<SEC-DOCUMENT>0001019687-14-001259.txt : 20140403
<SEC-HEADER>0001019687-14-001259.hdr.sgml : 20140403
<ACCEPTANCE-DATETIME>20140403170432
ACCESSION NUMBER:		0001019687-14-001259
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20140403
DATE AS OF CHANGE:		20140403

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:	333-171411
		FILM NUMBER:		14743039

	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>oculus_424b5.htm
<DESCRIPTION>PROSPECTUS SUPPLEMENT
<TEXT>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right"><B>Filed Pursuant to Rule&nbsp;424(b)(5)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right"><B>Registration No. 333-171411</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>PROSPECTUS SUPPLEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>(to Prospectus dated May 3, 2011)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 16pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>$9,159,000</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><IMG SRC="logo.jpg" ALT="">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>COMMON
STOCK</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have entered into an At-the-Market Issuance
Sales Agreement, or sales agreement, with MLV &amp; Co. LLC, or MLV, relating to the sale of shares of our common stock offered
by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the sales agreement, under this
prospectus supplement and the accompanying prospectus, we may offer and sell shares of our common stock, $0.0001 par value per
share, having an aggregate offering price of up to $9,159,000 from time to time through MLV, acting as agent.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">This Prospectus Supplement updates and
replaces the Prospectus Supplement dated April 2, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our common stock is quoted on The Nasdaq Capital
Market under the symbol &ldquo;OCLS.&rdquo; On April 1, 2014, the last reported sale price for our common stock was $4.04 per
share. The aggregate market value of our outstanding voting and non-voting common equity held by non-affiliates on April
1, 2014 was $32,190,167 based on a stock price of $4.04.&nbsp; During the twelve calendar months prior to and including the date
hereof, we have sold securities with an aggregate market value of $6,351,115 pursuant to General Instruction I.B.6. of Form S-3.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Sales of our common stock, if any,
under this prospectus supplement and the accompanying prospectus may be made by any method permitted that is deemed to be
an &ldquo;at the market offering&rdquo;   as defined in Rule 415 promulgated under the Securities Act of 1933, as
amended, or the Securities Act, including, without limitation, sales made directly on or through The Nasdaq Capital Market,
or any other existing trading market for our common stock, sales made to or through a market maker other than on an exchange
or otherwise, in certain negotiated transactions at market prices, and/or any other method permitted by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">MLV is not required to sell any specific number
or dollar amount of securities, but will act as our sales agent using commercially reasonable efforts consistent with its normal
trading and sales practices, on mutually agreed terms between MLV and us. There is no arrangement for funds to be received in any
escrow, trust or similar arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The compensation to MLV for sales of
common stock sold pursuant to the sales agreement will be an amount equal to 3% of the aggregate gross proceeds of any shares
of common stock sold under the sales agreement. In connection with the sale of the common stock on our behalf, MLV may be
deemed to be an &ldquo;underwriter&rdquo; within the meaning of the Securities Act and the compensation of MLV may be deemed
to be underwriting commissions or discounts. We have also agreed to provide indemnification and contribution to MLV with
respect to certain civil liabilities, including liabilities under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><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 &ldquo;Risk
Factors&rdquo; beginning on page S-7 of this Prospectus Supplement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt"><B><IMG SRC="mlvlogo.jpg" ALT="">&nbsp;</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The date of this Prospectus Supplement
is April 3, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Prospectus Supplement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 85%; padding-right: 0.8pt">&nbsp;</td>
    <td style="width: 5%; padding-right: 0.8pt">&nbsp;</td>
    <td style="width: 10%; padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt"><b>Page</b></font></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">About This Prospectus Supplement</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-1</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Prospectus Supplement Summary</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-2</font></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Risk Factors</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-</font>7</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Forward-Looking Statements</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-</font>23</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 0.8pt">Use of Proceeds</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">S-24</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <td style="padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">Dilution</FONT></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-24</font></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Plan of Distribution</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-</font>25</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0.8pt">Legal Matters</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">S-26</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Experts</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><font style="font-size: 10pt">S-</font>27</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td style="padding-right: 0.8pt"><font style="font-size: 10pt">Where You Can Find More Information</font></td>
    <td style="padding-right: 0.8pt">&nbsp;</td>
    <td style="padding-right: 0.8pt; text-align: center"><FONT STYLE="font-size: 10pt">S-</FONT>27</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 0.8pt">Incorporation of Certain Documents by Reference</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">S-27</TD></TR>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Prospectus</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 85%">&nbsp;</td>
    <td style="width: 5%">&nbsp;</td>
    <td style="width: 10%; text-align: center"><font style="font-size: 10pt"><b>Page</b></font></td></tr>
<tr style="background-color: #EEEEEE">
    <td style="vertical-align: top"><font style="font-size: 10pt">About This Prospectus</font></td>
    <td>&nbsp;</td>
    <td style="vertical-align: bottom; text-align: center"><font style="font-size: 10pt">2</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Our Company</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">2</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Risk Factors</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">3</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Forward-Looking Statements</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">15</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Use of Proceeds</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">15</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Description of Common Stock</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">15</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Description of Preferred Stock</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">17</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Description of Warrants</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">18</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Description of Units</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">18</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Plan of Distribution</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">19</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Legal Matters</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">19</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Experts</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">20</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <td><font style="font-size: 10pt">Where You Can Find More Information</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">20</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <td><font style="font-size: 10pt">Incorporation of Certain Documents by Reference</font></td>
    <td>&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt">20</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS SUPPLEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus supplement and the accompanying
prospectus are part of a &ldquo;shelf&rdquo; registration statement on Form S-3 that we filed with the Securities and Exchange
Commission on February 18, 2011 and was declared effective on May 3, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This document is in two parts. The first
part is this prospectus supplement, which describes the terms of this offering and also adds to and updates information contained
in the accompanying prospectus and the documents incorporated by reference into this prospectus and the accompanying prospectus.
The second part is the accompanying prospectus, which gives more general information about the shares of our common stock and other
securities we may offer from time to time under our shelf registration statement, some of which does not apply to the securities
offered by this prospectus supplement. To the extent there is a conflict between the information contained in this prospectus supplement,
on the one hand, and the information contained in the accompanying prospectus or any document incorporated by reference therein,
on the other hand, you should rely on the information in this prospectus supplement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You should read this prospectus supplement,
the accompanying prospectus, the documents incorporated by reference in this prospectus supplement and the accompanying prospectus
before making an investment decision. You should also read and consider the information in the documents referred to in the sections
of this prospectus supplement entitled &ldquo;Where You Can Find More Information&rdquo; and &ldquo;Incorporation of Certain Documents
by Reference.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In this prospectus supplement and the accompanying
prospectus, unless otherwise indicated, the terms &ldquo;Oculus,&rdquo; &ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our,&rdquo;
and similar terms refer to Oculus Innovative Sciences, Inc. and its subsidiaries on a consolidated basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUPPLEMENT SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><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 &ldquo;Risk Factors,&rdquo; and our consolidated financial statements and
the related notes and other documents incorporated by reference in the accompanying prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>OUR COMPANY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a global healthcare company that
designs, produces, and markets prescription and non-prescription products in 31 countries. We are pioneering innovative products
for the dermatology, surgical, advanced wound and tissue care, and animal healthcare markets. Our primary focus is on the commercialization
of our proprietary technology platform called Microcyn&reg; Technology. This technology is based on electrically charged oxychlorine
small molecules designed to target a wide range of organisms that cause disease (pathogens). These organisms 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, as well as <I>Clostridium difficile,</I> or C. diff, a highly contagious bacteria spread by human
contact. Several Microcyn&reg; Technology tissue care products are designed to treat infections and enhance healing while reducing
the need for antibiotics. Infection is a serious potential complication in both chronic and acute wounds, and controlling infection
is a critical step in wound healing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To date, we have obtained eight approvals
or clearances from the U.S. Food and Drug Administration, or FDA, that permit us to sell our Microcyn-based products as medical
devices under Section 510(k) of the Federal Food, Drug and Cosmetic Act in the United States. In December 2013, we announced that
we had received our latest 510(k) device clearance from the FDA for our new Microcyn&reg; Scar Management HydroGel. The Rx product,
under the supervision of a healthcare professional, is intended for the management of old and new hypertrophic and keloid scarring
resulting from burns, general surgical procedures and trauma wounds. Our U.S. dermatology partner, Quinnova Pharmaceuticals, Inc.,
intends to commercialize this product in the first half of 2014.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not have the necessary regulatory
approvals to market Microcyn&reg; as a drug or as a medical device with an antimicrobial or wound healing indication in the United
States. Outside the United States, our Microcyn&reg; Technology products have a CE Mark device approval in Europe for debriding,
irrigating and moistening acute and chronic wounds in comprehensive wound treatment through potential local antimicrobial effect
in the wound bed and creating a moist environment. In February 2014, we announced receipt of European CE Mark device approval
for our Microcyn&reg;-based GramaDerm&reg; Solution and GramaDerm&reg; Hydrogel. Both products are intended for use in the topical
treatment of mild to moderate acne and are designed to complement other acne treatments. In Mexico, we are approved as a drug
for antiseptic and were granted a Mexican patent for the use of our novel antimicrobial surgical solution in the treatment and
prevention of peritonitis. In India, our technology has a drug license for cleaning and debriding in wound management. In China,
we have obtained a medical device approval by the State Food and Drug Administration for reducing the propagation of microbes
in wounds and creating a moist environment for wound healing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we do not have the necessary regulatory
clearance for an antimicrobial or wound healing indication in the United States, several factors, including our global product
experience, clinical and laboratory testing, physician-led clinical studies based on our technology and scientific papers authored
about our technology, suggest that our Microcyn&reg; Technology may help reduce a wide range of pathogens in acute and chronic
wounds, while curing or improving infection, and concurrently enhancing wound healing through modes of action unrelated to the
treatment of infection. These physician-led clinical studies suggest that our Microcyn&reg; Technology is safe, easy to use and
complementary to many existing treatment methods in wound care. Physician-led clinical studies and usage of our products in the
United States suggest that our 510(k) cleared products may shorten hospital stays, lower aggregate patient care costs and, in certain
cases, reduce the need for systemic antibiotics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Ruthigen, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our subsidiary, Ruthigen, Inc., was
incorporated in the State of Nevada on January 18, 2013, and reincorporated from Nevada to Delaware on September 25,
2013. Ruthigen has established offices in Santa Rosa, California. Ruthigen announced its initial public offering on March 21,
2014. We own a minority stake in Ruthigen after its public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 31, 2014, we amended certain agreements with Ruthigen. Previously, we had entered into three key agreements with Ruthigen. Each of these agreements (the &ldquo;Ancillary Agreements&rdquo;)
was entered into in the overall context of Ruthigen&rsquo;s separation from us (the &ldquo;Separation&rdquo;). The effective date
for all three agreements is the closing date of Ruthigen&rsquo;s initial public offering, which was March 26, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Funding Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 31, 2014, we entered into a new
financing agreement with Ruthigen to govern the terms of certain additional financing to be provided to Ruthigen by us, pending
the Separation, subject to the terms and conditions set forth in the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We agreed to continue to fund
Ruthigen for a total of up to $760,000 to allow Ruthigen to proceed with its intended initial public offering. Furthermore,
any funds provided by us to Ruthigen pursuant to the funding agreement will be repaid to us by Ruthigen at the time of the
closing of the Ruthigen initial public offering. The funding agreement also contains provisions related to the composition
of our board of directors. One of the Ruthigen board of director members resigned from our board of directors effective February 21, 2014, which was the date of the filing of Ruthigen&rsquo;s filing of Amendment No. 4 to its
registration statement, while the remaining Ruthigen board of director members resigned from our board of directors on March
26, 2014, at the time Ruthigen&rsquo;s initial public offering closed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>License and Supply Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We initially entered into a license and
supply agreement with Ruthigen on June 6, 2013. Pursuant to the terms of the license and supply agreement, we agreed to
exclusively license certain of our proprietary technology to Ruthigen to enable Ruthigen&rsquo;s research and development and
commercialization of the newly discovered RUT58-60, and any improvements to it, in the United States, Canada, European Union
and Japan, referred to as the Territory, for certain invasive procedures in humans as defined in the license and supply
agreement. On October 9, 2013, we entered into Amendment No. 1 to the license and supply agreement with Ruthigen,
which amended the second milestone event set forth in Section 7.1 of the license and supply agreement. On November 6, 2013,
we entered into Amendment No. 2 to the license and supply agreement with Ruthigen to further amend the certain milestone
events set forth in Section 7.1 of the license and supply agreement and to amend the terms of the manufacturing equipment
purchases set forth in Section 6.13 of the license and supply agreement. On January 31, 2014, we entered into Amendment No. 3
to the license and supply agreement with Ruthigen to further amend certain milestone events and the terms of the
manufacturing equipment purchases, and to remove sections of the license and supply agreement which related to an exclusive
option granted by us to Ruthigen to expand the terms of the license and supply agreement to dermatologic uses. All other
terms and conditions of the license and supply agreement remain unmodified and in full force and effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the license and supply agreement,
we will be prohibited from using the licensed proprietary technology to sell products that compete with Ruthigen&rsquo;s products
within the Territory, and Ruthigen cannot sell any device or product that competes with our products being sold or developed as
of the effective date of the license and supply agreement.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Ruthigen will be required to make a total of
$8,000,000 in milestone payments to us for the first product only, as follows: upon completion of last patient enrollment in Ruthigen&rsquo;s
Phase 1/2 clinical study; upon completion of last patient enrollment in Ruthigen's first pivotal clinical study; upon completion
of Ruthigen&rsquo;s first meeting with the U.S. Food and Drug Administration following completion of Ruthigen&rsquo;s
first pivotal clinical trial; and upon first patient enrollment in Ruthigen&rsquo;s second pivotal clinical trial. In addition,
as further consideration under the agreement, Ruthigen will be required to make royalty payments to us based on Ruthigen&rsquo;s
annual net sales of the product from the date of first commercial sale to the date that Ruthigen ceases to commercialize the product,
which percentage royalty rate will vary between 3% and 20% and will increase based on various net sales thresholds and will differ
depending on the country in which the sales are made.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Shared Services Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We also entered into a shared services agreement
with Ruthigen initially on June 6, 2013, pursuant to which we will provide Ruthigen with general services, including general accounting,
human resources, laboratory personnel and shared R&amp;D resources while Ruthigen plans to establish an independent facility and
systems. On January
31, 2014, we entered into Amendment No. 1 to the shared services agreement with Ruthigen to amend the terms of certain standard
activities we shall provide Ruthigen and the terms related to access to our facilities. All other terms and conditions of the shared
services agreement remain unmodified and in full force and effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Separation Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Effectiveness and Term</I> &ndash; On August
2, 2013, we entered into a separation agreement with Ruthigen that contains  provisions relating to our ongoing relationship
with Ruthigen, and more specifically governs our relationship with Ruthigen following the completion of Ruthigen&rsquo;s initial public offering. On January 31, 2014, we amended the separation agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The separation agreement contains certain
limitations on our ability to control various aspects of Ruthigen&rsquo;s business and operations in order for Ruthigen to
operate as independently as possible from us to unlock the value proposition of RUT58-60, which Ruthigen expects to result in
financial gain to us and Ruthigen, if Ruthigen is successful. The separation agreement terminates 8.5 years following the
closing of Ruthigen&rsquo;s initial public offering, unless the parties mutually agree to terminate it earlier. However, most
of the material restrictions and obligations contained in the separation agreement lapse when we and our subsidiaries (other
than Ruthigen) own less than 19.9%, or the ownership threshold for purposes of the agreement, of the outstanding shares of
Ruthigen&rsquo;s common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Marketing and Transfer Restrictions
</I>&ndash; The separation agreement contains a series
of restrictions on our ability to transfer the Ruthigen shares we own. We are restricted from transferring any of the Ruthigen shares we own during
the one-year lock up period immediately following Ruthigen&rsquo;s initial public offering. Following the one-year lock
up period, transfers by us of the Ruthigen shares we own must be conducted with the consent of Ruthigen&rsquo;s board of directors
or within the prescribed requirements for such transfers set forth in the separation agreement. These prescribed requirements
include that the transfers must be in private placement transactions, that the purchase price discount may not exceed 15% or 20%
of the prevailing market price depending on the type of transferee, the amount of shares transferred in a given transfer (or series
of transfers comprising a single transaction) may not exceed the greater of 5% of Ruthigen&rsquo;s outstanding shares or $1.5
million in net proceeds to us, as well as certain other requirements set forth in the separation agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Registration Rights</I> &ndash; The separation
agreement provides us with certain &ldquo;piggy back&rdquo; registration rights if Ruthigen proposes to publicly register any
of its common stock following the completion of Ruthigen&rsquo;s intended initial public offering, subject to certain conditions
and limitations. The inclusion of the Ruthigen shares we own in such registration will be subject to the same terms that Ruthigen
offers its own securities in such offering and our registration rights will never be never be more than 30% of the value of all
securities to be registered in such offering. In addition, following transfers by us of the Ruthigen shares, we have certain demand
registration rights requiring Ruthigen to register all of the Ruthigen shares we have transferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Standstill</I> &ndash; We have agreed that,
subject to the ownership threshold, we shall not, and shall not act in concert with any person to, make or participate in a solicitation
of proxies or powers of attorney or similar rights to vote any of the Ruthigen shares we own or to deposit the Ruthigen shares
we own in a voting trust.</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Voting</I> &ndash; We have agreed that,
subject to the ownership threshold, we shall vote or consent all of the Ruthigen shares we own in the same manner as the majority
of the minority holders of Ruthigen&rsquo;s common stock (non-Oculus holders).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Equity Plan, Oculus Equity and Corporate
Governance</I> &ndash; We and Ruthigen have agreed on the principal terms of Ruthigen&rsquo;s equity incentive plan, including
the formula for the number of shares reserved under the plan, the vesting schedule of awards under the plan, timing, size and award
type of the initial grants to be made following the closing of Ruthigen&rsquo;s intended initial public offering, and the formula
for the evergreen refresh provision and other share caps on certain types of awards and future equity plans. The separation agreement
clarifies that options for common stock of our Company held by employees and directors of Ruthigen shall continue to vest as long
as the individuals continue in service to Ruthigen. In addition, the separation agreement provides that Ruthigen&rsquo;s restated
articles of incorporation and bylaws for purposes of operating as a public company will contain provisions for a staggered board
of directors and plurality voting for the election of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Indemnification &ndash;</I> The separation
agreement provides that each party will indemnify, defend and hold harmless the other party and its affiliates for third party
claims asserted against the other party, and that we will indemnify, defend and hold harmless Ruthigen and its affiliates from
and against any and all direct losses relating to the WTI loan agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Directors&rsquo; and Officers&rsquo; Insurance</I>
&ndash; The separation agreement provides that, so long as we shall maintain a directors&rsquo; and officers&rsquo; insurance program
covering the past and present officers and directors of our Company, the program shall be standard in our industry and if there
is a change to the program, then we shall provide prior notice.&nbsp; In addition, we have agreed not to exclude any former Oculus
director from any insurance policy coverage if such coverage is made available to our Company&rsquo;s then existing directors and
officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We incorporated under the laws of the State
of California in April 1999 as Micromed Laboratories, Inc. In August 2001, we changed our name to Oculus Innovative Sciences, Inc.
In December 2006, we reincorporated under the laws of the State of Delaware. Our principal executive offices are located at 1129&nbsp;N.&nbsp;McDowell
Blvd., Petaluma, California, 94954, and our telephone number is (707)&nbsp;283-0550. We have three principal subsidiaries: Ruthigen,
Inc., organized in Delaware; Oculus Technologies of Mexico, S.A. de C.V., organized in Mexico; and Oculus Innovative Sciences Netherlands,
B.V., organized in the Netherlands. References to our Company contained herein include our wholly owned subsidiary, Ruthigen, Inc.,
except where the context otherwise requires. Our fiscal year end is March 31. Our website is www.oculusis.com. Information contained
on our website does not constitute part of this prospectus.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Additional Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Investors and others should note that we
announce material financial information using our company website (www.oculusis.com), our investor relations website (ir.oculusis.com),
SEC filings, press releases, public conference calls and webcasts. Information about Oculus, our business, and our results of operations
may also be announced by posts on the following social media channels:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px; font-size: 10pt"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Oculus corporate blog (http://oculusis.com/dialogue/)</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px; font-size: 10pt"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Oculus Facebook page (www.facebook.com/oculusinnovativesciences)</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px; font-size: 10pt"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Dan McFadden&rsquo;s Twitter feed (http://twitter.com/dmcfaddenocls). Mr. McFadden is the Vice President of Public and Investor Relations of our Company.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The information that we post on these social
media channels could be deemed to be material information. Therefore, we encourage investors, the media, and others interested
in Oculus to review the information that we post on these social media channels. These social media channels may be updated from
time to time on Oculus&rsquo; investor relations website. The information on or accessible through our websites and social media
channels is not incorporated by reference in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 49%; text-align: left; vertical-align: top"><P STYLE="margin: 0">Common stock offered by us</P>


