Greetings and welcome to the Oculus Innovative Sciences, Inc. fiscal fourth quarter and year end 2008 financial results and corporate update conference call. (Operator Instructions) It is now my pleasure to introduce your host, Mr. Dan McFadden, Director of Public and Investor Relations.

Good afternoon everyone and thank you for joining us. With me on the call today are Hoji Alimi, our Founder and CEO along with Robert Miller, our Chief Financial Officer. We will open today’s call with Hoji’s discussion of corporate highlights from the most recent fiscal quarter as well as an update on our United States clinical program based on the Microcyn Technology. Following Hoji, Robert will review our financial results and then we will open up the call for questions. This afternoon Oculus issued a press release detailing fiscal fourth quarter financial results along with a review of recent corporate developments. A copy of this press release can be downloaded from our website at www.ir.oculusis.com/releases.cfm or you can phone Investor Relations at 646-536-7002 and we’ll be happy to assist you. Before we get started we would like to remind listeners that this conference call contains forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by use of words such as will be, intends, will enroll, and the initiation, among others. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially including risk inherent in the development and commercialization of potential products, the risk that current clinical studies or trials will not proceed as anticipated or may not be successful or sufficient to meet regulatory standards, or receive the regulatory clearances or approvals, the company’s future capital needs and its ability to obtain additional funding and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission including the Quarterly Report on Form 10-Q, the Annual Report on Form 10-K and Oculus Innovative Sciences disclaims any obligation to update these forward-looking statements. I will now turn the call over to Hoji Alimi, Founder and CEO of Oculus Innovative Sciences.

Thanks Dan and welcome everyone to our quarterly conference call today. As always I will talk about on this call, about our potential challenges, good and bad as well as the exciting opportunities that lie ahead for our business. However we have significant positive things to talk about and opportunities and no bad news on any fronts including our regulatory and other business functions. In the first part of the call I will talk to you about the fiscal year 2008 ending March 31st and in the second part of the call I would like to cover the goals and objectives that as a team at Oculus we will focus on in fiscal year 2009. Last year we focused on delivering two major milestones to the market. First and foremost completing our Phase II trials in mildly infected diabetic ulcers and then delivering positive results. And secondly reducing our overall expenses in the international markets and focusing our resources and funds on the US clinical programs, as Robert and I have consistently been giving that guidance to the market. We have successfully delivered on both of these milestones and in March, 2008 we announced positive Phase II data. Let me remind everyone on this call the importance of the data from this trial. We challenged Microcyn Technology against one of the most potent antibiotics in the world used in treatment of mildly infected diabetic ulcers. Levofloxacin is a potent broader spectrum antibiotic with nearly about $2.4 billion in annual sales last year. It is also referenced in the IDSA guidelines for treatment of mildly infected diabetic ulcers. We thought this would be an appropriate antibiotic to be used and challenged Microcyn Technology in the Phase II trial. In this trial on May 24, Microcyn showed a 93% cure and improvement…

Thank you Hoji. Before I get into more detail on the financials, I’d like to reiterate some of the comments that Hoji made that our strategy is first and foremost to focus on the clinical program in the United States since the US is the largest addressable market in the world for Microcyn. Last year as Hoji mentioned, we made a strategic decision to focus our resources on the US clinical process and to dramatically reduce international expenses. We achieved both objectives by completing the Phase II trial with good results, as Hoji discussed, and reducing our international expenses by $4 million compared to last year. This year while the primary focus is on the execution of the clinical process in the US we are now pursuing near-term commercial opportunities both inside and outside the US and business development deals to expand Microcyn’s geographic foothold and introduce new innovative products with the objective of growing our revenue and cash inflow. The growth of this revenue generates non-dilutive funding for our clinical programs and provides validation and additional clinical evidence of efficacy and safety of Microcyn. Furthermore it is consistent with our vision to be the topical standard of care in the treatment and irrigation of chronic, acute and trauma wounds in the world. Let’s first talk about Mexico. The objectives in Mexico for the fiscal year 2008 were first to break even by the end of the year and secondly reduce operating expenses. We achieved both objectives. Mexico broke even in the last month of the year and reduced operating expenses by $2.6 million for the year. As a result of paring down the Mexican sales force from over 70 to about 30, we decided to focus our sales effort on growing the more profitable pharmacy sector and de-emphasizing the…

(Operator Instructions) Your first question comes from the line of Dan Stall – Private Investor Dan Stall – Private Investor: I just wondered if you could address the investors who were at a cost basis of $18.00 a share looking at the stock trading today at $3.35 a share, what can we expect to see over the next couple of years or regain the money we put in back when it was a private placement?

