The U.S. Food and Drug Administration confirmed late Friday that Oculus Innovative Sciences ( OCLS) cannot make medical or drug-like claims about a diluted bleach product it sells to clean wounds.

The controversy over how Oculus markets Microcyn, an antiseptic sold over the counter for $20 a bottle, comes as the Petaluma, Calif.-based company, short on cash, is gearing up to raise money through a stock sale to investors, according to a source familiar with the plans.

Microcyn is a liquid- and gel-based antiseptic sold over the counter for $20 a bottle. The FDA allows Oculus to market Microcyn as a wound cleaner under the agency's regulation of simple medical devices known as 510(k) approvals.

TheStreet.com asked the FDA to explain what Microcyn could and could not say about Microcyn based on the product's approval as a medical device.

"Oculus only has FDA approval for Microcyn for the removal of debris after pouring on a wound," said FDA spokesperson Peper Long.

Long added that, "A medical device approved under a 510(k) is not a drug and therefore a manufacturer of such a device is not allowed to make therapeutic or drug-like claims."

As reported Thursday, Oculus is marketing Microcyn as a drug with specific medical claims that the product cures infections, accelerates wound healing and reduces inflammation in patients with serious diabetic ulcers, according to comments made by the company's CEO Hoji Alimi and CFO Bob Miller on a conference call with investors held on June 11.

The FDA was asked if Oculus had specific FDA permission to claim that Microcyn has wound-healing benefits for patients with diabetic foot ulcers.

The FDA's response: "No," according to spokesperson Long, adding that, "It is in our the FDA's purview to investigate companies which make unsupported claims about drugs or devices." She would not comment about any pending or ongoing FDA investigation involving Oculus.

Oculus did not respond to questions about the FDA's comments on Microcyn, but in its recent 10-K annual report filed with the Securities and Exchange Commission, the company states, "We do not have the necessary regulatory approvals to market Microcyn as a drug in the United States."

At Metro Medical Online, an Internet pharmacy, consumers can buy an 8.5 oz. bottle of Microcyn for $19.95 without a prescription.

According to the Metro Medical Web site, "Microcyn has been studied for its clinical benefits and safety, a number of these findings peer-reviewed and published. These studies demonstrate that the Microcyn Technology delivers wound healing benefits, reduction of inflammation, cure or improvement of infection and antimicrobial activity; all while remaining safe and biocompatible as evidenced in a 2007 study published in the International Wound Journal."

That study examined the effect of Microcyn in laboratory cell cultures, not in humans. And one of the study's investigators, Dr. Andres Gutierrez, was Oculus' Director of Medical Affairs at the time he participated in the study, according to Oculus' SEC filings.

In another company-sponsored phase II study conducted in late 2007, Oculus claimed treatment with Microcyn "cured or improved" 93% of infections in patients with diabetic foot ulcers compared to an infection "cure or improvement" rate of 56% for patients treated with the oral antibiotic levofloxacin.

The company announced results from this study in February 2008 and again in March 2008.

However, the positive result announced by Oculus was not the primary endpoint of the study and was derived from a smaller subset of the total patients enrolled.

The actual results of the study, which only enrolled 66 patients with mildly infected diabetic foot ulcers, showed that treatment with Microcyn alone did not lead to a statistically significant difference in "cure or improvement" of infection compared to levofloxacin plus saline or the combination of levofloxacin and Microcyn.

Moreover, Microcyn is not an approved or recommended treatment for infected diabetic foot ulcers, according to the official treatment guidelines of the Infectious Disease Society of America (IDSA).

Oculus did not respond to questions about the Microcyn studies. The company's 10-K states, "Most of these studies were not intended to be rigorously designed or controlled clinical trials and, as such, did not have all of the controls required for clinical trials used to support a new drug application, or NDA, submission to the FDA."

Meantime, Oculus is in danger of running of cash, which is why Oculus and its banker Dawson James are working to line up investors to buy into a new stock offering of 1.2 million shares and 600,000 warrants, according to a person familiar with the company's plans.

Oculus spokesman Dan McFadden would neither confirm nor deny the imminent stock sale. Oculus filed an amended registration statement for the new stock and warrants with the SEC last week. The company cannot sell the shares until the SEC deems the registration statement effective.

The company lost $17.6 million in the fiscal year ended March 31, burning through $16.8 million in cash in its operating activities. At the end of the March, Oculus reported having $2.9 million in cash, which compelled the company's auditor to attach a going concern letter to its annual report.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.