Novabay Pharmaceuticals

(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)(cid:6)(cid:9)(cid:9)(cid:14)(cid:6)(cid:8)(cid:1)(cid:12)(cid:7)(cid:11)(cid:10)(cid:12)(cid:13)

(cid:2) (cid:1) (cid:15) (cid:7) (cid:12) (cid:7) (cid:10) (cid:9) (cid:1) (cid:5) (cid:10) (cid:11) (cid:1) (cid:13) (cid:6) (cid:4) (cid:1) (cid:5) (cid:14) (cid:13) (cid:14) (cid:11) (cid:4)

(cid:19)(cid:39)(cid:1)(cid:13)(cid:47)(cid:1)(cid:7)(cid:30)(cid:36)(cid:36)(cid:39)(cid:46)(cid:1)(cid:18)(cid:43)(cid:39)(cid:28)(cid:35)(cid:32)(cid:39)(cid:36)(cid:29)(cid:30)(cid:41)(cid:42)(cid:53)

(cid:59)(cid:877)(cid:92)(cid:3)(cid:95)(cid:97)(cid:94)(cid:100)(cid:81)(cid:3)(cid:94)(cid:83)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:82)(cid:103)(cid:80)(cid:82)(cid:95)(cid:99)(cid:87)(cid:94)(cid:93)(cid:77)(cid:90)(cid:3)(cid:95)(cid:82)(cid:97)(cid:83)(cid:94)(cid:97)(cid:92)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)(cid:99)(cid:86)(cid:97)(cid:94)(cid:100)(cid:85)(cid:86)(cid:94)(cid:100)(cid:99)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:95)(cid:77)(cid:98)(cid:99)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:77)(cid:98)(cid:3)(cid:102)(cid:82)(cid:3)(cid:92)(cid:77)(cid:81)(cid:82)(cid:3)(cid:92)(cid:77)(cid:88)(cid:94)(cid:97)(cid:3)(cid:98)(cid:99)(cid:97)(cid:87)(cid:81)(cid:82)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:77)(cid:3)(cid:81)(cid:97)(cid:77)(cid:92)(cid:77)(cid:99)(cid:87)(cid:80)(cid:3)(cid:99)(cid:100)(cid:97)(cid:93)(cid:77)(cid:97)(cid:94)(cid:100)(cid:93)(cid:81)(cid:3)(cid:77)(cid:99)(cid:3)(cid:64)(cid:94)(cid:101)(cid:77)(cid:51)(cid:77)(cid:104)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:81)(cid:82)(cid:90)(cid:87)(cid:101)(cid:82)(cid:97)(cid:82)(cid:81)(cid:3)(cid:97)(cid:82)(cid:80)(cid:94)(cid:97)(cid:81)(cid:3)(cid:364)(cid:93)(cid:77)(cid:93)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)
(cid:26)(cid:34)(cid:37)(cid:1)(cid:4)(cid:2)(cid:3)(cid:6)(cid:1)(cid:42)(cid:29)(cid:39)(cid:28)(cid:1)(cid:38)(cid:21)(cid:31)(cid:25)(cid:38)(cid:1)(cid:34)(cid:26)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:35)(cid:39)(cid:29)(cid:34)(cid:33)(cid:1)(cid:9)(cid:41)(cid:25)(cid:33)(cid:34)(cid:41)(cid:21)(cid:50)(cid:1)(cid:31)(cid:29)(cid:24)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:31)(cid:21)(cid:38)(cid:28)(cid:1)(cid:28)(cid:44)(cid:27)(cid:29)(cid:25)(cid:33)(cid:25)(cid:1)(cid:37)(cid:25)(cid:21)(cid:23)(cid:28)(cid:29)(cid:33)(cid:27)(cid:1)(cid:49)(cid:3)(cid:2)(cid:46)(cid:8)(cid:1)(cid:32)(cid:29)(cid:31)(cid:31)(cid:29)(cid:34)(cid:33)(cid:47)(cid:1)(cid:40)(cid:35)(cid:1)(cid:3)(cid:7)(cid:5)(cid:45)(cid:1)(cid:34)(cid:41)(cid:25)(cid:37)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:35)(cid:37)(cid:29)(cid:34)(cid:37)(cid:1)(cid:44)(cid:25)(cid:21)(cid:37)(cid:47)(cid:1)(cid:42)(cid:28)(cid:29)(cid:31)(cid:25)(cid:1)(cid:42)(cid:25)(cid:1)(cid:33)(cid:21)(cid:37)(cid:37)(cid:34)(cid:42)(cid:25)(cid:24)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:34)(cid:35)(cid:25)(cid:37)(cid:21)(cid:39)(cid:29)(cid:33)(cid:27)(cid:1)(cid:31)(cid:34)(cid:38)(cid:38)(cid:1)(cid:22)(cid:44)(cid:1)(cid:33)(cid:25)(cid:21)(cid:37)(cid:31)(cid:44)(cid:1)(cid:28)(cid:21)(cid:31)(cid:26)(cid:47)(cid:1)
(cid:77)(cid:90)(cid:90)(cid:94)(cid:102)(cid:87)(cid:93)(cid:85)(cid:3)(cid:100)(cid:98)(cid:3)(cid:99)(cid:94)(cid:3)(cid:77)(cid:80)(cid:86)(cid:87)(cid:82)(cid:101)(cid:82)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:85)(cid:94)(cid:77)(cid:90)(cid:3)(cid:94)(cid:83)(cid:3)(cid:95)(cid:94)(cid:98)(cid:87)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:77)(cid:81)(cid:88)(cid:100)(cid:98)(cid:99)(cid:82)(cid:81)(cid:3)(cid:80)(cid:77)(cid:98)(cid:86)(cid:3)(cid:367)(cid:94)(cid:102)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:92)(cid:94)(cid:93)(cid:99)(cid:86)(cid:3)(cid:94)(cid:83)(cid:3)(cid:53)(cid:82)(cid:80)(cid:82)(cid:92)(cid:79)(cid:82)(cid:97)(cid:3)(cid:840)(cid:64)(cid:94)(cid:101)(cid:77)(cid:51)(cid:77)(cid:104)(cid:3)(cid:81)(cid:82)(cid:364)(cid:93)(cid:82)(cid:98)(cid:3)(cid:77)(cid:81)(cid:88)(cid:100)(cid:98)(cid:99)(cid:82)(cid:81)(cid:3)(cid:80)(cid:77)(cid:98)(cid:86)(cid:3)(cid:367)(cid:94)(cid:102)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:77)(cid:98)(cid:3)(cid:56)(cid:50)(cid:50)(cid:66)(cid:3)
