Oculus Innovative Sciences Reports Third Quarter Financial Results U.S. Dermatology and Rest of the World Sales Drive Product Revenue Growth of 40% Conference Call at 4:30pm ET Today PETALUMA, Calif

Innovative Sciences Reports Third Quarter Financial Results

U.S. Dermatology and Rest of the World

Sales Drive Product Revenue Growth of 40%

Conference Call at 4:30pm ET Today

PETALUMA, Calif.--(February 4, 2016)--Oculus Innovative

Sciences, Inc. (NASDAQ: OCLS, warrants OCLSW), a specialty pharmaceutical company that develops and markets solutions for the treatment

of dermatological conditions and advanced tissue care, today announced financial results for the third quarter of fiscal year 2016

ended December 31, 2015.

Total revenue was $3.8 million for the third quarter, an increase

of 19%, when compared to $3.2 million for the same period in 2014. Product revenues were up 40% from the same period last year,

led by increases in the United States dermatology market and the rest of world.

"We made a strategic decision in

late 2014 to change our business model and enter the U.S. dermatology market directly. We deployed a direct U.S. sales

force and over the last four quarters, launched a total of six new prescription dermatology products. These efforts,

combined with strong pricing reimbursement and rapid sales ramps, resulted in healthy sales growth during this quarter and

over the last twelve months," said Oculus CEO Jim Schutz. "We believe our growth in dermatology sales will continue

as we launch new products, continue to ramp sales for our existing products lines and hire additional sales people."

Results for the Three Months Ended December 31, 2015

Product revenue in the United States was $1.0 million for the

three months ended December 31, 2015, as compared to $647,000 in the quarter ended December 31, 2014. Product revenues increased

$363,000 or 56%. Sales increased primarily due to continued growth in four existing products for the treatment

of atopic dermatitis, scar management and surgical procedures, and the addition of two new products, including Mondoxyne, a pharmaceutical

indicated for severe acne.

Product revenue in Latin America for the quarter ended December

31, 2015, of $1.3 million increased by $185,000, or 17%, when compared to the same period in the prior year. This increase was

dampened by a 22% decline in the value of the peso from the same period in prior year. The sales growth in local currency, over

the same period in the prior year, was 43% with strong increases in most product categories. The increase in revenue is primarily

attributed to the larger distribution network and breadth of Oculus partner, Laboratorios Sanfer, S.A. de C.V.

Product revenue in Europe and the rest of the world for the

quarter ended December 31, 2015, of $1.2 million, increased by $451,000, or 60%, as compared to the same period in the prior year,

with the largest increases in Asia and the Middle East with a 19% increase in Europe. The sales growth in local currency in Europe

was 36% for the quarter when compared to the same period in prior year.

For the three months ended December 31, 2015 and 2014, product

licensing fees and royalty revenues were $120,000 and $555,000, respectively. The decrease is primarily related to the lower amortization

of upfront payments from the company's partner, Sanfer, in Latin America and the termination of Oculus' agreement with

its former animal healthcare partner.

Oculus reported gross profit related to its products of $1.5

million, or 39% of product revenues, during the three months ended December 31, 2015, compared to a gross profit of $1.6 million,

or 43% of total product revenues, for the same period in the prior year. The decline in gross profitability was due to the higher

dollar increase of the international revenue, which has lower product margins than products sold in the United States. Product

licensing fees and royalty revenues are not included in the calculation of gross profit for the quarters ended December 31, 2015

Total operating expenses of $4.6 million for the three months

ended December 31, 2015, increased by $1 million, or 29%, as compared to the same period in the prior year. Operating expenses

minus non-cash expenses during the third quarter of fiscal year 2015 were $4.1 million, up $858,000, as compared to the same period

in the prior year. The increase in operating expenses, minus non-cash expenses, was due to higher sales and marketing expenses

in the United States related to the costs of a direct sales force in dermatology.

Net loss for the quarter ended December 31, 2015, was $3.1 million,

a decrease of $2.8 million, as compared to net loss of $5.9 million for the same period in the prior year. The decrease in net

loss is primarily due to the change in fair value of the company's derivative liabilities of $674,000 and a reduced valuation

for the Ruthigen shares of $4.6 million, when compared to the prior period, partly offset by an increase of $920,000 in Oculus

selling, general and administrative expenses.

