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<SEC-DOCUMENT>0000950123-09-040486.txt : 20090902
<SEC-HEADER>0000950123-09-040486.hdr.sgml : 20090902
<ACCEPTANCE-DATETIME>20090902164337
ACCESSION NUMBER:		0000950123-09-040486
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20090902
DATE AS OF CHANGE:		20090902

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Oculus Innovative Sciences, Inc.
		CENTRAL INDEX KEY:			0001367083
		STANDARD INDUSTRIAL CLASSIFICATION:	SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
		IRS NUMBER:				680423298
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-149223
		FILM NUMBER:		091051380

	BUSINESS ADDRESS:	
		STREET 1:		1129 N. MCDOWELL BLVD.
		CITY:			PETALUMA
		STATE:			CA
		ZIP:			94954
		BUSINESS PHONE:		707-782-0792

	MAIL ADDRESS:	
		STREET 1:		1129 N. MCDOWELL BLVD.
		CITY:			PETALUMA
		STATE:			CA
		ZIP:			94954
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>f53458b5e424b5.htm
<DESCRIPTION>424B5
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Prospectus Supplement<BR>
Filed Pursuant to Rule&nbsp;424(b)(5)<BR>
File No.&nbsp;333-149223</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PROSPECTUS SUPPLEMENT</B><BR>
<B>(to Prospectus dated February&nbsp;26, 2008)</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>158,470 Shares</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><IMG src="f53458b5f5345801.gif" alt="(OCULUS LOGO)">

</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>COMMON STOCK</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are offering <B>158,470 </B>shares of our common stock. Our common stock is listed on the NASDAQ
Capital Market under the symbol &#147;OCLS.&#148; On August&nbsp;28, 2009, the last reported sale price for our
common stock on the NASDAQ Capital Market was $2.22 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our securities involves a high degree of risk. Before buying any of our
securities, you should carefully consider the risk factors described in &#147;Risk Factors&#148; beginning on
page S-2 of this Prospectus Supplement.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The
date of this Prospectus Supplement is September&nbsp;2, 2009
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS<BR>
Prospectus Supplement</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">About This Prospectus Supplement</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">ii</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Prospectus Supplement Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Where You Can Find More Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Prospectus</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">About This Prospectus</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Our Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Description of Preferred Stock</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Description of Depositary Shares</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Description of Common Stock</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Description of Warrants</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">Legal Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">Where You Can Find More Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>In this prospectus supplement and the accompanying prospectus, unless otherwise indicated, the
terms Oculus, &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; and similar terms refer to Oculus Innovative Sciences, Inc. and
its subsidiaries on a consolidated basis.</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS SUPPLEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This prospectus supplement and the accompanying prospectus are part of a &#147;shelf&#148; registration
statement on Form S-3 that we filed with the Securities and Exchange Commission on February&nbsp;26,
2008. This prospectus supplement describes the specific details regarding this offering,
including the amount of common stock being offered and the risks of investing in our common stock.
The accompanying prospectus provides more general information, some of which may not apply to our
common stock. You should read both this prospectus supplement and the accompanying prospectus
together with the additional information about us described in the section entitled &#147;Where You Can
Find More Information.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If information contained in this prospectus supplement is inconsistent with the accompanying
prospectus, you should rely on this prospectus supplement.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->ii<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROSPECTUS SUPPLEMENT SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>This summary contains basic information about us and this offering. Because it is a summary, it
does not contain all of the information that you should consider before investing. Before you
decide to invest in our common stock, you should read this entire prospectus supplement and the
accompanying prospectus carefully, including the section entitled &#147;Risk Factors,&#148; and our
consolidated financial statements and the related notes and other documents incorporated by
reference in the accompanying prospectus.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OUR COMPANY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We incorporated under the laws of the State of California in April&nbsp;1999 as Micromed Laboratories,
Inc. In August&nbsp;2001, we changed our name to Oculus Innovative Sciences, Inc. and later
reincorporated under the laws of the State of Delaware in December&nbsp;2006. We conduct our business
worldwide, with significant operating subsidiaries in Europe and Mexico, and references to our
Company contained in this prospectus supplement include our subsidiaries, Oculus Technologies of
Mexico, S.A. de C.V., Oculus Innovative Sciences Netherlands, B.V. and Oculus Innovative Sciences
Japan, K.K, except where the context otherwise requires. Our principal executive offices are
located at 1129 North McDowell Boulevard, Petaluma, California 94954. Our telephone number is (707)
782-0792. Our fiscal year end is March&nbsp;31. Our website is www.oculusis.com. Information contained
on our website does not constitute part of this prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We develop, manufacture and market a family of products intended to prevent and treat infections in
chronic and acute wounds. Our platform technology, called Microcyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, is a proprietary
solution of electrically charged oxychlorine small molecules designed to treat a wide range of
organisms that cause disease (pathogens). These include viruses, fungi, spores and
antibiotic-resistant strains of bacteria, such as Methicillin-resistant <I>Staphylococcus aureus</I>, or
MRSA, and Vancomycin-resistant <I>Enterococcus, </I>or VRE, in wounds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not have the necessary regulatory approvals to market Microcyn in the United States as a
drug. In the United States our device product does, however, have five clearances as a 510(k)
medical device. We do not have the necessary regulatory clearance or approval to market Microcyn in
the U.S. as a medical device for an antimicrobial or wound healing indication. In the future we
expect to apply with the FDA for clearance as an antimicrobial in a liquid and a gel form and as
conducive to wound healing via a 510(k) medical clearance. Outside the United States our product
has a CE Mark device approval in Europe for debriding, irrigating and moistening acute and chronic
wounds in comprehensive wound treatment by reducing microbial load and creating moist environment.
In Mexico we are approved as a drug as antiseptic treatment of wounds and infected areas. In India
our product has a drug license for cleaning and debriding in wound management while in China there
is a medical device approval by the State Food and Drug Administration, or SFDA, for reducing the
propagation of microbes in wounds and creating a moist environment for wound healing.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE OFFERING</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock offered by Oculus
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Up to 158,470 shares</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock to be outstanding
after this offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Up to 23,663,240 shares, based on
23,504,770 shares issued and outstanding as of August 31, 2009.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Use of proceeds
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We will not receive proceeds from the
issuance of the shares. See &#147;Use of
Proceeds.&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk factors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">See the &#147;Risk Factors&#148; section of this
prospectus for factors to consider
before deciding to purchase our
securities.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NASDAQ Capital Market symbol
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">OCLS</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->S-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have a history of losses, we expect to continue to incur losses and we may never achieve
profitability.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We incurred a net loss of $3,541,000 for the three months ended June&nbsp;30, 2009. At June&nbsp;30, 2009,
our accumulated deficit amounted to $112,346,000. During the three months ended June&nbsp;30, 2009, net
cash used in operating activities amounted to $1,694,000. At June&nbsp;30, 2009, our working capital
amounted to $1,430,000. We may need to raise additional capital from external sources. We expect to
continue incurring losses for the foreseeable future and may raise additional capital to pursue
product development initiatives and penetrate markets for the sale of our products. We may not
raise additional capital. We believe that we have access to capital resources through possible
public or private equity offerings, debt financings, corporate collaborations or other means. If
the economic climate in the U.S. does not improve or continues to deteriorate, our ability to raise
additional capital could be negatively impacted. If we are unable to secure additional capital, we
may be required to curtail our research and development initiatives and take additional measures to
reduce costs in order to conserve cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Declining general economic or business conditions may have a negative impact on our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit,
the U.S. mortgage market and a declining real estate market in the U.S. have contributed to
increased volatility and diminished expectations for the global economy and expectations of slower
global economic growth going forward. These factors, combined with volatile oil prices, declining
business and consumer confidence and increased unemployment, have precipitated a global economic
slowdown. If the economic climate in the U.S. does not improve or continues to deteriorate, our
business, including our patient population, our suppliers and our third-party payors, could be
negatively affected, resulting in a negative impact on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our inability to raise additional capital on acceptable terms in the future may cause us to curtail
certain operational activities, including regulatory trials, sales and marketing, and international
operations, in order to reduce costs and sustain the business, and would have a material adverse
effect on our business and financial condition.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect capital outlays and operating expenditures to increase over the next several years as we
work to conduct regulatory trials commercialize our products and expand our infrastructure. We have
entered into debt financing arrangements which are secured by all of our assets. We may need to
raise additional capital to, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fund our clinical trials and preclinical studies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sustain commercialization of our current products or new products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expand our manufacturing capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increase our sales and marketing efforts to drive market adoption and
address competitive developments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquire or license technologies; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>finance capital expenditures and our general and administrative expenses.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our present and future funding requirements will depend on many factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the progress and timing of our clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of research and development investment required to maintain
and improve our technology position;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost of filing, prosecuting, defending and enforcing patent claims and other intellectual
property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our efforts to acquire or license complementary technologies or acquire complementary
businesses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in product development plans needed to address any difficulties in commercialization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competing technological and market developments; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in regulatory policies or laws that affect our operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we raise additional funds by issuing equity securities, dilution to our stockholders could
result. Any equity securities issued also may provide for rights, preferences or privileges senior
to those of holders of our common stock. If we raise additional funds by issuing debt securities,
these debt securities would have rights, preferences and privileges senior to those of holders of
our common stock, and the terms of the debt securities issued could impose significant restrictions
on our operations. If we raise additional funds through collaborations and licensing arrangements,
we might be required to relinquish significant rights to our technologies or products, or grant
licenses on terms that are not favorable to us. A failure to obtain adequate funds may cause us to
postpone or curtail certain operational activities, including regulatory trials, sales and
marketing, and international operations, in order to reduce costs and sustain the business, and
would have a material adverse effect on our business and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We do not have the necessary regulatory approvals to market Microcyn as a drug in the United
States.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have obtained five 510(k) clearances in the United States that permit us to sell Microcyn as a
medical device to clean, moisten and debride wounds. Before we are permitted to sell Microcyn as a
drug in the United States, we must, among other things, successfully complete additional
preclinical studies and well-controlled clinical trials, submit a New Drug Application, or NDA, to
the FDA and obtain FDA approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The FDA approval process is expensive and uncertain, requires detailed and comprehensive scientific
and other data and generally takes several years. Despite the time and expense exerted, approval is
never guaranteed. Even if we obtain FDA approval to sell Microcyn as a drug, we may not be able to
successfully commercialize Microcyn as a drug in the United States and may never recover the
substantial costs we have invested in the development of our Microcyn products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Delays or adverse results in clinical trials could result in increased costs to us and delay our
ability to generate revenue.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Clinical trials can be long and expensive, and the outcomes of clinical trials are uncertain and
subject to delays. It may take several years to complete clinical trials, if at all, and a product
candidate may fail at any stage of the clinical trial process. The length of time required varies
substantially according to the type, complexity, novelty and intended use of the product candidate.
