Good afternoon. And welcome to the Oculus Innovative Sciences Fiscal Third Quarter 2014 Conference Call. My name is Karen, and I will be your coordinator for today's conference. At this time all participants are in listen-only mode. At the end of the call we will be holding a question-and-answer session with company management. (Operator Instructions) As a reminder, this conference call is being recorded for replaying purposes. I’ll now turn the call over to Mr. Dan McFadden. Please proceed, sir.

Thank you, Karen. Good afternoon. I want to thank all of you for joining us today. With me on the call will be our CEO, Jim Schutz; and our CFO/COO, Bob Miller. We will open the call with Bob Miller's review of our financial results for the quarter, followed by Jim Schutz update on current activities, as well as our business strategy and plan moving forward. This afternoon Oculus issued a press release detailing fiscal third quarter 2014 financial results and recent corporate developments. The copy of the release can be downloaded from our website which is oculusis.com, that's O-C-U-L-U-S-I-S dot com or you can call Investor Relations at 425-753-2105 and we’ll be happy to assist you. Before we begin, I remind listeners that this conference call does contain forward-looking statements within 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 expect, to expand, would and anticipate 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 potential clinical studies or trials will not proceed as anticipated or may not be successful or sufficient to meet regulatory approvals or receive the regulatory clearance 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 included in the quarterly report on Form 10-Q and the annual report on Form 10-K. Identified product applications and/or uses are intended to highlight potential applications for the investment community and does not infer that the company is marketing for these indications. The company does not provide any assurances that such applications will receive regulatory approvals. Oculus disclaims any obligation to update these forward-looking statements. So, with that, I will now turn the call over to Jim Schutz, our CEO. Thanks.

Thanks, Dan, and thank you all for joining us today. On today’s call our CFO, Bob Miller will jump right into the numbers describing our quarterly results and as well giving guidance for the upcoming quarter. Following, Bob, I'll spend just a few minutes on an update on the activity during this past quarter and then a look ahead with our 12-month growth plan and then we’ll open up the call for questions from investors. Bob?

Thank you, Jim. First, I will indicate how we did in our guidance for the third quarter ending December 31, 2013. Secondly, provide the guidance for the fourth quarter ending March 31. And lastly, we'll summarize our financial results for the third quarter. How did we do on our financial guidance for the quarter ending December 31, 2013? We provided guidance for total revenue of in the range of $3 million and achieved $3.4 million and achieved $3.3 million. We provided guidance of the $3 million range for cash operating expenses and spent $3.2 million. We provided guidance of in the range of $800,000 negative EBITDAS and had a $1 million negative due to slightly lower than expected revenue and higher than expected cash operating expenses. What is our guidance for the quarter ending March 31, 2014? For the quarter ending March, we expect total revenue to be in the range of $3.2 million, cash operating expenses in the $2.9 million range and EBITDAS to be in the range of $900,000 negative. This guidance includes the recently announced total quarterly budget of $760,000 for the Ruthigen IPO, which includes about $400,000 worth of new expenses and about $360,000 of Ruthigen payables, which is already been expensed or not paid. All these expenses will be repaid by Ruthigen at the time of the IPO if and when they exited their IPO. Our major initiative for fiscal year 2013 is to restore our revenue growth rate by launching new products. What are some of the key product launches, which can positively affect this growth? One, More Pharma will be launching new products in the oral/dental and scar markets, and expanding into additional Latin American countries over the next six months. Revenue for Mexico represents 40% of the total product revenue for the…

