NBY NovaBay Pharmaceuticals Inc New

• Record Avenova® sales of $2.6 million
• Gross margin improved to 82%
• Cash burn from operations reduced approximately 50% from Q1 2016
• Affirms outlook to reach positive cash flow from operations in December 2016

Conference call begins today at 4:30 p.m. Eastern time

NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company focusing on commercializing its prescription Avenova lid and lash hygiene product for the domestic eye care market, reports financial results for the three and six months ended June 30, 2016, and provides a business update.

“NovaBay achieved record Avenova sales of $2.6 million, representing a healthy 89% growth over first quarter and over a $10 million annualized run rate. We drove these gains by our focused execution on the higher margin prescription ophthalmology channel,” said Mark M. Sieczkarek, NovaBay’s President and CEO. “Our gross margin continues to expand as we increase our sales in this reimbursed channel. These improvements, in combination with the actions we took late last year to restructure the Company and reduce operating expenses, has lowered our cash burn by nearly 50%.

“Importantly, Avenova has yet to scratch the surface of the market opportunity we estimate at about 41 million Americans,” said Mr. Sieczkarek. “I’m pleased to report NovaBay still is on track to achieve our goal of positive adjusted cash flow from operations in December 2016.”

NovaBay defines adjusted cash flow from operations as GAAP cash flow from operations less changes in operating assets and liabilities.

Key Second Quarter Avenova Metrics (all comparisons from the first quarter of 2016)

• Total Avenova sales increased to $2.6 million, up 89%
• Prescription sales into the pharmacy channel increased to $1.7 million, up 201%
• Over 1,100 new prescribers added in the second quarter
• Total number of medical professionals who have prescribed Avenova increased 12%

Second Quarter 2016 Financial Results

Net sales for the second quarter of 2016 were $2.7 million, up 164% from $1.0 million for the second quarter of 2015. Product revenue, which includes sales of Avenova and NeutroPhase®, increased 185% to $2.7 million. Total gross profit margin was 82% for the second quarter of 2016, compared with 75% for the prior-year period, with the increase mainly due to higher sales of Avenova. The gross profit margin on Avenova sales grew to 85%.

Operating loss for the second quarter of 2016 was $2.2 million, representing improvements of 55% from $4.9 million reported for the second quarter of 2015 and 52% from the first quarter of 2016. R&D expenses for the second quarter of 2016 decreased by 80% to $278,000 from $1.4 million for the second quarter of 2015 and by 70% from the first quarter of 2016, primarily due to lower spending on clinical trials that were completed. G&A expenses for the second quarter of 2016 decreased by 35% to $1.3 million from $1.9 million for the prior-year period and by 24% from the first quarter of 2016, primarily due to overall cost reduction efforts including reductions in staff-related expenses, stock-based compensation expense and consulting and outside services. Sales and marketing expenses for the second quarter of 2016 increased by 23% to $2.9 from $2.3 million for the second quarter of 2015, primarily due to the focus on the commercialization of Avenova, and were down by 9% from the first quarter of 2016.

Non-cash loss on the change of fair value of warrant liability for the three month ended June 30, 2016 was $424,000, compared with no adjustment for the three months ended June 30, 2015.

The net loss for the second quarter of 2016 was $2.7 million, or $0.36 per share, compared with a net loss for the second quarter of 2015 of $4.9 million, or $1.84 per share. The net loss for the second quarter of 2016 declined by $2.4 million or 47% from the first quarter of 2016.

Six-Month 2016 Financial Results

Net sales for the six months ended June 30, 2016 were $4.4 million, up 183% from $1.5 million for the six months ended June 30, 2015, with the increase primarily attributable to significantly higher sales of Avenova. Product revenue for the first half of 2016 increased 203% to $4.3 million. Gross profit margin was 75% the first half of 2016, compared with 74% for the first half of 2015. Gross profit margin on the Avenova brand was 82% the first half of 2016.

Operating loss for the first six months of 2016 was $6.8 million, a 28% improvement from $9.5 million for the comparable period in 2015. R&D expenses for the first six months of 2016 were $1.2 million, a decrease of 59% from the prior-year period, and G&A expenses were $2.9 million, a decrease of 17% from the prior -year period. Sales and marketing expenses for the six months ended June 30, 2016 were $6.0 million, an increase of 42% from the prior-year period.

Non-cash loss on the change of fair value of warrant liability for the first six months of 2016 was $809,000, compared with a gain of $34,000 for the first six months of 2015.

The net loss for the six months ended June 30, 2016 was $7.8 million, or $1.35 per share, compared with a net loss for the six months ended June 30, 2015 of $9.5 million, or $3.94 per share.

NovaBay reported cash of $3.5 million as of June 30, 2016, compared with $2.4 million as of December 31, 2015. In May 2016, the Company closed the first tranche of a financing for gross proceeds of $7.8 million. On August 1, 2016, the Company closed the second and final tranche of the financing for gross proceeds of $4.0 million.

The Company used approximately $2.7 million in cash to fund operations during the second quarter of 2016, compared with $5.4 million used during the second quarter of 2015, with the decrease primarily due to higher gross profit from Avenova sales and lower operating expenses achieved through company-wide cost reduction programs.

Conference Call

NovaBay management will host an investment community conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results, and to answer questions. Shareholders and other interested parties may participate in the conference call by dialing 800-608-8202 from within the U.S. or 702-495-1913 from outside the U.S., with the conference identification number 54133101.