Interim results of a preclinical study or clinical trial do not necessarily predict final results,
and acceptable results in preclinical studies or early clinical trials may not be repeatable in
later subsequent clinical trials. The commencement or completion of any of our clinical trials may
be delayed or halted for a variety of reasons, including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>insufficient funds to continue our clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA requirements for approval, including requirements for testing efficacy or safety, may
change;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA or other regulatory authorities do not approve a clinical trial protocol;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>patients do not enroll in clinical trials at the rate we expect;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in reaching agreement on acceptable clinical trial agreement terms with prospective sites;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in obtaining institutional review board approval to conduct a study at a prospective site;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>third party clinical investigators do not perform our clinical trials on our anticipated
schedule or consistent with the clinical trial protocol and good clinical practices, or the
third party organizations do not perform data collection and analysis in a timely or accurate
manner; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>governmental regulations or administrative actions are changed.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not know whether future clinical trials will demonstrate safety and efficacy sufficiently to
result in additional FDA approvals. While a number of physicians have conducted clinical studies
assessing the safety and efficacy of Microcyn for various indications, the data from these studies
is not sufficient to support approval of Microcyn as a drug in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The FDA and other regulatory bodies may also change standards and acceptable trial procedures
required for a showing of safety and efficacy. For example, until recently, the FDA accepted
non-inferiority clinical trials, or clinical trials that show that a new treatment is equivalent to
standard treatment, as the standard for anti-infective drug approvals. On October&nbsp;12, 2007, the FDA
released draft guidance entitled Antibacterial Drug Products: Use of Noninferiority Studies to
Support Approval. This new agency guidance requires either placebo-controlled or superiority trial
designs, which are designed to test whether, and to what extent, a new treatment is better than the
placebo. The uncertainty of clinical trial protocols and changes within FDA guidelines could have a
negative impact on the timelines and milestones for our clinical program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If we fail to obtain, or experience significant delays in obtaining, additional regulatory
clearances or approvals to market our current or future products, we may be unable to commercialize
these products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Developing, testing, manufacturing, marketing and selling of medical technology products are
subject to extensive regulation by numerous governmental authorities in the United States and other
countries. The process of obtaining regulatory clearance and approval of medical technology
products is costly and time consuming. Even though the underlying product formulation may be the
same or similar, our products are subject to different regulations and approval processes depending
upon their intended use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To obtain regulatory approval of our products as drugs in the United States, we must first show
that our products are safe and effective for target indications through preclinical studies
(laboratory and animal testing) and clinical trials (human testing). The FDA generally clears
marketing of a medical device through the 510(k) pre-market clearance process if it is demonstrated
that the new product has the same intended use and the same or similar technological
characteristics as another legally marketed Class&nbsp;II device, such as a device already cleared by
the FDA through the 510(k) premarket notification process, and otherwise meets the FDA&#146;s
requirements. Product modifications, including labeling the product for a new intended use, may
require the submission of a new 510(k) clearance and FDA approval before the modified product can
be marketed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The outcomes of clinical trials are inherently uncertain. In addition, we do not know whether the
necessary approvals or clearances will be granted or delayed for future products. The FDA could
request additional information, changes to formulation or clinical testing that could adversely
affect the time to market and sale of products as drugs. If we do not obtain the requisite
regulatory clearances and approvals, we will be unable to commercialize our products as drugs or
devices and may never recover any of the substantial costs we have invested in the development of
Microcyn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Distribution of our products outside the United States is subject to extensive government
regulation. These regulations, including the requirements for approvals or clearance to market, the
time required for
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">regulatory review and the sanctions imposed for violations, vary from country to country. We do not
know whether we will obtain regulatory approvals in such countries or that we will not be required
to incur significant costs in obtaining or maintaining these regulatory approvals. In addition, the
export by us of certain of our products that have not yet been cleared for domestic commercial
distribution may be subject to FDA export restrictions. Failure to obtain necessary regulatory
approvals, the restriction, suspension or revocation of existing approvals or any other failure to
comply with regulatory requirements would have a material adverse effect on our future business,
financial condition, and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If our products do not gain market acceptance, our business will suffer because we might not be
able to fund future operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A number of factors may affect the market acceptance of our products or any other products we
develop or acquire, including, among others:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of our products relative to other treatments for the same or similar treatments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the perception by patients, physicians and other members of the health care community of
the effectiveness and safety of our products for their indicated applications and
treatments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to fund our sales and marketing efforts; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effectiveness of our sales and marketing efforts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If our products do not gain market acceptance, we may not be able to fund future operations,
including developing, testing and obtaining regulatory approval for new product candidates and
expanding our sales and marketing efforts for our approved products, which would cause our business
to suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If our competitors develop products similar to Microcyn, we may need to modify or alter our
business strategy, which may delay the achievement of our goals.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Competitors may develop products with similar characteristics as Microcyn. Such similar products
marketed by larger competitors can hinder our efforts to penetrate the market. As a result, we may
be forced to modify or alter our business and regulatory strategy and sales and marketing plans, as
a response to changes in the market, competition and technology limitations, among others. Such
modifications may pose additional delays in achieving our goals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We intend to license or collaborate with third parties in various potential markets, and events
involving these strategic partners or any future collaborations could delay or prevent us from
developing or commercializing products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our business strategy and our short- and long-term operating results will depend in part on our
ability to execute on existing strategic collaborations and to license or partner with new
strategic partners. We believe collaborations allow us to leverage our resources and technologies
and to access markets that are compatible with our own core areas of expertise while avoiding the
cost of establishing or maintaining a direct sales force in each market. We may incur significant
costs in the use of third parties to identify and assist in establishing relationships with
potential collaborators.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To penetrate our target markets, we may need to enter into additional collaborative agreements to
assist in the development and commercialization of products. For example, depending upon our
analysis of the time and expense involved in obtaining FDA approval to sell a product to treat open
wounds, we may choose to license our technology to a third party as opposed to pursuing
commercialization ourselves. Establishing strategic collaborations is difficult and time-consuming.
