Good afternoon, ladies and gentlemen. And welcome to the Fiscal Second Quarter 2016 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Mr. Dan McFadden.

Thanks, Christine. Good afternoon and thank you for joining us this afternoon. With me on the call today are our CEO, Jim Schutz; and our CFO, COO, Bob Miller. We will open the call with Bob Miller’s review of our financial results for the quarter, followed by Jim’s update on our business strategy moving forward. This afternoon Oculus issued a press release detailing fiscal second quarter 2016 financial results and recent corporate developments. Copy of the release can be downloaded from our website, which is at oculusis.com, that’s OCULUSIS.com, or you can call Investor Relations at 425-753-2105 and we’ll be happy to assist you. Before we begin, I 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 such 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 risks inherent in the development and commercialization of potential products, the risks 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 with that, I will now turn the call over to Bob Miller, our CFO and COO.

Thank you, Dan. I’ll first discuss the financial presentation of our businesses; secondly, our key strategies to achieve strong revenue growth for fiscal year 2016; third, a review of the financial results for our derm strategy, and our overall financial results for the September quarter; and lastly, we’ll provide some revenue guidance for the quarter ending December 2015. First of all, we have changed the detailed financial presentation of our businesses compared to last year, by separating product revenues which are shown on the last page of the press release into two categories: one, revenue from direct product sales; and two, revenue in the form of product licensing and royalty fees. For instance, all of our revenue related to our former partner [indiscernible] and animal healthcare is a royalty. This provides more transparency on the true sales growth of our continuing products in various geographic areas, especially as we focus on growing sales in U.S. with our direct sales-force. Secondly, what are our key strategies to ignite revenue growth year for fiscal year 2016? Our key strategies for growth for the rest of this fiscal year have not changed since detailed in the March earnings call and they are the following. The number one strategy is to focus on growing revenue in the U.S. dermatology market with our direct sales-force and a robust product pipeline. The U.S. dermatology segment provides us with the largest potential growth and will lead us to overall breakeven. Our number two strategy is to continue strong unit growth in our international business with new product launches and stronger partners. The international segment is 65% of our product revenue and will give us the largest dollar growth and further more generates cash to help us fund the U.S. term loan. Consistent with our strategy just mentioned…

Thank you, Bob. A former Wall Street analyst said something interesting recently. He said, I regard Oculus has a commercial story for the first time, so I suggest you focus during your earnings on the financial results and your prospects for continued performance. Bob and I’ll follow his good advice today. In the next seven minutes or so, I’d like to cover our general strategy, provide a few highlights on our execution towards that strategy. And then, as Bob said, spend just a moment looking ahead in our pipeline. First our general strategy, given the world as we see it and given our organization as we believe it exist today, here is how we envision our future. We’ll continue to grow our U.S. dermatology sales force as our core market, starting with our 11 medical device clearances, our growing sales force and using our Microcyn-based dermatology products as the initial cornerstone. We’ll diversify in the non-hypochlorous acid technologies to be license and acquisition becoming a multi technology specialty pharma company, again focused on dermatology. We’ll identify orphan drugs and low cost new drug applications for our direct sales forces itself. We think that strategy solidified competitive projection, especially our intellectual property portfolio. We will provide real reimbursement coverage and provide strong and on-label [indiscernible]. For our non-core markets, which we defined as all other U.S. and international products. Our non-core markets will use a partnership model to generate excess cash for the growth of our core market again U.S. derm. We believe that executing on the strategy is a transformational step that will provide our shareholders and employees, we can increasing market cap and increased stock price, and create long term shareholder value. Hopefully, our strategy is clear to shareholders, we certainly spend a lot of time with our teammate…

[Operator Instructions] Your first question comes from Jason McCarthy from Maxim. Your line is open.

They’re continuing to progress. I’m glad to see that U.S. sales are up over 200%, that’s pretty impressive. So I just had a couple of questions. Could you just quickly or briefly review how many products you have on the market right now? And how many expect by the end of this year and then going into the first quarter of 2016? Because we want to get a sense of where that next burst of growth could come from?