Actually we do have four members on our Board that they are also at the same cost basis and when we talk about building value for our shareholders we have to build the company for success. And that success can turn into value for our shareholders not only getting you your cost basis but we are hoping to exceed that. And in order to do that is we need to fire at all cylinders. Last year when we went public and as you said, you are on a cost basis of $18.00 and we went up at $8.00 there were two major I would say [inaudible]. One literally there were, we had people saying in the market that there is no way that these guys can execute on Phase II trial and there is no way their product is going to beat levofloxacin. That was a huge risk to the company and to our investors. We had to focus on that. We had to execute. We did overcome that and we came out actually very good. So the Phase II is done, the data is out and then the second thing was we needed to make sure that we control our spending outside the US and we did that as Robert mentioned so I don’t want to sound redundant. But moving forward in order to increase value for our shareholders and again the value is going to be determined by numerous factors in the market that I don’t think anyone can predict and just to give you an example, we were at $11.00 a share last year without Phase II, without breaking even, without a lot of things that we have today and today with a very strong Phase II, we beat levofloxacin one of the greatest antibiotics in the…

Your next question comes from the line of Richard Griffith – Private Investor Richard Griffith – Private Investor: I’m not sure that I understand the next process as far as what I would call Phase III. I attended the Shareholders Meeting last September, October, and at that time it was felt that rapid progress could be made on the next phase really taking less time because of the nature of how the clinical trials would take place as opposed to how they had to be conducted for Phase II. So I’d just like to have you run down where are you and timeframes and so forth on getting what I would call the full approval of the product as a, for treatment rather then cleansing?

So let take you back to end of September and fall of last year, at that time we were enrolling patients and our patient enrollment was completed based on the announcement we were sending to the market. I think the last announcement came out at the end of December of last year, that last patient, last evaluation was done. But that means that all patients were enrolled, all patients were evaluated, very similar to a financial audit then now you will have an outside audit firm, which in this case is a CRO, they come in and audit all your test results to make sure what you’re about to send to the agency is actually completely cleaned out. There are no errors. The last thing you want is to send something prematurely to the agency and you have some errors in there. It will completely muddy the water with the agency. That was done and then we announced the data or what we refer to as top line data, at the DFCon in Southern California. And all these events we’ve been sending our news releases and I’m hoping that you’ve been receiving them. Where we go from there, is the company has the choice of immediately jumping into a trial for Phase III trial and you can push ahead and you will take the risk of going into a trial that FDA has not reviewed, they are not comfortable with, and they may come back and question you. So in this case it is best to sit down with the agency. You set up a meeting face-to-face and that’s what we are planning to do. We made that request with the agency and that meeting really is not up to the company, it’s up to how many other companies are…

I would like to give you very candid answers and I know you’re looking for a certain number, but I’m trying to communicate here and I will give you a standard time, there are timeframes where analysts are expecting anywhere around two years to complete the pivotal trials. However, I want to caveat that with the fact that there are patient enrollment, you want to make sure that enrollment of the patients are happening fast enough. You want to make sure that the agency can give you a blessing. If they come back and say, no we want to take another four months, what I’m trying to get at is we don’t control the agency and we need to make sure we get through the agency the green light and then we can push ahead. But the expectations generally from the analysts I have been talking to, what they’re communicating to the market is about three year. But one thing I do want to again go back and mention is the drug trial, I hope this, I’ve been very clear on this call, if not I’m trying to clarify; the drug trial remains a critical path for our company. We are going to focus, we are going to execute and we want to be very conservative, don’t cut corners, provide quality data to the agency and get that approval. Not that that approval not only is important for commercialization but potentially for partnership is very critical. At the same time our focus is going to be looking at other way to also increase value for our shareholders. So for example, again generating revenue outside of US which it was not a priority on purpose for last year because again as a response to the market we did cut back, we…

The reason I don’t want to answer that is the day that we made that announcement, again to be very candid is we have had competitors for three four hours looking through our website and everything. We don’t want to give timelines and we would like to surprise the market. We are diligently working on those and what you can expect as an investor is over this year, there will be announcements as new products are coming out timed with the new VP of Sales and Marketing that is going to come in and then we’re going to tie R&D to sales and say, okay we got this product out to the market, not long trials to get approval, or outside of the United States you can get approval very quickly, how can we commercialize this, how can we generate more revenue. And more revenue has to translate into more value hopefully for the company. So those are the areas we’re going to push extremely hard. We did not do this on purpose last year because candidly we did not want to lose credibility with a lot of analysts, a lot of investors that they came in and they even had allergic reaction if they would see that we are focusing anything outside of our clinical program. But now we delivered, Phase II is done, beautiful results. There is no questions on our technology, now I think we need to go back and address near-term commercialization and market opportunity for us. Richard Griffith – Private Investor: Just one more question on the new, the vac product was that manufactured by our company or will it be manufactured by a third party company?

