Good afternoon, and welcome to the Oculus' Fiscal Fourth Quarter 2012 Conference Call. My name is Karen, and I'll be your coordinator for today's conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Mr. Dan McFadden. Please proceed, sir.

Good afternoon, and thank you for joining us. With me on the call today are our Founder and CEO, Hoji Alimi; and our Chief Financial Officer, Bob Miller. We will open the call with Hoji's discussion of the business highlights since the last earnings call and the company's execution on our strategic business plan. Bob Miller will next review financial results, and then we will take questions. This afternoon, Oculus issued a press release detailing fiscal fourth quarter and fiscal year 2012 financial results and recent corporate developments. A copy of the release can be downloaded from our website, which is www.oculusis.com. That's O-C-U-L-U-S-I-S.com, or you can call Investor Relations at (425) 753-2105, and we'll be happy to assist you. Those listening to this call via a webcast over the Internet can also view a number of slides that corresponds to today's narrative. These slides are also available via an 8-K filed approximately 10 minutes ago with the SEC. Before we begin, I'll remind listeners that this conference call contains forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by use of words as expect, to expand, would and anticipate, among others. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, including risk inherent in the development and commercialization of potential products, the risk that potential clinical studies or trials will not proceed as anticipated or may not be successful or sufficient to meet regulatory standards or receive the regulatory clearance or approvals, the company's future capital needs and its ability to obtain additional funding and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission, including the quarterly report on Form 10-Q and the annual report on Form 10-K. Identified product applications and/or uses are intended to highlight potential applications for the investment community and does not infer that the company is marketing for these indications. The company does not provide any assurances that such applications will receive regulatory approvals. Oculus disclaims any obligation to update these forward-looking statements. So now, I will now turn the call over to Hoji Alimi, our CEO and Founder.

Thanks, Dan. Thank you, good afternoon, everyone, and thanks for joining us again for the Oculus Innovative Sciences Fourth Quarter Fiscal 2012 Earnings Conference Call. As Dan already introduced me, my name is Hoji Alimi, I'm President, Founder and Chief Executive Officer of Oculus Innovative Sciences. This afternoon, also, Bob Miller, our CFO, joins me on this call. There are 4 fundamental topics I would like to discuss during this call. First and foremost, is Oculus' main technology, Microcyn, and the competitive landscape. Secondly, a top-level view of our financial. Third, the existing as well as new partnerships that we have announced over the last quarter, and the corresponding commercial activities and sales from those partners in [indiscernible] markets. And then lastly, I'd like to cover our 12-month plan moving forward. So to begin, I would like to explain Oculus' position in the market from a technology point of view. As a lot of you are aware, hypochlorous acid, which is the main active ingredient in Microcyn, has demonstrated significant clinical benefits in a variety of healthcare-related markets. Oculus' key technology or technological advantage is our ability to reduce the concentration of hypochlorous acid within safe limits while delivering a prolonged shelf-life and a stable form of it, in some cases, more than 10 years, and still maintain the product antimicrobial efficacy. Today, we hold 14 issued patents and more than 90 pending patents on this technology. And most importantly, the technology works and is highly effective in treating a variety of infections and reducing the need for antibiotics. And we have well demonstrated that over the last few years in the international market, specifically. But we hear from time to time that there are other entities that they are trying to get into this space. So how do we…

Thank you, Hoji. I'll first review the guidance we provided for the fourth quarter of fiscal year 2012, followed by guidance for the first quarter of fiscal year 2013, and then summarize our financial results for the fourth quarter and the fiscal year 2012. In conclusion, I will provide the key assumptions which Oculus needs to achieve in order to reach EBITDAS breakeven. How did we do in our guidance for the fourth quarter ended March 31, 2012? First of all, our total revenue for the quarter was $3.4 million, above our guidance of greater than $3 million. Secondly, our cash operating expenses of $3.1 million were close to the $3 million range. And third, the actual EBITDAS was $924,000 versus the guidance of to be less than $1 million. What is our guidance for the quarter ending June 30, 2012? We expect our revenue to be -- to exceed $3.3 million, EBITDAS to be less than $1 million, and our cash operating expenses to be in the $3 million to $3.2 million range. The cash operating expenses can be slightly higher in the June quarter due to higher accounting costs associated with the year-end closing. Moving now to the results for the fourth fiscal quarter ending March 31, 2012. Product revenues increased $660,000 or 26% for the fourth quarter compared with the same period this year, with increases in the U.S., Mexico, India and Singapore, partially offset by declines in Europe and China. Product revenue in the United States increased $556,000 or 64%, primarily due to the increased unit growth and royalty fees received from our partner, Innovacyn, Inc., and to a lesser extent the sales entered the dermatology markets sold by of our partners, partially offset by declines from sales from Union Springs. Last year's revenue from the…