Potential collaborators may reject collaborations based upon their assessment of our financial,
regulatory or intellectual property position and our internal capabilities. Our discussions with
potential collaborators may not lead to the establishment of new
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">collaborations on favorable terms and may have the potential to provide collaborators with access
to our key intellectual property filings and next generation formations. We have limited control
over the amount and timing of resources that our current collaborators or any future collaborators
devote to our collaborations or potential products. These collaborators may breach or terminate
their agreements with us or otherwise fail to conduct their collaborative activities successfully
and in a timely manner. Further, our collaborators may not develop or commercialize products that
arise out of our collaborative arrangements or devote sufficient resources to the development,
manufacture, marketing or sale of these products. By entering into a collaboration, we may preclude
opportunities to collaborate with other third parties who do not wish to associate with our
existing third party strategic partners. Moreover, in the event of termination of a collaboration
agreement, termination negotiations may result in less favorable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If we are unable to expand our direct domestic sales force, we may not be able to successfully sell
our products in the United States.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have very limited commercialization capability and make Microcyn-based products available
primarily through our website, and several regional distributors. We plan for a more aggressive
commercialization and product launch in the event we obtain drug approval from the FDA or obtain
other clearance or approval with wound healing claims. Developing a sales force is expensive and
time consuming, and the lack of qualified sales personnel could delay or limit the success of our
product launch. Our domestic sales force, if established, will be competing with the sales
operations of our competitors, which are better funded and more experienced. We may not be able to
develop domestic sales capacity on a timely basis or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our dependence on distributors for sales could limit or prevent us from selling our products and
from realizing long-term revenue growth.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently depend on distributors to sell Microcyn in the United States, Europe and other
countries and intend to continue to sell our products primarily through distributors in Europe and
the United States for the foreseeable future. If we are unable to expand our direct sales force, we
will continue to rely on distributors to sell Microcyn. Our existing distribution agreements are
generally short-term in duration, and we may need to pursue alternate distributors if the other
parties to these agreements terminate or elect not to renew their agreements. If we are unable to
retain our current distributors for any reason, we must replace them with alternate distributors
experienced in supplying the wound care market, which could be time-consuming and divert
management&#146;s attention from other operational matters. In addition, we will need to attract
additional distributors to expand the geographic areas in which we sell Microcyn. Distributors may
not commit the necessary resources to market and sell our products to the level of our
expectations, which could harm our ability to generate revenues. In addition, some of our
distributors may also sell products that compete with ours. In some countries, regulatory licenses
must be held by residents of the country. For example, the regulatory approval for one product in
India is owned and held by our Indian distributor. If the licenses are not in our name or under our
control, we might not have the power to ensure their ongoing effectiveness and use by us. If
current or future distributors do not perform adequately, or we are unable to locate distributors
in particular geographic areas, we may not realize long-term revenue growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated
problems with our products, these products could be subject to restrictions or withdrawal from the
market.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Regulatory approvals or clearances that we currently have and that we may receive in the future are
subject to limitations on the indicated uses for which the products may be marketed, and any future
approvals could contain requirements for potentially costly post-marketing follow-up studies. If
the FDA determines that our promotional materials or activities constitute promotion of an
unapproved use or we otherwise fail to comply with FDA regulations, we may be subject to regulatory
enforcement actions, including a warning letter, injunction, seizure, civil fine or criminal
penalties. In addition, the manufacturing, labeling, packaging, adverse event reporting, storage,
advertising, promotion, distribution and record-keeping for approved products are subject to
extensive regulation. Our manufacturing facilities, processes and specifications are subject to
periodic inspection by the FDA, European and other regulatory authorities and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from time to time, we may receive notices of deficiencies from these agencies as a result of such
inspections. Our failure to continue to meet regulatory standards or to remedy any deficiencies
could result in restrictions being imposed on products or manufacturing processes, fines,
suspension or loss of regulatory approvals or clearances, product recalls, termination of
distribution or product seizures or the need to invest substantial resources to comply with various
existing and new requirements. In the more egregious cases, criminal sanctions, civil penalties,
disgorgement of profits or closure of our manufacturing facilities are possible. The subsequent
discovery of previously unknown problems with Microcyn, including adverse events of unanticipated
severity or frequency, may result in restrictions on the marketing of our products, and could
include voluntary or mandatory recall or withdrawal of products from the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">New government regulations may be enacted and changes in FDA policies and regulations, their
interpretation and enforcement, could prevent or delay regulatory approval of our products. We
cannot predict the likelihood, nature or extent of adverse government regulation that may arise
from future legislation or administrative action, either in the United States or abroad. Therefore,
we do not know whether we will be able to continue to comply with any regulations or that the costs
of such compliance will not have a material adverse effect on our future business, financial
condition, and results of operations. If we are not able to maintain regulatory compliance, we will
not be permitted to market our products and our business would suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We may experience difficulties in manufacturing Microcyn, which could prevent us from
commercializing one or more of our products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The machines used to manufacture our Microcyn-based products are complex, use complicated software
and must be monitored by highly trained engineers. Slight deviations anywhere in our manufacturing
process, including quality control, labeling and packaging, could lead to a failure to meet the
specifications required by the FDA, the EPA, European notified bodies, Mexican regulatory agencies
and other foreign regulatory bodies, which may result in lot failures or product recalls. If we are
unable to obtain quality internal and external components, mechanical and electrical parts, if our
software contains defects or is corrupted, or if we are unable to attract and retain qualified
technicians to manufacture our products, our manufacturing output of Microcyn, or any other product
candidate based on our platform that we may develop, could fail to meet required standards, our
regulatory approvals could be delayed, denied or revoked, and commercialization of one or more of
our Microcyn-based products may be delayed or foregone. Manufacturing processes that are used to
produce the smaller quantities of Microcyn needed for clinical tests and current commercial sales
may not be successfully scaled up to allow production of significant commercial quantities. Any
failure to manufacture our products to required standards on a commercial scale could result in
reduced revenues, delays in generating revenue and increased costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our competitive position depends on our ability to protect our intellectual property and our
proprietary technologies.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our ability to compete and to achieve and maintain profitability depends on our ability to protect
our intellectual property and proprietary technologies. We currently rely on a combination of
patents, patent applications, trademarks, trade secret laws, confidentiality agreements, license
agreements and invention assignment agreements to protect our intellectual property rights. We also
rely upon unpatented know-how and continuing technological innovation to develop and maintain our
competitive position. These measures may not be adequate to safeguard our Microcyn technology. In
addition, we granted a security interest in our assets, including our intellectual property, under
a loan and security agreement. If we do not protect our rights adequately, third parties could use
our technology, and our ability to compete in the market would be reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although we have filed U.S. and foreign patent applications related to our Microcyn based products,
the manufacturing technology for making the products, and their uses, only one U.S. patent has been
issued from these applications to date.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our pending patent applications and any patent applications we may file in the future may not
result in issued patents, and we do not know whether any of our in-licensed patents or any
additional patents that might ultimately be issued by the U.S. Patent and Trademark Office or
foreign regulatory body will protect our Microcyn technology. Any claims that issue may not be
sufficiently broad to prevent third parties from producing competing substitutes and may be
infringed, designed around, or invalidated by third parties. Even issued patents may later be found
to be invalid, or may be modified or revoked in proceedings instituted by third parties before
various patent offices or in courts. For example, a competitor filed a Notice of Opposition with
the Opposition Division of the European Patent Office in February&nbsp;2008 opposing our recently issued
European patent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The degree of future protection for our proprietary rights is more uncertain in part because legal
means afford only limited protection and may not adequately protect our rights, and we will not be
able to ensure that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we were the first to invent the inventions described in patent applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we were the first to file patent applications for inventions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>others will not independently develop similar or alternative technologies or
duplicate our products without infringing our intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any patents licensed or issued to us will provide us with any competitive advantages;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we will develop proprietary technologies that are patentable; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the patents of others will not have an adverse effect on our ability to do business.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The policies we use to protect our trade secrets may not be effective in preventing
misappropriation of our trade secrets by others. In addition, confidentiality and invention
assignment agreements executed by our employees, consultants and advisors may not be enforceable or
may not provide meaningful protection for our trade secrets or other proprietary information in the
event of unauthorized use or disclosures. We cannot be certain that the steps we have taken will
prevent the misappropriation and use of our intellectual property in the United States, or in
foreign countries where the laws may not protect our proprietary rights as fully as in the United
States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We may face intellectual property infringement claims that could be time-consuming, costly to
defend and could result in our loss of significant rights and, in the case of patent infringement
claims, the assessment of treble damages.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On occasion, we may receive notices of claims of infringement, misappropriation or misuse of other
parties&#146; proprietary rights. We may have disputes regarding intellectual property rights with the
parties that have licensed those rights to us. We may also initiate claims to defend our
intellectual property. Intellectual property litigation, regardless of outcome, is expensive and
time-consuming, could divert management&#146;s attention from our business and have a material negative
effect on our business, operating results or financial condition. In addition, the outcome of such
litigation may be unpredictable. If there is a successful claim of infringement against us, we may
be required to pay substantial damages (including treble damages if we were to be found to have
willfully infringed a third party&#146;s patent) to the party claiming infringement, develop
non-infringing technology, stop selling our products or using technology that contains the
allegedly infringing intellectual property or enter into royalty or license agreements that may not
be available on acceptable or commercially practical terms, if at all. Our failure to develop
non-infringing technologies or license the proprietary rights on a timely basis could harm our
business. In addition, modifying our products to exclude infringing technologies could require us
to seek re-approval or clearance from various regulatory bodies for our products, which would be
costly and time consuming. Also, we may be unaware of pending patent applications that relate to
our technology. Parties making infringement claims on future issued patents may be able to obtain
an injunction that would prevent us from selling our products
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or using technology that contains the allegedly infringing intellectual property, which could harm
our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our ability to generate revenue will be diminished if we are unable to obtain acceptable prices or
an adequate level of reimbursement from third-party payors of healthcare costs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The continuing efforts of governmental and other third-party payors, including managed care
organizations such as health maintenance organizations, or HMOs, to contain or reduce costs of
health care may affect our future revenue and profitability, and the future revenue and
profitability of our potential customers, suppliers and collaborative or license partners and the
availability of capital. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United States, governmental
and private payors have limited the growth of health care costs through price regulation or
controls, competitive pricing programs and drug rebate programs. Our ability to commercialize our
products successfully will depend in part on the extent to which appropriate coverage and
reimbursement levels for the cost of our Microcyn products and related treatment are obtained from
governmental authorities, private health insurers and other organizations, such as HMOs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There is significant uncertainty concerning third-party coverage and reimbursement of newly
approved medical products and drugs. Third-party payors are increasingly challenging the prices
charged for medical products and services. Also, the trend toward managed healthcare in the United
States and the concurrent growth of organizations such as HMOs, as well as legislative proposals to
reform healthcare or reduce government insurance programs, may result in lower prices for or
rejection of our products. The cost containment measures that health care payors and providers are