You want to cover, Bob, the six products that our U.S. derm sales-force is selling now. I think you outlined them, but repeating them is a…

Yes, we have two - we have a gel, Alevicyn Gel, regular gel. We have Alevicyn regular or Spray Gel, a no-touch spray gel. We have Alevicyn Dermal Spray for surgical procedures like mouth procedures. We have a one or two prescription scar products called Celacyn. And then, Jim, talked about the two that we just loaded into the wholesale system. One is a combo-pack which is for people that have a procedure that can get it and take it home. And the other one is an oral drug product.

And Jason, to answer your question, in the March 2016 timeframe we expect an approval for this LMS, it’s lipid and moisturizing factor product that we’re enthusiastic about it. No guarantees on timing. You know better than we do about the FDA, but it would be great to add that product this spring to add a seven total product in our U.S. derm sales-force’s bag.

Okay. And can you - well, thank you for that. Can you also talk a little about the MicrocynAH products, the spray gel, it’s spray in the hot spot. I think the animal market. Now, listen, I have dogs and they have hot spots. So I think it’s an underserved market and there is a real opportunity there. And maybe you can just give us a second and walk us through what the potential is in that market, because I don’t think it’s talked about that much, but there’s certain is an opportunity there.

All right, it’s a great question and we happen to have our animal health guru on the phone today, Tuesday [indiscernible]. But frankly, Jason, we got into the animal health business because of that mange hot spot description you just gave us. We thought that was really interesting and some homework by R&D on the mammalian cells associated with the itch in mange, normally associated with dog mange, really caught our attention. So it was one of our bigger sellers through our previous partner. Of course, you’ll remember, we manufactured those great products for our previous partner. So Dan is working with one current partner under our own brand in the animal health space. And we hope to add more there soon.

Great. Thank you, guys.

Yes, we do plan to - for going forward in terms of…

Great. Thank you, guys.

Yes. We do plan to - for going forward in terms of our pipeline. Our target is to have one new product per quarter and in some cases were two that we have planned for, but at least one per quarter over the next year.

Great. Thanks for the update. I congratulations on the progress in the last quarter.

Thank you, Jason.

[Operator Instruction] The next question comes from the line of Clark Lehman, from Logos Partners. Your line is open.

Hi, guys.

Hi, Clark.

I had a question about penetration. You talked about prescription Q1, Q2, Q3, what was that progression, 4,400, 7,000, 8,600. Yes, we - how many, how many…

Yes, we went from [indiscernible] 8,600.

So how many docs wrote prescriptions, how many - and what percentage - I’m trying to get to the penetration rate. How many dermatologists actually wrote prescriptions in those quarters, and are you seeing - where is that in terms of the overall market?

Yes. We - best estimate is that we’re selling into about 200 to 300 dermatologists at this point. Our target group, of course you don’t realize, we only had 10 salespeople from most of the year, field salespeople. So that’s limited, our target is 3,000 to 5,000 dermatologist per year. We obviously need to expand our sales force to do that, which we are in the process of doing. We think we’ve got tremendous ability to penetrate the market, if you just take atopic dermatitis alone, and I think we mentioned that when we saw you up here, we have 13.5 million strips of relating to a year, relating to atopic dermatitis and obviously we have a very small percentage of that overall market at this time.

Well, again, so the 200 to 300, you don’t know exactly, so the 8,600 strips if you look back. Did you - so that’s only you’re talking less than 10% of the docs?

That’s correct. Yes.

Here half a percent, I mean here 5% of the docs didn’t even know about you guys.

That’s correct.

Are you getting any feedback to the satisfaction or the - the performance of the prescriptions versus competition, I mean what are the docs telling him. Do you get any feedback from the docs?

Well, two docs there, focused on two products. Our star product is generating our biggest number of TRXs card, we get great feedback on that from a clinical perspective and we love this from a price point. The second product, our Alevicyn atopic dermatitis products are typically compared to the corticosteroids, which are good anti-inflammatories, but also carries some serious side effects denim itch skin. You certainly won’t use them on children or the elderly. And it’s in that area that, are we occurring 300 dermatologists script writers are giving us praise, so affordable attractive prices with the [indiscernible].