Thank you, Bob. I'd like to cover two topics today before we open the call for Q&A. First a quick look back at our business during the quarter ending December 31st, and then second, look ahead in our 12-month plan for growth. So first the Middle East during the past quarter, team had a productive quarter, achieving several positive milestones that Bob mentioned but I’ll cover just a handful that we think prepares well for our future. On December 4, 2013, we announced our strong management FDA approval based upon solid clinical studies with good results. It’s a nice win for our R&D and regulatory team and it’s a really interesting product as patient weren’t speaking and a big market that Life Science reporter calculates as representing an estimated $2 billion plus as a market opportunity globally. Also in December, as Bob mentioned -- the Bob and finance team pay off our $3 million in debt related liability which was a terrific win and greatly improves our financial health. Because of our cash lack of debt and increased net worth based upon the December financing, we gained compliance with NASDAQ listing rules which again points to our financial health. Our team in Mexico also received an approval for the scar management product using our [USRCA] in clinicals. And our Latin America partner, that is conducting a second similar study comparing our Microcyn-based scar product to a popular topical product sold only at Mexico. That topical product that we’ll do the head-to-head study against, owned 36% of the Mexican’s scar market with annual sales of approximately US$6.7 million. More Pharma, our partner, that is targeting a launch of this new scar product in mid summer 2014. Our U.S. dermatology partner, Quinnova, was acquired during the quarter by a very interesting midsize…

(Operator Instructions) And our first question comes from the line of Chuck Lipson from CSL Associates.

Hi, there. Regarding Ruthigen, I guess it was about a year ago that we announced, that we were separating two companies and I guess now you probably said it. Will this be the last quarter of expenses associated with Ruthigen so that we can expect either an IPO by the end of this quarter or if not then what happens?

Great question, Chuck. We filed an 8-K on February 6th this year and in the 8-K, we attach those documents and provided summaries. But in essence, we completed all necessary agreements with Ruthigen, necessary to continue the IPO process exactly as you said. It’s happening on or before March, one way or another there either going to be IPO process or as we described in the 8-K the funding stops.

And then but you are going to have this asset that suddenly is just on hold, is that what you seek to license it to somebody else or it’s suddenly -- it’s either all or nothing it sounds like?

Well, the base technology is fascinating new technology and differentiated from what we are focusing on. So having spent a lot of money on developing the intellectual property this new technology, this new version [of course] asset, we’re not going to just have it sit on the shelf. So just as you said should the IPO not occur in the quarter ending March 31, 2014, we do have plans B, C, D, E, E, F, G and looking at how to monetize and move forward that fascinating new technology.

Okay. And then also regarding more on Mexico sometime around August to September we had lapped the pricing to them. So I had expected that more sales would start reflecting the increased volume at that same price. Maybe you can, when is we’re still growing volume wise or it seems to slow down, what’s happening there?

Yeah, they did, as you pointed out, they have and as I recall in the December quarter of last year they had a very, very large unit volume growth that occurred over what we had done I think in the prior year and that unit volume growth was -- had a couple of factors in it which you mentioned in the press release. One of which they were in effect selling their pipeline still and secondly we had sales that we recognized part of our distributor sales in Mexico before More Pharma on a question basis or sales to directly the hospitals versus the pharmacy. And so we had $133,000 worth of sales that occurred in the December quarter last year. So that actually increased the size of the revenue that we are comparing to this year, but yes, you are correct that we should be comparing more apples-to-apples starting in March on a growth rate. And as I pointed out we believe that we think that they will grow on average over the next several quarters at 15% rate.

15%. Is that including new products or is that…?

That’s a general growth, rate including new products, yes.

Okay. So that does show some slowdown with more on the older products?

Well, some of that it shows a little bit of slowdown, but at the same time we are trying to give you a guideline that we think is reasonable.

Okay. And the last question I have is, we have so many products coming out that sound like they are addressing markets of tens and hundreds of millions of dollars, yet we seem to be waiting for our European distributors till June to start selling. Am I getting overly enthusiastic about these products but don’t seem to be representing a large pickup in sales that I would have expected? What’s the holdup, scars, wounds? I mean, these are big markets ACNE. Maybe you could give me a little color on why we have to wait till June with this distributor in Europe to start selling?

