NBY NovaBay Pharmaceuticals Inc New

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

NovaBay® Pharmaceuticals, Inc. (NYSE American: NBY), a biopharmaceutical company focusing on commercializing prescription Avenova® for the domestic eye care market, reports financial results for the three and nine months ended September 30, 2018 and provides a business update.

Net sales for the third quarter of 2018 were $3.1 million, compared with $4.1 million for the third quarter of 2017 and $2.8 million for the second quarter of 2018.

“We achieved quarterly revenue growth on a sequential basis, as anticipated, driven primarily by deploying sales representatives to territories we’ve identified as having favorable health plan coverage, as well as by initial contributions from sales representatives we hired mid-year,” said Jack McGovern, NovaBay Interim CEO and CFO. “We also saw a modest improvement in net product revenue per unit compared with the second quarter as more patients satisfied their 2018 health plan deductibles.

“We are executing on a strategy to support improved per-unit revenue by engaging specialty pharmacy providers as new channel partners,” he added. These channels will allow us to significantly improve the overall patient experience. We have contracted with two such providers to date, with more expected by year end.

“We expect net sales for the fourth quarter of 2018 to be higher than the third quarter and anticipate returning to double-digit year-over-year growth in 2019. Our optimism is based on improving productivity from our sales representatives, a more focused marketing message to our providers and on expectations for higher per-unit revenue through our new channel partners,” concluded McGovern.

Third Quarter Financial Results

Net sales for the third quarter of 2018 were $3.1 million, compared with $4.1 million for the third quarter of 2017, with the decrease primarily due to a lower selling price of Avenova. Gross margin on net product revenue was 89% for the third quarter of 2018, compared with 87% for the prior-year period, with the improvement due to product mix.

Sales and marketing expenses for the third quarter of 2018 were $3.2 million, compared with $3.3 million for the third quarter of 2017, with the decrease primarily due to a reduction in the number of sales representatives, partially offset by an increase in sampling. General and administrative expenses for the third quarter of 2018 were $1.3 million, compared with $2.3 million for the prior-year period, with the decrease primarily due to lower stock-based compensation expense and lower professional services and consulting fees. Research and development expenses for the third quarter of 2018 were $45,000, compared with $132,000 for the third quarter of 2017.

The operating loss for the third quarter of 2018 was $1.8 million, a 17% improvement from an operating loss of $2.2 million for the third quarter of 2017.

Non-cash gain on the change of fair value of warrant liability for the third quarter of 2018 was $267,000, compared with a non-cash loss of $281,000 for the third quarter of 2017.

The net loss for the third quarter of 2018 was $1.5 million, or $0.09 per share, compared with a net loss for the third quarter of 2017 of $2.4 million, or $0.16 per share.

Nine Month Financial Results

Net sales for the nine months ended September 30, 2018 were $8.9 million, compared with $11.9 million for the nine months ended September 30, 2017. Gross margin on net product revenue was 88% for the first nine months of 2018, up from 85% for the first nine months of 2017.

The operating loss for the first nine months of 2018 was $6.3 million, a 19% improvement from an operating loss of $7.7 million for the comparable period in 2017. For the nine months ended September 30, 2018, sales and marketing expenses decreased 8% to $9.6 million, general and administrative expenses decreased 39% to $4.3 million, and research and development expenses decreased 42% to $152,000, all compared with the nine months ended September 30, 2017.

Non-cash gain on the change of fair market of warrant liability for the first nine months of 2018 was $1.0 million, compared with a non-cash loss of $501,000 for the first nine months of 2017.

The net loss for the nine months ended September 30, 2018 was $5.3 million, or $0.31 per share, compared with a net loss for the nine months ended September 30, 2017 of $8.2 million, or $0.54 per share.

NovaBay reported cash and cash equivalents of $5.2 million as of September 30, 2018, compared with $3.2 million as of December 31, 2017. In February 2018, the company raised net proceeds of $5.6 million through a private placement of common stock.

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 5709629.

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 November 15 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 5709629.

About Avenova®

Avenova is an eye care product formulated with our proprietary, stable and pure form of hypochlorous acid. It has proven in laboratory testing to have broad antimicrobial properties as a preservative in solution as it removes foreign material including microorganisms and debris from the skin on the eyelids and lashes without burning or stinging. Avenova is marketed to optometrists and ophthalmologists throughout the U.S. by NovaBay’s direct salesforce. It is accessible from more than 90% of retail pharmacies in the U.S. through agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen.