Let me make one very clear because these are public records and I want to make one thing very, very clear so there is no misrepresentation. This is not a vacuum assisted therapy device out there. It’s actually very different then KCI and [inaudible] however it will compete with there’s. Answering your question is this is contracted to the outside but we are trying to, again to be fiscally responsible we are balancing whether we need to hire engineers to do this or can we contract this for less then $50,000 or $100,000, whatever it is to get prototypes done. So most likely a lot of this is going to be as much as we can contract out we will making sure we don’t lose IP and protect our patents but then we don’t take the cost of ongoing internal resources.

Your next question comes from the line of Jim Martin – Private Investor Jim Martin – Private Investor: How soon do you anticipate revenue will start flowing in China and from say $20 million of revenue what percent of that would be profit?

Okay so let’s go back and answer your first portion of your question. I want to make sure again we are managing expectations very correctly. When I referred to the $20 million revenue, what I’m saying is when you penetrate the market and you reach the same market penetration rate as we did in Mexico that can potentially turn into $20 million in revenue from China. How fast that is going to happen it depends on the execution, on Sinopharm and our distributor in China. We are not in control of sales and marketing but we are providing full assistance and why, because we do want to make sure that they are positioning it correctly.

Generally our margins down in Mexico and they’re be fairly similar to that, tend to be in the 70% to 75% level on the gross margin basis. And we would expect margins like that when the volumes get to be a reasonable level.

And we are selling final finished product to China and avoid any manufacturing in China to avoid any potential black market issues there. Jim Martin – Private Investor: How many shares are outstanding right now and do you anticipate having to issue more shares any time soon?

In terms of the funding let me answer that. In terms of the funding what my job is to keep a finger on the pulse of the market and have options available to The Board. The last thing you want for your shareholders is that management wasn’t paying attention and they were not creating options to fundraise and we need to build the company for success in long-term and that’s I believe how you can create value and become attractive whether its an [inaudible] strategy you’re going to get acquired, or you’re going to commercialize. So we’re going to push hard on partnerships, we’re going to push really hard on [phase] that is non-dilutive for example increasing revenue, that’s one area that we are pushing hard and the other one is at the same time looking at the market. All those options, its going to be evaluated by The Board, at the time, in advance and figure out when would be appropriate for any potential fundraising. So again selling equities is not the first choice. But again we will have all those options available at all times to make sure that we are being fiscally responsible and you don’t want to drive the company onto the edge of the cliff financially and that would be irresponsible.

The primary shares outstanding are about 16 million; 15.9 million.

Your next question comes from the line of Unidentified Analyst – Rodman & Renshaw Unidentified Analyst – Rodman & Renshaw: Some brief clarifications, you did say that you were going to ship initial product to China in the fall of this calendar year, is that correct?

That’s correct. Unidentified Analyst – Rodman & Renshaw: And when would you expect to begin seeing revenue from sales in China?

That’s something that we are still discussing with our partners in China. The initial shipment of the product is going to be used for sampling there and getting more hospitals to do more trials. They want to do significant amount of marketing to these hospitals making sure everybody understands what Microcyn is and how it should be used. And one of the major challenges with Microcyn, as simple as that sounds, you pour it on the wound, you treat it, you moisten it, you get rid of the infection, the most critical questions we get back from physicians is how much do you use? How often do you use it? Do you [spay] once, do you [spay] four times a day? So in order to get it incorporated into their standard of care in those hospitals you have to do either trials or do trials at reputable hospitals that you can go back and say, okay based on all this data, this is how you do it and that’s how you reduce the use of [systemic] antibiotic. That’s the first step that you’re doing so I think the majority of their focus for the remainder of this year I would say partially for the beginning of next year is heavy marketing, sampling and trials. And they are doing trials not only in wound care, but they are even extending it to outside of wound care which we will send announcements out once those trails are done. But I fully understand, I’m going to sit back for a second and put my investor’s hat on, as an investor I want to hear next quarter you’re going to ship this much, this much profitability and this much revenue is coming in. But then we put our management hat on and CEO hat on, we all want to make sure that I’m not just pacifying the market and shipping product to China and then a year from now realize, oh my God, they didn’t take their time to do the right marketing, they didn’t position it, now the product is not taking off really well. I have seen a lot of those kinds of products that failed in the markets. So that’s why it’s really important to just build the foundation correctly and then launch it and I’m very definite that penetration in China is not going to be a challenge for them. If they get these trials done correctly. Unidentified Analyst – Rodman & Renshaw: Then with respect to the pivotal trial program, how quickly following the end of Phase II meeting with the FDA would you expect to initiate that program?