A live webcast of the call will be available at http://novabay.com/investors/events and will be archived for 90 days.

A replay of the call will be available beginning two hours after call completion through 11:59 p.m. Eastern time August 15, 2016, by dialing 855-859-2056 from within the U.S. or 404-537-3406 from outside the U.S. and entering the conference identification number 54133101

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics®

NovaBay Pharmaceuticals is a biopharmaceutical company focusing on the commercialization of prescription Avenova® lid and lash hygiene for the eye care market. Avenova is formulated with Neutrox™, which is cleared by the U.S. Food and Drug Administration (FDA) as a 510(k) medical device. Neutrox is NovaBay’s pure hypochlorous acid. Laboratory tests show that pure hypochlorous acid has potent antimicrobial activity in solution yet is non-toxic to mammalian cells and it also neutralizes bacterial toxins. Data from a multicenter clinical study show that Avenova reduced bacterial load, the underlying cause of blepharitis, on ocular skin surface by more than 90%. Avenova is marketed to optometrists and ophthalmologists throughout the U.S. by NovaBay’s direct medical salesforce. It is accessible from more than 90% of retail pharmacies in the U.S. through agreements with McKesson Corporation, Cardinal Health and AmeriSource Bergen.

Forward-Looking Statements

This release contains forward-looking statements, which are based upon management's current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our ability to become cash flow positive by the end of 2016, future sales of our products, the ability to raise additional capital through warrant exercises, and the Company’s expected future financial results. Forward-looking statements can be identified with words like (and variations of): “estimate,” “believe,” and “expect.” These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to difficulties or delays in manufacturing, distributing, and selling the Company's products, unexpected adverse side effects or inadequate therapeutic efficacy of our product, the uncertainty of patent protection for the Company's intellectual property, and the Company's ability to obtain additional financing as necessary. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay's latest Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, especially under the heading "Risk Factors." The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

Stay informed on NovaBay's progress:Download our Mobile InvestorApp from the Apple Store or Google PlayLike us on FacebookFollow us on TwitterConnect with NovaBay on LinkedInJoin us on Google+Visit NovaBay's Website

NOVABAY PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except per share data)       June 30, December 31,   2016     2015   ASSETS Current assets: Cash $ 3,495 $ 2,385 Accounts receivable, net of allowance for doubtful accounts ($22 and $40 at June 30, 2016 and December 31, 2015, respectively) 1,490 536 Inventory, net of allowance for obsolete inventory and lower cost of market ($37 and $45 at June 30, 2016 and December 31, 2015, respectively) 1,115 1,345 Prepaid expenses and other current assets   474     261   Total current assets 6,574 4,527 Property and equipment, net 366 395 Other assets   65     155   TOTAL ASSETS $ 7,005   $ 5,077     LIABILITIES AND STOCKHOLDERS' (DEFICIT) Liabilities: Current liabilities: Accounts payable $ 860 $ 2,483 Accrued liabilities 1,915 1,980 Deferred revenue   1,593     170   Total current liabilities 4,368 4,633 Deferred revenues - non-current 2,132 2,248 Deferred rent 189 189 Notes payable, related party 524 1,655 Warrant liability   2,259     1,450   Total liabilities   9,472     10,175     Stockholders' (deficit): Common stock, $0.01 par value; 240,000,000 shares authorized; 9,156,935 and 3,486,232 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively 92 35 Additional paid-in capital 95,728 85,387 Accumulated deficit   (98,287 )   (90,520 ) Total stockholders' (deficit)   (2,467 )   (5,098 ) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 7,005   $ 5,077     NOVABAY PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (In thousands, except per share data)    

Three Months Ended

  Six Months Ended

June 30,

June 30,   2016       2015     2016       2015   Sales:     Product revenue $ 2,654 $ 931 $ 4,309 $ 1,423 Other revenue   9     77     73     123   Total net sales 2,663 1,008 4,382 1,546   Product cost of goods sold   479     253     1,090     401   Gross profit   2,184     755     3,292     1,145     Research and development 278 1,357 1,211 2,940 Sales and marketing 2,853 2,311 5,997 4,225 General and administrative   1,258     1,946     2,913     3,500   Total operating expenses   4,389     5,614     10,121     10,665   Operating Loss (2,205 ) (4,859 ) (6,829 ) (9,520 )   Non cash (loss) gain on changes in fair value of warrant liability (424 ) - (809 ) 34 Other expense, net   (59 )   (22 )   (127 )   (33 )   Loss before provision for income taxes (2,688 ) (4,881 ) (7,765 ) (9,519 ) Provision for income tax   (2 )   (6 )   (2 )   (8 ) Net loss and comprehensive loss $ (2,690 ) $ (4,887 ) $ (7,767 ) $ (9,527 )   Net loss per share attributable to common stock (basic and diluted) $ (0.36 ) $ (1.84 ) $ (1.35 ) $ (3.94 )   Weighted-average shares of common stock outstanding used in computing net loss per share of common stock 7,406,605 2,653,226 5,746,314 2,415,361

View source version on businesswire.com: http://www.businesswire.com/news/home/20160811006012/en/

NovaBay ContactsFor NovaBay Avenova purchasing information, please contact:Email usCall us: 1-800-890-0329www.Avenova.comorFrom the CompanyThomas J. PaulsonChief Financial Officer510-899-8809Contact TomorInvestor ContactLHAJody Cain310-691-7100Jcain@lhai.com