Got you. I can answer first, Bob why don’t you answer second half. We are excited by the scar product both in the U.S. and New Mexico, but we don’t yet have a European approval. So if I was tongue tight earlier and suggested that we have European approval for scar product, we did not have. In the U.S., our U.S. dermatology partner in Philadelphia Quinnova has a planned launch in the June timeframe. Their timeline has one of the challenges associated with partnering rather than selling us directly ourselves. In Mexico, interestingly and coincidently, our partner there is also targeting scar product launch in June/July timeframe. With the additional information that they are doing a head-to-head study, most likely did in the U.S. to confirm safety and efficacy against the number one product in Mexico. That’s not a big product here in U.S. So although our clinical trial conducted in the U.S. to show safety and efficacy for scar product management was helpful, they want go ahead against the market. Is that specific to the scar product?

Yeah, it does. I would just like to see it in the sales numbers at some point sooner than later.

Yeah, us too. And that in-patient is felt and cheered also. Bob I know there was the second half to that question?

I also say that for us and just as getting our guidance, it’s really difficult to forecast exactly what the ramp up is going to be, it’s probably easier for us to do that like Quinnova there is ramp ups they done in the past and now they have more sales people. So we did expect to see a fairly quick uptake on the scar product from Quinnova. Obviously Mexico is a smaller market than the U.S., so that’s going to be a smaller number especially given the size of our business down there. In Europe we really need to find a partner over there for a lot of organic products as Jim mentioned and partnering finding the partner they would then lead to the ramp is usually a longer drawn out process. So that’s why we hesitate to put a bunch of numbers into the ramps if you will.

I will get back in queue.

Okay, thanks.

Thank you. And our next question comes from the line of Jack Wallace from Sidoti & Company.

Good morning, Jim and Bob how are you? Or good afternoon, how are you guys?

We are doing good, Jack. Thank you.

I just want to follow up on the Mexico question. If you were to compare this quarter apples-to-apples to strip out some of the pieces of the figures there from last quarter that you are making it a little bit difficult to just look at the numbers straight on, how you were doing there year-over-year from the demand standpoint if we separate that out?

Year over year it’s pretty strong. If you separate it out, in fact More Pharma is contending that they were clearly double-digit growth over the year on a year-to-year basis. So now the other thing that affected the quarter in More Pharma and we know that Mexico although that this happens every year tends to shutdown in the last two weeks of December. In fact More Pharma is turned down the lights off it’s now that is fairly common in Mexico. We generally tend to have seasonality to that in Mexico. We didn’t see it the prior year because they were still in the pipeline. So it’s difficult we think to make any kind of influences from the quarter-to-quarter versus the year-to-date.

Yes. Thanks. That was helpful. And then why don’t you give me a little bit more color on the progress with the selling in the Walgreens, any more you can give me on that?

It’s -- the jury still out on that. We are -- they are still stocking it. They are still selling it. We don’t have a good -- a lot of good feedback on the exactly how they are doing and restocking at this point and that’s why we are sort of begging off till next quarter we will provide that to you.

Okay. And what are the, I guess, the -- what’s the situation you are looking into partner in the EU for your derm opportunities? Is this something that we can expect to hear some more, I guess, tangible, I guess, comings and goings there in the next couple of quarters or just we are going to wait till end of the next year. How do we think about hearing something about in EU partnership?

Well, it certainly helps to have two of the approvals in hand speaking personally with a long a history of partnering. So that helps and then we got two more in the queue. So two in hand are both acne liquid and gel and the two in the queue are atopic dermatitis and the scar management product. Two in two gives us an interesting half of the bag, quarter of bag for larger European derm company. I won’t tell you this and this is not a hand, this is not intended to be connecting the dot, but the new owner of Quinnova certainly treats us. Besides you can look them on the web to see how big they are, they are private, but they clearly are interesting in the U.S. dermatology space and we think that that could be very interesting for us to proceed. That having been said, let me answer you a good short question on timeframe. We would like to do it when the time is right, when the deal terms are right. We are not going to pull the trigger just to do something quick, if that answers your questions, Scott?