Operator, before you jump in, this is Hoji Alimi. Just one more time if I can just -- first of all, thanks, Bob. We are at a tipping point where on top of a solid partner like Innovacyn, who's been doing a fantastic job selling more than 40,000 units in animal healthcare. To be candid, 2 years ago, some people rolled their eyes and said, "What you guys are doing?" And they have proven to the entire market that they have done a phenomenal job. And first of all, I want to compliment our Innovacyn partners in that market. And now, they're even investing and pursuing larger market upside in food, animal, and other areas. And we are here providing in full support in whatever we need to do to make sure that they succeed because this -- all success is tied to our partner's success. In addition to the growth in animal healthcare, international business has continued to grow. Now on top of that, we have added 2 solid partners with high-margin products in dermatology and hospital -- U.S. hospital call points, which we had no presence in. And on top of those, now we are financially in a position to start seaming the market and initiating new trials, carefully managed and fiscally being responsible not to overspend, but to create huge clinical upsize for additional partnership and product launches and momentum for next year and years after that. So this is to us, exciting, and once again, I appreciate everybody being on the call, and turn it to operator for any Q&A session.

[Operator Instructions] Our first question comes from the line of Laura Engel from Stonegate Securities.

I wanted to see if we could start with just some basics. On the margins, how quickly do you think you can, I guess, regain some of those margins, and at what rate do think we should expect to see improvements in the next year?

I think we've given guidance in the past that we expect to be at around the 75% gross margins going forward. That's something that I would hope that sometime this year, we could get to that level on a quarterly basis.

Okay. And I guess this next one is a little bit involved. You discussed -- you talked about Microcyn and the different Rx approvals that you could look to going forward. You also, obviously, gave a lot of information on your cash and how you're going to maintain certain cash expenditures going forward. Could you kind of walk us through some of these indications you're looking at, say, acute wound care, surgical, maybe the acne? And just kind of walk us through how those are going to be funded, if there is a partner already in place, what the expectations are? And then also, maybe, as you mention that, if you could touch on timing of those?

Good question, Laura, this is Hoji. So let me start by reduction of the scar or management of the scar. This is a clinical study that we intend to initiate. The development is done. The site selection has been completed. We are going through the IRB process. Conservatively, we are looking at about a year to complete and announce top line data. With a solid partner, Amneal/Quinnova, who has already communicated they are willing to partner and is now commercializing this product on the heels of launch -- already launched products in dermatology of other Microcyn products. The cost for this trial, I want to give you a ballpark, is, I would say, less than $400,000, well below that. And once we have completed the trial, we plan to get reimbursed from our partner for the cost of this study. Does that answer your question on this one before I move on?

Yes, yes.

Okay. This is a -- and if you want a little bit more information, I can tell you, this is going to be at least at 4 different clinical sites, and we are looking at certain scars that it just -- this is a very large market, so we are enrolling patients with different parts of a scar to capture as larger market as possible. To be honest with you, it's a very sexy, fancy and high-margin market, and we are only a year away from getting into that. So enough about that one. The cost-effective study that we mentioned is directly related to the sale of our product, not in hospital market, but in home healthcare and nursing homes. For any of the company to penetrate the market, you need to make sure -- you can have the best product possible, and making sure that you have the best solution to save patient life, it's sad to say, but those products and solutions will not be adopted because hospitals don't have the money to spend money, so it needs to be covered on their insurance. So this cost-benefit study is a single site. We're going to be enrolling approximately about 100 patients, primarily with chronic wounds. The cost of the study, currently, roughly, is less than $100,000, but it is a long study. You're looking at approximately about 1.5 year to 2 years. And we are in direct discussions with the agency on that. So we think this is a huge catalyst for us to open up. We have had a lot of anecdotal success in the nursing home and home healthcare, but again, the missing ingredient is that reimbursement and that's where we're focused on. So less than $100,000, and about 1.5 years to 2 to complete that.…

Yes.