(cid:80)(cid:77)(cid:98)(cid:86)(cid:3)(cid:367)(cid:94)(cid:102)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:90)(cid:82)(cid:98)(cid:98)(cid:3)(cid:80)(cid:86)(cid:77)(cid:93)(cid:85)(cid:82)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:98)(cid:98)(cid:82)(cid:99)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:90)(cid:87)(cid:77)(cid:79)(cid:87)(cid:90)(cid:87)(cid:99)(cid:87)(cid:82)(cid:98)(cid:841)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:77)(cid:90)(cid:98)(cid:94)(cid:3)(cid:97)(cid:82)(cid:77)(cid:90)(cid:87)(cid:106)(cid:82)(cid:81)(cid:3)(cid:77)(cid:80)(cid:97)(cid:94)(cid:98)(cid:98)(cid:889)(cid:99)(cid:86)(cid:82)(cid:889)(cid:79)(cid:94)(cid:77)(cid:97)(cid:81)(cid:3)(cid:87)(cid:92)(cid:95)(cid:97)(cid:94)(cid:101)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:89)(cid:82)(cid:104)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:93)(cid:85)(cid:3)(cid:92)(cid:82)(cid:99)(cid:97)(cid:87)(cid:80)(cid:98)(cid:3)(cid:81)(cid:100)(cid:97)(cid:87)(cid:93)(cid:85)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)
(cid:38)(cid:40)(cid:22)(cid:38)(cid:39)(cid:21)(cid:33)(cid:39)(cid:29)(cid:21)(cid:31)(cid:1)(cid:29)(cid:33)(cid:23)(cid:37)(cid:25)(cid:21)(cid:38)(cid:25)(cid:38)(cid:1)(cid:29)(cid:33)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:35)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:47)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:22)(cid:29)(cid:33)(cid:27)(cid:1)(cid:35)(cid:28)(cid:44)(cid:38)(cid:29)(cid:23)(cid:29)(cid:21)(cid:33)(cid:38)(cid:47)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:33)(cid:40)(cid:32)(cid:22)(cid:25)(cid:37)(cid:1)(cid:34)(cid:26)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:22)(cid:25)(cid:37)(cid:38)(cid:1)(cid:42)(cid:37)(cid:29)(cid:39)(cid:29)(cid:33)(cid:27)(cid:1)(cid:32)(cid:40)(cid:31)(cid:39)(cid:29)(cid:35)(cid:31)(cid:25)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:35)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:37)(cid:25)(cid:34)(cid:37)(cid:24)(cid:25)(cid:37)(cid:1)(cid:37)(cid:21)(cid:39)(cid:25)(cid:38)(cid:46)

(cid:65)(cid:100)(cid:97)(cid:3)(cid:98)(cid:99)(cid:97)(cid:94)(cid:93)(cid:85)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:102)(cid:82)(cid:97)(cid:82)(cid:3)(cid:81)(cid:97)(cid:87)(cid:101)(cid:82)(cid:93)(cid:3)(cid:79)(cid:104)(cid:3)(cid:77)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:95)(cid:97)(cid:87)(cid:80)(cid:87)(cid:93)(cid:85)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:104)(cid:3)(cid:102)(cid:82)(cid:3)(cid:87)(cid:93)(cid:99)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:82)(cid:81)(cid:3)(cid:87)(cid:93)(cid:3)(cid:82)(cid:77)(cid:97)(cid:90)(cid:104)(cid:3)(cid:9)(cid:6)(cid:8)(cid:13)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:83)(cid:94)(cid:80)(cid:100)(cid:98)(cid:82)(cid:98)(cid:3)(cid:94)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:92)(cid:94)(cid:97)(cid:82)(cid:3)(cid:95)(cid:97)(cid:94)(cid:364)(cid:99)(cid:77)(cid:79)(cid:90)(cid:82)(cid:3)(cid:94)(cid:95)(cid:86)(cid:99)(cid:86)(cid:77)(cid:90)(cid:92)(cid:94)(cid:90)(cid:94)(cid:85)(cid:104)(cid:3)(cid:80)(cid:86)(cid:77)(cid:93)(cid:93)(cid:82)(cid:90)(cid:3)(cid:87)(cid:93)(cid:3)(cid:102)(cid:86)(cid:87)(cid:80)(cid:86)(cid:3)
(cid:95)(cid:77)(cid:99)(cid:87)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:364)(cid:90)(cid:90)(cid:3)(cid:99)(cid:86)(cid:82)(cid:87)(cid:97)(cid:3)(cid:95)(cid:97)(cid:82)(cid:98)(cid:80)(cid:97)(cid:87)(cid:95)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:77)(cid:99)(cid:3)(cid:97)(cid:82)(cid:99)(cid:77)(cid:87)(cid:90)(cid:3)(cid:95)(cid:86)(cid:77)(cid:97)(cid:92)(cid:77)(cid:80)(cid:87)(cid:82)(cid:98)(cid:857)(cid:3)(cid:65)(cid:100)(cid:97)(cid:3)(cid:82)(cid:77)(cid:97)(cid:90)(cid:104)(cid:3)(cid:90)(cid:77)(cid:100)(cid:93)(cid:80)(cid:86)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:104)(cid:3)(cid:102)(cid:77)(cid:98)(cid:3)(cid:77)(cid:87)(cid:92)(cid:82)(cid:81)(cid:3)(cid:95)(cid:97)(cid:87)(cid:92)(cid:77)(cid:97)(cid:87)(cid:90)(cid:104)(cid:3)(cid:77)(cid:99)(cid:3)(cid:94)(cid:95)(cid:99)(cid:94)(cid:92)(cid:82)(cid:99)(cid:97)(cid:87)(cid:98)(cid:99)(cid:98)(cid:3)(cid:99)(cid:94)(cid:3)(cid:98)(cid:99)(cid:94)(cid:80)(cid:89)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:81)(cid:87)(cid:98)(cid:95)(cid:82)(cid:93)(cid:98)(cid:82)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:82)(cid:87)(cid:97)(cid:3)(cid:94)(cid:369)(cid:80)(cid:82)(cid:98)(cid:857)(cid:3)(cid:3)
