NovaBay Pharmaceuticals Announces Agreement for Nearly $12 Million in Two-Tranche Private Placement

By April 6, 2016

NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY) a biopharmaceutical company focusing on commercializing its Avenova® Lid and Lash Cleanser for the domestic eye care market, announces that it has entered into a securities purchase agreement for the sale of its common stock and warrants in a private placement to accredited investors for $11.791 million.

The financing structure is a commitment by investors to participate in two tranches.  The first tranche closing is scheduled to occur on May 5th, 2016 with proceeds totaling $7,791,000 and a second tranche closing is scheduled to occur on July 31st, 2016 for additional proceeds of $4,000,000.

In the combined tranche closings, investors have agreed to purchase up to a total of 6,173,299 units with each unit consisting of one share of NovaBay common stock and a warrant to purchase an additional one-half share of common stock. The cost per unit is $1.91. The warrants, totaling rights to 3,086,651 shares, have a four-year term from the date of issuance, an exercise price of $1.91 per share, and are callable by NovaBay if the closing price of the common stock as reported by the NYSE MKT is $4.00 per share or greater for five consecutive trading days.  If all warrants related to this financing are exercised, gross proceeds from those warrants will total approximately $5.9 million, bringing the cumulative amount raised in this financing to nearly $18 million.

Investors who have agreed to participate in the private placement include current stockholders Mr. Jian Ping Fu and Pioneer Pharma (Singapore) Pte. Ltd.  Pioneer Pharma (Singapore) Pte. Ltd., together with its affiliates, is NovaBay’s largest shareholder.  China Kington Asset Management Co. Ltd. is acting as the sole placement agent for the sales to Mr. Fu, Pioneer Pharma (Singapore) Pte. Ltd. and three other investors.  NovaBay Chairman and Interim President and CEO Mark M. Sieczkarek, as well as other accredited investors, have also agreed to participate in the private placement.

The financing is contingent on stockholder approval and the satisfaction of other customary conditions. The results of the vote by stockholders will be announced at the Company’s Annual Meeting of Stockholders to be held May 3, 2016.

“We are firmly committed to NovaBay’s success,” said Eric Wu, Partner and Senior Vice President of China Kington Asset Management.  “We see the significant opportunity for Avenova growth in the large and relatively untapped U.S. market, and we support management’s business plan to increase sales through innovative marketing and sales strategies, while managing expenses.  We are reaffirming our position as NovaBay’s long-term financial partner.”

“Our goal is to reach positive cash flow from operations by the end of 2016 through increases in revenue from Avenova sales combined with the approximately $7+ million in cost reductions related to a restructuring we implemented in late 2015.  The successful completion of this financing would provide NovaBay with what we believe are the necessary funds to reach that goal without need for additional financing, while also allowing our management team more time to focus on operations,” said Mr. Sieczkarek.  “We are very appreciative of the investors who have agreed to participate in this financing for their help in securing what we see as a highly successful future for our Company and our shareholders.”

The foregoing securities were offered in the private placement and have not been registered under the Securities Act of 1933, as amended, or under applicable state securities laws. Accordingly, these securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.  As part of the transaction, NovaBay has agreed to file a registration statement with the Securities and Exchange Commission specific to certain investors for purposes of registering the resale of a portion of (i) the shares of common stock sold to the investors, and (ii) the common stock issuable upon the exercise of the warrants.

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics
NovaBay Pharmaceuticals is a biopharmaceutical company focusing on the commercialization of prescription Avenova® Lid and Lash Cleanser 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 hypochlorous acid has potent antimicrobial activity in solution yet is non-toxic to mammalian cells and also neutralizes bacterial toxins.  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 the anticipated market acceptance of our products, future sales of our products, and the Company’s expected future financial results. Forward looking statements in this release can be identified by the words “expect,” “believe,” and “approximately,” or variations of these words. 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.

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For NovaBay Avenova purchasing information, please contact:
Toll Free: 1-800-890-0329

At the Company
Thomas J. Paulson
Chief Financial Officer
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Investor Contact
Jody Cain