Welcome to the NovaBay Pharmaceuticals’ Fourth Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. [Operator Instructions]. As a reminder, this conference is being recorded today, March 28, 2019. I would now like to turn the conference over to Mr. Bruce Voss. Please go ahead, sir.

Thank you. This is Bruce Voss with LHA. Thank you all for participating in today's call. Joining me from NovaBay Pharmaceuticals are Justin Hall, Interim President and Chief Executive Officer; and Jason Raleigh, the Company's Interim Chief Financial Officer. I’d like to remind listeners that comments made during this call by management will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results. For a list and description of those risks and uncertainties, please review NovaBay Pharmaceuticals’ filings with the Securities and Exchange Commission. Furthermore, the content of this conference call contains information that is accurate only as of the date of the live broadcast, March 28, 2019. NovaBay Pharmaceuticals undertakes no obligation to revise or update any statements to reflect events or circumstances, except as required by law. And now, I'd like to turn the call over to Justin Hall. Justin?

Thank you, Bruce. Good afternoon, everyone, and thank you for joining us. I'm pleased to address you today in my role as Interim President and Chief Executive Officer. As you may have read, we announced a shift in our US commercial strategy earlier this month. This included changes to Executive Management and our Board of Directors, as well as a restructuring of our sales organization. This shift was made in support of cost management measures with a focus on long-term profitable growth at NovaBay. Our Board deems this approach to be in the best interest of our shareholders and to facilitate our future access to capital. Importantly, I'm affirming today our position that Avenova is the best topical product available to treat chronic bacterial infections that affect about 85% of those suffering from dry eye disease. This is a sizable market comprised of millions of Americans who suffer from blepharitis and dry eye as well as those who undergo ophthalmic procedures such as LASIK retinal and cataract surgeries or experience contact lens intolerance issues. We have an established position in the dry eye market with more than 827,000 prescriptions filled since the launch of Avenova in 2014 and the addition of more than 2,400 new prescribers in 2018, bringing the total number of prescribers to approximately over 15,000. We are fully committed to providing ongoing long-term broad access to Avenova to eye care professionals and patients. We are now providing that access under a model that makes economic sense for NovaBay. In conjunction with this shift in commercial strategy, Interim CEO and CFO, Jack McGovern resigned from the company and our Lead Independent Director, Paul Freiman was named as Chairman of the Board. Paul is a long serving Director having joined our Board in 2002. He follows Mark Sieczkarek’s chair and we're happy that Mark continues to serve as a Director on our Board. Personally, I've been with NovaBay for over six years in a variety of different roles, including financing and legal. And in recent years, I've been actively involved in a number of operating functions, including the sales organization and manufacturing. Jason Raleigh has been with NovaBay for more than three years and has nearly 20 years of financial experience. I speak for Jason and myself in saying that we’re fully engaged and excited to be taking on these newly expanded management responsibilities. Our Board was compelled to implement this shift in commercial strategy due to changes in the reimbursement environment. Under our prior strategy, we were expanding our US field Salesforce with plans for continued hiring knowing it typically takes about 18 months for new rep to reach productivity. However, at the beginning of this year, we saw an acceleration in the trend favoring high deductible healthcare plans. As these plans reset each year, NovaBay uses rebates and coupons to ensure that no patient pays more than $60 for Avenova. As a result, we anticipate that rebates will have an even greater negative impact on revenues this year than in past years. This trend was compounded by the unexpected loss of reimbursement coverage from some large national payers, which will impact our 2019 revenues. Under this strategic shift, our Board reviewed our commercial operations and identified 15 territories that are currently profitable or on the verge of profitability. We now have 15 sales reps deployed in these territories, which include 26 major metropolitan areas. All of our reps are familiar with their territories. And while some territories have been expanded, all reps have relationships with the key eye care professionals in their respective territories. Importantly, in reviewing sales through the retail pharmacy channel over a trailing six month period, these 15 territories