instituting and the effect of any health care reform could materially and adversely affect our
ability to generate revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, given ongoing federal and state government initiatives directed at lowering the total
cost of health care, the United States Congress and state legislatures will likely continue to
focus on health care reform, the cost of prescription pharmaceuticals and the reform of the
Medicare and Medicaid payment systems. While we cannot predict whether any proposed
cost-containment measures will be adopted, the announcement or adoption of these proposals could
reduce the price that we receive for our Microcyn products in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We could be required to indemnify third parties for alleged infringement, which could cause us to
incur significant costs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some of our distribution agreements contain commitments to indemnify our distributors against
liability arising from infringement of third party intellectual property such as patents. We may be
required to indemnify our customers for claims made against them or license fees they are required
to pay. If we are forced to indemnify for claims or to pay license fees, our business and financial
condition could be substantially harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>A significant part of our business is conducted outside of the United States, exposing us to
additional risks that may not exist in the United States, which in turn could cause our business
and operating results to suffer.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have international operations in Mexico and Europe. During the years ended March&nbsp;31, 2009 and
2008, approximately 76% and 70% of our total revenues, respectively, were generated from sales
outside of the United States. Our business is highly regulated for the use, marketing and
manufacturing of our Microcyn products both domestically and internationally. Our international
operations are subject to risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>local political or economic instability;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in governmental regulation;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-9<!-- /Folio -->
</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in import/export duties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>trade restrictions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lack of experience in foreign markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties and costs of staffing and managing operations in certain foreign countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>work stoppages or other changes in labor conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties in collecting accounts receivables on a timely basis or at all; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse tax consequences or overlapping tax structures.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We plan to continue to market and sell our products internationally to respond to customer
requirements and market opportunities. We currently have international manufacturing facilities in
Mexico and the Netherlands. Establishing operations in any foreign country or region presents risks
such as those described above as well as risks specific to the particular country or region. In
addition, until a payment history is established over time with customers in a new geography or
region, the likelihood of collecting receivables generated by such operations could be less than
our expectations. As a result, there is a greater risk that reserves set with respect to the
collection of such receivables may be inadequate. If our operations in any foreign country are
unsuccessful, we could incur significant losses and we may not achieve profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, changes in policies or laws of the United States or foreign governments resulting in,
among other things, changes in regulations and the approval process, higher taxation, currency
conversion limitations, restrictions on fund transfers or the expropriation of private enterprises,
could reduce the anticipated benefits of our international expansion. If we fail to realize the
anticipated revenue growth of our future international operations, our business and operating
results could suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our sales in international markets subject us to foreign currency exchange and other risks and
costs which could harm our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A substantial portion of our revenues are derived from outside the United States; primarily from
Mexico. We anticipate that revenues from international customers will continue to represent a
substantial portion of our revenues for the foreseeable future. Because we generate revenues in
foreign currencies, we are subject to the effects of exchange rate fluctuations. The functional
currency of our Mexican subsidiary is the Mexican Peso, and the functional currency of our
subsidiary in the Netherlands is the Euro. For the preparation of our consolidated financial
statements, the financial results of our foreign subsidiaries are translated into U.S. dollars on
average exchange rates during the applicable period. If the U.S. dollar appreciates against the
Mexican Peso or the Euro, as applicable, the revenues we recognize from sales by our subsidiaries
will be adversely impacted. Foreign exchange gains or losses as a result of exchange rate
fluctuations in any given period could harm our operating results and negatively impact our
revenues. Additionally, if the effective price of our products were to increase as a result of
fluctuations in foreign currency exchange rates, demand for our products could decline and
adversely affect our results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The loss of key members of our senior management team, one of our directors or our inability to
retain highly skilled scientists, technicians and salespeople could adversely affect our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our success depends largely on the skills, experience and performance of key members of our
executive management team, including Hojabr Alimi, our Chief Executive Officer and Robert Northey,
our Director of Research and Development. The efforts of these people will be critical to us as we
continue to develop our products and attempt to commercialize products in the chronic and acute
wound care market. If we were to lose one or more of these individuals, we may experience
difficulties in competing effectively, developing our technologies and implementing our business
strategies.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our research and development programs depend on our ability to attract and retain highly skilled
scientists and technicians. We may not be able to attract or retain qualified scientists and
technicians in the future due to the intense competition for qualified personnel among medical
technology businesses, particularly in the San Francisco Bay Area. We also face competition from
universities and public and private research institutions in recruiting and retaining highly
qualified personnel. In addition, our success depends on our ability to attract and retain
salespeople with extensive experience in wound care and close relationships with the medical
community, including physicians and other medical staff. We may have difficulties locating,
recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of
adoption of our products. If we are not able to attract and retain the necessary personnel to
accomplish our business objectives, we may experience constraints that will adversely affect our
ability to support our research, development and sales programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We maintain key-person life insurance only on Mr.&nbsp;Alimi. We may discontinue this insurance in the
future, it may not continue to be available on commercially reasonable terms or, if continued, it
may prove inadequate to compensate us for the loss of Mr.&nbsp;Alimi&#146;s services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The wound care industry is highly competitive and subject to rapid technological change. If our
competitors are better able to develop and market products that are less expensive or more
effective than any products that we may develop, our commercial opportunity will be reduced or
eliminated.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our success depends, in part, upon our ability to stay at the forefront of technological change and
maintain a competitive position. We compete with large healthcare, pharmaceutical and biotechnology
companies, along with smaller or early-stage companies that have collaborative arrangements with
larger pharmaceutical companies, academic institutions, government agencies and other public and
private research organizations. Many of our competitors have significantly greater financial
resources and expertise in research and development, manufacturing, pre-clinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved products than we
do. Our competitors may:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>develop and patent processes or products earlier than we will;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>develop and commercialize products that are less expensive or more efficient
than any products that we may develop;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain regulatory approvals for competing products more rapidly than we will; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>improve upon existing technological approaches or develop new or different
approaches that render our technology or products obsolete or non-competitive.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result, we may not be able to successfully commercialize any future products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The success of our research and development efforts may depend on our ability to find suitable
collaborators to fully exploit our capabilities. If we are unable to establish collaborations or if
these future collaborations are unsuccessful, our research and development efforts may be
unsuccessful, which could adversely affect our results of operations and financial condition.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An important element of our business strategy will be to enter into collaborative or license
arrangements under which we license our Microcyn technology to other parties for development and
commercialization. We expect that while we may initially seek to conduct initial clinical trials on
our drug candidates, we may need to seek collaborators for our drug candidates and for a number of
our potential products because of the expense, effort and expertise required to conduct additional
clinical trials and further develop those potential product candidates. Because collaboration
arrangements are complex to negotiate, we may not be successful in our attempts to establish these
arrangements. If we need third party assistance in identifying and negotiating one or more
acceptable arrangements, it might be costly. Also, we may not have products that are desirable to
other parties, or we may be unwilling to license a potential product because the party interested
in it is a competitor. The terms of any arrangements that we establish may not be favorable to us.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Alternatively, potential collaborators may decide against entering into an agreement with us
because of our financial, regulatory or intellectual property position or for scientific,
commercial or other reasons. If we are not able to establish collaborative agreements, we may not
be able to develop and commercialize new products, which would adversely affect our business and
our revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order for any of these collaboration or license arrangements to be successful, we must first
identify potential collaborators or licensees whose capabilities complement and integrate well with
ours. We may rely on these arrangements for not only financial resources, but also for expertise or
economies of scale that we expect to need in the future relating to clinical trials, manufacturing,
sales and marketing, and for licenses to technology rights. However, it is likely that we will not
be able to control the amount and timing or resources that our collaborators or licensees devote to
our programs or potential products. If our collaborators or licensees prove difficult to work with,
are less skilled than we originally expected, or do not devote adequate resources to the program,
the relationship will not be successful. If a business combination involving a collaborator or
licensee and a third party were to occur, the effect could be to diminish, terminate or cause
delays in development of a potential product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If we are unable to comply with broad and complex federal and state fraud and abuse laws, including
state and federal anti-kickback laws, we could face substantial penalties and our products could be
excluded from government healthcare programs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to various federal and state laws pertaining to healthcare fraud and abuse, which
include, among other things, &#147;anti-kickback&#148; laws that prohibit payments to induce the referral of
products and services, and &#147;false claims&#148; statutes that prohibit the fraudulent billing of federal
healthcare programs. Our operations are subject to the Federal Anti-Kickback Statute, a criminal
statute that, subject to certain statutory exceptions, prohibits any person from knowingly and
willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, to induce
or reward a person either (i)&nbsp;for referring an individual for the furnishing of items or services
for which payment may be made in whole or in part by a government healthcare program such as
Medicare or Medicaid, or (ii)&nbsp;for purchasing, leasing, or ordering or arranging for or recommending
the purchasing, leasing or ordering of an item or service for which payment may be made under a
government healthcare program. Because of the breadth of the federal anti-kickback statute, the
Office of Inspector General of the U.S. Department of Health and Human Services, or the OIG, was
authorized to adopt regulations setting forth additional exceptions to the prohibitions of the
statute commonly known as &#147;safe harbors.&#148; If all of the elements of an applicable safe harbor are
fully satisfied, an arrangement will not be subject to prosecution under the federal anti-kickback
statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, if there is a change in law, regulation or administrative or judicial interpretations
of these laws, we may have to change our business practices or our existing business practices
could be challenged as unlawful, which could have a negative effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Healthcare fraud and abuse laws are complex, and even minor, inadvertent irregularities can
potentially give rise to claims that a statute or regulation has been violated. The frequency of
suits to enforce these laws have increased significantly in recent years and have increased the
risk that a healthcare company will have to defend a false claim action, pay fines or be excluded
from the Medicare, Medicaid or other federal and state healthcare programs as a result of an
investigation arising out of such action. We cannot assure you that we will not become subject to
such litigation. Any violations of these laws, or any action against us for violation of these
laws, even if we successfully defend against it, could harm our reputation, be costly to defend and
divert management&#146;s attention from other aspects of our business. Similarly, if the physicians or
other providers or entities with whom we do business are found to have violated abuse laws, they
may be subject to sanctions, which could also have a negative impact on us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our efforts to discover and develop potential products may not lead to the discovery, development,
commercialization or marketing of actual drug products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are currently engaged in a number of different approaches to discover and develop new product
applications and product candidates. At the present time, we have one Microcyn-based drug candidate
in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">clinical trials. We also have a non-Microcyn-based compound in the research and development phase.