</TD>
    <TD STYLE="width: 51%; text-align: justify"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shares of our common stock having an aggregate offering price of up to $9,159,000.</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



&nbsp;<BR></TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 49%"><P STYLE="margin: 0">Manner of offering</P>


</TD>
    <TD STYLE="text-align: justify; width: 51%"><FONT STYLE="font-family: Times New Roman, Times, Serif">&ldquo;At
    the market offering&rdquo;  that may be made from time to time on the Nasdaq Capital Market or other market for our common
    stock in the United States through our agent, MLV &amp; Co. LLC. See &ldquo;Plan of Distribution&rdquo; on page S-25 of this
    prospectus supplement.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 47%; padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">Use of proceeds</FONT></TD>
    <TD STYLE="width: 2%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 51%; padding-right: 0.8pt; text-align: justify">We intend to use the net proceeds from this offering for working capital and general corporate purposes. See
&ldquo;Use of Proceeds&rdquo; on page S-24 of this prospectus supplement.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">Risk factors</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-size: 10pt">This investment involves a high degree of
    risk. See &ldquo;Risk Factors&rdquo; on page S-7 of this prospectus supplement for factors to consider before deciding to
    purchase our securities.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">Nasdaq Capital Market symbol</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">OCLS</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have a history of losses, we expect
to continue to incur losses and we may never</I></B> <B><I>achieve profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We reported a net loss of
$3,722,000 for the nine  months ended December 31, 2013. We incurred net losses of $5,431,000 and $7,329,000 for the years
ended March&nbsp;31, 2013 and 2012, respectively. At December 31, 2013, our accumulated deficit amounted to $141,467,000 and
at March&nbsp;31, 2013, our accumulated deficit amounted to $137,745,000. During the nine months ended December 31, 2013, net
cash used in operating activities was $3,401,000, and during the year ended March&nbsp;31, 2013, net cash provided by
operating activities amounted to $1,150,000. We had working capital of $2,573,000 as of December 31, 2013.
We expect to continue incurring losses for the foreseeable future and may never achieve or sustain profitability. We may need
to raise additional capital to pursue product development initiatives and to penetrate markets for the sale of our products.
We believe that we have access to capital resources through possible public or private equity offerings, debt
financings, corporate collaborations or other means. 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 our cash in amounts sufficient to sustain operations and meet our obligations. These
measures could cause significant delays in our efforts to commercialize our products in the United States, which are critical
to the realization of our business plan and to future operations.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to maintain compliance with the continued listing standards as set forth in the Nasdaq Listing Rules, our common stock could
be delisted from The Nasdaq Capital Market, and if this were to occur, then the price and liquidity of our common stock, and
our ability to raise additional capital may be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock is currently listed on
The Nasdaq Capital Market. Continued listing of a security on The Nasdaq Capital Market is conditioned upon compliance with certain
continued listing requirements and continued listing standards set forth in the Nasdaq Listing Rules for Nasdaq Capital Market
companies. There can be no assurance we will continue to satisfy the requirements for maintaining a Nasdaq Capital Market listing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As previously
announced, on November 22, 2013, we received a letter from the Listing Qualifications staff of The Nasdaq Stock Market LLC,
notifying us that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires us to maintain a minimum of $2,500,000
in stockholders&rsquo; equity for continued listing on the Nasdaq Capital Market. As of September 30, 2013, we had stockholders&rsquo;
equity of $1,550,000, as reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, filed by us with
the Securities and Exchange Commission on November 19, 2013. The letter also noted that, as of November 21, 2013, we did not meet
the compliance alternative requirement of market value of listed securities under Listing Rule 5550(b)(2), or the compliance alternative
requirement of net income from continuing operations under Listing Rule 5550(b)(3).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On December 9,
2013, we announced two transactions that increased our stockholders&rsquo; equity. We closed on a registered direct offering of
550,000 shares of common stock at $4.00 per share, with no warrant coverage, yielding gross proceeds of $2.2 million. This transaction
resulted in an increase to our stockholders&rsquo; equity of $2 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The second transaction
involved the sale of 617,285 shares of our common stock by our lenders, Venture Lending and Leasing V, LLC and Venture Lending
and Leasing VI, LLC (collectively with Venture Lending and Leasing V, LLC, &ldquo;VLL&rdquo;). On October 30, 2012, we entered
into a stock purchase agreement with VLL for the issuance of shares of common stock having an aggregate fair market value equal
to $3,500,000 and subsequently issued an aggregate of 617,285 shares to VLL. The use of proceeds from the sale of the shares pursuant
to the stock purchase agreement was intended to be used to eliminate our put warrants liabilities under certain warrants held by
VLL and to eliminate or reduce outstanding debt payments owed by us under certain loans outstanding with VLL. As of December 16,
2013, VLL sold all of its shares of our stock acquired in the October 2012 transaction at an average price of about $5.35 per share.
The net proceeds of the shares will be applied to the put warrant liabilities of those certain warrants held by VLL, and will also
prepay the remaining balance of principal and interest owed by us under those certain loan agreements with VLL. The net result
of this transaction is intended to increase our stockholders&rsquo; equity by $1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">As of December 31, 2013, we had stockholders&rsquo;
equity of $3,397,000, as reported in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2013, filed by us with
the Securities and Exchange Commission on February 14, 2014.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are not able to maintain compliance
with the continued listing standards as set forth in the Nasdaq Listing Rules for Nasdaq Capital Market companies, our common
stock will be delisted from The Nasdaq Capital Market and an associated decrease in liquidity in the market for our common stock
may occur. In addition, the delisting of our common stock could materially adversely affect our access to the capital markets,
and any limitation on liquidity or reduction in the price of our common stock could materially adversely affect our ability to
raise capital on terms acceptable to us or at all. Delisting from The Nasdaq Capital Market could also result in the potential
loss of confidence by our business partners and suppliers, the loss of institutional investor interest and fewer business development
opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our strategy to separate our businesses
into two publicly traded companies may have a negative impact on our business operations, operating results and assets. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 26, 2014, our subsidiary,
Ruthigen, Inc. closed its initial public offering. As a result, we now own a minority interest in Ruthigen. There are
various uncertainties and risks relating to this separation that could have, and in some cases have had, a negative
impact on our business operations, operating results or assets, including: (i) the distraction of management and disruption
of operations; (ii) perceived uncertainties as to our future direction may result in increased difficulties in recruiting and
retaining employees, particularly highly qualified employees; (iii) perceived uncertainties as to our future direction may
have a negative impact on our relationships with our customers, suppliers, vendors and partners and may result in the loss of
business opportunities; (iv) the process of completing the separation may be time consuming and expensive and may result in
the loss of business opportunities; and (v) we may not be able to successfully achieve the benefits of any strategic
alternative undertaken by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our inability to raise additional
capital on acceptable terms in the future may cause</I></B> <B><I>us to curtail certain operational activities, including regulatory
trials, sales and</I></B> <B><I>marketing, and international operations, in order to reduce costs and sustain the</I></B> <B><I>business,
and such inability would have a material adverse effect on our business and financial</I></B> <B><I>condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 may need to raise additional capital in order to, among other things:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fund our clinical trials and preclinical studies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>sustain commercialization of our current products or new products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>expand our manufacturing capabilities;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>increase our sales and marketing efforts to drive market adoption and address competitive developments;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>acquire or license technologies;&nbsp;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>finance capital expenditures and our general and administrative expenses; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop new products.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our present and future funding requirements
will depend on many factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the progress and timing of our clinical trials;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the level of research and development investment required to maintain and improve our technology position;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our efforts to acquire or license complementary technologies or acquire complementary businesses;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in product development plans needed to address any difficulties in commercialization;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>competing technological and market developments;&nbsp;and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in regulatory policies or laws that affect our operations.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we raise additional funds by issuing
equity securities, dilution to our stockholders will 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
or 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 curtail certain operational activities,
including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain our business,
and would have a material adverse effect on our business and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not have the necessary regulatory
approvals to market Microcyn</I>&reg;<I> as a drug in the</I></B> <B><I>United States.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To date, we have obtained eight approvals
or clearances from the FDA that permit us to sell our Microcyn-based products as medical devices under Section 510(k) of the Federal
Food, Drug and Cosmetic Act in the United States. In December 2013, we announced that we had received our latest 510(k) device
clearance from the FDA for our new Microcyn&reg; Scar Management HydroGel. Before we are permitted to sell Microcyn&reg; 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 to the FDA and obtain FDA approval.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&reg;
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-based products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Delays or adverse results in clinical
trials could result in increased costs to us</I></B> <B><I>and could delay our ability to generate revenue.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Clinical trials can be long and expensive,
and the outcome of clinical trials is 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>insufficient funds to continue our clinical trials;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in the FDA requirements for approval, including requirements for testing efficacy and safety;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delay in obtaining or failure to obtain FDA or other regulatory authority approval of a clinical trial protocol;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>patients not enrolling in clinical trials at the rate we expect;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays in reaching agreement on acceptable clinical trial agreement terms with prospective sites;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays in obtaining institutional review board approval to conduct a study at a prospective site;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">third party clinical investigators not performing our clinical trials on our anticipated schedule or performance is not consistent
with the clinical trial protocol and good clinical practices, or the third party organizations not performing data collection and
analysis in a timely or accurate manner;&nbsp;and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in governmental regulations or administrative actions.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not know whether
future clinical trials will demonstrate safety and efficacy sufficiently to result in additional FDA approvals or clearances. While a
number of physicians have conducted clinical studies assessing the safety and efficacy of Microcyn&reg; for various
indications, the data from these studies are not sufficient to support approval of Microcyn&reg; as a drug in the United
States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Clinical trials involve a lengthy
and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial
results. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The results of preclinical studies and
early clinical trials of new drugs do not necessarily predict the results of later-stage clinical trials. The design of our clinical
trials is based on many assumptions about the expected effects of our product candidates, and if those assumptions are incorrect,
the trials may not produce statistically significant results. Preliminary results may not be confirmed upon full analysis of the
detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and
efficacy sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected
from clinical trials of our product candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere.
Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if or when we will have
an approved product for commercialization or achieve sales or profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we fail to obtain, or experience
significant delays in obtaining, additional</I></B> <B><I>regulatory clearances or approvals to market our current or future products,
we may</I></B> <B><I>be unable to commercialize these products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The 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 their underlying product formulations may be the same or similar, our products are subject
to different regulations and approval processes depending upon their intended use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 product formulation(s) 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&reg;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have established a nutritional
products division under the name NVN Therapeutics, and if the products we create in our new division are not accepted by the marketplace,
we may cease operations in this division.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We established a nutritional products
division under the name Napa Valley Nutritionals in the beginning of 2012 to expand our product pipeline. The name of the
division was subsequently changed to NVN Therapeutics and is currently based out of Sacramento, California. This division was
originally intended to develop and manufacture medical foods with a primary focus on the women&rsquo;s healthcare market.
However, as a result of recently revised FDA guidance regarding medical foods, we have ceased production of medical foods and
we are redirecting  our efforts into the development and manufacture of dietary supplements for this same women&rsquo;s
healthcare market. If we cannot generate sufficient revenues from the sale of such products, we may cease operations
in this nutritional products division.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If our products do not gain market
acceptance, our business will suffer because we</I></B> <B><I>might not be able to fund future operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A number of factors may affect the market
acceptance of our products or any other products we develop or acquire, including, among others:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the price of our products relative to other products for the same or similar treatments;&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">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;&nbsp;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">changes in practice guidelines and the standard of care for the targeted indication;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">our ability to fund our sales and marketing efforts;&nbsp;and</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the effectiveness of our sales and marketing efforts or our partners&rsquo; sales and marketing efforts.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our ability to effectively promote and
sell any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a
competitive price and our ability to obtain sufficient third-party coverage or reimbursement, if any. In addition, our efforts
to educate the medical community on the benefits of our product candidates may require significant resources, may be constrained
by FDA rules and policies on product promotion, and may never be successful. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If our competitors develop products
similar to Microcyn</I></B>&reg;<B><I>, we may need to modify or</I></B> <B><I>alter our business strategy, which may delay the
achievement of our goals.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Competitors may develop products with similar
characteristics to Microcyn&reg;. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We intend to license or
collaborate with third parties in various potential markets,</I></B> <B><I>or in some cases we may utilize a small
direct sales force, and events involving these strategic partners or any future collaboration could</I></B> <B><I>delay or
prevent us from developing or commercializing products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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. We may incur significant costs in the use of third parties to identify and assist in establishing relationships with
potential collaborators. We currently have a small direct sales force which sells our products in the wound care and
women&rsquo;s health markets, and we intend to slowly expand the geographical coverage of our direct sales force.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To penetrate our target markets,
we may need to enter into additional collaborative agreements to assist in the development and commercialization of products,
or in some cases, we intend to create a direct sales force to sell into certain core markets. In some of our markets, we are
using a direct sales force to sell our products, while in other markets we are working with partners or distributors to
commercialize our products. Utilizing a direct sales force requires more cash flow upfront to hire a sales force in
comparison to partnering with a company, which uses its already established sales force. On the other hand, 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 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 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to expand our
direct domestic sales force, we may not be able to successfully increase  the sales of our products in the United
States.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We currently use a direct sales force to sell our products in
the wound care and women&rsquo;s health markets, while we have established partnerships to commercialize our products in the
animal healthcare and dermatology markets. Expanding our sales force is expensive and time consuming, and the lack of
qualified sales personnel could delay or limit the success of our product launches in the United States. Our domestic sales
force competes with the sales operations of our competitors, which are better funded, larger and more
experienced. We may not be able to develop domestic sales capacity on a timely basis, or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our dependence on distributors for sales could limit or prevent us from selling our</I></B> <B><I>products and from realizing long-term
revenue growth.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently depend on
distributors to sell Microcyn&reg; in Europe and other countries, and intend to continue to sell our products primarily
through distributors in Europe for the foreseeable future. Our existing distribution agreements are generally short-term
in duration, and we may need to pursue alternate partners 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 and our other markets, which could be
time-consuming and divert management&rsquo;s attention from other operational matters. In addition, we will need to attract
additional distributors to expand our the geographic areas in which we sell Microcyn&reg;. 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 of our products 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we fail to comply with ongoing
regulatory requirements, or if we experience</I></B> <B><I>unanticipated problems with our products, these products could be subject
to</I></B> <B><I>restrictions or withdrawal from the market.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 warning letters, injunctions, seizures,
civil fines or criminal penalties. In addition, the manufacturing, labeling, packaging, adverse event reporting, storing, advertising,
promoting, distributing 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 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 our products or manufacturing
processes, fines, suspension or loss of regulatory approvals or clearances, product recalls, termination of distribution, 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&reg;, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">New government regulations may be enacted