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics®

NovaBay Pharmaceuticals, Inc. is a biopharmaceutical company focusing on commercializing and developing its non-antibiotic anti-infective products to address the unmet therapeutic needs of the global, topical anti-infective market with its two distinct product categories: the NEUTROX® family of products and the AGANOCIDE® compounds. The Neutrox family of products includes AVENOVA® for the eye care market, NEUTROPHASE® for wound care market, and CELLERX® for the aesthetic dermatology market. The Aganocide compounds, still under development, have target applications in the dermatology and urology markets.

Forward-Looking Statements

This release contains forward-looking statements that are based upon management's current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our business strategies and future focus, our estimated future revenue, and generally the Company’s expected future financial results. Forward-looking statements can be identified with words like (and variations of): “expect,” and “anticipate.” 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 sales rep productivity, product distribution, obtaining adequate insurance reimbursement for the Company’s products, and any potential regulatory problems. 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-Q/K 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.

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NOVABAY PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETS(Unaudited)(in thousands, except par value amounts)

          September 30 December 31,   2018     2017   ASSETS Current assets: Cash and cash equivalents $ 5,207 $ 3,199 Accounts receivable, net of allowance for doubtful accounts ($9 and $13 at September 30, 2018 and December 31, 2017, respectively) 2,612 3,629 Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $124 and $140 at September 30, 2018 and December 31, 2017, respectively) 390 504 Prepaid expenses and other current assets   1,319     1,663   Total current assets 9,528 8,995 Property and equipment, net 271 471 Other assets   566     613   TOTAL ASSETS $ 10,365   $ 10,079     LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Current liabilities: Accounts payable $ 564 $ 466 Accrued liabilities 2,751 1,672 Deferred revenue   62     2,841   Total current liabilities 3,377 4,979 Deferred revenues - non-current - 534 Deferred rent 213 286 Warrant liability 518 1,489 Other liabilities   198     197   Total liabilities   4,306     7,485     Stockholders' equity : Preferred stock: 5,000 shares authorized; none outstanding at September 30, 2018 and December 31, 2017 — — Common stock, $0.01 par value; 50,000 and 240,000, shares authorized at September 30, 2018 and December 31, 2017, respectively; 17,089 and 15,385 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively 171 154 Additional paid-in capital 119,601 113,514 Accumulated deficit   (113,713 )   (111,074 ) Total stockholders' equity   6,059     2,594   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,365   $ 10,079    

NOVABAY PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(Unaudited)(in thousands except per share data)

          Three Months Ended Nine Months Ended September 30, September 30,     2018         2017       2018         2017   Sales:           Product revenue, net $ 3,142 $ 4,080 $ 8,870 $ 11,868 Other revenue -   11   13   46   Total sales, net 3,142 4,091 8,883 11,914   Product cost of goods sold 332   521   1,062   1,807   Gross profit 2,810   3,570   7,821   10,107     Research and development 45 132 152 264 Sales and marketing 3,230 3,296 9,603 10,412 General and administrative 1,344   2,311   4,326   7,134   Total operating expenses 4,619   5,739   14,081   17,810   Operating loss (1,809 ) (2,169 ) (6,260 ) (7,703 )   Non cash gain (loss) on changes in fair value of warrant liability 267 (281 ) 971 (501 ) Other income, net 4   3   13   9     Loss before provision for income taxes (1,538 ) (2,447 ) (5,276 ) (8,195 ) Provision for income tax -   -   (1 ) (1 ) Net loss and comprehensive loss $ (1,538 ) $ (2,447 ) $ (5,277 ) $ (8,196 )   Net loss per share attributable to common stockholders, basic $ (0.09 ) $ (0.16 ) $ (0.31 ) $ (0.54 ) Net loss per share attributable to common stockholders, diluted $ (0.11 ) $ (0.16 ) (0.37 ) (0.54 ) Weighted-average shares of common stock outstanding used in computing net loss per share of common stock Basic 17,089 15,324 16,864 15,306 Diluted 17,148 15,324 17,056 15,306

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NovaBay ContactsFor NovaBay Avenova+ purchasing information:Please call us toll free: 1-800-890-0329 or email sales@avenova.comwww.Avenova.com

From the CompanyJack McGovernChief Financial Officer510-899-8800jmcgovern@novabay.com

Investor ContactLHA Investor RelationsJody Cain310-691-7100Jcain@lhai.com