Oculus Innovative Sciences Reports FY 2010 Financial Results and Reviews Upcoming Microcyn Product Approvals and Introductions Q4 (January, February, March) FY 2010 Milestones : Revenue of $2.2 Million, Product Revenue G

Innovative Sciences Reports FY 2010 Financial Results and Reviews

Microcyn Product Approvals and Introductions

Q4 (January, February,

March) FY 2010 Milestones:

For Fiscal Year Ending March

Upcoming International

PETALUMA, Calif. (June 3, 2010) -

Oculus Innovative Sciences, Inc. (Nasdaq: OCLS) today announced financial

and operating results for the fourth quarter of fiscal year 2010, ended March

31, 2010. During the quarter the company increased product revenue by

65% with increases in the United States, Mexico, India, China and Middle East.

Operating expenses for the quarter were down 9% from the same period last year

and in line with previous guidance.

reported total revenue of $2.2 million in the fourth quarter of fiscal 2010, an

increase of 51% over $1.5 million in the fourth quarter of fiscal

2009. Product revenue was $2.0 million, up 65% from $1.2 in the prior

fourth quarter primarily due to higher sales in the United States, Mexico,

China, India and the Middle East.

ago we had a single product offering in the United States. Now, along

with our partner Vetericyn, we have over a dozen products and formulations

introduced in the U.S. and our portfolio continues to expand, including recent

U.S. launches of the Microcyn Solution for post-surgical irrigation, the

Microcyn Dermatology HydroGel and just earlier this week, the launch of the

Microcyn Negative-Pressure Wound Therapy Solution," said Hoji Alimi, founder and

CEO of Oculus. "Pursuant to our two-year strategic plan, we

multiplied our single shot on goal to many shots on goal with five more expected

FDA clearances and product launches in the U.S. in 2010 alone. These

are significant market opportunities that are at the foundation for our targeted

annual global revenue growth rate of 50% to 100% and guidance of annual revenue

of $45 to $60 million by calendar year 2013 with operating profitability of

this organic growth, it's also important to note that with the recent U.S.

healthcare reform-and its central focus on improving the overall quality of

healthcare and patient outcomes while reducing costs-that an unprecedented

opportunity for Microcyn Technology emerges. Our proven track record

of improving patient outcomes and mitigating costs make Microcyn a primary

candidate in this evolving healthcare paradigm in which mitigation' becomes an

efficient cost-saving step in the healthcare continuum. In between the bookends

of prevention and expensive high-end medical intervention, Microcyn, deployed

before the disease takes control, can mitigate patient risk and suffering while

fourth quarter of 2010, product revenues increased $774,000 or 65% over the

prior year quarter due to higher sales in the U.S., China, Mexico, India, Middle

East and Singapore. Revenue in Mexico increased 13% over the prior

year period. Sales of our 240-milliliter presentation, which is

primarily sold to pharmacies in Mexico, increased 15% over the prior year to a

monthly average of 36,275 units with a combination of both unit growth and

higher selling prices. Sales to hospitals decreased 17% as a result

of lower unit sales which was partially offset by higher average selling

fourth quarter of 2010, Europe/ROW revenue increased $153,000, up 49% over the

prior year period, due to higher sales in China, India, Middle East, Singapore,

Netherlands and Italy, partially offset by a decline in Czech Republic. Product

revenue in the U.S. increased $521,000, from $79,000 in the quarter ending March

31, 2009, to $600,000 in the period ended March 31, 2010; with strong increases

in human and animal wound care, mostly related to television advertising and

sales initiatives sponsored by Innovacyn, Inc. and with a significant payment

from Union Springs Pharmaceuticals LLC, selling MyClyns, a germ-protection spray

to the professional and consumer markets.

revenue decreased $17,000 when compared to the prior year period due to a

decrease in the number of tests provided by the company's services

reported gross profit from the Microcyn-based products business of $1.2 million,

or 61% of product revenues, during the three months ended March 31, 2010,

compared to a gross profitability or 60%, in the prior year period. The slight

increase in gross margin was primarily due to improved product mix related to

certain U.S. sales, which had higher gross margins. This was

partially offset by higher shipping costs to Europe and higher manufacturing

costs in U.S. as we were manufacturing in two U.S. locations during the current

quarter. We also incurred losses due to the write-off of excess and

obsolete inventory of $40,000. Mexico's margins were 75% during the

quarter ended March 31, 2010, compared to 75% in the prior year

operating expenses declined $254,000, or 9%, to $2.7 million for the three

months ended March 31, 2010, compared to $3.0 million in the prior

year. Research and development expense declined 49%, to $320,000 for

the three months ended March 31, 2010, compared to the same period last year.

Most of the decrease was attributable to the reduction in personnel and related

expenses, as we converted our research development facility and the related

people to operational manufacturing, supporting the U.S. and European

general and administrative expense increased $57,000, or 2%, to $2.4 million

during the three months ended March 31, 2010, compared to the same period last

year, primarily due to stock compensation charges, up by $104,000, and higher

selling costs in Mexico. These increases were partially offset by lower sales

and marketing costs in the U.S. and Europe.

for the three months ended March 31, 2010 was $1.5 million, or $0.06 per share,

down from $2.2 million, or $0.13 per share, for the same period in the prior

year. Stock compensation expense for the quarter ended March 31, 2010 and 2009

was $288,000 and $151,000, respectively.

March 31, 2010, Oculus had unrestricted cash and cash equivalents of $6.3

million, compared with $1.9 million as of March 31, 2009. On May 3, 2010 Oculus

completed a $2.0 million debt financing with Western Technology Inc., which

further improves the company's cash position.

2010 Commercial and Regulatory Progress

has made significant progress in its commercial operations and regulatory

efforts, including the following highlights:

for the Fiscal Year Ended March 31, 2010

fiscal year ended March 2010, Oculus reported total revenue of $7.4 million, up

$2.0 million from the $5.4 million in the fiscal year ended March 31,

2009. The worldwide product revenue was up 51% from the same period

last year on a local currency basis and up 43% without adjusting for the decline

in the peso. The gross margin on product revenue in the fiscal year

2010 was 58%, compared with 62% in the fiscal year 2009, due to the cost of

transferring the manufacturing to the United States from