We believe this compound has potential applications in oncology. Discovery and development of
potential drug candidates are expensive and time-consuming, and we do not know if our efforts will
lead to discovery of any drug candidates that can be successfully developed and marketed. If our
efforts do not lead to the discovery of a suitable drug candidate, we may be unable to grow our
clinical pipeline or we may be unable to enter into agreements with collaborators who are willing
to develop our drug candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We must implement additional and expensive finance and accounting systems, procedures and controls
to accommodate growth of our business and organization and to satisfy public company reporting
requirements, which will increase our costs and require additional management resources.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a public reporting company, we are required to comply with the Sarbanes-Oxley Act of 2002 and
the related rules and regulations of the Securities and Exchange Commission, or the Commission.
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, or Section&nbsp;404, requires our management to perform
an annual assessment of our internal control over financial reporting. Compliance with Section&nbsp;404
and other requirements of doing business as a public company have and will continue to increase our
costs and require additional management resources to implement an ongoing program to perform system
and process evaluation and testing of our internal controls. In the past, we entered into
transactions that resulted in accounting consequences that we did not identify at the time of the
transactions. As a result, our prior independent auditors informed us that we did not have the
appropriate financial management and reporting structure in place to meet the demands of a public
company and that our accounting and financial personnel lacked the appropriate level of accounting
knowledge, experience and training. In calendar year 2006, our current independent auditors
recommended certain changes which, in addition to other changes in our financial reporting and
management structure, have been implemented at additional cost. We have upgraded our accounting
systems, procedures and controls and will need to continue to implement additional finance and
accounting systems, procedures and controls as we grow our business and organization, enter into
complex business transactions and take actions designed to satisfy reporting requirements. As of
our second report on Form 10-K, our management concluded that our internal controls were adequate
to meet the required Section&nbsp;404 assessment. If we are unable to complete the required Section&nbsp;404
assessment as to adequacy of our internal control over financial reporting in future Form 10-K
filings, our ability to obtain additional financing could be impaired. In addition, investors could
lose confidence in the reliability of our internal control over financial reporting and in the
accuracy of our periodic reports filed under the Securities Exchange Act of 1934. A lack of
investor confidence in the reliability and accuracy of our public reporting could cause our stock
price to decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We may not be able to maintain sufficient product liability insurance to cover claims against us.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product liability insurance for the healthcare industry is generally expensive to the extent it is
available at all. We may not be able to maintain such insurance on acceptable terms or be able to
secure increased coverage if the commercialization of our products progresses, nor can we be sure
that existing or future claims against us will be covered by our product liability insurance.
Moreover, the existing coverage of our insurance policy or any rights of indemnification and
contribution that we may have may not be sufficient to offset existing or future claims. A
successful claim against us with respect to uninsured liabilities or in excess of insurance
coverage and not subject to any indemnification or contribution could have a material adverse
effect on our future business, financial condition, and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Our Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our operating results may fluctuate, which could cause our stock price to decrease.</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Fluctuations in our operating results may lead to fluctuations, including declines, in our share
price. Our operating results and our share price may fluctuate from period to period due to a
variety of factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>demand by physicians, other medical staff and patients for our Microcyn products;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reimbursement decisions by third-party payors and announcements of those decisions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>clinical trial results and publication of results in peer-reviewed journals or the presentation
at medical conferences;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the inclusion or exclusion of our Microcyn products in large clinical trials conducted by others;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>actual and anticipated fluctuations in our quarterly financial and operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments or disputes concerning our intellectual property or other proprietary rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issues in manufacturing our product candidates or products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new or less expensive products and services or new technology introduced or offered by our
competitors or us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the development and commercialization of product enhancements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the regulatory environment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in establishing new strategic relationships;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs associated with collaborations and new product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduction of technological innovations or new commercial products by us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>litigation or public concern about the safety of our product candidates or products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in recommendations of securities analysts or lack of analyst coverage;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to meet analyst expectations regarding our operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additions or departures of key personnel; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general market conditions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Variations in the timing of our future revenues and expenses could also cause significant
fluctuations in our operating results from period to period and may result in unanticipated earning
shortfalls or losses. In addition, the NASDAQ Capital Market, in general, and the market for life
sciences companies, in particular, have experienced significant price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of those companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If an active, liquid trading market for our common stock does not develop, you may not be able to
sell your shares quickly or at or above the price you paid for it.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although our common stock is listed on the NASDAQ Capital Market, an active and liquid trading
market for our common stock has not yet and may not ever develop or be sustained. You may not be
able to sell your shares quickly or at or above the price you paid for our stock if trading in our
stock is not active.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Anti-takeover provisions in our charter and by-laws and under Delaware law may make it more
difficult for stockholders to change our management and may also make a takeover difficult.</I></B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->S-14<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our corporate documents and Delaware law contain provisions that limit the ability of stockholders
to change our management and may also enable our management to resist a takeover. These provisions
include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of our board of directors to issue and designate the rights of,
without stockholder approval, up to 5,000,000 shares of convertible preferred
stock, which rights could be senior to those of common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limitations on persons authorized to call a special meeting of stockholders; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>advance notice procedures required for stockholders to make nominations of
candidates for election as directors or to bring matters before meeting of
stockholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These provisions might discourage, delay or prevent a change of control in our management. These
provisions could also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and cause us to take other corporate actions. In addition, the
existence of these provisions, together with Delaware law, might hinder or delay an attempted
takeover other than through negotiations with our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our stockholders may experience substantial dilution in the value of their investment if we issue
additional shares of our capital stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our charter allows us to issue up to 100,000,000 shares of our common stock and to issue and
designate the rights of, without stockholder approval, up to 5,000,000 shares of convertible
preferred stock. In the event we issue additional shares of our capital stock, dilution to our
stockholders could result. In addition, if we issue and designate a class of convertible preferred
stock, these securities may provide for rights, preferences or privileges senior to those of
holders of our common stock.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This prospectus supplement, the accompanying prospectus and the documents incorporated by reference
in this prospectus supplement contain forward looking statements. When used in this prospectus
supplement, the words &#147;expects,&#148; &#147;anticipates,&#148; &#147;intends,&#148; &#147;estimates,&#148; &#147;plans,&#148; &#147;projects,&#148;
&#147;continue,&#148; &#147;ongoing,&#148; &#147;potential,&#148; &#147;expect,&#148; &#147;predict,&#148; &#147;believe,&#148; &#147;intend,&#148; &#147;may,&#148; &#147;can,&#148; &#147;will,&#148;
&#147;should,&#148; &#147;could,&#148; &#147;would&#148; and similar expressions are intended to identify forward-looking
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">You should not place undue reliance on these forward-looking statements. Our actual results could
differ materially from those anticipated in the forward-looking statements for many reasons,
including the reasons described in our &#147;Risk Factors&#148; section. Although we believe the expectations
reflected in the forward-looking statements are reasonable, they relate only to events as of the
date on which the statements are made. These forward-looking statements speak only as of the date
of this prospectus supplement. We expressly disclaim any obligation or undertaking to update or
revise any forward-looking statements contained herein to reflect any change in our expectations
with regard thereto or any change in events, conditions or circumstances on which any such
statement is based, except as required by law.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have
negotiated with certain of our service providers to pay our aged payables
with common stock in lieu of cash. We are issuing 158,470 shares to
settle $428,063 in debt.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have
negotiated with certain of our service providers to pay our aged payables
with common stock in lieu of cash. We are issuing 158,470 shares to
settle $428,063 in debt. Neither our Company nor any member of our management will be
compensated for the foregoing distribution of securities other than the regular compensation they
receive under the terms of their employment. Any expenses incurred in this distribution will be
borne by us.
</DIV>






<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements of Oculus Innovative Sciences, Inc. appearing in Oculus
Innovative Sciences, Inc.&#146;s Annual Report on Form 10-K for the year ended March&nbsp;31, 2009, have been
audited by Marcum LLP, independent registered public accounting firm, as set forth in their report
therein, included therein, and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have filed a registration statement on Form S-3 with the SEC under the Securities Act of 1933,
as amended. This prospectus supplement and the accompanying prospectus is part of the registration
statement but the registration statement includes and incorporates by reference additional
information and exhibits. We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy the registration statement and any document we file
with the SEC at the public reference room maintained by the SEC at 100 F. Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the public reference room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy and
information statements and other information regarding companies, such as ours, that file documents
electronically with the SEC. The address of that site on the world wide web is http://www.sec.gov.