Okay. On surgical, I can tell you very bluntly, we are not ready to initiate clinical study, but, and I'll tell you for a couple of reasons. One is, it has taken us a significant amount of funds and time to develop a specific formulation that can actually be used in peritoneal cavity, surgical heart surgery, lung surgery, joints and so on. The formulation is done and we needed to go through a rigorous study by certain protocols, which FDA has suggested to make sure that we maintain certain stability once we go through those processes. All that have been paid, all that have been completed, now we are now involving some key opinion leaders in terms of what specific surgical indication we will want to use to conduct this trial, at least in our Phase I, Phase II. And currently, what we would like to do, the ideal task for us is while we are working on the reimbursement, reduction of the scar, supporting all our trials and our partners in U.S., we would like to look for a new partner that is going to say, "Well, you have fantastic data, all of it international." We have spoken with the FDA. This is a very specific formulation. Other formulations are not going to cannibalize in this market, and then partner that similar, like acne, and now, and you have a second drug fully paid by our partner for a specific surgical indication. So all of the legwork has been done in anticipation of getting a partner in that front.

Okay, okay. And then I didn't really here you talk much about the release that came out a little bit, maybe it's last month or the month before last, the Napa Valley Nutritionals. You talked about the product on the previous call, but I didn't really hear you kind of give us any updates. Is there anything you can tell us about that, how that's going?

Absolutely. Unfortunately, I do get calls from shareholders after the earnings call, and we get 10 to 12 minutes max to speak about everything. And sometimes, there isn't enough time. So we get criticized afterwards, they think we are sitting on some bad news because they didn't mention something. So on Glucorein, as I mentioned before, it's a product in-licensed from a practicing physician from Harvard Medical School. To be very candid, out of the first team that -- of the Type 2 diabetic patients, I tested on myself. It took us a greater time to develop this product. Now I can literally brag about the presentation, the product labeling and everything. And we took a serious look at a regional rollout. This is not national. And we are not -- we're going to be very, very fiscally responsible. What we are doing is we are rolling this out in Atlanta, Northern California, including here, we are in Sonoma County, San Francisco and Seattle area. And we are selling this through medical professionals and then listening to them, what they think about the use of this product. I can tell you the feedback has been -- we are targeting pre- and Type 2 diabetic patients, is very well known, they are the most noncompliant patients, they don't control their glucose. They eat, they smoke, they don't work out, their ideal thing is watch TV, eat a bowl of rice, and, eventually, they're going to end with insulin injection. With this product, the feedback has been people are -- they're stabilizing their sugar, and they are seeing not a yo-yo -- this is my terminology, not a yo-yo, you're going to lose weight and gain weight, but a sustainable weight loss in these patients. Where they eat, but they're losing anywhere…

I guess -- and this is one last quick on. When might we see your K filed?

It's going to be at the end of next week.

And our next question comes from the line of Russ Huffington from Calton & Associates.

Just want to go over a couple of things on the expense side. On the total operating expenses, just want to know how -- they increased by $284,000, is that under control? Are you all going to be able to, hopefully, bring some of those down?

Yes. A lot of those -- I'm not sure where you're referring to this $280,000, is that the total operating?

Yes, sir. Total operating expenses increased $284,000, off your release.

Yes. We would plan, as we said, that we would be in the range of $3 million. We're going to stay in that range for total operating expenses for quite some time. Now that range would, as I mentioned, for the June quarter, is probably going to be 3% to 3.2%. And the reason that's a higher range than normal, is because we are -- if you go back and look at our June quarter, every quarter it's a little bit higher, a couple -- $100,000 or $200,000 higher than the other quarters, because the accounting costs relating to the year-end closing. But other than that, you will see our operating expenses remain at about the $3 million level.