and changes in FDA policies and regulations and, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may experience difficulties in
manufacturing Microcyn</I></B>&reg;<B><I>, which could prevent us from</I></B> <B><I>commercializing one or more of our products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 Environmental Protection Agency, 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&reg;, 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&reg; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our competitive position depends
on our ability to protect our intellectual property</I></B> <B><I>and our proprietary technologies.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&reg; Technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We also have agreed to certain
prohibitions on our intellectual property. Pursuant to a license and supply agreement, as subsequently amended, we entered
into with our wholly owned subsidiary, Ruthigen, Inc., we agreed to exclusively license certain of our proprietary technology
to Ruthigen to enable Ruthigen&rsquo;s research and development and commercialization of the newly discovered RUT58-60, and
any improvements to it, in the United States, Canada, European Union and Japan for certain invasive procedures in humans as
defined in the license and supply agreement,as amended. Under the terms of the license and supply agreement, as amended, we are also
prohibited from using the licensed proprietary technology to sell products that compete with Ruthigen&rsquo;s products within
the defined territory, and Ruthigen cannot sell any device or product that competes with our products being sold or developed
as of the effective date of the license and supply agreement. Such agreement will take effect as of the closing date
of Ruthigen&rsquo;s proposed initial public offering, if any should occur. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although we have filed several U.S.&nbsp;and
foreign patent applications related to our Microcyn-based products, the manufacturing technology for making the products, and their
uses, only five U.S.&nbsp;patents have been issued from these applications to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.&nbsp;Patent and Trademark Office or foreign regulatory
body will protect our Microcyn&reg; Technology. Any claims that are issued 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, our European patent that was initially issued on May 30, 2007 was revoked by the Opposition
Division of the European Patent Office in December 2009 following opposition proceedings instituted by a competitor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we were the first to invent the inventions described in patent applications;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we were the first to file patent applications for inventions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>others will not independently develop similar or alternative technologies or duplicate our products without infringing our
intellectual property rights;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any patents licensed or issued to us will provide us with any competitive advantages;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we will develop proprietary technologies that are patentable; or</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the patents of others will not have an adverse effect on our ability to do business.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may face intellectual property
infringement claims that could be time-consuming,</I></B> <B><I>costly to defend and could result in our loss of significant rights
and, in the case</I></B> <B><I>of patent infringement claims, the assessment of treble damages.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On occasion, we may receive notices of
claims of infringement, misappropriation or misuse of other parties&rsquo; 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 its outcome, is expensive and time-consuming, and could divert management&rsquo;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&rsquo;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 or using technology that contains
the allegedly infringing intellectual property, which could harm our business.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our ability to generate revenue will
be diminished if we are unable to obtain</I></B> <B><I>acceptable prices or an adequate level of reimbursement from third-party
payors of</I></B> <B><I>healthcare costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&reg; products and related treatment are obtained from governmental
authorities, private health insurers and other organizations, such as HMOs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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,&nbsp;lowering the cost of prescription pharmaceuticals and Medicare and Medicaid
payment systems reform. 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&reg; products in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We could be required to indemnify
third parties for alleged infringement, which could</I></B> <B><I>cause us to incur significant costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 contribute to 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>A significant part of our business
is conducted outside of the United States,</I></B> <B><I>exposing us to additional risks that may not exist in the United States,
which in</I></B> <B><I>turn could cause our business and operating results to suffer.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have material international operations
in Mexico and Europe. During the years ended March&nbsp;31, 2013 and 2012, approximately 50% and 56% of our total revenues were
generated from sales outside of the United States. Our business is highly regulated for the use, marketing and manufacturing of
our Microcyn-based products both domestically and internationally. Our international operations are subject to risks, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>local political or economic instability;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in governmental regulation;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in import/export duties;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>trade restrictions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>lack of experience in foreign markets;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>difficulties and costs of staffing and managing operations in certain foreign countries;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>work stoppages or other changes in labor conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>difficulties in collecting accounts receivables on a timely basis or at all;&nbsp;and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>adverse tax consequences or overlapping tax structures.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 United States. 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 geographic area 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 the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our sales in international markets
subject us to foreign currency exchange and other</I></B> <B><I>risks and costs which could harm our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A substantial portion of our revenues are
derived from outside the United States; primarily from Mexico and Europe. 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 Netherlands subsidiary is the Euro. For the preparation of our consolidated financial
statements, the financial results of our foreign subsidiaries are translated into U.S.&nbsp;dollars using average exchange rates
during the applicable period. If the U.S.&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We rely on a number of key customers
who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although we have a significant number
of customers in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion
of our revenues. For the nine months ended December 31, 2013, one customer represented 37%, one customer represented 25%, and
one customer represented 10% of net revenue. During the year ended March&nbsp;31, 2013, one customer represented 25%, and one
customer represented 13%, respectively, of net revenues. During the year ended March&nbsp;31, 2012, one customer represented 26%
of net revenues. In the future, a small number of customers may continue to represent a significant portion of our total
revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent
period. The loss of any of these customers could adversely affect our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Negative economic conditions increase
the risk that we could suffer unrecoverable losses on our customers&rsquo; accounts receivable which would adversely affect our
financial results.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We grant credit to our business
customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for
trade receivables.&nbsp;We maintain allowances for potential credit losses. At December 31, 2013, one customer represented
43%, one customer represented 21%, and one customer represented 13% of the net accounts receivable balance.  At March 31, 2013, one customer represented 34%, one customer represented 26%, and one customer
represented 15% of the net accounts receivable balance. At March 31, 2012, one customer represented 13% and two customers
each represented 12% of the net accounts receivable balance. While we believe we have a varied customer base and have
experienced strong collections in the past, if current economic conditions disproportionately impact any one of our key
customers, including reductions in their purchasing commitments to us or their ability to pay their obligations, it could
have a material adverse effect on our revenues and liquidity. We have not purchased insurance on our accounts receivable
balances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The loss of key members of our senior
management team, one of our directors or our</I></B> <B><I>inability to retain highly skilled scientists, technicians and salespeople
could</I></B> <B><I>adversely affect our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our success depends largely on the skills,
experience and performance of key members of our executive management team, including Jim Schutz, our Chief Executive Officer; and Robert Northey, our Vice President 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 wound and skin care markets. If we were to lose one or more
of these individuals, we might experience difficulties in competing effectively, developing our technologies and implementing our
business strategies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&nbsp;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. &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The dermatology, wound and skin care
industries are highly competitive and subject to rapid technological</I></B> <B><I>change. If our competitors are better able to
develop and market products that are</I></B> <B><I>less expensive or more effective than any products that we may develop, our</I></B>
<B><I>commercial opportunity will be reduced or eliminated.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop and patent processes or products earlier than we will;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop and commercialize products that are less expensive or more efficient than any products that we may develop;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>obtain regulatory approvals for competing products more rapidly than we will;&nbsp;and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></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>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result, we may not be able to successfully
commercialize any future products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The success of our research and development
efforts may depend on our ability to find</I></B> <B><I>suitable collaborators to fully exploit our capabilities. If we are unable
to</I></B> <B><I>establish collaborations or if these future collaborations are unsuccessful, our</I></B> <B><I>research and development
efforts may be unsuccessful, which could adversely affect</I></B> <B><I>our results of operations and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An important element of our business strategy
will be to enter into collaborative or license arrangements under which we license our Microcyn&reg; Technology to other parties
for development and commercialization. We expect 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. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to comply with broad
and complex federal and state fraud and abuse</I></B> <B><I>laws, including state and federal anti-kickback laws, we could face
substantial</I></B> <B><I>penalties and our products could be excluded from government healthcare programs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to various federal and state
laws pertaining to healthcare fraud and abuse, which include, among other things, &ldquo;anti-kickback&rdquo; laws that prohibit
payments to induce the referral of products and services, and &ldquo;false claims&rdquo; 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, 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.&nbsp;Department of Health and Human Services was authorized to adopt regulations
setting forth additional exceptions to the prohibitions of the statute commonly known as &ldquo;safe harbors.&rdquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 has increased significantly in recent years and has 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&rsquo;s attention from other aspects of
our business. Similarly, if the physicians or other providers or entities with which 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our efforts to discover and develop
potential products may not lead to the discovery,</I></B> <B><I>development, commercialization or marketing of actual drug products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently engaged in a number of
different approaches to discover and develop new product applications and product candidates. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may not be able to maintain sufficient
product liability insurance to cover claims</I></B> <B><I>against us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B><I>If any of
our third-party contractors fail to perform their responsibilities to comply with FDA rules and regulations, the manufacture, marketing
and sales of our products could be delayed, which could decrease our revenues.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Supplying the
market with our Microcyn&reg; Technology products requires us to manage relationships with an increasing number of collaborative
partners, suppliers and third-party contractors. As a result, our success depends partially on the success of these third parties
in performing their responsibilities to comply with FDA rules and regulations. Although we pre-qualify our contractors and we believe
that they are fully capable of performing their contractual obligations, we cannot directly control the adequacy and timeliness
of the resources and expertise that they apply to these activities. For example, we and our suppliers are required to comply with
the FDA&rsquo;s quality system regulations, which cover the methods and documentation of the design, testing, production, control,
quality assurance, labeling, packaging, storage and shipping of our products. The FDA enforces the quality system regulation through
inspections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2011, we initiated a voluntary
recall of select lot numbers of certain of our Microcyn-based products due to product labeling. The voluntary recall was prompted
after notification by the FDA that a limited number of our products were improperly labeled. The recall was classified by the FDA
as a Class II recall, which means the probability of serious health consequences was remote. Customer safety and product quality
are critically important to us and to date we have received no complaints regarding customer safety or product quality issues.
The costs of the voluntary recall were nominal and there were no restrictions on our future sales of Microcyn-based products, other
than revising our product labeling for certain products. The voluntary recall did not materially impact revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">If any of our
partners or contractors fail to perform their obligations in an adequate and timely manner, or fail to comply with the FDA&rsquo;s
rules and regulations, including failure to comply with quality systems regulations or a corrective action submitted to the FDA
after notification by the FDA of a deficiency is deemed insufficient, then the manufacture, marketing and sales of our products
could be delayed. Our products could be detained or seized, the FDA could order a recall, or require our partner to replace or
offer refunds for our products. The FDA could also require our partner, and, depending on our agreement with our partner, us, to
notify health professionals and others that the products present unreasonable risks of substantial harm to the public health. If
any of these events occur, the manufacture, marketing and sales of our products could be delayed which could decrease our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B><I>If we fail
to comply with the FDA&rsquo;s rules and regulations and are subject to a FDA recall as part of an FDA enforcement action, the
associated costs could like have a material adverse effect on our business, financial position, results of operations and cash
flows.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Our Company, our
products, the manufacturing facilities for our products, the distribution of our products, and our promotion and marketing materials
are subject to strict and continual review and periodic inspection by the FDA and other regulatory agencies for compliance with
pre-approval and post-approval regulatory requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">If we fail to
comply with the FDA&rsquo;s rules and regulations, we could be subject to an enforcement action by the FDA. The FDA could undertake
regulatory actions, including seeking a consent decree, recalling or seizing our products, ordering a total or partial shutdown
of production, delaying future marketing clearances or approvals, and withdrawing or suspending certain of our current products
from the market. A product recall, restriction, or withdrawal could result in substantial and unexpected expenditures, destruction
of product inventory, and lost revenues due to the unavailability of one or more of our products for a period of time, which could
reduce profitability and cash flow. In addition, a product recall or withdrawal could divert significant management attention and
financial resources. If any of our products are subject to an FDA recall, we could incur significant costs and suffer economic
losses. Production of our products could be suspended and we could be required to establish inventory reserves to cover estimated
inventory losses for all work-in-process and finished goods related to products we or our third-party contractors manufacture.
A recall of a material amount of our products could have a significant, unfavorable impact on our future gross margins.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B><I>If our products
fail to comply with FDA and other governmental regulations, or our products are deemed defective, we may be required to recall
our products and we could suffer adverse public relations that could adversely impact our sales, operating results, and reputation
which would adversely affect our business operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We may be exposed
to product recalls, including voluntary recalls or withdrawals, and adverse public relations if our products are alleged to cause
injury or illness, or if we are alleged to have mislabeled or misbranded our products or otherwise violated governmental regulations.
Governmental authorities can also require product recalls or impose restrictions for product design, manufacturing, labeling, clearance,
or other issues. For the same reasons, we may also voluntarily elect to recall, restrict the use of a product or withdraw products
that we consider below our standards, whether for quality, packaging, appearance or otherwise, in order to protect our brand reputation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Product recalls,
product liability claims (even if unmerited or unsuccessful), or any other events that cause consumers to no longer associate our
brand with high quality and safe products may also result in adverse publicity, hurt the value of our brand, harm our reputation
among our customers and other healthcare professionals who use or recommend the products, lead to a decline in consumer confidence
in and demand for our products, and lead to increased scrutiny by federal and state regulatory agencies of our operations, any
of which could have a material adverse effect on our brand, business, performance, prospects, value, results of operations and
financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our operating results may fluctuate,
which could cause our stock price to decrease.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>demand by physicians, other medical staff and patients for our Microcyn-based products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>reimbursement decisions by third-party payors and announcements of those decisions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">clinical trial results published by others in our industry and publication of results in peer-reviewed journals or the presentation
at medical conferences;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the inclusion or exclusion of our Microcyn-based products in large clinical trials conducted by others;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>actual and anticipated fluctuations in our quarterly financial and operating results;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>developments or disputes concerning our intellectual property or other proprietary rights;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>issues in manufacturing our product candidates or products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>new or less expensive products and services or new technology introduced or offered by our competitors or by us;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the development and commercialization of product enhancements;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in the regulatory environment;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delays in establishing new strategic relationships;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>costs associated with collaborations and new product candidates;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>introduction of technological innovations or new commercial products by us or our competitors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>litigation or public concern about the safety of our product candidates or products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in recommendations of securities analysts or lack of analyst coverage;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>failure to meet analyst expectations regarding our operating results;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>additions or departures of key personnel;&nbsp;and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>general market conditions.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If an active, liquid trading market