(cid:18)(cid:21)(cid:31)(cid:25)(cid:38)(cid:1)(cid:39)(cid:28)(cid:37)(cid:34)(cid:40)(cid:27)(cid:28)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:34)(cid:35)(cid:28)(cid:39)(cid:28)(cid:21)(cid:31)(cid:32)(cid:34)(cid:31)(cid:34)(cid:27)(cid:44)(cid:1)(cid:23)(cid:28)(cid:21)(cid:33)(cid:33)(cid:25)(cid:31)(cid:1)(cid:21)(cid:31)(cid:31)(cid:34)(cid:42)(cid:1)(cid:40)(cid:38)(cid:1)(cid:39)(cid:34)(cid:1)(cid:23)(cid:21)(cid:35)(cid:39)(cid:40)(cid:37)(cid:25)(cid:1)(cid:29)(cid:33)(cid:38)(cid:40)(cid:37)(cid:21)(cid:33)(cid:23)(cid:25)(cid:1)(cid:37)(cid:25)(cid:29)(cid:32)(cid:22)(cid:40)(cid:37)(cid:38)(cid:25)(cid:32)(cid:25)(cid:33)(cid:39)(cid:1)(cid:21)(cid:31)(cid:37)(cid:25)(cid:21)(cid:24)(cid:44)(cid:1)(cid:29)(cid:33)(cid:1)(cid:35)(cid:31)(cid:21)(cid:23)(cid:25)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:21)(cid:33)(cid:39)(cid:29)(cid:22)(cid:29)(cid:34)(cid:39)(cid:29)(cid:23)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:38)(cid:39)(cid:25)(cid:37)(cid:34)(cid:29)(cid:24)(cid:38)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:22)(cid:25)(cid:24)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:25)(cid:44)(cid:25)(cid:1)(cid:23)(cid:34)(cid:33)(cid:24)(cid:29)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:46)(cid:1)(cid:12)(cid:33)(cid:1)(cid:26)(cid:21)(cid:23)(cid:39)(cid:47)(cid:1)
(cid:94)(cid:101)(cid:82)(cid:97)(cid:3)(cid:16)(cid:6)(cid:836)(cid:3)(cid:94)(cid:83)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:95)(cid:97)(cid:82)(cid:98)(cid:80)(cid:97)(cid:87)(cid:95)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:364)(cid:90)(cid:90)(cid:82)(cid:81)(cid:3)(cid:77)(cid:99)(cid:3)(cid:95)(cid:86)(cid:77)(cid:97)(cid:92)(cid:77)(cid:80)(cid:87)(cid:82)(cid:98)(cid:3)(cid:77)(cid:80)(cid:97)(cid:94)(cid:98)(cid:98)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:71)(cid:857)(cid:69)(cid:857)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:93)(cid:94)(cid:102)(cid:3)(cid:97)(cid:82)(cid:87)(cid:92)(cid:79)(cid:100)(cid:97)(cid:98)(cid:82)(cid:81)(cid:857)(cid:3)(cid:65)(cid:100)(cid:97)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:94)(cid:97)(cid:85)(cid:77)(cid:93)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:82)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:82)(cid:81)(cid:3)(cid:102)(cid:82)(cid:90)(cid:90)(cid:3)(cid:94)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:104)(cid:3)(cid:98)(cid:102)(cid:87)(cid:99)(cid:80)(cid:86)(cid:857)(cid:3)(cid:51)(cid:104)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)
(cid:83)(cid:94)(cid:100)(cid:97)(cid:99)(cid:86)(cid:3)(cid:96)(cid:100)(cid:77)(cid:97)(cid:99)(cid:82)(cid:97)(cid:3)(cid:94)(cid:83)(cid:3)(cid:9)(cid:6)(cid:8)(cid:13)(cid:3)(cid:92)(cid:94)(cid:97)(cid:82)(cid:3)(cid:99)(cid:86)(cid:77)(cid:93)(cid:3)(cid:99)(cid:86)(cid:97)(cid:82)(cid:82)(cid:889)(cid:96)(cid:100)(cid:77)(cid:97)(cid:99)(cid:82)(cid:97)(cid:98)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:94)(cid:99)(cid:77)(cid:90)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:98)(cid:77)(cid:90)(cid:82)(cid:98)(cid:3)(cid:80)(cid:77)(cid:92)(cid:82)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:94)(cid:95)(cid:86)(cid:99)(cid:86)(cid:77)(cid:90)(cid:92)(cid:94)(cid:90)(cid:94)(cid:85)(cid:104)(cid:3)(cid:80)(cid:86)(cid:77)(cid:93)(cid:93)(cid:82)(cid:90)(cid:860)(cid:3)(cid:100)(cid:95)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:90)(cid:82)(cid:98)(cid:98)(cid:3)(cid:99)(cid:86)(cid:77)(cid:93)(cid:3)(cid:94)(cid:93)(cid:82)(cid:889)(cid:99)(cid:86)(cid:87)(cid:97)(cid:81)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:9)(cid:6)(cid:8)(cid:13)(cid:3)(cid:364)(cid:97)(cid:98)(cid:99)(cid:3)(cid:96)(cid:100)(cid:77)(cid:97)(cid:99)(cid:82)(cid:97)(cid:857)(cid:3)(cid:3)