Okay. So what do we expect to middle - when do we - is the lack of salespeople or feet on the street still the limiting factoring of - I mean wouldn’t that information in the marketplace get distributed fairly fast that your product that Alevicyn is…

It’s important to have the feet on the street, we will - we believe thus far we’ve shown only strong growth, in our scripts or - and in our sales, especially with just 10 salespeople. We think part of it is continuing to grow the salespeople and territories, because there is just some territories we’re just not in, and we’re - we just added somebody to Dallas recently. We didn’t have anybody in Dallas. So you need to obviously have the salespeople out there to sell the product. And so, that’s important. We think that the Alevicyn and Celacyn will continue to grow like it’s grown. And as we - just on a normal - a little bit slower plateau growth-fully.

Yes, one thought there, Clark, because we love talking about our growth rate there, 233%, we’re awfully proud of, we agree, we’d really like to expand the footprint. And regen-frequency, we just had an interesting clinical published in The Dermatologist in the September 2015 publication of The Dermatologist. It’s a great document for our sales-force to then going and bang the drum to increase the number of dermatologist that we call on and increase the territory. So we think we’re just getting started.

Okay. Did you tell me - did you mention what you thought 2016 - what you thought the prescription growth rate was going to be?

We think that there are two things to key off of both the prescriptions and the dollars, the total dollars related to those prescriptions. Next month, we’ll start providing that information, the dollars related to those prescriptions. So we would expect to see the dollar growth go up substantially, because at the beginning of October we actually raised our prices of Alevicyn, Celacyn, the Alevicyn/Celacyn products from $40, $45 up to $80. So you’ll see a very - you’ll see an uptake in the scripts. You’ll also see almost a double in the dollars related - the total dollars relating to those scripts.

And so, everything else being equal - everything else being equal, you go from - you did the equivalence of $2.5 million in the quarter?

You mean off the eight, off the - exactly.

Okay.

You mean, on a per…

Of your most recently reported $1.2 million revenues that’s really $2.4 million.

No, no, no, it’s not - not all of that is derm. I think we said 700-and-some-thousnd of that external.

Okay. Okay.

So you need to - and see, you also got to remember that that’s shipped. That’s not a product that goes out to the pharmacy.

Okay.

Now, we also have as a part of that, we shipped two new products in September. And on a ship basis you pick up - when you ship it to the wholesalers, you pick up some of that revenue. And then it gets sold out as scripts later on. So you have to look at it - the best way is to look at it both ways and have an understanding of both ways book, the dollars related to shipment and also the dollars relating to scripts being dispensed from the pharmacy.

Are you seeing any anecdotal and where can you direct me to go to see anecdotal descriptions of the actual performance vis-à-vis steroids? Is there some site or some…?

Yes, there is the Walter-Scores-Data, if that’s what you’re asking. Some people - some investors do have data that they can access like IMS data or Walter-Scores-Data that actually you can see on a weekly basis what kind of scripts we’re selling or…

No, no, not the actual scripts. I’m talking about the actual response by a patient.

Oh, okay.

Got you, you mean that there is some dermatology…

I mean, I’m a simple guys, does this stuff or doesn’t work? I mean, I don’t - if Alevicyn solves my problem then it’s - I’m trying to find…

Well, let me try to - well, let me try this. We’re a science and clinical company first and foremost. So we have terrific clinicals. I wouldn’t rely upon anecdotal evidence.

Okay. Smart. That makes sense. That makes sense.

And we certainly can share the clinicals, yes.

We can sell you the clinicals on reduction of itch and improvement in scarring. And in fact, the article that Jim referred to in The Dermatologist, I can send you that article or a copy of that article.

Okay. Wonderful. Thank you, guys. Good work.

Thank you, Clark.

I am showing not further questions at this time. I would now like to turn the call back to the presenters.

Hey, thank you very much for joining us today. We look forward to talking to you in February for the quarter ending December 31.