Oculus Innovative Sciences Reports Financial Results for Fiscal Year 2016 and Fourth Quarter Ending March 31, 2016

Total revenues of $15.1 million increased by $1.2 million, or 9%, for the fiscal year ended March 31, 2016, as compared to $13.9 million for the twelve months ended March 31, 2015. Product revenue of $13.0 million increased $3.1 million, or 31%, when compared to the same period in 2015. This increase was the result of strong product revenue growth in the United States of $2.4 million, or 121%, and Europe and rest of world of $798,000, or 27%, partially offset by a 2% decrease in Latin America due in large part to the decline in the value of the peso against the U.S. dollar.

“In late 2014, we announced our strategic decision to focus on the U.S. dermatology market with our own dedicated, direct sales force. Starting from a zero base line, we have built a strong foundation in the dermatology market including hiring an experienced direct dermatology sales team of over 20 people and launching seven new products with a cumulative 33,100 prescriptions filled. With this foundation, we are more confident than ever that our plan is bearing fruit and will result in continued and sustainable growth in the dermatology market,” said Oculus CEO Jim Schutz. “Regarding the rest of world, revenue growth in Latin America this past quarter fell from normal ranges due to a decline of the Mexican peso and our partner’s consolidation of their warehouses, causing a quarterly reduction in units sold.”

Total operating expenses less non-cash expenses increased $3.0 million, or 24%, for the twelve months compared to the same period in the prior year, primarily due to higher costs for the dermatology sales force. Operating loss less non-cash expenses (EBITDAS) for the twelve months ended March 31, 2016, was $7.9 million, compared to $4.6 million for the same period last year. The net loss for the twelve months ended March 31, 2015, includes non-cash impairment losses related to an investment in Ruthigen of $4.7 million, partly offset by a non-cash gain of $3.2 million related to a reduction in Oculus’ derivative liability relating to certain warrants reported in the same period.

Product revenue in the United States was $1.4 million for the three months ended March 31, 2016, as compared to $623,000 in the quarter ended March 31, 2015. Product revenues increased $765,000 or 123%. Sales increased primarily due tocontinuedgrowthin sixexisting products for the treatment of atopic dermatitis, scar management, surgical procedures, an oral anti-infective for severe acne and the launch of Ceramax, which utilizes a “state of the art” skin repair technology. In addition, sales to a new farm and ranch animal health partner increased during the quarter compared to last year.

Product revenue in Latin America for the quarter ended March 31, 2016, was $880,000, a decrease of $833,000, or 49%, when compared to the same period in the prior year. This decrease was caused by a 22% decline in the value of the peso from the same period in prior year along with very robust sales in the March quarter of 2015. The fourth quarter of fiscal year 2015 also included stocking by Oculus’ new Latin American partner Sanfer to fill their expansive pharmacy store network. In addition, there was a decline in local currency sales in the quarter ended March 31, 2016, as a result of warehouse consolidations. During the quarter, ended March 31, 2016, Sanfer closed a number of the former More Pharma warehouses, reducing the need for new product units.

For the three months ended March 31, 2016 and 2015, product licensing fees and royalty revenues were $75,000 and $455,000, respectively. The decrease is primarily related to the lower amortization of upfront payments from the company’s partner, Sanfer, in Latin America.

Oculus reported gross profit of $1.7 million, or 49% of revenue, during the three months ended March 31, 2016, compared to a gross profit of $2.0 million, or 50% of revenue when compared to the same period in the prior year. The gross profit was down slightly compared to last year due to the reduction in higher margined products, license fees and royalties revenue of $380,000, related mostly to our agreement with Sanfer.

Total operating expenses of $4.6 million for the three months ended March 31, 2016, increased by $940,000, or 26%, as compared to the same period in the prior year. Operating expenses minus non-cash expenses during the fourth quarter of fiscal year 2016 were $4.1 million, up $850,000, as compared to the same period in the prior year. The increase in operating expenses, minus non-cash expenses, was due to mostly higher sales and marketing expenses in the United States related to the costs of Oculus’ direct sales force in dermatology.

Net loss for the quarter ended March 31, 2016, was $2.9 million, an increase of $1.4 million, as compared to net loss of $1.5 million for the same period in the prior year.

As of March 31, 2016, Oculus had unrestricted cash and cash equivalents of $7.5 million, as compared with $6.1 million as of March 31, 2015. The company has no debt outstanding.

Oculus and Microcyn(R) Technology are trademarks or registered trademarks of Oculus Innovative Sciences, Inc. All other trademarks and service marks are the property of their respective owners.

(1) Loss from operations minus non-cash expenses (EBITDAS) is a non-GAAP financial measure. The Company defines operating loss minus non-cash expenses as GAAP reported operating loss minus operating depreciation and amortization, and operating stock-based compensation. The Company uses this measure for the purpose of modifying the operating loss to reflect direct cash related transactions during the measurement period.

(2) Net loss minus non-cash expenses is a non-GAAP financial measure. The Company defines net loss minus non-cash expenses as GAAP reported net loss minus depreciation and amortization, stock-based compensation, a change in fair value of common stock, a change in the fair value of derivative instruments, loss on impairment of investment, and non-cash interest expense. The Company uses this measure for the purpose of modifying the net loss to reflect only those expenses to reflect direct cash transactions during the measurement period.