(cid:20)(cid:25)(cid:1)(cid:37)(cid:21)(cid:29)(cid:38)(cid:25)(cid:24)(cid:1)(cid:21)(cid:35)(cid:35)(cid:37)(cid:34)(cid:43)(cid:29)(cid:32)(cid:21)(cid:39)(cid:25)(cid:31)(cid:44)(cid:1)(cid:49)(cid:4)(cid:2)(cid:1)(cid:32)(cid:29)(cid:31)(cid:31)(cid:29)(cid:34)(cid:33)(cid:1)(cid:31)(cid:21)(cid:38)(cid:39)(cid:1)(cid:44)(cid:25)(cid:21)(cid:37)(cid:47)(cid:1)(cid:42)(cid:28)(cid:29)(cid:23)(cid:28)(cid:1)(cid:42)(cid:21)(cid:38)(cid:1)(cid:25)(cid:38)(cid:38)(cid:25)(cid:33)(cid:39)(cid:29)(cid:21)(cid:31)(cid:1)(cid:39)(cid:34)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:27)(cid:37)(cid:34)(cid:42)(cid:39)(cid:28)(cid:1)(cid:38)(cid:39)(cid:37)(cid:21)(cid:39)(cid:25)(cid:27)(cid:44)(cid:46)(cid:1)(cid:19)(cid:28)(cid:25)(cid:1)(cid:32)(cid:21)(cid:30)(cid:34)(cid:37)(cid:29)(cid:39)(cid:44)(cid:1)(cid:34)(cid:26)(cid:1)(cid:39)(cid:28)(cid:25)(cid:38)(cid:25)(cid:1)(cid:26)(cid:40)(cid:33)(cid:24)(cid:38)(cid:1)(cid:23)(cid:21)(cid:32)(cid:25)(cid:1)(cid:26)(cid:37)(cid:34)(cid:32)(cid:1)(cid:25)(cid:36)(cid:40)(cid:29)(cid:39)(cid:44)(cid:1)(cid:39)(cid:37)(cid:21)(cid:33)(cid:38)(cid:21)(cid:23)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:1)(cid:35)(cid:37)(cid:29)(cid:23)(cid:25)(cid:24)(cid:1)(cid:21)(cid:39)(cid:1)
(cid:97)(cid:82)(cid:77)(cid:98)(cid:94)(cid:93)(cid:77)(cid:79)(cid:90)(cid:82)(cid:3)(cid:99)(cid:82)(cid:97)(cid:92)(cid:98)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:87)(cid:93)(cid:101)(cid:82)(cid:98)(cid:99)(cid:94)(cid:97)(cid:98)(cid:3)(cid:102)(cid:86)(cid:94)(cid:3)(cid:79)(cid:82)(cid:90)(cid:87)(cid:82)(cid:101)(cid:82)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:98)(cid:99)(cid:97)(cid:94)(cid:93)(cid:85)(cid:3)(cid:83)(cid:100)(cid:99)(cid:100)(cid:97)(cid:82)(cid:3)(cid:94)(cid:83)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:857)(cid:3)(cid:50)(cid:98)(cid:3)(cid:77)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:3)(cid:94)(cid:83)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:87)(cid:92)(cid:95)(cid:97)(cid:94)(cid:101)(cid:82)(cid:81)(cid:3)(cid:364)(cid:93)(cid:77)(cid:93)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:95)(cid:82)(cid:97)(cid:83)(cid:94)(cid:97)(cid:92)(cid:77)(cid:93)(cid:80)(cid:82)(cid:860)(cid:3)(cid:102)(cid:82)(cid:3)(cid:82)(cid:93)(cid:81)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:902)(cid:16)(cid:857)(cid:12)(cid:3)(cid:92)(cid:87)(cid:90)(cid:90)(cid:87)(cid:94)(cid:93)(cid:3)
(cid:94)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:79)(cid:77)(cid:90)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)(cid:98)(cid:86)(cid:82)(cid:82)(cid:99)(cid:860)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:86)(cid:87)(cid:85)(cid:86)(cid:82)(cid:98)(cid:99)(cid:3)(cid:80)(cid:77)(cid:98)(cid:86)(cid:3)(cid:79)(cid:77)(cid:90)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)(cid:102)(cid:82)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:86)(cid:77)(cid:81)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:102)(cid:94)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:98)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:93)(cid:94)(cid:102)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:98)(cid:100)(cid:369)(cid:80)(cid:87)(cid:82)(cid:93)(cid:99)(cid:3)(cid:364)(cid:93)(cid:77)(cid:93)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:94)(cid:100)(cid:97)(cid:80)(cid:82)(cid:98)(cid:3)(cid:99)(cid:94)(cid:3)(cid:83)(cid:100)(cid:93)(cid:81)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:80)(cid:94)(cid:93)(cid:99)(cid:87)(cid:93)(cid:100)(cid:82)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:99)(cid:94)(cid:95)(cid:889)(cid:90)(cid:87)(cid:93)(cid:82)(cid:3)
(cid:27)(cid:37)(cid:34)(cid:42)(cid:39)(cid:28)(cid:1)(cid:39)(cid:28)(cid:37)(cid:34)(cid:40)(cid:27)(cid:28)(cid:34)(cid:40)(cid:39)(cid:1)(cid:4)(cid:2)(cid:3)(cid:7)(cid:46)

(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:77)(cid:81)(cid:81)(cid:97)(cid:82)(cid:98)(cid:98)(cid:82)(cid:98)(cid:3)(cid:77)(cid:93)(cid:3)(cid:100)(cid:93)(cid:81)(cid:82)(cid:97)(cid:98)(cid:82)(cid:97)(cid:101)(cid:82)(cid:81)(cid:3)(cid:71)(cid:857)(cid:69)(cid:857)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:102)(cid:82)(cid:3)(cid:82)(cid:98)(cid:99)(cid:87)(cid:92)(cid:77)(cid:99)(cid:82)(cid:3)(cid:77)(cid:99)(cid:3)(cid:11)(cid:8)(cid:3)(cid:92)(cid:87)(cid:90)(cid:90)(cid:87)(cid:94)(cid:93)(cid:3)(cid:95)(cid:77)(cid:99)(cid:87)(cid:82)(cid:93)(cid:99)(cid:98)(cid:857)(cid:3)(cid:70)(cid:86)(cid:82)(cid:3)(cid:92)(cid:77)(cid:88)(cid:94)(cid:97)(cid:87)(cid:99)(cid:104)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:87)(cid:98)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:860)(cid:3)(cid:77)(cid:79)(cid:94)(cid:100)(cid:99)(cid:3)(cid:10)(cid:6)(cid:3)(cid:92)(cid:87)(cid:90)(cid:90)(cid:87)(cid:94)(cid:93)(cid:3)(cid:95)(cid:77)(cid:99)(cid:87)(cid:82)(cid:93)(cid:99)(cid:98)(cid:860)(cid:3)(cid:98)(cid:100)(cid:362)(cid:82)(cid:97)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:80)(cid:86)(cid:97)(cid:94)(cid:93)(cid:87)(cid:80)(cid:3)