for our common stock does not develop, you may</I></B> <B><I>not be able to sell your shares quickly or at or above the price you
paid for it.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Anti-takeover provisions in our charter
and by-laws and under Delaware law may make</I></B> <B><I>it more difficult for stockholders to change our management and may also
make a</I></B> <B><I>takeover difficult.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the ability of our board of directors to issue and designate, without stockholder approval,
                                                                                                               the rights of up to 5,000,000 shares of convertible preferred stock, which rights could be senior to those of common
                                                                                                               stock;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>limitations on persons authorized to call a special meeting of stockholders; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring
matters before meetings of stockholders.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to Section 203 of the Delaware
General Corporation Law, which, subject to certain exceptions, prohibits &ldquo;business combinations&rdquo; between a publicly-held
Delaware corporation and an &ldquo;interested stockholder,&rdquo; which is generally defined as a stockholder who became a beneficial
owner of 15% or more of a Delaware corporation&rsquo;s voting stock for a three-year period following the date that such stockholder
became an interested stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our stockholders may experience substantial
dilution in the value of their investment</I></B> <B><I>if we issue additional shares of our capital stock or other securities
convertible into common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our charter allows us to issue up to 14,285,715&nbsp;shares
of our common stock and to issue and designate, without stockholder approval, the rights of up to 5,000,000&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Planned Separation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our Company and Ruthigen may be unable
to achieve some or all of the benefits that we expect to achieve from our Separation. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 31, 2014, we entered
into certain new agreements with our subsidiary, Ruthigen, Inc. Previously, we had entered into three key agreements
with Ruthigen, that governed our relationship with Ruthigen following the completion of Ruthigen&rsquo;s initial
public offering. Each of these agreements (the &ldquo;Ancillary Agreements&rdquo;) was entered into in the overall context
of Ruthigen&rsquo;s separation from us (the &ldquo;Separation&rdquo;). The effective date for the Ancillary Agreements is
March 26, 2014, the closing date of Ruthigen&rsquo;s initial public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The
strategic, operating and financial benefits expected to result from the Separation may be delayed or may never be realized at
all. For instance, there can be no assurance that by separating the businesses that either our Company or Ruthigen will be better
positioned to capitalize on future market opportunities or that either company will be able to increase their respective shareholder
value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to this Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We will have broad discretion in
how we use the proceeds, and we may use the proceeds in ways in which you and other stockholders may disagree. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to use the net proceeds
from this offering for working capital and general corporate purposes. Our management will have broad discretion in
the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results
of operations or enhance the value of our common stock. The failure by management to apply these funds effectively could
result in financial losses that could have a material adverse effect on our business or cause the price of our common stock
to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Investors in this offering may suffer
immediate and substantial dilution in the net tangible book value per share of our common stock. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Because the price per share of common
stock in this offering may be substantially higher than the net tangible book value per share of common stock, investors in
this offering may suffer immediate and substantial dilution in the net tangible book value per share of common stock. The
shares in this offering will be sold at market prices which may fluctuate substantially. For purposes of calculating
dilution, we have assumed a sale price of $3.77 per share which was the closing price of our stock on March 31, 2014.
However, since the shares may be sold at a variety of prices, these dilution numbers may not be accurate. Assuming that
an aggregate of 2,429,443 shares of our common stock are sold at a price of $3.77 per share, the last reported sale price of
our common stock on the Nasdaq Capital Market on March 31, 2014, for aggregate gross proceeds of $9.16 million, and
after deducting commissions and estimated offering expenses payable by us, you will experience immediate dilution of $2.62
per share, representing the difference between our as adjusted net tangible book value per share as of March 31, 2014
after giving effect to this offering and the assumed offering price. See the section entitled &ldquo;Dilution&rdquo; below
for a more detailed illustration of the dilution you would incur if you participate in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>You may experience future dilution as
a result of future equity offerings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In order to raise additional capital, we may
in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common
stock at prices that may not be the same as the price per share in this offering. We may sell shares or other securities in any
other offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing
shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we
sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions
may be higher or lower than the price per share paid by investors in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 &ldquo;expects,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;intends,&rdquo; &ldquo;estimates,&rdquo;
&ldquo;plans,&rdquo; &ldquo;projects,&rdquo; &ldquo;continue,&rdquo; &ldquo;ongoing,&rdquo; &ldquo;potential,&rdquo; &ldquo;expect,&rdquo;
&ldquo;predict,&rdquo; &ldquo;believe,&rdquo; &ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;can,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo;
&ldquo;could,&rdquo; &ldquo;would,&rdquo; &ldquo;proposal,&rdquo; and similar expressions are intended to identify forward-looking
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 &ldquo;Risk Factors&rdquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We may issue and sell shares of our common
stock having aggregate sales proceeds of up to $9,159,000 from time to time. Because there is no minimum offering amount required
as a condition to close this offering, the actual total public offering amount, commissions and proceeds to us, if any, are not
determinable at this time. We estimate that the net proceeds from the sale of the shares of common stock that we are offering may
be up to approximately $8.9 million, after deducting MLV&rsquo;s commission and estimated offering expenses payable by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We intend to use the net proceeds of this offering
for working capital and general corporate purposes. As of the date of this prospectus supplement, we cannot specify with certainty
all of the particular uses for the net proceeds to us from this offering. Accordingly, our management will have broad discretion
in the application of these proceeds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>DILUTION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Purchasers of common stock offered by this
prospectus supplement and the accompanying prospectus will suffer immediate and substantial dilution in the net tangible book
value per share of common stock. Our net tangible book value on December 31, 2013 was approximately $7.2 million, or approximately
$.31 per share of common stock based upon 7,239,131 shares outstanding as of December 31, 2013. Net tangible book value per share
is determined by dividing our net tangible book value, which consists of tangible assets less total liabilities, by the number
of shares of common stock outstanding on that date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The
shares in this offering will be sold at market prices which may fluctuate substantially. For purposes of calculating
dilution, we have assumed a sale price of $3.77 per share which was the closing price of our stock on March 31, 2014.
However, since the shares may be sold at a variety of prices, these dilution numbers may not be accurate. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">After giving effect to the sale of our
common stock in the aggregate amount of $9,159,000 at an assumed offering price of $3.77 per share, the last reported sale
price of our common stock on the Nasdaq Capital Market on March 31, 2014, and after deducting estimated offering commissions
and offering expenses payable by us, our net tangible book value as of December 31, 2013 would have been approximately $11.1
million, or $1.15 per share of common stock. This represents an immediate increase in net tangible book value of $.84 per share
to existing stockholders and immediate dilution in net tangible book value of $2.62 per share to new investors purchasing our
common stock in this offering at the public offering price. The following table illustrates this calculation on a per share
basis:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; width: 86%; padding-left: 12pt; text-indent: -12pt; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Assumed public offering price per share</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 3%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 3%; text-align: right; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">3.77</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; width: 1%; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.5in; text-indent: -12pt; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Net tangible book value per share of as December 31, 2013</FONT></TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">.31</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; padding-left: 0.5in; text-indent: -12pt; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Increase in net tangible book value per share attributable to this offering</FONT></TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif">.84</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.5in; text-indent: -12pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">As adjusted net tangible book value per share as of December 31, 2013, after giving effect to this offering</FONT></TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt; border-bottom: Black 1pt solid">1.15</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Dilution in net tangible book value per share to new investors purchasing our common stock in this offering</FONT></TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; font-size: 10pt; border-bottom: Black 2.5pt double"><FONT STYLE="font-family: Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right; font-size: 10pt; border-bottom: Black 2.5pt double"><FONT STYLE="font-family: Times New Roman, Times, Serif">2.62</FONT></TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-size: 10pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The foregoing table is based on 7,239,131 shares
of our common stock outstanding as of December 31, 2013 and excludes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%; text-align: justify; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 2%; text-align: justify; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%; text-align: justify; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">1,253,000 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2013, at a weighted average exercise price of $11.78 per share; </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%; text-align: justify; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 2%; text-align: justify; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%; text-align: justify; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">1,334,000 shares of common stock issuable upon the exercise of warrants outstanding as of December 31, 2013, at an exercise price of $18.31 per share; and </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 2%; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&bull;</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">823,648 shares
    of common stock reserved for future issuance under our equity incentive plans as of December 31, 2013.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To the extent that outstanding options or warrants
outstanding as of December 31, 2013 have been or may be exercised or other shares issued, investors purchasing our common stock
in this offering may experience further dilution. In addition, we may choose to raise additional capital due to market conditions
or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent
that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could
result in further dilution to our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have entered into an At-the-Market
Issuance Sales Agreement with MLV under which we may issue and sell our common stock from time to time through MLV acting as
agent, subject to certain limitations, including the number of shares registered under the registration statement to which
the offering relates. The form of the sales agreement was filed as an exhibit to a report filed under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, and is incorporated by reference in this prospectus supplement. The sales, if
any, of shares of our common stock made under the sales agreement will be made by any method that is deemed to be an
&ldquo;at the market offering&rdquo;   as defined in Rule 415 promulgated under the Securities Act, including, without
limitation, sales made directly on or through the Nasdaq Capital Market, or any other existing trading market for our common
stock, sales made to or through a market maker other than on an exchange or otherwise, certain negotiated transactions at
market prices and/or any other method permitted by law. We may instruct MLV not to sell common stock if the sales cannot be
effected at or above the price designated by us from time to time. We or MLV may suspend the offering of common stock upon
notice and subject to other conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Each time we wish to issue and sell common
stock under the sales agreement, we will notify MLV of the number of shares proposed to be issued, the dates on which such sales
are requested to be made, any limitation on the number of shares which may be sold in any one trading day, any minimum price below
which sales may not be made, and other sales parameters as we deem appropriate. Once we have so instructed MLV, unless MLV declines
to accept the terms of the notice, MLV has agreed to use its commercially reasonable efforts consistent with its normal trading
and sales practices to sell such shares up to the amount specified on such terms. The obligations of MLV under the sales agreement
to sell our common stock are subject to a number of conditions that we must meet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We will pay MLV commissions for its
services in acting as agent in the sale of common stock. MLV will be entitled to a commission equal to 3% of the aggregate
gross proceeds from the sale of common stock offered hereby. In addition, we have agreed to reimburse certain expenses of MLV
for fees and disbursements related to its legal counsel in an amount not to exceed $25,000. We estimate that the total
expenses for the offering, excluding compensation payable to MLV under the terms of the sales agreement, will be
approximately $300,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Settlement for sales of common stock will generally
occur on the third business day following the date on which any sales are made, or on some other date that is agreed upon by us
and MLV in connection with a particular transaction, in return for payment of the net proceeds to us. There is no arrangement for
funds to be received in an escrow, trust or similar arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the sale of the common stock
on our behalf, MLV may, and will with respect to sales effected in an &ldquo;at-the-market offering,&rdquo; be deemed to be an
&ldquo;underwriter&rdquo; within the meaning of the Securities Act and the compensation of MLV may be deemed to be underwriting
commissions or discounts. We have agreed to provide indemnification and contribution to MLV with respect to certain civil liabilities,
including liabilities under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The offering of our common stock pursuant
to the sales agreement will terminate upon the earlier of (i) the sale of all of our common stock provided for in this prospectus
supplement, or (ii) termination of the sales agreement as provided therein.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">MLV and its affiliates may in the future provide
various investment banking and other financial services for us and our affiliates, for which services they may in the future receive
customary fees. To the extent required by Regulation M, MLV will not engage in any market making activities
involving our common stock while the offering is ongoing under this prospectus supplement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">This summary of the material provisions of the sales agreement does not purport to be a complete statement of its
terms and conditions. A copy of the sales agreement is filed with the Securities and Exchange Commission, and is incorporated by
reference into the registration statement of which this prospectus supplement is a part. See the section below entitled &ldquo;Where
You Can Find More Information.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>LEGAL MATTERS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The validity of the common stock offered hereby
will be passed upon by Trombly Business Law, PC, Boulder, Colorado. LeClairRyan, A Professional Corporation, New York, New York, is
counsel for MLV in connection with this offering.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements
of Oculus Innovative Sciences, Inc. appearing in Oculus Innovative Sciences, Inc.&rsquo;s annual report on Form 10-K for the
year ended March&nbsp;31, 2013, filed June 25, 2013 have been audited by Marcum LLP, an independent registered public
accounting firm, as set forth in their report 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have filed a registration statement
on Form S-3 with the SEC under the Securities Act of 1933, as amended, and our registration was declared effective on May 3, 2011.
This prospectus supplement and the accompanying prospectus are 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 Internet is http://www.sec.gov. The information on the SEC&rsquo;s website is not
part of this prospectus supplement and the accompanying prospectus, and any references to this website or any other website are
inactive textual references only.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The SEC permits us to &ldquo;incorporate
by reference&rdquo; 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 the following in this prospectus supplement and the accompanying prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27px">&nbsp;</TD>
    <TD STYLE="width: 27px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">our Annual Report on Form 10-K for the year ended March 31, 2013, filed June 25, 2013;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27px">&nbsp;</TD>
    <TD STYLE="width: 27px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013, filed on
    August 14, 2013;  our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013, filed on November 19,
    2013;</FONT> and our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2013, filed on February 14, 2014;</TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27px">&nbsp;</TD>
    <TD STYLE="width: 27px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-size: 10pt">our Current Reports on Form 8-K filed on May 29, 2013; May
    30,     2013; June 7, 2013 and amended on September 24, 2013; June 13, 2013; August 5, 2013; August 8, 2013; September 17,
    2013;     September 24, 2013; November 19, 2013;  November 27, 2013;</FONT> December 6, 2013;  December 18, 2013; February 6,
    2014; February 13, 2014;  February 26, 2014; and April 1, 2014.</TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27px">&nbsp;</TD>
    <TD STYLE="width: 27px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">our Proxy Statement on Schedule 14A filed on July 29, 2013; and</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27px">&nbsp;</TD>
    <TD STYLE="width: 27px"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-size: 10pt">the description of our common stock contained in our Registration Statement on Form 8-A filed on December 15, 2006, including any amendment or report filed for the purpose of updating such description.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, all documents that we file
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934, as amended, after the date
of the initial registration statement of which this prospectus is a part and prior to the effectiveness of the registration statement
as well as all such documents that we file with the SEC after the date of this prospectus and before the termination of the offering
of our securities shall be deemed incorporated by reference into this prospectus and to be a part of this prospectus from the respective
dates of filing such documents. Unless specifically stated to the contrary, none of the information that we disclose under Items
2.02 or 7.01 of any Current Report on Form 8-K that we may from time to time furnish to the SEC will be incorporated by reference
into, or otherwise included in, this prospectus.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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;283-0550. We will not, however, send exhibits to those documents,
unless the exhibits are specifically incorporated by reference in those documents.&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<BR>
<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">PROSPECTUS</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 12pt Times New Roman">$75,000,000