Yes. Thanks and then lastly here with the, if the new product launched outside of Mexico and both inside of the Mexico, actually that matter, are we getting the same transfer rate, the same kick back that we were under normal terms?

In Mexico, you are saying?

Mexico and then elsewhere with some of the new product approvals.

If we can unless use transfer price that kick back (inaudible).

Sure. Yes. Excuse me.

(Inaudible)

So, actually, there is a part of the agreement Mexico that we get a increase in the price that every year actually based on the increase, the inflation now in Mexico actually I think popped up maybe almost 4%, 3.8% or something. So we will automatically get that increase that improves our pricing down there. In terms of the scar products down there, that’s something that…

I can help to answer it.

Yes.

If the method of manufacturing and packaging is similar then, yes, it typically does follow the same transfer and pricing schedule in existence now. The scar product has a couple of additional steps in the method of manufacturing and the packaging is significantly different. So we are negotiating different pricing there. But you can live with the rule of thumb that, if it’s something similar to what we are currently selling assume similar transfer prices.

Okay. Thanks. One more question here, looking at the book value with $3.4 million now and we know we need $2.5 million to maintain NASDAQ listing. Looking at the guidance, looking at minus $900k EBITDA, so we are going to get closer to that $2.5 million the book value again, what’s the plan to make sure we maintain the NASDAQ listing requirements if the risk-in deal does not go down?

Yeah. Obviously, the first choice of the plan is to have the Ruthigen deal occur and you are right, if doesn’t then, we may have to supplement it with the funding.

Is there a situation here where you might rush into an EU partnership agreement that would be something similar to what you have done in Mexico, whether it would be an upfront payment, et cetera?

That’s possible, yes. And I think that we have got enough as Jim pointed out, we got four products that would be attractive to a large derm company and would merit some upfront money, at the same time given the partnering process, it generally takes a fair amount of time.

Got it. And then just tying this back into the guidance, it looks that you are going to start getting new product launches starting in Q1 fiscal ’15, is that correct and last quarter of fiscal ’14, which we are entering in now seems to be at least bottom in terms of year-over-year revenue out performance, is that a fair assumption?

We actually have one of the product launches taking place right now with their own sales force, taking back the product from southwest. And as Jim pointed out, the oral product launch in Mexico is starting this quarter coming up in April, so that’s pretty quick. The scar in the United States is more like the middle of the year, fiscal year, summer I think instead. So we have a lot of -- we think that a lot of these product launches will have an impact on fiscal year ’15.

Is the cash flow breakeven revenue figure still about $3.5 million per quarter?

I think it’s a little -- our cash operating expenses, we have indicated to be about $2.5 million. We will continue to provide that as guidance generally and our operating margins and gross profitability would probably be 69%, probably a pretty good number. But 68%, 69%, so yes, it would probably be a little bit higher than $3.5 million.

Okay. Thanks.

I think we have said $3.5 million to $4 million.

Okay. Thanks. That’s will be all for me.

Excellent.

Thank you. And our next question comes from the line of Dan Trang from Stonegate Securities.

Yes. Following-up on some of the color you provided about Walgreens, are there any other retailers that you are exploring right now?

Our partner there in Innovacyn is a privately held company and they ask us to see two certain things in confidence. So there is some we can’t share, some we can share, Dan. What they shared with us and I think we’ve shared publicly is should we see success with Walgreens. There are other brick-and-mortar stores that we would like to pursue, that we could pursue. But as Bob said, we’re in the wait-and-see mark with Walgreens to see how the reordering process going. So, sorry to be up to us for not answer the question. We like to respect the confidentiality of your question partner.

Okay, regarding the partner, you’re looking for in Europe for your dermal products, I’m kind of wondering if you could provide some color behind some of the criterion you are looking at as far as choosing a partner?