The information on the SEC&#146;s web site is not part of this prospectus supplement and the
accompanying prospectus, and any references to this web site or any other web site are inactive
textual references only.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The SEC permits us to &#147;incorporate by reference&#148; the information contained in documents we file
with the SEC, which means that we can disclose important information to you by referring you to
those documents rather than by including them in this prospectus supplement and the accompanying
prospectus. Information that is incorporated by reference is considered to be part of this
prospectus supplement and the accompanying prospectus and you should read it with the same care
that you read this prospectus supplement and the accompanying prospectus. Later information that we
file with the SEC will automatically update and supersede the information that is either contained,
or incorporated by reference, in this prospectus supplement and the accompanying prospectus, and
will be considered to be a part of this prospectus supplement and the accompanying prospectus from
the date those documents are filed. We have filed with the SEC, and incorporate by reference in
this prospectus supplement and the accompanying prospectus:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Annual Report on Form 10-K for the year ended March&nbsp;31, 2009;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarter ended June&nbsp;30, 2009;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Current Report on Form 8-K, filed on August&nbsp;6, 2009;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Proxy Statement on Schedule&nbsp;14A filed on July&nbsp;29, 2009; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the description of our common stock contained in our Registration
Statement on Form 8-A filed on December&nbsp;15, 2006, including any
amendment or report filed for the purpose of updating such
description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also incorporate by reference all additional documents that we file with the SEC under the terms
of Sections&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act that are made between the date of this
prospectus supplement and the termination of any offering of securities offered by this prospectus
supplement or the accompanying prospectus. We are not, however, incorporating, in each case, any
documents or information that we are deemed to furnish and not file in accordance with SEC rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">You may request a copy of any or all of the documents incorporated by reference but not delivered
with this prospectus supplement and the accompanying prospectus, at no cost, by writing or
telephoning us at the following address and number: Investor Relations, Oculus Innovative Sciences,
Inc., 1129 N. McDowell Blvd., Petaluma, California 94954, telephone (707)&nbsp;782-0792. We will not,
however, send exhibits to those documents, unless the exhibits are specifically incorporated by
reference in those documents.
</DIV>


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</DIV>




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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PROSPECTUS</B>
</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><B>$75,000,000</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><IMG src="f53458b5f5345802.gif" alt="(OCULUS LOGO)">

</DIV>

<DIV align="Center" style="font-size: 24pt; margin-top: 6pt"><B>OCULUS INNOVATIVE SCIENCES, INC.</b></div>
<DIV align="Center" style="font-size: 14pt; margin-top: 0pt"><b>Common Stock<BR>
Preferred Stock<BR>
Depositary Shares<BR>
Warrants</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may, from time to time, offer and sell preferred stock, either separately or represented by
depositary shares, common stock or warrants, either separately or in units, in one or more
offerings. The preferred stock and warrants may be convertible into or exercisable or exchangeable
for common or preferred stock. We will specify in the accompanying prospectus supplement more
specific information about any such offering. The aggregate initial offering price of all
securities sold under this prospectus will not exceed $75,000,000, including the U.S. dollar
equivalent if the public offering of any such securities is denominated in one or more foreign
currencies, foreign currency units or composite currencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer these securities independently or together in any combination for sale directly
to investors or through underwriters, dealers or agents. We will set forth the names of any
underwriters, dealers or agents and their compensation in the accompanying prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus may not be used to sell any of these securities unless accompanied by a
prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the NASDAQ Global Market under the symbol &#147;OCLS.&#148; On February
12, 2008, the closing price of our common stock on the NASDAQ Global Market was $5.24 per share.
The market value of our outstanding common equity on February&nbsp;12, 2008 was $60,380,824. We have not
offered any securities pursuant to General Instruction I.B.6. of Form S-3 during the 12 calendar
months prior to and including the date hereof.
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our securities involves a high degree of risk. See the section entitled &#147;Risk
Factors&#148; in the accompanying prospectus supplement and in the documents we incorporate by reference
in this prospectus.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The date of this prospectus is February&nbsp;26, 2008.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#111">About This Prospectus
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#112">Risk Factors
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#113">Our Company
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#114">Forward-Looking Statements
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#115">Use of Proceeds
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">4</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#116">Description of Preferred Stock
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">4</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#117">Description of Depositary Shares
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">4</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#118">Description of Common Stock
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#119">Description of Warrants
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#120">Plan of Distribution
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">9</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#121">Legal Matters
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">10</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#122">Experts
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">10</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#123">Where You Can Find More Information
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">10</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information incorporated by reference or provided in this
prospectus, any prospectus supplement and the registration statement. We have not authorized anyone
else to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer to sell these
securities in any state where the offer or sale is not permitted. You should assume that the
information in this prospectus and any prospectus supplement, or incorporated by reference, is
accurate only as of the dates of those documents. Our business, financial condition, results of
operations and prospects may have changed since those dates.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission, or SEC, using a &#147;shelf&#148; registration, or continuous offering, process. Under
this shelf registration process, we may, from time to time, issue and sell any combination of
preferred stock, either separately or represented by depositary shares, common stock or warrants,
either separately or in units, in one or more offerings with a maximum aggregate offering price of
$75,000,000, including the U.S. dollar equivalent if the public offering of any such securities is
denominated in one or more foreign currencies, foreign currency units or composite currencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering and the offered securities. Any prospectus supplement
may also add, update or change information contained in this prospectus. Any statement that we make
in this prospectus will be modified or superseded by any inconsistent statement made by us in a
prospectus supplement. The registration statement we filed with the SEC includes exhibits that
provide more detail of the matters discussed in this prospectus. You should read this prospectus
and the related exhibits filed with the SEC and any prospectus supplement, together with additional
information described under the heading &#147;Where You Can Find More Information,&#148; before making your
investment decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, references in this prospectus and the accompanying
prospectus supplement to &#147;Oculus,&#148; &#147;we,&#148; &#147;us&#148; and &#147;our&#148; refer to Oculus Innovative Sciences, Inc.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in our securities involves a high degree of risk. The prospectus supplement relating
to a particular offering will contain a discussion of risks applicable to an investment in the
securities offered. Prior to making a decision about investing in our securities, you should
carefully consider the specific factors discussed under the heading &#147;Risk Factors&#148; in the
applicable prospectus supplement together with
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">all of the other information contained in the prospectus supplement or appearing or
incorporated by reference in this prospectus.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OUR COMPANY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed, and we manufacture and market, a family of products intended to prevent and
treat infections in chronic and acute wounds. Infection is a serious potential complication in both
chronic and acute wounds, and controlling infection is a critical step in wound healing. Our
platform technology, called Microcyn, is a proprietary oxychlorine small molecule formulation that
is designed to treat a wide range of organisms that cause disease, including viruses, fungi, spores
and antibiotic resistant strains of bacteria, in wounds. We do not have the necessary regulatory
approvals to market Microcyn in the United States as a drug, nor do we have the necessary
regulatory clearance or approval to market Microcyn in the United States as a medical device for an
antimicrobial or wound healing indication. However, our device product is cleared for sale in the
United States as a medical device for wound cleaning, or debridement, lubricating, moistening and
dressing; is a device under CE Mark in Europe with anti-infective claims; and is approved as a drug
in India and as an antiseptic in Mexico. In the first fiscal quarter of 2008, we began enrolling
patients in a Phase II randomized open label clinical trial, which is designed to evaluate the
effectiveness of Microcyn in mildly infected diabetic foot ulcers with endpoints of clinical cure
and improvement of infection (resolution of signs and symptoms of infection) supported by
microbiological response. We completed enrollment and treatment of patients of our Phase II trial
in the fourth calendar quarter of 2007 and expect to announce results in the first calendar quarter
of 2008. We are currently pursuing strategic partnerships to assess potential applications for
Microcyn in several other markets, including respiratory, ophthalmology, dermatology, dental and
veterinary markets, and FDA or other governmental approvals may be required for any potential new
products or new indications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal operations are in Petaluma, California, and we conduct operations in Europe,
Latin America and Japan through our wholly owned subsidiaries, Oculus Innovative Sciences
Netherlands B.V., Oculus Technologies of Mexico, S.A. de C.V. and Oculus Japan K.K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in California in 1999 as Micromed Laboratories, Inc. In August&nbsp;2001, we
changed our name to Oculus Innovative Sciences, Inc. In December&nbsp;2006, we reincorporated in
Delaware. Our principal executive offices are located at 1129 N. McDowell Blvd., Petaluma,
California, 94954, and our telephone number is (707)&nbsp;782-0792. Our website is www.oculusis.com.