</FONT><BR>
</DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-align: center; display: block">
<IMG SRC="logo.jpg" ALT=""><DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"></FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 24pt Times New Roman">OCULUS INNOVATIVE SCIENCES, INC.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 12pt Times New Roman">Common Stock</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 12pt Times New Roman">Preferred Stock</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 12pt Times New Roman">Warrants</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 12pt Times New Roman">Units</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We may, from time to time, offer and sell common stock, preferred 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.&#160;dollar equivalent if the public offering of any such securities is denominated in one or more foreign currencies, foreign currency units or composite currencies.</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">This prospectus may not be used to sell any of these securities unless accompanied by a prospectus supplement.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Our common stock is traded on the NASDAQ Global Market under the symbol &#8220;OCLS.&#8221; On December 21, 2010, the closing price of our common stock on the NASDAQ Global Market was $1.73 per share. The market value of our outstanding common equity held by non-affiliates on December 21, 2010 was $38,439,866. We have sold $664,475 of our securities pursuant to General Instruction I.B.6 of Form S-3 during the prior 12 calendar month period that ends on and includes the date of this prospectus.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">Investing in our securities involves a high degree of risk. See the section entitled &#8220;Risk Factors&#8221; beginning on page 3.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">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.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">The
date of this prospectus is May 3, 2011. </FONT></DIV>
</DIV>