generated 95% of Avenova prescriptions, so we're still clearly operating in the [bulls eye] as a sales target. We have maintained our inside sales team at its current size. We expanded this team last year to service our in-office direct sales model under which eye care specialists resale Avenova directly to their patients. As some of you may recall, we launched Avenova through this channel prior to introducing the higher margin retail pharmacy channel. Our in-house sales team now conducts an incoming and outbonding -- outbound calling strategy dedicated to those prescribers. In conjunction with our decision to restructure our commercial operations, we expanded the responsibility of our inside sales team to include the prescribing eye care specialists no longer called on by our field sales representatives. Between adjusting territories for our field sales representatives in adding duties for our inside sales team, we are confident that all current subscribers of Avenova will continue to be effectively serviced at a greatly reduced cost. Our sales organization is in the capable hands of Pat Damberg who is a seasoned member of our field sales team. Pat has been with the company for three years and has been instrumental in developing a motivated sales team and forging strong customer relationships. I personally have biweekly calls with the entire sales team to assess their progress, discuss their challenges and share best practices. In keeping with our commitment to positive patient relations, we continue to execute on our strategy of engaging partner pharmacies. These partners allow for excellent Avenova patient experiences with a relatively short amount of time between the initial script writing and the filling of that prescription with fast refills and home delivery. They have the added benefit of providing NovaBay with a negotiated per price prescription. We recently signed several new partner pharmacies so that we have coverage in all 50 states. These relationships are especially important as we work to reduce our patients’ reliance on rebates and coupons. And lastly, we received $2 million from a promissory note and have a commitment for a further $3 million from an institutional fund. Both these deals were announced and filed with the SEC this morning. We also have the current support of our majority shareholders and Board members who have pledged additional financial resources as we execute on our strategy. I would now like to turn the call over to our Interim CFO, Jason Raleigh to review our financial results. Jason? Jason Raleigh : Thank you, Justin, and good afternoon, everyone. Starting with our Q4 top-line, net sales for the fourth quarter of 2018 were $3.6 million compared with $6.3 million for the prior year period with the decrease primarily due to low insurance reimbursement resulting in a lower average unit selling price of Avenova along with a $1.3 million reduction in non-Avenova sales. In reviewing Q4 2018 sales by channel, Avenova sales into the retail pharmacy channel were $3.3 million or 92% of the total while sales through our in-office direct channel were $282,000. Gross margin on net product revenue for the fourth quarter of 2018 was 88%, an improvement from 85% for the year ago period, mainly due to product mix. In reviewing Q4 expenses by line item, sales and marketing expense was $3.2 million compared with $3.3 million for the prior year period. G&A expense for the fourth quarter of 2018 and 2017 were unchanged at $1.5 million. R&D expense for Q4 2018 were $107,000, down from $146,000 in the year ago period. The operating loss for the fourth quarter of 2018 was $1.6 million compared with an operating income of $392,000 for the fourth quarter of 2017. The non-cash gain on the fair value of warrant liability for Q4 2018 was $340,000 compares with a non-cash gain of $400,000 for Q4 2017. We reported a net loss for the 2018 fourth quarter of $1.3 million or $0.07 per share. This compares with a net income for the 2017 fourth quarter of $793,000 or $0.02 per diluted share. Turning to our full year 2018 results, net sales for 2018 were $12.5 million compared with $18.2 million for 2017. Gross margin on net product revenue was 88% for 2018, up from 85% for 2017. The operating loss for 2018 was $7.9 million compared with an operating loss of $7.3 million for 2017. Operating expense for 2018 included sales and marketing expense of $12.8 million, G&A expense of $5.8 million and R&D expense of $259,000. Non-cash gain on the fair value of warrant liability for 2018 was $1.3 million versus a non-cash loss for 2017 of $101,000. The net loss for 2018 was $6.5 million or $0.39 per share, compared with a net loss for 2017 of $7.4 million or $0.48 per share. In reviewing our balance sheet, we had cash and cash equivalents of $3.2 million as of December 31, 2018. As Justin mentioned, we will continue to raise money for a variety of sources to fund operations in 2019. With that, I will turn the call back to Justin.