(cid:25)(cid:44)(cid:25)(cid:1)(cid:23)(cid:34)(cid:33)(cid:24)(cid:29)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:1)(cid:22)(cid:31)(cid:25)(cid:35)(cid:28)(cid:21)(cid:37)(cid:29)(cid:39)(cid:29)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:24)(cid:37)(cid:44)(cid:1)(cid:25)(cid:44)(cid:25)(cid:46)(cid:1)(cid:11)(cid:34)(cid:37)(cid:1)(cid:44)(cid:25)(cid:21)(cid:37)(cid:38)(cid:1)(cid:25)(cid:44)(cid:25)(cid:1)(cid:23)(cid:21)(cid:37)(cid:25)(cid:1)(cid:38)(cid:35)(cid:25)(cid:23)(cid:29)(cid:21)(cid:31)(cid:29)(cid:38)(cid:39)(cid:38)(cid:1)(cid:28)(cid:21)(cid:41)(cid:25)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:22)(cid:25)(cid:24)(cid:1)(cid:21)(cid:1)(cid:37)(cid:21)(cid:39)(cid:28)(cid:25)(cid:37)(cid:1)(cid:37)(cid:40)(cid:24)(cid:29)(cid:32)(cid:25)(cid:33)(cid:39)(cid:21)(cid:37)(cid:44)(cid:1)(cid:38)(cid:39)(cid:21)(cid:33)(cid:24)(cid:21)(cid:37)(cid:24)(cid:1)(cid:34)(cid:26)(cid:1)(cid:23)(cid:21)(cid:37)(cid:25)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:39)(cid:28)(cid:25)(cid:38)(cid:25)(cid:1)(cid:35)(cid:21)(cid:39)(cid:29)(cid:25)(cid:33)(cid:39)(cid:38)(cid:1)(cid:23)(cid:34)(cid:33)(cid:38)(cid:29)(cid:38)(cid:39)(cid:29)(cid:33)(cid:27)(cid:1)(cid:34)(cid:26)(cid:1)(cid:42)(cid:21)(cid:37)(cid:32)(cid:1)(cid:25)(cid:44)(cid:25)(cid:1)
(cid:80)(cid:94)(cid:92)(cid:95)(cid:97)(cid:82)(cid:98)(cid:98)(cid:82)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:85)(cid:82)(cid:93)(cid:99)(cid:90)(cid:104)(cid:3)(cid:102)(cid:77)(cid:98)(cid:86)(cid:87)(cid:93)(cid:85)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:82)(cid:104)(cid:82)(cid:98)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:79)(cid:77)(cid:79)(cid:104)(cid:3)(cid:98)(cid:86)(cid:77)(cid:92)(cid:95)(cid:94)(cid:94)(cid:98)(cid:860)(cid:3)(cid:99)(cid:97)(cid:82)(cid:77)(cid:99)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:100)(cid:93)(cid:83)(cid:94)(cid:97)(cid:99)(cid:100)(cid:93)(cid:77)(cid:99)(cid:82)(cid:90)(cid:104)(cid:3)(cid:95)(cid:97)(cid:94)(cid:101)(cid:87)(cid:81)(cid:82)(cid:3)(cid:92)(cid:87)(cid:93)(cid:87)(cid:92)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:90)(cid:87)(cid:82)(cid:83)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:82)(cid:93)(cid:80)(cid:97)(cid:100)(cid:98)(cid:99)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:860)(cid:3)(cid:87)(cid:93)(cid:367)(cid:77)(cid:92)(cid:92)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:87)(cid:97)(cid:97)(cid:87)(cid:99)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)
(cid:80)(cid:77)(cid:100)(cid:98)(cid:82)(cid:81)(cid:3)(cid:79)(cid:104)(cid:3)(cid:79)(cid:90)(cid:82)(cid:95)(cid:86)(cid:77)(cid:97)(cid:87)(cid:99)(cid:87)(cid:98)(cid:857)(cid:3)(cid:3)(cid:69)(cid:99)(cid:82)(cid:97)(cid:94)(cid:87)(cid:81)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:77)(cid:93)(cid:99)(cid:87)(cid:79)(cid:87)(cid:94)(cid:99)(cid:87)(cid:80)(cid:98)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:82)(cid:362)(cid:82)(cid:80)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:79)(cid:100)(cid:99)(cid:3)(cid:80)(cid:77)(cid:93)(cid:3)(cid:79)(cid:82)(cid:3)(cid:95)(cid:97)(cid:82)(cid:98)(cid:80)(cid:97)(cid:87)(cid:79)(cid:82)(cid:81)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:94)(cid:93)(cid:90)(cid:104)(cid:3)(cid:98)(cid:86)(cid:94)(cid:97)(cid:99)(cid:3)(cid:95)(cid:82)(cid:97)(cid:87)(cid:94)(cid:81)(cid:98)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:87)(cid:92)(cid:82)(cid:857)(cid:3)(cid:73)(cid:87)(cid:99)(cid:86)(cid:3)(cid:98)(cid:104)(cid:92)(cid:95)(cid:99)(cid:94)(cid:92)(cid:98)(cid:3)(cid:87)(cid:93)(cid:101)(cid:77)(cid:97)(cid:87)(cid:77)(cid:79)(cid:90)(cid:104)(cid:3)(cid:97)(cid:82)(cid:99)(cid:100)(cid:97)(cid:93)(cid:87)(cid:93)(cid:85)(cid:3)(cid:102)(cid:86)(cid:82)(cid:93)(cid:3)(cid:99)(cid:97)(cid:82)(cid:77)(cid:99)(cid:92)(cid:82)(cid:93)(cid:99)(cid:3)