<BR>
<DIV ID="PGBRK" STYLE="text-indent: 0pt; width: 100%; margin-left: 0pt; margin-right: 0pt">
<DIV ID="FTR">
<DIV ID="GLFTR" ALIGN="LEFT" STYLE="width: 100%"><FONT STYLE="display: inline; font: 8pt Times New Roman; color: #000000">&#160; </FONT></DIV>
</DIV>

<DIV ID="PN" STYLE="page-break-after: always">
<DIV STYLE="text-align: center; width: 100%"><FONT STYLE="display: inline; font: 8pt Times New Roman">&#160; </FONT></DIV>

<DIV STYLE="text-align: center; width: 100%">
<HR NOSHADE SIZE="1" STYLE="color: black">
</DIV>
</DIV>

<DIV ID="HDR">
<DIV ID="GLHDR" ALIGN="RIGHT" STYLE="width: 100%"><FONT STYLE="display: inline; font: 8pt Times New Roman; color: #000000">&#160; </FONT></DIV>
</DIV>
</DIV>

<BR>
<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">TABLE OF CONTENTS</FONT></DIV>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>
</DIV>

<DIV>
<DIV ALIGN="RIGHT">
<DIV ALIGN="RIGHT">
<DIV ALIGN="RIGHT">
<DIV ALIGN="RIGHT">
<DIV ALIGN="RIGHT">
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR>
<TD VALIGN="TOP" WIDTH="95%"><FONT STYLE="display: inline; font: 10pt times new roman">&#160; </FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" WIDTH="5%" STYLE="border-bottom: black 2px solid">
<DIV ALIGN="RIGHT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman"><FONT STYLE="display: inline">Page</FONT></FONT></DIV>
</TD>
</TR><TR STYLE="background-color: rgb(238,238,238)">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">About This Prospectus</FONT></DIV>
</TD>
<TD VALIGN="BOTTOM" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">2</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: White">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Our Company</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">2</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: rgb(238,238,238)">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Risk Factors</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">3</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: White">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Forward-Looking Statements</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">15</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: rgb(238,238,238)">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Use of Proceeds</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">15</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: White">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Description of Common Stock</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">15</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: rgb(238,238,238)">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Description of Preferred Stock</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">17</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: White">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Description of Warrants</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">18</FONT></DIV>
</TD>
</TR><TR STYLE="background-color: rgb(238,238,238)">
<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="95%">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Description of Units</FONT></DIV>
</TD>
<TD VALIGN="TOP" WIDTH="5%">
<DIV STYLE="text-align: right"><FONT STYLE="display: inline; font: 10pt times new roman">18</FONT></DIV>
</TD>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Where You Can Find More Information</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt times new roman">Incorporation of Certain Documents by Reference</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">PROSPECTUS SUMMARY</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="font: italic 10pt Times New Roman; display: inline">This summary highlights information contained elsewhere in this prospectus or incorporated by reference. This summary does not contain all of the information you should consider before buying shares of our common stock, preferred stock, warrants, or units or any combination of these securities. You should read the entire prospectus carefully, especially the risks of investing in our securities that we describe under &#8220;Risk Factors&#8221; and our consolidated financial statements appearing in our annual and periodic reports incorporated in this prospectus by reference, before deciding to invest in our securities. Unless the context requires otherwise, references to &#8220;Oculus,&#8221; &#8220;the Company,&#8221; &#8220;the Registrant,&#8221; &#8220;we,&#8221; &#8220;our&#8221; and &#8220;us&#8221; refer to Oculus Innovative Sciences, Inc.</FONT></DIV>

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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">ABOUT THIS PROSPECTUS</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using a &#8220;shelf&#8221; registration, or continuous offering, process. Under this shelf registration process, we may, from time to time, issue and sell any combination of preferred stock, 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 &#8220;Where You Can Find More Information,&#8221; before making your investment decision.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 &#8220;Risk Factors&#8221; in the applicable prospectus supplement together with all of the other information contained in the prospectus supplement or appearing or incorporated by reference in this prospectus.</FONT></DIV>
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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">OUR COMPANY</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We develop, manufacture and market a family of tissue care products that cure infections and, through a separate mechanism of action, enhance healing while reducing the need for antibiotics.&#160; 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&#174;, 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&#160;<FONT STYLE="font-style: italic; display: inline">Staphylococcus aureus</FONT>, or MRSA, and vancomycin-resistant&#160;<FONT STYLE="font-style: italic; display: inline">Enterococcus,</FONT>&#160;or VRE, in wounds, as well as&#160;<FONT STYLE="font-style: italic; display: inline">Clostridium difficile</FONT>, or C. diff, a highly contagious bacteria spread by human contact.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We do not have the necessary regulatory approvals to market Microcyn in the United States as a drug. In the United States our&#160;product does, however, have six clearances as a 510(k) medical device for the following summary indications: &#160;</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">moistening and lubricating absorbent wound dressings for traumatic wounds requiring a prescription;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">moistening and debriding acute and chronic dermal lesions requiring a prescription;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">moistening absorbent wound dressings and cleaning minor cuts as an over-the-counter product;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">management of exuding wounds such as leg ulcers, pressure ulcers and diabetic ulcers, and for the management of mechanical or surgical debridement of wounds in a gel form and required as a prescription;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">debridement of wounds, such as stage I-IV pressure ulcers, diabetic foot ulcers, post surgical wounds, first and second degree burns, grafted and donor sites as a preservative, which can kill listed bacteria such as MRSA&#160;&amp; VRE and required as a prescription; and</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">as a hydrogel, for management of wounds including itch and pain relief associated with dermal irritation, sores, injuries and ulcers of dermal tissue as a prescription.&#160; As an over-the-counter product, the hydrogel is intended to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns. It is also indicated for management of irritation and pain from minor sunburn.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We do not have the necessary regulatory clearance or approval to market Microcyn in the U.S.&#160;as a medical device for an antimicrobial or wound healing indication. In the future we expect to apply&#160;to the FDA for clearance as an antimicrobial in a liquid and a hydrogel form and as conducive to wound healing via a 510(k) medical device clearance.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 a moist environment. In Mexico, we are approved as a drug for antiseptic treatment of wounds and infected areas. In India, our technology 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 for reducing the propagation of microbes in wounds and creating a moist environment for wound healing.&#160;</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">While in the U.S. we do not have the necessary regulatory clearance for an antimicrobial or wound healing indication, clinical and laboratory testing we conducted in connection with our submissions to the FDA, as well as physician clinical studies and scientific papers, suggest that our Microcyn Technology may help reduce a wide range of pathogens from acute and chronic wounds while curing or improving infection and concurrently enhancing wound healing through modes of action unrelated to the treatment of infection. These physician clinical studies suggest that our Microcyn is safe, easy to use and complementary to many existing treatment methods in wound care. Physician clinical studies and usage in the United States suggest that our 510(k) cleared products may shorten hospital stays, lower aggregate patient care costs and, in certain cases, reduce the need for systemic antibiotics. We are also pursuing the use of our Microcyn platform technology in other markets outside of wound and skin care, including the respiratory, ophthalmology, dental, dermatology, animal healthcare and industrial markets.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We incorporated under the laws of the State of California in April 1999 as Micromed Laboratories, Inc. In August 2001, we changed our name to Oculus Innovative Sciences, Inc. In December 2006, we reincorporated under the laws of the State of Delaware. Our principal executive offices are located at 1129&#160;N.&#160;McDowell Blvd., Petaluma, California, 94954, and our telephone number is (707)&#160;782-0792. We have two principal subsidiaries: Oculus Technologies of Mexico, S.A. de C.V., organized in Mexico, and Oculus Innovative Sciences Netherlands, B.V., organized in the Netherlands. On January&#160;20, 2009, we dissolved our subsidiary, Oculus Innovative Sciences Japan, KK., which was organized under Japanese law. Our fiscal year end is March&#160;31. Our website is&#160;<FONT STYLE="font-style: normal; display: inline">www.oculusis.com</FONT>.&#160;&#160;Information contained on our website does not constitute part of this prospectus.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">Risks Related to Our Business</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We have a history of losses, we expect to continue to incur losses and we may never </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">achieve profitability.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We incurred net losses of $8,232,000 and $17,656,000 for the years ended March&#160;31, 2010 and 2009, respectively. At March&#160;31, 2010, our accumulated deficit amounted to $117,037,000. During the year ended March&#160;31, 2010, net cash used in operating activities amounted to $6,639,000. At March&#160;31, 2010, our working capital amounted to $6,315,000. We expect to continue incurring losses for the foreseeable future and may raise additional capital to pursue product development initiatives, penetrate markets for the sale of our products and continue as a going concern. 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.&#160;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 our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our efforts to commercialize our products in the U.S., which are critical to the realization of our business plan and to future operations.</FONT></DIV>