Great question, if we were -- since we’re U.S. centric, it seems Valeant has bought just about everything of decent size in the dermal space in the U.S. They’ve been recently active overseas also. So I think they’re sure and unsure targets but they are all a handful of the established European dermal companies that do intrigue us criteria to enter, pricing would be expertise, wound bag, positioning of the product, we would hope to be way up in food chain in their bag. And then deal terms associated with royalties upfront in potential prices. So no rabbit out of the hat, that kind of basic blocking and tackling. But I will tell you at the risk of reputation, the permitting processes is currently benefited by having two products in hand and two additional on the queue.

Okay, thank you.

Thanks Dan.

Thank you. (Operator Instructions) And our next question comes from the line of Bob Robbins from Robbins Capital Management.

Hello gentlemen. I would like to ask you going half way around the world, India, I recall, you mentioned that Microcyn is approved as a drug in India. And you’ve been there for a while, is that recall and there would seem to be this many people who could afford Microcyn and Carrasyn and whatever in India. Vetericyn and whatever as they are in Mexico. Why are we not getting revenues to take of in India?

I think one of the -- they’ve been selling primarily the liquids only down there and it's been lock head labs. They’ve been selling it right for three four years. We sell it to them in block. If the pricing is fairly low to the retailer and it probably needs to be in India. We do have (inaudible) to get a dermatology approval, I think in India, in which case again we would probably want to find a different partner. The dermal, I mean, perhaps the dermal partner that we find in Europe would be more than international worldwide. Dermal partner too perhaps cover India and some of the other countries we’re involved in or not involved in. So you are correct. We are fairly widely distributed in India with outcome at this point in time. But one of the reasons that sales is fairly lowest because we sell it to them in bulk. We don’t sell -- we don’t bottle and label. We ship it to in large containers and they pay for those large containers. Therefore the revenues much less what is in Mexico for instance.

Thank you. One more follow-up on Mexico, you mentioned that you have a new approval on oral and wrote application. That sounds awfully close to pursuing the common cold and is that application including nasal as well as oral?

You’re asking good questions. I'm glad you asked me this because we’re excited about those new product. So bear with me for a second, Bob. The partner, More Pharma, there sold a product that’s an older Vetericyn product called Ilosone is the brand and its in liquid and capsule form. Long-term antibiotic typically prescribed to adult and children, one of the big targets for them is strep growth but interesting to us to have been a liquid product for oral and throat infection. We are anticipating some very interesting opportunities in the back of the mouth, out of the throat in combination with more former current product line. As because I know you do a lot homework, take a moment to go on the More Pharma site, they have do have an English version. You can see how they’re branding and selling Ilosone and some of their drug products. But we think, the first oral care approvals for us in Mexico could be something interesting. It’s not just an over-the-counter mouthwash. This could be a high-price, high-margin interesting new product for us.

Okay, thank you.

Thank you. And our next question comes from the line of George Dahl from Newport.

Hey George.

How are you?

Doing good, doing good.

Good. What happened with Vetericyn that you said the sales went down?

Well, the reason, there were the two things that affected the sales of Vetericyn. And actually we combined the Vetericyn in over-the-counter into one number. But the reason for Vetericyn is one just a seasonality, the seasonality and I hate to use the word weather but I mean, you talk to anybody even, Karen, who is our moderator today sitting in DC with 8 inches of snow. And yes, they had storms last year. But the seasonality makes it very difficult to compare quarter-to-quarter with finding in the Vetericyn businesses. The strength of our Vetericyn business is actually in the horse area and the farm area, both of which are affected lot by the weather. The second reason is the competition. We’re finding that according to Innovacyn, there is a lot of competition of other products. There are some HLCL type products that are starting to come to compete against this. But there is also an off lot of just regular wound care products that have come on the market to in effect compete with Vetericyn. George, both those factors.

All right. Thank you very much.

Yeah. You’re welcome George.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to management for any concluding remarks.

Thank you again for joining us. Look forward to continued news releases in our next call. Thanks everyone.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.