(cid:82)(cid:93)(cid:81)(cid:98)(cid:860)(cid:3)(cid:95)(cid:77)(cid:99)(cid:87)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:97)(cid:82)(cid:99)(cid:100)(cid:97)(cid:93)(cid:3)(cid:94)(cid:101)(cid:82)(cid:97)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:94)(cid:101)(cid:82)(cid:97)(cid:3)(cid:77)(cid:85)(cid:77)(cid:87)(cid:93)(cid:3)(cid:99)(cid:94)(cid:3)(cid:94)(cid:95)(cid:86)(cid:99)(cid:86)(cid:77)(cid:90)(cid:92)(cid:94)(cid:90)(cid:94)(cid:85)(cid:87)(cid:98)(cid:99)(cid:98)(cid:3)(cid:94)(cid:97)(cid:3)(cid:94)(cid:95)(cid:99)(cid:94)(cid:92)(cid:82)(cid:99)(cid:97)(cid:87)(cid:98)(cid:99)(cid:98)(cid:3)(cid:98)(cid:82)(cid:82)(cid:89)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:3)(cid:98)(cid:94)(cid:90)(cid:100)(cid:99)(cid:87)(cid:94)(cid:93)(cid:857)(cid:3)(cid:3)

(cid:69)(cid:94)(cid:92)(cid:82)(cid:3)(cid:93)(cid:82)(cid:102)(cid:82)(cid:97)(cid:3)(cid:95)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:99)(cid:98)(cid:3)(cid:82)(cid:93)(cid:99)(cid:82)(cid:97)(cid:87)(cid:93)(cid:85)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:83)(cid:94)(cid:97)(cid:92)(cid:100)(cid:90)(cid:77)(cid:99)(cid:82)(cid:81)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:90)(cid:82)(cid:98)(cid:98)(cid:3)(cid:99)(cid:86)(cid:77)(cid:93)(cid:3)(cid:95)(cid:100)(cid:97)(cid:82)(cid:3)(cid:86)(cid:104)(cid:95)(cid:94)(cid:80)(cid:86)(cid:90)(cid:94)(cid:97)(cid:94)(cid:100)(cid:98)(cid:3)(cid:77)(cid:80)(cid:87)(cid:81)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:77)(cid:80)(cid:99)(cid:100)(cid:77)(cid:90)(cid:90)(cid:104)(cid:3)(cid:80)(cid:94)(cid:93)(cid:99)(cid:77)(cid:87)(cid:93)(cid:3)(cid:79)(cid:90)(cid:82)(cid:77)(cid:80)(cid:86)(cid:3)(cid:95)(cid:77)(cid:97)(cid:99)(cid:87)(cid:80)(cid:90)(cid:82)(cid:98)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:79)(cid:82)(cid:90)(cid:87)(cid:82)(cid:101)(cid:82)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:82)(cid:104)(cid:82)(cid:3)(cid:80)(cid:77)(cid:97)(cid:82)(cid:3)(cid:98)(cid:95)(cid:82)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:98)(cid:99)(cid:98)(cid:3)
(cid:42)(cid:29)(cid:31)(cid:31)(cid:1)(cid:23)(cid:28)(cid:34)(cid:34)(cid:38)(cid:25)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:35)(cid:40)(cid:37)(cid:25)(cid:1)(cid:28)(cid:44)(cid:35)(cid:34)(cid:23)(cid:28)(cid:31)(cid:34)(cid:37)(cid:34)(cid:40)(cid:38)(cid:1)(cid:26)(cid:34)(cid:37)(cid:32)(cid:40)(cid:31)(cid:21)(cid:39)(cid:29)(cid:34)(cid:33)(cid:1)(cid:34)(cid:41)(cid:25)(cid:37)(cid:1)(cid:39)(cid:28)(cid:25)(cid:38)(cid:25)(cid:1)(cid:35)(cid:37)(cid:34)(cid:24)(cid:40)(cid:23)(cid:39)(cid:38)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:39)(cid:28)(cid:25)(cid:29)(cid:37)(cid:1)(cid:35)(cid:21)(cid:39)(cid:29)(cid:25)(cid:33)(cid:39)(cid:38)(cid:46)(cid:1)(cid:14)(cid:34)(cid:37)(cid:25)(cid:1)(cid:37)(cid:25)(cid:23)(cid:25)(cid:33)(cid:39)(cid:31)(cid:44)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:29)(cid:33)(cid:39)(cid:37)(cid:34)(cid:24)(cid:40)(cid:23)(cid:39)(cid:29)(cid:34)(cid:33)(cid:1)(cid:34)(cid:26)(cid:1)(cid:21)(cid:33)(cid:34)(cid:39)(cid:28)(cid:25)(cid:37)(cid:1)(cid:35)(cid:37)(cid:34)(cid:24)(cid:40)(cid:23)(cid:39)(cid:1)(cid:29)(cid:33)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:24)(cid:37)(cid:44)(cid:1)(cid:25)(cid:44)(cid:25)(cid:1)(cid:38)(cid:35)(cid:21)(cid:23)(cid:25)(cid:1)(cid:28)(cid:21)(cid:38)(cid:1)(cid:22)(cid:37)(cid:34)(cid:40)(cid:27)(cid:28)(cid:39)(cid:1)
(cid:97)(cid:82)(cid:93)(cid:82)(cid:102)(cid:82)(cid:81)(cid:3)(cid:86)(cid:82)(cid:77)(cid:101)(cid:104)(cid:3)(cid:87)(cid:93)(cid:99)(cid:82)(cid:97)(cid:82)(cid:98)(cid:99)(cid:3)(cid:87)(cid:93)(cid:3)(cid:87)(cid:93)(cid:101)(cid:82)(cid:98)(cid:99)(cid:92)(cid:82)(cid:93)(cid:99)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:80)(cid:77)(cid:99)(cid:82)(cid:85)(cid:94)(cid:97)(cid:104)(cid:3)(cid:87)(cid:93)(cid:3)(cid:102)(cid:86)(cid:87)(cid:80)(cid:86)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:98)(cid:82)(cid:97)(cid:101)(cid:82)(cid:98)(cid:3)(cid:77)(cid:98)(cid:3)(cid:77)(cid:3)(cid:98)(cid:99)(cid:97)(cid:94)(cid:93)(cid:85)(cid:3)(cid:80)(cid:94)(cid:92)(cid:95)(cid:90)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:77)(cid:97)(cid:104)(cid:3)(cid:95)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:99)(cid:857)(cid:3)(cid:50)(cid:93)(cid:81)(cid:860)(cid:3)(cid:102)(cid:82)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:85)(cid:77)(cid:87)(cid:93)(cid:87)(cid:93)(cid:85)(cid:3)(cid:99)(cid:97)(cid:77)(cid:80)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:97)(cid:82)(cid:92)(cid:77)(cid:87)(cid:93)(cid:87)(cid:93)(cid:85)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)