Thanks, Jason. Given our commercial shift, we are revising our financial outlook for 2019 as follows: We expect revenues for 2019 to be in the range of $6 million to $8 million, which is a conservative estimate with potential upside from several strategic initiatives we have just begun implementing. As in year passed, we expect the reset in healthcare plan deductibles to have the greatest impact on revenues in the first quarter and for revenues to increase each subsequent quarter throughout the year. As we gain clarity in the coming quarters we may adjust this expectation. We expect the cost savings related to the reduction in force of $3.6 million over the course of 2019. This figure includes the reduction in salaries, benefits and bonuses. We expect to report a minimal amount of charges related to the restructuring all in the first quarter of 2019. We also expect to significantly nil our operating expenses and reduce cash burn over 2018 levels. And lastly, we are exploring new distribution channels to have the potential to increase our overall unit volume above current projections. So, in summary, we have completed the restructuring of our sales force with 15 field representatives covering 26 metropolitan areas and territories that are profitable or nearing profitably. We expect to continue calling on all eye care specialists who are currently prescribing Avenova through the combined effort of our field representatives and our inside sales team. We are engaging partner pharmacies to support quality patient experiences with contracted per unit revenue for NovaBay. And we intend to further strengthen our balance sheet and increase the market presence of Avenova nationwide. Foremost, we are committed over the long-term to bring Avenova to eye care specialists and notations now and in the future. With that overview of our business and our plans, I thank you for your attention.Operator, we are ready to take questions.

[Operator instructions]. And our first question is from Yi Chen with H.C. Wainwright. Your line is now open.

Sorry, if I missed it, could you reiterate your projected operating expenses in 2019?

Yes, so, we don’t have a fixed on that quite yet, Yi, but we do expect it to be significantly lower than 2018.

Both the selling and marketing expenses and the G&A expenses?

Yes, so G&A expenses might drop down a little bit but those will remain mostly flat. But we are going to leverage the 15 sales reps that we have to cover most of the nation, so that’s going to be down significantly. So that will be, say, at a minimum a 30% reduction.

Okay, okay. And so after the restructuring, at what revenue level do you expect achieve breakeven and potentially in which year do you expect to achieve breakeven?

Yes, so that’s an excellent question. It's definitely a corporate objective to reach breakeven. But because of the change in the reimbursement landscape that really we're only seeing January, February, March of this year, we are not quite not sure what our growth scenario is going to be for the rest of the year. We can make some projections but it's still an unknown and we also have the partner pharmacy program, I think which is going to greatly impact our gross to net as well. So, I'm sorry, we don't have a fix on that quite yet.

[Operator Instructions]. And our next question comes from the line of Ed Woo with Ascendiant Capital. Your line is now open.

Yes. You've mentioned that the reorganization of the sales force is essentially done. Is there going to be any more operational changes that you expect near-term?

Well, so I guess it depends on what you mean by operational changes. I think we're done with the reductions in the field sales force where I think we're leveled out to a pretty stable place that both the company and the Board and the marketplace, is happy with. So I think from that perspective, we're done. But I think that we're always looking for ways to improve operational excellence, cost cutting sort of across the board is going to be important for the rest of the year, always looking at those opportunities. So it's a little bit of a mixed bag. But I think from a G&A and sales rep perspective, we're at where we expect to be for the rest of the year.

And is there any timeline for bringing a permanent CEO or CFO?

Yes. So that I think is a question best answered by the Board. But there's nothing I think in the immediate near-term.

And our next question comes from the line of François Brisebois with Laidlaw. Your line is now open. François Brisebois : Just a quick one here. Lots been answered. Just so you guys are down to 15 reps after all the restructuring. Can you just talk about -- you talked about the time that it takes to get to profitability for the reps, you’re obviously targeting certain areas. Can you talk about what would make you feel comfortable to start that hiring process again, and what is it, would you just stay in those areas or would you branch out, just your process -- your thought process behind upping the sales reps again?

Yes, Frank, excellent question. So, when we did the strategic review earlier this month and identified those 15 territories, I think that we brought it down to what we think is a sustainable level. It really -- it would be great if we can reach breakeven. And once we reach breakeven, we’ll start hiring on sales reps again and layering them in territories that are already profitable. So, I think it really is the desire of management and the Board that we can grow again. But I think that will only be once we can show that we've brought costs down to sort of a stable level and we can maintain the scripts with the 15 reps that we have.

Thank you. And there are no further questions at this time. Please proceed with your presentation or any closing remarks.

Thank you once again for joining us today and your interest in NovaBay. We look forward to updating you on our next call in May to discuss our financial results for the first quarter of 2019 and report on our progress. Thank you, everybody, and have a great.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.