of goods sold for each period was comprised entirely of costs associated with Altrazeal®.

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Research and Development

Research and development expenses totaled $295,781 for the three months ended September 30, 2010, including $32,409 in share-based compensation, compared to $376,191 for the three months ended September 30, 2009, which included $31,103 in share-based compensation.  The decrease of approximately $81,000 in research and development expenses consisted of decreases in scientific personnel costs of $34,000, regulatory consulting expenses of $11,000, direct research costs of $8,000, and clinical testing expenses for our wound care technologies of $29,000.

The direct research and development expenses for the three months ended September 30, 2010 and 2009 were as follows:

	Three Months Ended September 30,
Technology	2010		2009
Wound care & nanoparticle	$	24,478	$	4,636
OraDisc™		3,000		4,200
Aphthasol® & other technologies		1,396		28,617
Total	$	28,874	$	37,453

Selling, General and Administrative

Selling, general and administrative expenses totaled $666,205 for the three months ended September 30, 2010, including $25,699 in share-based compensation, compared to $981,212 for the three months ended September 30, 2009, which included $126,448 in share-based compensation.  The decrease of approximately $315,000 in selling, general and administrative expenses continues to reflect the Company’s restructured business plan which contributed to a decrease of $164,000 in administrative compensation, lower legal fees of $134,000, lower legal fees related to our patents of $30,000, lower consulting fees of $28,000, a decrease in travel expenses of $15,000, and a decrease of $13,000 in insurance expense.  These expense decreases were partially offset by an increase in director fees of $64,000.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled $206,454 for the three months ended September 30, 2010 as compared to $272,102 for the three months ended September 30, 2009.  The expense for each period consists of amortization associated with our acquired patents.  There were no additional purchases of patents during the three months ended September 30, 2010 and 2009.

Depreciation

Depreciation expense totaled $79,073 for the three months ended September 30, 2010 as compared to $46,424 for the three months ended September 30, 2009.  The increase of approximately $33,000 is attributable to our purchase of additional equipment during 2009 and placing certain manufacturing equipment into service in July 2010.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled $4,840 for the three months ended September 30, 2010 as compared to $6,676 for the three months ended September 30, 2009.  The decrease of approximately $2,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2010.

Interest Expense

Interest expense totaled $20,650 for the three months ended September 30, 2010 as compared to $1,926 for the three months ended September 30, 2009 and consisted of financing costs for our insurance policies and interest costs related to regulatory fees.  The increase of approximately $19,000 is attributable to interest costs related to regulatory fees.

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Comparison of the nine months ended September 30, 2010 and 2009

Total Revenues

Revenues were $528,481 for the nine months ended September 30, 2010, as compared to revenues of $435,057 for the nine months ended September 30, 2009, and were comprised of licensing fees of approximately $100,000 for a Zindaclin® milestone, $46,000 for two OraDisc™ licensing agreements, $5,000 for an Altrazeal® licensing agreement, $75,000 of foreign royalties from the sale of Zindaclin® by our distributor, $57,000 of domestic royalties from the sale of Aphthasol® by our distributor, product sales of approximately $138,000 for Aphthasol® and $107,000 for Altrazeal®.

The nine months ended September 30, 2010 revenues represent an overall increase of approximately $93,000 versus the comparative nine months ended September 30, 2009 revenues, due primarily to an increase of $138,000 in Aphthasol® product sales as we did not sell any Aphthasol® finished product to our domestic distributor during the first three quarters of 2009, an increase of $101,000 in licensing due to the achievement of a Zindaclin® milestone, and an increase of $5,000 in Altrazeal® licensing fees.  These increases were partially offset by decreases in Zindaclin® royalty fees of $64,000, a decrease in sponsored research of $38,000, a decrease of $12,000 in Altrazeal® product sales, a decrease of $8,000 in Aphthasol® royalties, and an adjustment of $29,000 for OraDisc™ licensing fee amortization.

Costs and Expenses

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2010 was $143,259 and consisted of $123,122 in costs associated with Aphthasol® and $20,137 in costs associated with Altrazeal®.  Cost of goods sold for the nine months ended September 30, 2009 was $22,783 and was comprised entirely of costs associated with Altrazeal®.

Research and Development

Research and development expenses totaled $948,960 for the nine months ended September 30, 2010, including $104,106 in share-based compensation, compared to $2,006,070 for the nine months ended September 30, 2009, which included $286,160 in share-based compensation.  The decrease of approximately $1,057,000 in research and development expenses was primarily due to decreases in direct research costs of $124,000, scientific personnel costs of $601,000, clinical testing expenses for our wound care technologies of $153,000, and regulatory consulting expenses of $202,000.  These decreases were partially offset by an increase in regulatory fees of $23,000.