(cid:94)(cid:83)(cid:3)(cid:8)(cid:8)(cid:3)(cid:92)(cid:87)(cid:90)(cid:90)(cid:87)(cid:94)(cid:93)(cid:3)(cid:50)(cid:92)(cid:82)(cid:97)(cid:87)(cid:80)(cid:77)(cid:93)(cid:98)(cid:860)(cid:3)(cid:102)(cid:86)(cid:87)(cid:80)(cid:86)(cid:3)(cid:87)(cid:98)(cid:3)(cid:80)(cid:94)(cid:92)(cid:95)(cid:97)(cid:87)(cid:98)(cid:82)(cid:81)(cid:3)(cid:94)(cid:83)(cid:3)(cid:95)(cid:97)(cid:82)(cid:889)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:95)(cid:94)(cid:98)(cid:99)(cid:889)(cid:94)(cid:95)(cid:82)(cid:97)(cid:77)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:100)(cid:98)(cid:82)(cid:3)(cid:87)(cid:93)(cid:3)(cid:82)(cid:104)(cid:82)(cid:3)(cid:98)(cid:100)(cid:97)(cid:85)(cid:82)(cid:97)(cid:87)(cid:82)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:80)(cid:94)(cid:93)(cid:99)(cid:77)(cid:80)(cid:99)(cid:3)(cid:90)(cid:82)(cid:93)(cid:98)(cid:3)(cid:87)(cid:93)(cid:99)(cid:94)(cid:90)(cid:82)(cid:97)(cid:77)(cid:93)(cid:80)(cid:82)(cid:857)(cid:3)

(cid:73)(cid:82)(cid:3)(cid:79)(cid:82)(cid:90)(cid:87)(cid:82)(cid:101)(cid:82)(cid:3)(cid:102)(cid:82)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:79)(cid:77)(cid:97)(cid:82)(cid:90)(cid:104)(cid:3)(cid:98)(cid:80)(cid:97)(cid:77)(cid:99)(cid:80)(cid:86)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:98)(cid:100)(cid:97)(cid:83)(cid:77)(cid:80)(cid:82)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:90)(cid:77)(cid:97)(cid:85)(cid:82)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:857)(cid:3)(cid:73)(cid:86)(cid:87)(cid:90)(cid:82)(cid:3)(cid:102)(cid:82)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:12)(cid:6)(cid:3)(cid:86)(cid:87)(cid:85)(cid:86)(cid:90)(cid:104)(cid:3)(cid:82)(cid:103)(cid:95)(cid:82)(cid:97)(cid:87)(cid:82)(cid:93)(cid:80)(cid:82)(cid:81)(cid:3)(cid:81)(cid:87)(cid:97)(cid:82)(cid:80)(cid:99)(cid:3)(cid:98)(cid:77)(cid:90)(cid:82)(cid:98)(cid:3)(cid:97)(cid:82)(cid:95)(cid:97)(cid:82)(cid:98)(cid:82)(cid:93)(cid:99)(cid:77)(cid:99)(cid:87)(cid:101)(cid:82)(cid:98)(cid:3)(cid:90)(cid:94)(cid:80)(cid:77)(cid:99)(cid:82)(cid:81)(cid:3)(cid:87)(cid:93)(cid:3)(cid:92)(cid:77)(cid:88)(cid:94)(cid:97)(cid:3)(cid:92)(cid:77)(cid:97)(cid:889)
(cid:89)(cid:82)(cid:99)(cid:98)(cid:3)(cid:77)(cid:80)(cid:97)(cid:94)(cid:98)(cid:98)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:80)(cid:94)(cid:100)(cid:93)(cid:99)(cid:97)(cid:104)(cid:860)(cid:3)(cid:99)(cid:86)(cid:87)(cid:98)(cid:3)(cid:90)(cid:87)(cid:92)(cid:87)(cid:99)(cid:82)(cid:81)(cid:3)(cid:94)(cid:97)(cid:85)(cid:77)(cid:93)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:77)(cid:362)(cid:94)(cid:97)(cid:81)(cid:98)(cid:3)(cid:100)(cid:98)(cid:3)(cid:82)(cid:103)(cid:95)(cid:94)(cid:98)(cid:100)(cid:97)(cid:82)(cid:3)(cid:99)(cid:94)(cid:3)(cid:94)(cid:93)(cid:90)(cid:104)(cid:3)(cid:77)(cid:79)(cid:94)(cid:100)(cid:99)(cid:3)(cid:94)(cid:93)(cid:82)(cid:889)(cid:99)(cid:86)(cid:87)(cid:97)(cid:81)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:95)(cid:94)(cid:99)(cid:82)(cid:93)(cid:99)(cid:87)(cid:77)(cid:90)(cid:3)(cid:81)(cid:94)(cid:92)(cid:82)(cid:98)(cid:99)(cid:87)(cid:80)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:90)(cid:94)(cid:94)(cid:89)(cid:3)(cid:99)(cid:94)(cid:3)(cid:80)(cid:77)(cid:95)(cid:99)(cid:100)(cid:97)(cid:82)(cid:3)(cid:92)(cid:94)(cid:97)(cid:82)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)(cid:79)(cid:104)(cid:3)
(cid:21)(cid:24)(cid:24)(cid:29)(cid:33)(cid:27)(cid:1)(cid:38)(cid:21)(cid:31)(cid:25)(cid:38)(cid:1)(cid:37)(cid:25)(cid:35)(cid:37)(cid:25)(cid:38)(cid:25)(cid:33)(cid:39)(cid:21)(cid:39)(cid:29)(cid:41)(cid:25)(cid:38)(cid:47)(cid:1)(cid:42)(cid:28)(cid:29)(cid:31)(cid:25)(cid:1)(cid:22)(cid:21)(cid:31)(cid:21)(cid:33)(cid:23)(cid:29)(cid:33)(cid:27)(cid:1)(cid:38)(cid:21)(cid:31)(cid:25)(cid:38)(cid:26)(cid:34)(cid:37)(cid:23)(cid:25)(cid:1)(cid:25)(cid:43)(cid:35)(cid:21)(cid:33)(cid:38)(cid:29)(cid:34)(cid:33)(cid:1)(cid:42)(cid:29)(cid:39)(cid:28)(cid:1)(cid:32)(cid:21)(cid:33)(cid:21)(cid:27)(cid:29)(cid:33)(cid:27)(cid:1)(cid:25)(cid:43)(cid:35)(cid:25)(cid:33)(cid:38)(cid:25)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:21)(cid:41)(cid:21)(cid:29)(cid:31)(cid:21)(cid:22)(cid:31)(cid:25)(cid:1)(cid:23)(cid:21)(cid:38)(cid:28)(cid:46)(cid:1)(cid:12)(cid:33)(cid:1)(cid:13)(cid:21)(cid:33)(cid:40)(cid:21)(cid:37)(cid:44)(cid:1)(cid:34)(cid:26)(cid:1)(cid:39)(cid:28)(cid:29)(cid:38)(cid:1)(cid:44)(cid:25)(cid:21)(cid:37)(cid:47)(cid:1)(cid:42)(cid:25)(cid:1)(cid:39)(cid:37)(cid:21)(cid:33)(cid:38)(cid:29)(cid:39)(cid:29)(cid:34)(cid:33)(cid:25)(cid:24)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:23)(cid:34)(cid:33)(cid:39)(cid:37)(cid:21)(cid:23)(cid:39)(cid:1)