We would like to initiate it right away so what I mean by initiation, and some maybe already have initiated, so in other words we picked a CRO firm, we’ve been talking about sites, a lot of leg work has been done. So in other words we are not just waiting for the FDA and then go back and take time to do this. So we are doing all our homework so what we are looking for for the agency to say, this proposed trial design is appropriate for your next stage of trail. Yes, levofloxacin can be used or they’re going to come back and say, no use a different antibiotic in your control group. Once they bless that our strategy is to run to the sites and start getting IRB approval. And again, for a lot of private individuals we have on the call, those are the ethical committees that each site, each hospital, that they have to approve your protocol before you’re allowed to start enrolling patients. That IRB approval process is, it varies from site to site. There are hospitals that they have approval in a month and there are some that literally have taken three, four months. But from initiation, we will initiate it immediately but right after we get blessing from the agency. Unidentified Analyst – Rodman & Renshaw: Just to revisit the guidance for the remainder of fiscal 2009, in terms of R&D spend, what would you project for the next three, four quarters in fiscal 2009?

We have not really provided guidance specifically on that, but I’ll give you some general thoughts. The real guidance that we’ve been providing is modified net loss, minus non-cash expenses, minus outside clinical costs and those we feel for the first two quarters of fiscal year, that’s the quarter ending June and the quarter ending September, will be in the $4.5 million to $5 million range. But what we do see is that our, we are going to continue to build slightly our R&D teams as we’ve done over the last year, and we’re of course going to have as Hoji mentioned increasing outside clinical costs as we get closer to the pivotal trial as we get closer to that, toward the end of the year. So that we will expect to see that increase over the first couple of quarters. So that’s the guidance that we are providing at this point in time for the cost side. Our SG&A expenses we don’t see that that’s going to increase that much. In general terms we think that’s going to be fairly steady. We did pass the SOX or we will be passing the SOX this year and we’ve spend money on SOX. We expect that to be fairly constant as well as our legal and accounting fees compared to last year.

Your next question comes from the line of Greg Gust – Roth Capital Partners Greg Gust – Roth Capital Partners: Could you give us a breakdown of the $1.4 million in other non-operating?

Most of that is foreign exchange relating to our inter company loans with Mexico our subsidiaries, Mexico and Europe. And those are non-cash expenses and that represents about almost 80% of that number.

What we are trying to do is when we make an investment for example in Mexico, and we used to send money to them or [inaudible] operation, what you are looking at that, if you are taking this as a loan to that subsidiary so when for example Netherlands is up and ready and they are shipping product and they become profitable, instead of taxes they owe significant amounts of money to the US, and for those are the kind of tax things that we have to manage.

Those are in denominated and US dollars so that we have a, there’s a foreign exchange currency transaction that occurs at the end of each month where we translate it between pesos and dollars and euros and dollars. And as a result of the change in the dollar, the decline in the dollar over the year, we’ve had in effect we’ve had a gain that gets translated in that other income number and that relates to FAS 52 which is the current method of accounting for that treatment. Greg Gust – Roth Capital Partners: So going back to the Phase III trials then, so we really should see the R&D really escalating most likely in the third quarter of this fiscal year, is that correct?

So as we get close to, as soon as we hear blessing from the FDA that we are good to go, obviously you will see increasing costs for, because we are initiating the next stage of the trials.

I’m sorry, no further questions in queue.

And one last thing I do want to mention since the question came up about China’s revenue, one thing that we will do is as we make progress with our partners officially in India as well as in China and we haven’t talked about [Mycleanse] the spray that we launched in the US and actually we are getting very excellent response back from EMT especially in certain areas in certain states and the meeting there, there is actually several expectations. We will provide revenue forecast to the market and to our shareholders and but I want to make sure that we are managing expectations and what we are telling the market right now, is we are building the foundation for that kind of revenue growth even before the India approval. So as we get there and we are putting that as a priority for us and we are hiring a VP of Sales and Marketing I think we will get there pretty quickly and provide additional information to the market when we are ready. With that I’d like to thank everyone for being on the call, should you have any additional questions and it was not addressed on this call, please feel free to contact Robert and I at the office, 707-782-0792. We’ll be more then happy to speak to you. Thanks so much.