Information on our website is not a part of this prospectus. Oculus, Microcyn, and Dermacyn are our
trademarks or registered trademarks. All other trademarks and services marks are the property of
their respective owners.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When used in this prospectus, the words &#147;expects,&#148; &#147;believes,&#148; &#147;anticipates,&#148; &#147;estimates,&#148;
&#147;may,&#148; &#147;could,&#148; &#147;intends,&#148; and similar expressions are intended to identify forward-looking
statements. These statements are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those projected or otherwise implied by the
forward-looking statements. These forward-looking statements speak only as of the date of this
prospectus. Given these risks and uncertainties, you should not place undue reliance on these
forward-looking statements. We will discuss many of these risks and uncertainties in greater detail
in any prospectus supplement under the heading &#147;Risk Factors.&#148; Additional cautionary statements or
discussions of risks and uncertainties that could affect our results or the achievement of the
expectations described in forward-looking statements may also be contained in the documents we
incorporate by reference into this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These forward-looking statements speak only as of the date of this prospectus. We expressly
disclaim any obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on which any such statement is based.
You should, however, review additional disclosures we make in our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, and
Current Reports on Form 8-K filed with the SEC.
</DIV>


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</DIV>




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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless we state otherwise in the accompanying prospectus supplement, we intend to use the net
proceeds from the sale of the securities offered by this prospectus for general corporate purposes.
General corporate purposes may include clinical trials, additions to working capital, research and
development, financing of capital expenditures, repayment or redemption of existing indebtedness,
and future acquisitions and strategic investment opportunities. Pending the application of net
proceeds, we expect to invest the net proceeds in interest-bearing securities.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF PREFERRED STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;31, 2008, our authorized preferred stock, par value $0.0001 per share, was
5,000,000 shares, none of which were issued and outstanding. We may issue preferred stock, in
series, with such designations, powers, preferences and other rights and qualifications,
limitations or restrictions as our board of directors may authorize, without further action by our
stockholders, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the distinctive designation of each series and the number of shares that will constitute the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the voting rights, if any, of shares of the series and the terms and conditions of the voting rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the dividend rate on the shares of the series, the dates on which dividends are payable, any
restriction, limitation or condition upon the payment of dividends, whether dividends will be
cumulative, and the dates from and after which dividends shall accumulate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prices at which, and the terms and conditions on which, the shares of the series may be
redeemed, if the shares are redeemable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the terms and conditions of a sinking or purchase fund for the purchase or redemption of shares of
the series, if such a fund is provided;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any preferential amount payable upon shares of the series in the event
of the liquidation, dissolution or winding up of, or upon the
distribution of any of our assets; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prices or rates of conversion or exchange at which, and the terms
and conditions on which, the shares of the series may be converted or
exchanged into other securities, if the shares are convertible or
exchangeable.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The particular terms of any series of preferred stock, and the transfer agent and registrar
for that series, will be described in a prospectus supplement. All preferred stock offered, when
issued, will be fully paid and nonassessable. Any material United States federal income tax
consequences and other special considerations with respect to any preferred stock offered under
this prospectus will also be described in the applicable prospectus supplement.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF DEPOSITARY SHARES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following description of the depositary shares does not purport to be complete and is
subject to and qualified in its entirety by the relevant deposit agreement and the depositary
receipts with respect to the depositary shares relating to any particular series of preferred
stock. You should read these documents as they, and not this description, will define your rights
as a holder of depositary shares. Forms of these documents will be filed with the SEC in connection
with the offering of depositary shares.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we elect to offer fractional interests in shares of preferred stock, we will provide for
the issuance by a depositary to the public of receipts for depositary shares. Each depositary share
will represent fractional interests of preferred stock. We will deposit the shares of preferred
stock underlying the depositary shares under a deposit agreement between us and a bank or trust
company selected by us. The bank or trust company must have its principal office in the United
States and a combined capital and surplus of at least $50&nbsp;million. The depositary receipts will
evidence the depositary shares issued under the deposit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The deposit agreement will contain terms applicable to the holders of depositary shares in
addition to the terms stated in the depositary receipts. Each owner of depositary shares will be
entitled to all the rights and preferences of the preferred stock underlying the depositary shares
in proportion to the applicable fractional interest in the underlying shares of preferred stock.
The depositary will issue the depositary receipts to individuals purchasing the fractional
interests in shares of the related preferred stock according to the terms of the offering described
in a prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends and Other Distributions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The depositary will distribute all cash dividends or other cash distributions received for the
preferred stock to the entitled record holders of depositary shares in proportion to the number of
depositary shares that the holder owns on the relevant record date. The depositary will distribute
only an amount that can be distributed without attributing to any holder of depositary shares a
fraction of one cent. The depositary will add the undistributed balance to and treat it as part of
the next sum received by the depositary for distribution to holders of depositary shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If there is a non-cash distribution, the depositary will distribute property received by it to
the entitled record holders of depositary shares, in proportion, insofar as possible, to the number
of depositary shares owned by the holders, unless the depositary determines, after consultation
with us, that it is not feasible to make such distribution. If this occurs, the depositary may,
with our approval, sell such property and distribute the net proceeds from the sale to the holders.
The deposit agreement also will contain provisions relating to how any subscription or similar
rights that we may offer to holders of the preferred stock will be available to the holders of the
depositary shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Conversion, Exchange, Redemption and Liquidation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any series of preferred stock underlying the depositary shares may be converted or
exchanged, each record holder of depositary receipts will have the right or obligation to convert
or exchange the depositary shares represented by the depositary receipts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms on which the depositary shares relating to the preferred stock of any series may be
redeemed, and any amounts distributable upon our liquidation, dissolution or winding up, will be
described in the relevant prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Voting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When the depositary receives notice of a meeting at which the holders of the preferred stock
are entitled to vote, the depositary will mail the particulars of the meeting to the record holders
of the depositary shares. Each record holder of depositary shares on the record date may instruct
the depositary on how to vote the shares of preferred stock underlying the holder&#146;s depositary
shares. The depositary will try, if practical, to vote the number of shares of preferred stock
underlying the depositary shares according to the instructions. We will agree to take all
reasonable action requested by the depositary to enable it to vote as instructed.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Amendments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the depositary may agree to amend the deposit agreement and the depositary receipt
evidencing the depositary shares. Any amendment that (a)&nbsp;imposes or increases certain fees, taxes
or other charges payable by the holders of the depositary shares as described in the deposit
agreement or that (b)&nbsp;otherwise prejudices any substantial existing right of holders of depositary
shares, will not take effect until 30&nbsp;days after the depositary has mailed notice of the amendment
to the record holders of depositary shares. Any holder of depositary shares that continues to hold
its shares at the end of the 30-day period will be deemed to have agreed to the amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Termination</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may direct the depositary to terminate the deposit agreement by mailing a notice of
termination to holders of depositary shares at least 30&nbsp;days prior to termination. In addition, a
deposit agreement will automatically terminate if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the depositary has redeemed all related outstanding depositary shares, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we have liquidated, terminated or wound up our business and the
depositary has distributed the preferred stock of the relevant series to
the holders of the related depositary shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Payment of Fees and Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will pay all fees, charges and expenses of the depositary, including the initial deposit of
the preferred stock and any redemption of the preferred stock. Holders of depositary shares will
pay transfer and other taxes and governmental charges and any other charges as are stated in the
deposit agreement for their accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Resignation and Removal of Depositary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At any time, the depositary may resign by delivering notice to us, and we may remove the
depositary. Resignations or removals will take effect upon the appointment of a successor
depositary and its acceptance of the appointment. The successor depositary must be appointed within
60&nbsp;days after delivery of the notice of resignation or removal and must be a bank or trust company
having its principal office in the United States and having a combined capital and surplus of at
least $50&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Reports</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The depositary will forward to the holders of depositary shares all reports and communications
from us that are delivered to the depositary and that we are required by law, the rules of an
applicable securities exchange or our restated certificate of incorporation to furnish to the
holders of the preferred stock. Neither we nor the depositary will be liable if the depositary is
prevented or delayed by law or any circumstances beyond its control in performing its obligations
under the deposit agreement. The deposit agreement limits our obligations and the depositary&#146;s
obligations to performance in good faith of the duties stated in the deposit agreement. Neither we
nor the depositary will be obligated to prosecute or defend any legal proceeding connected with any
depositary shares or preferred stock unless the holders of depositary shares requesting us to do so
furnish us with satisfactory indemnity. In performing our obligations, we and the depositary may
rely upon the written advice of our counsel or accountants, on any information that competent
people provide to us and on documents that we believe are genuine.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF COMMON STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section describes the general terms and provisions of the shares of our common stock, par
value $0.0001 per share. This description is only a summary and is qualified in its entirety by
reference to the description of our common stock incorporated by reference in this prospectus. Our
restated certificate of incorporation and our bylaws have been filed as exhibits to our periodic
reports filed with the SEC, which are incorporated by reference in this prospectus. You should read
our restated certificate of incorporation
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and our bylaws for additional information before you buy any of our common stock or other
securities. See &#147;Where You Can Find More Information.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have 100,000,000 shares of authorized common stock. As of February&nbsp;7, 2008, there were
13,271,035 shares of common stock issued and outstanding. Each holder of common stock is entitled
to one vote for each share of common stock held on all matters submitted to a vote of stockholders.