As of December 31, 2015, Oculus had unrestricted cash and cash

equivalents of $6.1 million, as compared with $6.1 million as of March 31, 2015. The company has no debt outstanding.

Results for the Nine Months Ended December 31, 2015

Total revenues of $11.6 million increased by $1.7 million, or

17%, for the nine months ended December 31, 2015, as compared to $9.9 million for the nine months ended December 31, 2014. Product

revenue of $9.8 million increased $3.1 million, or 47%, with strong growth in all major segments, led by product revenue growth

in the United States of $1.6 million, an increase of 120%. Latin America's revenue was up 22%, despite a 21% decline in the

peso and rest of world's revenue was up 38% with strong growth in Asia.

Oculus reported gross profit related to sales of its products

of $5.5 million, or 45% of product revenues, for the nine months ended December 31, 2015, compared to a gross profit of $5.3 million,

or 38% of product revenues, for the same period in the prior year. The increase in gross profitability was caused by the higher

dollar increase in the U.S. sales, which have higher product margins than products sold internationally.

Total operating expenses less non-cash expenses increased $2.2

million, or 24%, for the nine months compared to the same period in the prior year, primarily due to higher sales costs for the

direct sales force for dermatology. Operating loss less non-cash expenses (EBITDAS) for the nine months ended December 31, 2015,

was $5.5 million, compared to $3.5 million for the same period last year. The net loss for the nine months ended December 31, 2014

includes a non-cash loss related to a reduced valuation in Ruthigen shares of $4.6 million, partly offset by a non-cash gain of

$3.0 million due to a reduction in Oculus' derivative liability relating to certain warrants.

Oculus' management will hold a conference call today to

discuss third quarter fiscal year 2016 results and answer questions, beginning at 4:30 p.m. ET. Individuals interested in participating

in the conference call may do so by dialing 877-303-7607 for domestic callers or 973-638-3203 for international callers.

Those interested in listening to the conference call live via

the Internet may do so at http://ir.oculusis.com/events.cfm. Please log on approximately 30 minutes prior to the presentation in

order to register and download the appropriate software.

A telephone replay will be available for seven days following

the conclusion of the call by dialing 855-859-2056 for domestic callers, or 404-537-3406 for international callers, and entering

conference code 28872996. A webcast replay will be available on the site at http://ir.oculusis.com/events.cfm for one year following

About Oculus Innovative Sciences, Inc.

Oculus Innovative Sciences is a specialty pharmaceutical company

that develops and markets solutions for the treatment of dermatological conditions and advanced tissue care. The company's

products, which are sold throughout the United States and internationally, have improved outcomes for more than five million

patients globally by reducing infections, itch, pain, scarring and harmful inflammatory responses. The company's headquarters

are in Petaluma, California, with manufacturing operations in the United States and Latin America. European marketing and

sales are headquartered in Roermond, Netherlands. More information can be found at www.oculusis.com.

Forward-Looking Statements

Except for historical information herein, matters set

forth in this press release are forward-looking within the meaning of the "safe harbor" provisions of the Private

Securities Litigation Reform Act of 1995, including statements about the commercial and technology progress and

future financial performance of Oculus Innovative Sciences, Inc. and its subsidiaries (the "Company"). These

forward-looking statements are identified by the use of words such as "continue," "ramp,"

"hire," and "launch," among others. Forward-looking statements in this press release are subject to

certain risks and uncertainties inherent in the Company's business that could cause actual results to vary,

including such risks that regulatory clinical and guideline developments may change, scientific data may

not be sufficient to meet regulatory standards or receipt of required regulatory clearances or approvals, clinical

results may not be replicated in actual patient settings, protection offered by the Company's patents and

patent applications may be challenged, invalidated or circumvented by its competitors, the available market

for the Company's products will not be as large as expected, the Company's common stock and

warrants may be delisted from NASDAQ, the Company's products will not be able to penetrate one or more

targeted markets, revenues will not be sufficient to fund further development and clinical studies, the Company may not