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general economic or business conditions may have a negative impact on our </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">business.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S.&#160;mortgage market and a declining real estate market in the U.S.&#160;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.&#160;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.</FONT></DIV>

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inability to raise additional capital on acceptable terms in the future may cause </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">us
to curtail certain operational activities, including regulatory trials, sales and </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">marketing,
and international operations, in order to reduce costs and sustain the</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">
business, and would have a material adverse effect on our business and financial </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">condition.</FONT></FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 may need to raise additional capital to, among other things:</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">fund our clinical trials and preclinical studies;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">sustain commercialization of our current products or new products;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">expand our manufacturing capabilities;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">increase our sales and marketing efforts to drive market adoption and address competitive developments;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">acquire or license technologies;&#160;and</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">finance capital expenditures and our general and administrative expenses.</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Our present and future funding requirements will depend on many factors, including but not limited to:</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the progress and timing of our clinical trials;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the level of research and development investment required to maintain and improve our technology position;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the costs<FONT ID="TAB2" STYLE="letter-spacing: 9pt"> </FONT>of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">our efforts to acquire or license complementary technologies or acquire complementary businesses;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">changes in product development plans needed to address any difficulties in commercialization;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">competing technological and market developments;&#160;and</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">changes in regulatory policies or laws that affect our operations.</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">If we raise additional funds by issuing equity securities, dilution to our stockholders could result. Any equity securities issued may also 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 or 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 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.</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We do not have the necessary regulatory approvals to market Microcyn as a drug in the</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">United States.</FONT></FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We have obtained six 510(k) clearances in the United States that permit us to sell Microcyn-based products as medical devices. Before we are permitted to sell Microcyn as a drug in the United&#160;States, we must, among other things, successfully complete additional preclinical studies and well-controlled clinical trials, submit a new drug application to the FDA and obtain FDA approval.</FONT></DIV>

<BR>
<DIV ID="PGBRK" STYLE="text-indent: 0pt; width: 100%; margin-left: 0pt; margin-right: 0pt">
<DIV ID="FTR">
<DIV ID="GLFTR" ALIGN="LEFT" STYLE="width: 100%"><FONT STYLE="display: inline; font: 8pt Times New Roman; color: #000000">&#160; </FONT></DIV>
</DIV>

<DIV ID="PN" STYLE="page-break-after: always">
<DIV STYLE="text-align: center; width: 100%"><FONT STYLE="display: inline; font-size: 10pt">4</FONT></DIV>

<DIV STYLE="text-align: center; width: 100%">
<HR NOSHADE SIZE="1" STYLE="color: black">
</DIV>
</DIV>

<DIV ID="HDR">
<DIV ID="GLHDR" ALIGN="RIGHT" STYLE="width: 100%"><FONT STYLE="display: inline; font: 8pt Times New Roman; color: #000000">&#160; </FONT></DIV>
</DIV>
</DIV>

<BR>
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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-based products.</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Delays
or adverse results in clinical trials could result in increased costs to us</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">
and could delay our ability to generate revenue.</FONT></FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Clinical trials can be long and expensive, and the outcome of clinical trials is 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:</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">insufficient funds to continue our clinical trials;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">changes in the FDA requirements for approval, including requirements for testing efficacy or safety;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">lack of FDA or other regulatory authority approvals of a clinical trial protocol;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">patients not enrolling in clinical trials at the rate we expect;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">delays in reaching agreement on acceptable clinical trial agreement terms with prospective sites;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">delays in obtaining institutional review board approval to conduct a study at a prospective site;</FONT></FONT></DIV>
</TD>
</TR></TABLE>
</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
<TR VALIGN="TOP">
<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">third party clinical investigators not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol and good clinical practices, or the third party organizations not performing data collection and analysis in a timely or accurate manner;&#160;and</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">changes in governmental regulations or administrative actions.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;are not sufficient to support approval of Microcyn as a drug in the United States.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;12, 2007, the FDA released draft guidance entitled Antibacterial Drug Products: Use of Non-inferiority 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If we fail to obtain, or experience </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">significant delays in obtaining</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold"> additional </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">regulatory clearances or approvals to market</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold"> our current or future products, we may </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">be unable to commercialize these products.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">The 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.</FONT></DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 18pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;II device, such as a device already cleared by the FDA through the 510(k) pre-market notification process, and otherwise meets the FDA&#8217;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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 18pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If our products do not gain market acceptance, our business will suffer because we </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">might not be able to fund future operations.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">A number of factors may affect the market acceptance of our products or any other products we develop or acquire, including, among others:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the price of our products relative to other treatments for the same or similar treatments;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">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;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">our ability to fund our sales and marketing efforts;&#160;and</FONT></FONT></DIV>
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<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">&#8226;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the effectiveness of our sales and marketing efforts.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If our competitors develop products similar to Microcyn, we may need to modify or </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">alter our business strategy, which may delay the achievement of our goals.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Competitors may develop products with similar characteristics to 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We intend to license or collaborate with third parties in various potential markets, </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">and events involving these strategic partners or any future collaboration could </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">delay or prevent us from developing or commercializing products.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 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 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If we are unable to expand our direct domestic sales force, we may not be able to </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">successfully sell our products in the United States.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our dependence on a commission-based sales force and distributors for sales could limit or prevent us from selling our </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">products and from realizing long-term revenue growth.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We currently depend on a commission-based sales force and distributors to sell Microcyn in the United States, Europe and other countries and intend to continue to sell our products primarily through a commission-based sales force and 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 a commission-based sales force and distributors to sell Microcyn. Our existing commission-based sales force and distribution agreements are generally short-term in duration and we may need to pursue alternate partners if the other parties to these agreements terminate or elect not to renew their agreements. If we are unable to retain our current commission-based sales force and distributors for any reason, we must replace them with alternate salespeople and distributors experienced in supplying the wound care market, which could be time-consuming and divert management&#8217;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 at 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If we fail to comply with ongoing regulatory requirements, or if we experience </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">unanticipated problems with our products, these products could be subject to </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">restrictions or withdrawal from the market.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 fines or criminal penalty. In addition, the manufacturing, labeling, packaging, adverse event reporting, storing, advertising, promoting, distributing 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 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 our products or manufacturing processes, fines, suspension or loss of regulatory approvals or clearances, product recalls, termination of distribution,&#160;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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">New government regulations may be enacted and changes in FDA policies and regulations and, 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We may experience difficulties in manufacturing Microcyn, which could prevent us from </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">commercializing one or more of our products.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 Environmental Protection Agency, 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our competitive position depends on our ability to protect our intellectual property </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">and our proprietary technologies.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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, excluding our intellectual property under certain circumstances, 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Although we have filed U.S.&#160;and foreign patent applications related to our Microcyn-based products, the manufacturing technology for making the products, and their uses, to date only two U.S.&#160;patents have been issued from these applications.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.&#160;Patent and Trademark Office or foreign regulatory body will protect our Microcyn technology. Any claims that are issued 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, our European patent that was issued on May 30, 2007, was revoked by the Opposition Division of the European Patent Office in December, 2009 following opposition proceedings instituted by a competitor.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">we were the first to invent the inventions described in patent applications;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">we were the first to file patent applications for inventions;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">others will not independently develop similar or alternative technologies or duplicate our products without infringing our intellectual property rights;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">any patents licensed or issued to us will provide us with any competitive advantages;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">we will develop proprietary technologies that are patentable;&#160;or</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the patents of others will not have an adverse effect on our ability to do business.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We may face intellectual property infringement claims that could be time-consuming, </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">costly to defend and could result in our loss of significant rights and, in the case </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">of patent infringement claims, the assessment of treble damages.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">On occasion, we may receive notices of claims of infringement, misappropriation or misuse of other parties&#8217; 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 its outcome, is expensive and time-consuming, could divert management&#8217;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&#8217;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 or using technology that contains the allegedly infringing intellectual property, which could harm our business.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our ability to generate revenue will be diminished if we are unable to obtain </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">acceptable prices or an adequate level of reimbursement from third-party payors of </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">healthcare costs.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 18pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We could be required to indemnify third parties for alleged infringement, which could </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">cause us to incur significant costs.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">A significant part of our business is conducted outside of the United States, </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">exposing us to additional risks that may not exist in the United States, which in </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">turn could cause our business and operating results to suffer.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We have international operations in Mexico and Europe. During the year ended March&#160;31, 2010 approximately 69% of our total revenues were generated from sales outside of the United States and during the year ended March 31, 2009, approximately 76% of our total revenues were generated from sales outside of the United States. Our business is highly regulated for the use, marketing and manufacturing of our Microcyn-based products both domestically and internationally. Our international operations are subject to risks, including:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">difficulties in collecting accounts receivables on a timely basis or at all;&#160;and</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">adverse tax consequences or overlapping tax structures.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 United States. 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 geographical area or region, the likelihood of collecting receivables generated by such operations could be lower than our expectations. &#160;As a result, there is a greater risk that reserves set with respect to the collection of such receivables may be inadequate. &#160;If our operations in any foreign country are unsuccessful, we could incur significant losses and we may not achieve profitability.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our sales in international markets subject us to foreign currency exchange and other </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">risks and costs which could harm our business.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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. For the preparation of our consolidated financial statements, the financial results of our foreign subsidiaries are translated into U.S.&#160;dollars on average exchange rates during the applicable period. If the U.S.&#160;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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="font: italic bold 10pt Times New Roman; display: inline">We rely on a number of key customers who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Although we have a significant number of customers in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion of our sales.&#160; During the year ended March&#160;31, 2010 three customers represented 23% of sales, and during the year ended March 31, 2009, three customers represented 21% of sales.&#160; In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period. A loss of any of these customers could adversely affect our revenues.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="font: italic bold 10pt Times New Roman; display: inline">Negative economic conditions increase the risk that we could suffer unrecoverable losses on our customers&#8217; accounts receivable which would adversely affect our financial results.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We grant credit to our business customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables.&#160; We maintain allowances for potential credit losses. Three customers represented a total of 42% of our net accounts receivable balance at March 31, 2010, and two customers represented 29% of our net accounts receivable balance at March&#160;31, 2009.&#160; While we believe we have a varied customer base and have experienced strong collections in the past, if current economic conditions disproportionately impact any one of our key customers, including reductions in their purchasing commitments to us or their ability to pay their obligations, it could have a material adverse effect on our revenues and liquidity. We have not purchased insurance on our accounts receivable balances.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">The loss of key members of our senior management team, one of our directors or our </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">inability to retain highly skilled scientists, technicians and salespeople could </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">adversely affect our business.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 wound and skin care markets. 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We maintain key-person life insurance only on Mr.&#160;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.&#160;Alimi&#8217;s services.</FONT><BR>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">The wound care industry is highly competitive and subject to rapid technological </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">change. If our competitors are better able to develop and market products that are </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">less expensive or more effective than any products that we may develop, our</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">&#160;</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">commercial opportunity will be reduced or eliminated.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">improve upon existing technological approaches or develop new or different approaches that render our technology or products obsolete or non-competitive.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">As a result, we may not be able to successfully commercialize any future products.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">The success of our research and development efforts may depend on our ability to find </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">suitable collaborators to fully exploit our capabilities. If we are unable to </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">establish collaborations or if these future collaborations are unsuccessful, our</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">&#160;</FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">research and development efforts may be unsuccessful, which could adversely affect </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">our results of operations and financial condition.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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. 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If we are unable to comply with broad and complex federal and state fraud and abuse </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">laws, including state and federal anti-kickback laws, we could face substantial </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">penalties and our products could be excluded from government healthcare programs.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We are subject to various federal and state laws pertaining to healthcare fraud and abuse, which include, among other things, &#8220;anti-kickback&#8221; laws that prohibit payments to induce the referral of products and services, and &#8220;false claims&#8221; 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)&#160;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)&#160;for purchasing, leasing, 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.&#160;Department of Health and Human Services, was authorized to adopt regulations setting forth additional exceptions to the prohibitions of the statute commonly known as &#8220;safe harbors.&#8221; 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 has increased significantly in recent years and has 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&#8217;s attention from other aspects of our business. Similarly, if the physicians or other providers or entities with which 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our efforts to discover and develop potential products may not lead to the discovery, </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">development, commercialization or marketing of actual drug products.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We must maintain expensive finance and accounting systems, procedures and controls to </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">accommodate growth of our business and organization and to satisfy public company </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">reporting requirements, which will increase our costs and require additional </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">management resources.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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. Section&#160;404 of the Sarbanes-Oxley Act of 2002, or Section&#160;404, requires our management to perform an annual assessment of our internal control over financial reporting. Compliance with Section&#160;404 and other requirements of doing business as a public company have increased 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. Our management has concluded that our internal controls are adequate to meet the required Section&#160;404 assessment. If we are unable to complete the required Section&#160;404 assessment as to adequacy of our internal control over financial reporting in future Form&#160;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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">We may not be able to maintain sufficient product liability insurance to cover claims </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">against us.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">Risks Related to Our Common Stock</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="font: italic bold 10pt Times New Roman; display: inline">Our operating results may fluctuate, which could cause our stock price to decrease.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">demand by physicians, other medical staff and patients for our Microcyn-based products;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the inclusion or exclusion of our Microcyn-based products in large clinical trials conducted by others;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the development and commercialization of product enhancements;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">litigation or public concern about the safety of our product candidates or products;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">If an active, liquid trading market for our common stock does not develop, you may </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">not be able to sell your shares quickly or at or above the price you paid for it.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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:</FONT></DIV>