We have not provided for cumulative voting for the election of directors in our restated
certificate of incorporation. This means that the holders of a majority of the shares voted can
elect all of the directors then standing for election. Subject to preferences that may apply to
shares of preferred stock outstanding at the time, the holders of outstanding shares of our common
stock are entitled to receive dividends out of assets legally available at the times and in the
amounts that our board of directors may determine from time to time. Upon our liquidation,
dissolution or winding-up, the holders of common stock are entitled to share ratably in all assets
remaining after payment of all liabilities and the liquidation preferences of any outstanding
preferred stock. Holders of common stock have no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of
common stock offered, when issued, will be fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certain Provisions of Delaware Law and of the Charter and Bylaws</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The provisions of Delaware law, our restated certificate of incorporation and our bylaws
described below may have the effect of delaying, deferring or discouraging another party from
acquiring control of us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Delaware Law. </I>We are subject to the provisions of Section&nbsp;203 of the Delaware General
Corporation Law regulating corporate takeovers. In general, those provisions prohibit a Delaware
corporation from engaging in any business combination with any interested stockholder for a period
of three years following the date that the stockholder became an interested stockholder, unless:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the transaction is approved by the board before the date the
interested stockholder attained that status;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on or after the date the business combination is approved by the board
and authorized at a meeting of stockholders by at least two-thirds of
the outstanding voting stock that is not owned by the interested
stockholder.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;203 defines &#147;business combination&#148; to include the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any merger or consolidation involving the corporation and the interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>subject to certain exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, Section&nbsp;203 defines an interested stockholder as any entity or person beneficially
owning 15% or more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by any of these entities or persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Delaware corporation may opt out of these provisions either with an express provision in its
original certificate of incorporation or in an amendment to its certificate of incorporation or
bylaws approved by its stockholders. However, we have not opted out, and do not currently intend to
opt out of, these provisions. The statute could prohibit or delay mergers or other takeover or
change in control attempts and, accordingly, may discourage attempts to acquire us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Charter and Bylaws. </I>Our restated certificate of incorporation and bylaws provide that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our bylaws may be amended or repealed only by a two-thirds vote of our board of directors or a
two-thirds stockholder vote;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>no action can be taken by stockholders except at an annual or special meeting of the
stockholders called in accordance with our bylaws, and stockholders may not act by written
consent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>stockholders may not call special meetings of the stockholders or fill vacancies on the board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the approval of holders of two-thirds of the shares entitled to vote at an election of
directors is required to amend or repeal the provisions of our certificate of incorporation
regarding the inability of stockholders to take action by written consent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our board of directors is authorized to issue preferred stock without stockholder approval; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we will indemnify officers and directors against losses that they may incur in investigations
and legal proceedings resulting from their services to us, which may include services in
connection with takeover defense measures.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer Agent</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is The Bank of New York Mellon.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF WARRANTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue warrants for the purchase of preferred stock, common stock, depositary shares, or
any combination thereof. We may issue warrants independently or together with any other securities
offered by any prospectus supplement and may be attached to or separate from the other offered
securities. Each series of warrants will be issued under a separate warrant agreement to be entered
into by us with a warrant agent. The warrant agent will act solely as our agent in connection with
the warrants and will not assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants. Further terms of the warrants and the applicable warrant
agreements will be set forth in the applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable prospectus supplement relating to any particular issue of warrants will
describe the terms of the warrants, including, as applicable, the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the title of the warrants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the aggregate number of the warrants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price or prices at which the warrants will be issued;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the designation, terms and number of shares of preferred stock or
common stock purchasable upon exercise of the warrants;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the designation and terms of the offered securities, if any, with
which the warrants are issued and the number of the warrants issued
with each offered security;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date, if any, on and after which the warrants and the related
preferred stock or common stock will be separately transferable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price at which each share of preferred stock or common stock purchasable upon
exercise of the warrants may be purchased;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date on which the right to exercise the warrants shall commence and the date on
which that right shall expire;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the minimum or maximum amount of the warrants which may be exercised at any one time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>information with respect to book-entry procedures, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a discussion of certain federal income tax considerations; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the warrants.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the warrant agent may amend or supplement the warrant agreement for a series of
warrants without the consent of the holders of the warrants issued thereunder to effect changes
that are not inconsistent with the provisions of the warrants and that do not materially and
adversely affect the interests of the holders of the warrants.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may sell the securities offered by this prospectus to one or more underwriters or dealers
for public offering and sale by them or to investors directly or through agents. The accompanying
prospectus supplement will set forth the terms of the offering and the method of distribution and
will identify any firms acting as underwriters, dealers or agents in connection with the offering,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name or names of any underwriters, dealers or agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the purchase price of the securities and the proceeds to us from the sale;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any underwriting discounts and other items constituting compensation to
underwriters, dealers or agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any public offering price;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any discounts or concessions allowed or reallowed or paid to dealers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any securities exchange or market on which the securities offered in the
prospectus supplement may be listed.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only those underwriters identified in such prospectus supplement are deemed to be underwriters
in connection with the securities offered in the prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The distribution of the securities may be effected from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at prices determined as the
applicable prospectus supplement specifies. The securities may be sold through a rights offering,
forward contracts or similar arrangements. In connection with the sale of the securities,
underwriters, dealers or agents may be deemed
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to have received compensation from us in the form of underwriting discounts or commissions and
also may receive commissions from securities purchasers for whom they may act as agent.
Underwriters may sell the securities to or through dealers, and the dealers may receive
compensation in the form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers for whom they may act as agent. Some of the underwriters, dealers
or agents who participate in the securities distribution may engage in other transactions with, and
perform other services for, us or our subsidiaries in the ordinary course of business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide in the applicable prospectus supplement information regarding any underwriting
discounts or other compensation that we pay to underwriters or agents in connection with the
securities offering, and any discounts, concessions or commissions which underwriters allow to
dealers. Underwriters, dealers and agents participating in the securities distribution may be
deemed to be underwriters, and any discounts and commissions they receive and any profit they
realize on the resale of the securities may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933. Underwriters and their controlling persons, dealers and agents
may be entitled, under agreements entered into with us, to indemnification against and contribution
toward specific civil liabilities, including liabilities under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities may or may not be listed on a national securities exchange. In connection with
an offering, the underwriters may purchase and sell securities in the open market. These
transactions may include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a greater number of
securities than they are required to purchase in an offering. Stabilizing transactions consist of
bids or purchases made for the purpose of preventing or retarding a decline in the market price of
the securities while an offering is in progress. The underwriters also may impose a penalty bid.
This occurs when a particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased securities sold by or for the
account of that underwriter in stabilizing or short-covering transactions. These activities by the
underwriters may stabilize, maintain or otherwise affect the market price of the securities. As a
result, the price of the securities may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the underwriters at any
time.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of any securities offered by this prospectus will be passed upon for us by
Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of Oculus Innovative Sciences, Inc. appearing in Oculus
Innovative Sciences, Inc.&#146;s Annual Report on Form 10-K for the year ended March&nbsp;31, 2007, as
amended, have been audited by Marcum &#038; Kliegman LLP, independent registered public accounting firm,
as set forth in their report therein, included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed a registration statement on Form S-3 with the SEC under the Securities Act of
1933. This prospectus is part of the registration statement but the registration statement includes
and incorporates by reference additional information and exhibits. We file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may read and copy the
registration statement and any document we file with the SEC at the public reference room
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on
the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site that contains reports, proxy and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">information statements and other information regarding companies, such as ours, that file
documents electronically with the SEC. The address of that site on the world wide web is
http://www.sec.gov. The information on the SEC&#146;s web site is not part of this prospectus, and any
references to this web site or any other web site are inactive textual references only.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC permits us to &#147;incorporate by reference&#148; the information contained in documents we
file with the SEC, which means that we can disclose important information to you by referring you
to those documents rather than by including them in this prospectus. Information that is
incorporated by reference is considered to be part of this prospectus and you should read it with
the same care that you read this prospectus. Later information that we file with the SEC will
automatically update and supersede the information that is either contained, or incorporated by
reference, in this prospectus, and will be considered to be a part of this prospectus from the date
those documents are filed. We have filed with the SEC, and incorporate by reference in this
prospectus:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Annual Report on Form 10-K for the year ended March&nbsp;31, 2007, as amended;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Reports on Form 10-Q for the quarters ended June&nbsp;30, 2009, September
30, 2007 and December&nbsp;31, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Proxy Statement on Schedule&nbsp;14A filed on August&nbsp;17, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the description of our common stock contained in our Registration Statement on
Form 8-A filed on December&nbsp;15, 2006, including any amendment or report filed for the
purpose of updating such description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also incorporate by reference all additional documents that we file with the SEC under the
terms of Sections&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the initial
filing date of the registration statement of which this prospectus is a part and the effectiveness
of the registration statement, as well as between the date of this prospectus and the termination
of any offering of securities offered by this prospectus. We are not, however, incorporating, in
each case, any documents or information that we are deemed to furnish and not file in accordance
with SEC rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may request a copy of any or all of the documents incorporated by reference but not
delivered with this prospectus, at no cost, by writing or telephoning us at the following address
and number: Investor Relations, Oculus Innovative Sciences, Inc., 1129 N. McDowell Blvd., Petaluma,
California 94954, telephone (707)&nbsp;782-0792. We will not, however, send exhibits to those documents,
unless the exhibits are specifically incorporated by reference in those documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><IMG src="f53458b5f5345801.gif" alt="(OCULUS LOGO)">
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>




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