Okay. And let's go to the SG&A, that increased $438,000. And then you have on the second line, this increase is due -- what is -- it says, "Higher consulting and patent costs." What are the "higher consulting," is that just a onetime deal?

The patent costs relates to the endotracheal tube that we patent from the NIH. And we paid them a fee for it to do that, and then we paid them on an ongoing fee to do that. So but the upfront fee was much larger than the ongoing fee, so that actually will -- that's a onetime kind of fee. The -- some of the consulting is an ongoing consulting, like for Investor Relations, but...

Russ, also, one of the consulting that I do want to mention is we do use is in research and development. In certain areas, we do hire a specific expertise to -- whether it's Microcyn-related or Glucorein-related, or endotracheal tube-related. Those are some of the expertise that we do need to either for patent purposes or for designing trials, and things of that sort. Go ahead.

Okay, sure. And just one last thing, I didn't know if you all saw that article in Seeking Alpha, just referring to Oculus in association with Abbott Labs, and you have any comment on that?

Russ, can I say something because sometimes, when I went public, I can tell you the first day I woke up and looked at the message board, and [indiscernible] play. Literally, I was blown away. And then after a while, as I got more gray hair and talking to more people, and the board, they were saying, "You don't run the company based on some people who have no clue what they are talking about. They're going to write something on your message board, you don't pay attention." So I can tell you, the answer is no. And as a Founder of this company, I didn't bring this company to this point -- I mean, I didn't sell a single share, when we went public at $8, then to $11 a share and I didn't sell any shares, and we are at $0.74, I'm not planning to sell any shares. I have a big vision for this company and selling this company through [indiscernible] it would be, I think would be a mistake at these prices. So short answer is, no. And one other thing I do want to mention because I do get a lot of call from shareholders based on comments on Yahoo! message boards, all I want to say is, with confidence as a human being, that there are a lot of people that they will get on message boards with total ignorance, regarding whether it's Oculus or any other company, I don't care if it is our competitor, you're in business of manufacturing a product that literally -- I know you guys have not had the pleasure of having this experience, I've been in clinics where a mom has hugged me and cried because we have save people. And so there are people who get on message boards of our company or any other companies, create a hype, run the stock up to make money, or on the other side, short it and make -- create panic so everybody can sell and then they can make money off of that stock going down. It's just, I don't see that as a responsible human being behavior. So I'll just stop right there. But my short answer, I think...

And we also have a question from the line of Bob Robbins from Robbins Capital Management.

The slides in the presentation, I would like to know, where to access those slides during the next conference call, as I couldn't find them on your website?

There's a file that's part of our 8-K. And I will be speaking -- this is the first time we have done it, Bob, so it is with SEC filing. You can always get it from there. But in the future, we'll try to -- based on our SEC counsel's advice, if we can't put it on our website, there's a easier way for you guys to access those, we'll definitely do that.

Okay. And also, Union Springs, as you pointed out, didn't pay a royalty fee this time because, I guess, obviously, they didn't do so well. And I'd like you to comment on their evolving role with Oculus?

Some partners are going to do phenomenal in the active list of licensing. And some partners are not going to do well, some are going to go excel really fast, and then they're going to plateau. You -- and we see that with the Union Springs, that was one of our partners in the beginning. Their rights are limited to a very small presentation of this product in a pen-like applicator. They've been trying to sell this product internationally and domestically. But more and more, they're becoming a smaller player in the portfolio of our partners as we are dealing with companies like Innovacyn or Amneal or Onset and so on. So materially, that -- I mean, they are not a material partner. But we continue to support them, and my job as a CEO is to put our best foot forward with all our partners and make sure that they have the best chance to succeed. So I hope that answers your question, Bob.

And that concludes the question-and-answer session of today's call. I would like to turn the conference back to management for any concluding remarks.

Well, I'd like to thank all of you guys, again, and I appreciate your patience to listen to my long answers. But we look forward, definitely, to speaking with you guys, I believe it will be in August. And hopefully by then, we'll have more updates on our clinical trials, updates from our partners, especially in the dermatology field, and we're going to have more and more exciting quarters as we get closer to our breakeven. Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.