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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">the ability of our board of directors to issue and designate the rights of, without stockholder approval, up to 5,000,000&#160;shares of convertible preferred stock, which rights could be senior to those of common stock;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">limitations on persons authorized to call a special meeting of stockholders;&#160;and</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-size: 10pt">advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before meetings of stockholders.</FONT></FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline; font-weight: bold">Our stockholders may experience substantial dilution in the value of their investment </FONT><FONT STYLE="font-style: italic; display: inline; font-weight: bold">if we issue additional shares of our capital stock or other securities convertible into common stock.</FONT></FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Our charter allows us to issue up to 100,000,000&#160;shares of our common stock and to issue and designate the rights of, without stockholder approval, up to 5,000,000&#160;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.</FONT></DIV>

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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">FORWARD-LOOKING STATEMENTS</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">When used in this prospectus, the words &#8220;expects,&#8221; &#8220;believes,&#8221; &#8220;anticipates,&#8221; &#8220;estimates,&#8221; &#8220;may,&#8221; &#8220;could,&#8221; &#8220;intends,&#8221; 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 have discussed many of these risks and uncertainties in greater detail in any prospectus supplement under the heading &#8220;Risk Factors.&#8221; 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.</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;Form&#160;10-K,&#160;Quarterly Reports on&#160;Form&#160;10-Q,&#160;and Current Reports on&#160;Form&#160;8-K&#160;filed with the SEC.</FONT></DIV>
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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">USE OF PROCEEDS</FONT></DIV>

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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">DESCRIPTION OF COMMON STOCK</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 Amended and Restated Bylaws, as Amended 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 and our Amended and Restated Bylaws, as Amended for additional information before you buy any of our common stock or other securities. See &#8220;Where You Can Find More Information.&#8221;</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We have 100,000,000&#160;shares of authorized common stock. As of December 21, 2010, there were 26,463,726&#160;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&#160;winding-up,&#160;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.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">Certain Provisions of Delaware Law and of the Charter and Bylaws</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">The provisions of Delaware law, our Restated Certificate of Incorporation and our Amended and Restated Bylaws, as Amended described below may have the effect of delaying, deferring or discouraging another party from acquiring control of us.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="font-style: italic; display: inline">Delaware Law.</FONT>&#160;&#160;We are subject to the provisions of Section&#160;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:</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the transaction is approved by the board before the date the interested stockholder attained that status;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;&#160;or</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">Section&#160;203 defines &#8220;business combination&#8221; to include the following:</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any merger or consolidation involving the corporation and the interested stockholder;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;&#160;or</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">In general, Section&#160;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.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">our bylaws may be amended or repealed only by a two-thirds vote of our board of directors or a two-thirds stockholder vote;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;&#160;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;&#160;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">stockholders may not call special meetings of the stockholders or fill vacancies on the board;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;&#160;</FONT></DIV>
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<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 Restated Certificate of Incorporation regarding the inability of stockholders to take action by written consent;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;&#160;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">our board of directors is authorized to issue preferred stock without stockholder approval;&#160;and</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;&#160;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the voting rights, if any, of shares of the series and the terms and conditions of the voting rights;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;</FONT></DIV>
</TD>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the prices at which, and the terms and conditions on which, the shares of the series may be redeemed, if the shares are redeemable;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;&#160;and</FONT></DIV>
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</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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<BR>
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We may issue warrants for the purchase of preferred stock, common stock, 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.</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
<TABLE ALIGN="CENTER" BORDER="0" CELLPADDING="0" CELLSPACING="0" ID="hangingindent" WIDTH="100%" STYLE="font: 10pt times new roman; font-size: 10pt; font-family: times new roman">
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the price or prices at which the warrants will be issued;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the designation, terms and number of shares of preferred stock or common stock purchasable upon exercise of the warrants;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">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;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the date, if any, on and after which the warrants and the related preferred stock or common stock will be separately transferable;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the price at which each share of preferred stock or common stock purchasable upon exercise of the warrants may be purchased;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the date on which the right to exercise the warrants shall commence and the date on which that right shall expire;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<TD STYLE="width: 18pt">
<DIV><FONT STYLE="display: inline; font: 10pt Times New Roman">&#160; </FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
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<DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">information with respect to book-entry procedures, if any;</FONT></DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">DESCRIPTION OF UNITS</FONT></DIV>

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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-weight: bold">&#8226;</FONT></FONT></DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-weight: bold">&#8226;</FONT></FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-weight: bold">&#8226;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the date, if any, on and after which the units may be transferable separately;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-weight: bold">&#8226;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">whether we will apply to have the units traded on a securities exchange or securities quotation system;</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman"><FONT STYLE="display: inline; font-weight: bold">&#8226;</FONT></FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any material United States federal income tax consequences; and</FONT></DIV>
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</TD>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">how, for United States federal income tax purposes, the purchase price paid for the units is to be allocated among the component securities.</FONT></DIV>
</TD>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">PLAN OF DISTRIBUTION</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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:</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
</TD>
<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the name or names of any underwriters, dealers or agents;</FONT></DIV>
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</DIV>

<DIV>
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</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">the purchase price of the securities and the proceeds to us from the sale;</FONT></DIV>
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</DIV>

<DIV>
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<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any underwriting discounts and other items constituting compensation to underwriters, dealers or agents;</FONT></DIV>
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</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any public offering price;</FONT></DIV>
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</DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
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<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any discounts or concessions allowed or re-allowed or paid to dealers;&#160;and</FONT></DIV>
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<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV>
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</TD>
<TD STYLE="width: 18pt">
<DIV STYLE="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">&#8226;</FONT></DIV>
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<TD>
<DIV ALIGN="LEFT"><FONT STYLE="display: inline; font: 10pt Times New Roman">any securities exchange or market on which the securities offered in the prospectus supplement may be listed.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
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</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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 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.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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.</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">LEGAL MATTERS</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">The validity of any securities offered by this prospectus will be passed upon for us by Trombly Business Law, PC.</FONT></DIV>
</DIV>

<BR>
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<DIV ID="PN" STYLE="page-break-after: always">
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<BR>
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<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">EXPERTS</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">The consolidated financial statements of Oculus Innovative Sciences, Inc. and Subsidiaries. appearing in Oculus Innovative Sciences, Inc.&#8217;s Annual Report on&#160;Form&#160;10-K&#160;for the year ended March&#160;31, 2010, have been audited by Marcum LLP, an independent registered public accounting firm, as set forth in their report included therein and incorporated herein by reference. &#160;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.</FONT></DIV>
</DIV>

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<DIV STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">
<DIV ALIGN="CENTER" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: bold 10pt Times New Roman">WHERE YOU CAN FIND MORE INFORMATION</FONT></DIV>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">We file reports, proxy statements and other documents with the SEC. You may read and copy any document we file at the SEC&#8217;s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You should call 1-800-SEC-0330 for more information on the public reference room. Our SEC filings are also available to you on the SEC&#8217;s Internet site at http://www.sec.gov.</FONT></DIV>

<DIV STYLE="text-indent: 0pt; display: block"><BR>
</DIV>

<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">This prospectus is part of a Registration Statement that we filed with the SEC. The Registration Statement contains more information than this prospectus regarding us and our common stock, including certain exhibits and schedules. You can obtain a copy of the Registration Statement from the SEC at the address listed above or from the SEC&#8217;s Internet site.</FONT></DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">In addition, all documents that we file with the SEC pursuant to Sections&#160;13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934, as amended, after the date of the initial registration statement of which this prospectus is a part and prior to the effectiveness of the registration statement as well as all such documents that we file with the SEC after the date of this prospectus and before the termination of the offering of our securities shall be deemed incorporated by reference into this prospectus and to be a part of this prospectus from the respective dates of filing such documents. Unless specifically stated to the contrary, none of the information that we disclose under Items 2.02 or 7.01 of any Current Report on Form 8-K that we may from time to&#160;time furnish to the SEC will be incorporated by reference into, or otherwise included in, this prospectus.</FONT></DIV>
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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt">&#160;</DIV>

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<DIV ALIGN="LEFT" STYLE="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt"><FONT STYLE="display: inline; font: 10pt Times New Roman">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&#160;N.&#160;McDowell Blvd., Petaluma, California 94954, telephone&#160;(707)&#160;782-0792.&#160;We will not, however, send exhibits to those documents, unless the exhibits are specifically incorporated by reference in those documents.</FONT></DIV>
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<DIV>&#160;</DIV>

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<DIV>&#160;</DIV>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>







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<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P></DIV>

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<p>&nbsp;</P>

<P></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>$5,161,000</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>Common Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0 0; text-align: center"><B>PROSPECTUS SUPPLEMENT </B><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<!-- Field: Rule-Page --><DIV STYLE="text-align: left; margin-top: 3pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>April _, 2014</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

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