The direct research and development expenses for the nine months ended September 30, 2010 and 2009 were as follows:

	Nine Months Ended September 30,
Technology	2010		2009
Wound care & nanoparticle	$	72,577	$	54,421
OraDisc™		6,187		163,326
Aphthasol® & other technologies		50,041		34,710
Total	$	128,805	$	252,457

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Selling, General and Administrative

Selling, general and administrative expenses totaled $2,405,123 for the nine months ended September 30, 2010, including $195,481 in share-based compensation, compared to $5,041,318 for the nine months ended September 30, 2009, which included $1,165,190 in share-based compensation.

The decrease of approximately $2,636,000 in selling, general and administrative expenses continues to reflect the Company’s restructured business plan which contributed to reduced costs associated with our sales and marketing efforts of approximately $1,199,000 due to lower head count and marketing expenses, a decrease of $1,097,000 in administrative compensation, a decrease of $395,000 in legal fees as 2009 included expenses related to the proposed York Pharma acquisition, lower consulting fees of $100,000, decreased legal fees related to our patents of $60,000, lower travel expenses of $25,000, and a decrease of $19,000 in administrative operating expenses.  These expense decreases were partially offset by an increase in director fees of $159,000, costs of $42,000 associated with our annual meeting of shareholders, co mmissions of $30,000 related to the Aiqilin licensing agreement, increased investor relation expenses of $18,000, and higher accounting fees of $11,000 related to the audit fees for 2009.

The net decrease in administrative compensation of $1,097,000 includes savings in direct compensation expense of $346,000 due to lower head count and lower share-based compensation expense of $726,000 as 2009 included the impact of certain vesting accelerations of stock options and restricted stock pursuant to the separation agreement with our former chief executive officer.

Amortization of Intangible Assets

Amortization of intangible assets expense totaled $699,252 for the nine months ended September 30, 2010 as compared to $807,551 for the nine months ended September 30, 2009.  The expense for each period consists primarily of amortization associated with our acquired patents.  The decrease of approximately $108,000 is attributable to our divestiture of the Zindaclin® technology in June 2010.  There were no purchases of patents during the nine months ended September 30, 2010 and 2009.

Depreciation

Depreciation expense totaled $179,053 for the nine months ended September 30, 2010 as compared to $126,002 for the nine months ended September 30, 2009.  The increase of approximately $53,000 is attributable to our purchase of additional equipment during 2009 and placing certain manufacturing equipment into service in July 2010.

Interest and Miscellaneous Income

Interest and miscellaneous income totaled $5,555 for the nine months ended September 30, 2010 as compared to $42,296 for the nine months ended September 30, 2009.  The decrease of approximately $37,000 is attributable to a decrease in interest income due to lower cash balances and interest yields in 2010.

Interest Expense

Interest expense totaled $37,138 for the nine months ended September 30, 2010 as compared to $1,926 for the nine months ended September 30, 2009.  Interest expense is comprised of financing costs for our insurance policies and interest costs related to regulatory fees.  The increase of approximately $35,000 is attributable to interest costs related to regulatory fees.

Loss on Sale of Intangible Asset

Loss on sale of intangible asset totaled $857,839 for the nine months ended September 30, 2010 and consisted of the divestiture of our Zindaclin® intangible asset.  There was no intangible asset divestiture for the nine months ended September 30, 2009.

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LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the public and 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 September 30, 2010 our cash and cash equivalents were $1,320,021 which is a decrease of $614,156 as compared to our cash and cash equivalents at December 31, 2009 of $1,934,177.  Our working capital (current assets less current liabilities) was $1,754,719 at September 30, 2010 as compared to our working capital at December 31, 2009 of $2,615,079.

Consolidated Cash Flow Data

	Nine Months Ended September 30,
Net Cash Provided by (Used in)	2010			2009
Operating activities	$	(1,897,136	)	$	(6,161,448	)
Investing activities		425,000			(7,027	)
Financing activities		857,980			---
Net (Decrease) in cash and cash equivalents	$	( 614,156	)	$	(6,168,475	)

Operating Activities

For the nine months ended September 30, 2010, net cash used in operating activities was $1,897,136.  The principal components of net cash used for the nine months ended September 30, 2010 was our net loss of approximately $4,737,000.  Our net loss for the nine months ended September 30, 2010 included a loss of $858,000 from the sale of an intangible asset (Zindaclin®) and substantial non-cash charges of $1,178,000 in the form of share-based compensation, amortization of patents, and depreciation.

The aforementioned net cash used for the nine months ended September 30, 2010 was partially offset by an increase in deferred revenues of $199,000 relating to the Aiqilin licensing agreement, an increase in accounts payable of $160,000 due to timing of vendor payments, an increase in accrued liabilities of $50,000, a decrease in prepaid expenses of $152,000 due to expense amortization, a decrease in accounts receivable of $145,000 due to collection activities, and a decrease in inventory of $99,000 due to product sales.

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.

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Investing Activities

Net cash provided by investing activities during the nine months ended September 30, 2010 was $425,000 and relates to the proceeds received in June and September 2010 from the divestiture of our Zindaclin® intangible asset. The Company expects to receive additional payments from the divestiture of Zindaclin® of $125,000 in November 2010, $250,000 in June 2011, and $250,000 in June 2012.

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.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2010 was $857,980 from the net proceeds of our sale of common stock in February 2010.

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

Liquidity

In July 2009, the Company restructured its operations in efforts to reduce operating expenses, optimize operations, and to conserve the necessary cash to further the Company’s revised business plan.  These conservation efforts continue to be in effect as part of the Company’s strategic plan for 2010.

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 fundraising using the Company’s effective shelf registration statement on Form S-3 or through the sale of non-core assets.

In July 2009, the Company filed a Form S-3 shelf registration statement where we may from time to time sell an indeterminate number of shares of 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 million.  The registration statement was declared effective by the Securities and Exchange Commission on July 23, 2009 (File No. 333-160568).

Management utilized this shelf registration statement in November 2009 by completing a registered direct offering of 10,714,467 shares of the Company’s common stock and 5,357,233 warrant shares to purchase the Company’s common stock for aggregate gross proceeds of $1.5 million ($1.3 million approximate net proceeds to the Company).  In addition, in February 2010, management completed another registered direct offering of 5,000,000 shares of the Company’s common stock for aggregate gross proceeds of $1 million ($0.9 million approximate net proceeds to the Company).  Approximately $22.5 million remains available under the Company’s 2009 shelf registration statement as of September 30, 2010.

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As of September 30, 2010, we had cash and cash equivalents of $1,320,021.  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.  At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth, if any, during 2010 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 out come of our current efforts to develop, receive approval for, and successfully launch our near-term product candidates.

Based on our existing liquidity, the expected level of operating expenses, projected sales of our products combined with other revenues and proceeds from the divestiture of non-core assets, we believe that we will be able to meet our working capital and capital expenditure requirements at least through the third quarter of 2011.  We do not expect any material changes in our capital expenditure spending during the fourth quarter of 2010.  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 a vailable 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.

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Contractual Obligations

The following table summarizes our outstanding contractual cash obligations as of September 30, 2010, which consists of a lease agreement for office and laboratory space in Addison, Texas which commenced on April 1, 2006 and separation agreements with former officers of the Company.

	Payments Due By Period
Contractual Obligations	Total		Less Than 1 Year		2-3 Years		4-5 Years		After 5 Years
Operating lease	$	290,598	$	114,633	$	175,965	$	---	$	---
Separation agreements		702,356		313,495		326,361		62,500		---
Total contractual cash obligations	$	992,954	$	428,128	$	502,326	$	62,500	$	---

Off-Balance Sheet Arrangements

As of September 30, 2010, 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.

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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 w hich 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 accounting policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on March 24, 2010.  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 stat ements 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 to fund our operations through the third quarter of 2011, 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 uncerta inties, 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 2009 Annual Report on Form 10-K, particularly under “Risk Associated with our Business” 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.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Concentrations of Credit Risk

Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, 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.  Currently, we utilize Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as our banking institutions.  At September 30, 2010 and December 31, 2009 our cash and cash equivalents totaled $1,320,021 and $1,934,177, respectively.  However, because deposits are maintained at these two financial institutions, we do not believe that there is a significant risk of loss of uninsured amounts.  We al so 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 September 30, 2010 and at December 31, 2009.  As of September 30, 2010, two customers exceeded the 5% threshold, one customer with 42% and the other customer with 32%.  Three customers exceeded the 5% threshold at December 31, 2009, each customer with 67%, 11%, and 10%, respectively.  We believe that the customer accounts are fully collectible as of September 30, 2010.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-14(c) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report, concluded that the Company’s disclosure controls and procedures were (1) designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s chief executive officer and chief financial officer by others within the Company, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in internal controls.

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to material affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings.

As of the date of this filing, there have been no additional material legal proceedings or material developments in the legal proceedings disclosed in Part I, Item 3, of our 2009 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 24, 2010.

ITEM 1A.  Risk Factors.

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our 2009 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 24, 2010.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. (Removed and Reserved).

ITEM 5. Other Information.

None.

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ITEM 6. Exhibits.

Exhibit Number		Description
31.1	*	Certification of Principal Executive Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
31.2	*	Certification of Principal Accounting Officer of ULURU Inc. Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
32.1	**	Certification of Chief Executive Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	**	Certification of Chief Financial Officer of ULURU Inc. Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
		*	Filed herewith.
		**	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act of 1934.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ULURU Inc.
Date:  November 15, 2010	By:	/s/ Kerry P. Gray
		Kerry P. Gray
		Chief Executive Officer and President
		(Principal Executive Officer)
Date:  November 15, 2010	By:	/s/ Terrance K. Wallberg
		Terrance K. Wallberg
		Chief Financial Officer and Vice President
		(Principal Financial and Accounting Officer)

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