(cid:98)(cid:77)(cid:90)(cid:82)(cid:98)(cid:83)(cid:94)(cid:97)(cid:80)(cid:82)(cid:3)(cid:99)(cid:94)(cid:3)(cid:79)(cid:82)(cid:3)(cid:81)(cid:87)(cid:97)(cid:82)(cid:80)(cid:99)(cid:3)(cid:82)(cid:92)(cid:95)(cid:90)(cid:94)(cid:104)(cid:82)(cid:82)(cid:98)(cid:3)(cid:94)(cid:83)(cid:3)(cid:64)(cid:94)(cid:101)(cid:77)(cid:51)(cid:77)(cid:104)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:59)(cid:877)(cid:92)(cid:3)(cid:81)(cid:82)(cid:90)(cid:87)(cid:85)(cid:86)(cid:99)(cid:82)(cid:81)(cid:3)(cid:99)(cid:94)(cid:3)(cid:97)(cid:82)(cid:95)(cid:94)(cid:97)(cid:99)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:98)(cid:77)(cid:90)(cid:82)(cid:98)(cid:3)(cid:97)(cid:82)(cid:95)(cid:97)(cid:82)(cid:98)(cid:82)(cid:93)(cid:99)(cid:77)(cid:99)(cid:87)(cid:101)(cid:82)(cid:98)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:86)(cid:87)(cid:85)(cid:86)(cid:90)(cid:104)(cid:3)(cid:82)(cid:93)(cid:82)(cid:97)(cid:85)(cid:87)(cid:106)(cid:82)(cid:81)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:83)(cid:94)(cid:80)(cid:100)(cid:98)(cid:82)(cid:81)(cid:3)(cid:98)(cid:94)(cid:90)(cid:82)(cid:90)(cid:104)(cid:3)(cid:94)(cid:93)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:877)(cid:98)(cid:3)(cid:98)(cid:100)(cid:80)(cid:80)(cid:82)(cid:98)(cid:98)(cid:857)

(cid:73)(cid:82)(cid:3)(cid:97)(cid:82)(cid:77)(cid:90)(cid:87)(cid:106)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:87)(cid:93)(cid:3)(cid:90)(cid:77)(cid:100)(cid:93)(cid:80)(cid:86)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:3)(cid:95)(cid:97)(cid:82)(cid:98)(cid:80)(cid:97)(cid:87)(cid:95)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:82)(cid:104)(cid:82)(cid:3)(cid:80)(cid:77)(cid:97)(cid:82)(cid:3)(cid:95)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:99)(cid:3)(cid:102)(cid:82)(cid:3)(cid:102)(cid:94)(cid:100)(cid:90)(cid:81)(cid:3)(cid:93)(cid:82)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:98)(cid:100)(cid:95)(cid:95)(cid:94)(cid:97)(cid:99)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:82)(cid:104)(cid:82)(cid:3)(cid:80)(cid:77)(cid:97)(cid:82)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:100)(cid:93)(cid:87)(cid:99)(cid:104)(cid:860)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:82)(cid:77)(cid:97)(cid:90)(cid:104)(cid:3)(cid:87)(cid:93)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:102)(cid:82)(cid:3)(cid:77)(cid:98)(cid:98)(cid:82)(cid:92)(cid:79)(cid:90)(cid:82)(cid:81)(cid:3)
(cid:21)(cid:24)(cid:41)(cid:29)(cid:38)(cid:34)(cid:37)(cid:44)(cid:1)(cid:27)(cid:37)(cid:34)(cid:40)(cid:35)(cid:38)(cid:1)(cid:34)(cid:26)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:39)(cid:29)(cid:27)(cid:29)(cid:34)(cid:40)(cid:38)(cid:1)(cid:34)(cid:35)(cid:28)(cid:39)(cid:28)(cid:21)(cid:31)(cid:32)(cid:34)(cid:31)(cid:34)(cid:27)(cid:29)(cid:38)(cid:39)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:34)(cid:35)(cid:39)(cid:34)(cid:32)(cid:25)(cid:39)(cid:37)(cid:29)(cid:38)(cid:39)(cid:38)(cid:1)(cid:39)(cid:34)(cid:1)(cid:23)(cid:28)(cid:21)(cid:32)(cid:35)(cid:29)(cid:34)(cid:33)(cid:1)(cid:9)(cid:41)(cid:25)(cid:33)(cid:34)(cid:41)(cid:21)(cid:46)(cid:1)(cid:12)(cid:48)(cid:32)(cid:1)(cid:35)(cid:31)(cid:25)(cid:21)(cid:38)(cid:25)(cid:24)(cid:1)(cid:39)(cid:34)(cid:1)(cid:37)(cid:25)(cid:35)(cid:34)(cid:37)(cid:39)(cid:1)(cid:39)(cid:28)(cid:21)(cid:39)(cid:1)(cid:42)(cid:25)(cid:1)(cid:21)(cid:37)(cid:25)(cid:1)(cid:37)(cid:25)(cid:23)(cid:25)(cid:29)(cid:41)(cid:29)(cid:33)(cid:27)(cid:1)(cid:37)(cid:25)(cid:38)(cid:34)(cid:40)(cid:33)(cid:24)(cid:29)(cid:33)(cid:27)(cid:1)(cid:38)(cid:40)(cid:35)(cid:35)(cid:34)(cid:37)(cid:39)(cid:1)(cid:26)(cid:37)(cid:34)(cid:32)(cid:1)(cid:39)(cid:28)(cid:25)(cid:38)(cid:25)(cid:1)
(cid:39)(cid:28)(cid:34)(cid:40)(cid:27)(cid:28)(cid:39)(cid:1)(cid:31)(cid:25)(cid:21)(cid:24)(cid:25)(cid:37)(cid:38)(cid:1)(cid:21)(cid:39)(cid:1)(cid:29)(cid:33)(cid:24)(cid:40)(cid:38)(cid:39)(cid:37)(cid:44)(cid:1)(cid:23)(cid:34)(cid:33)(cid:26)(cid:25)(cid:37)(cid:25)(cid:33)(cid:23)(cid:25)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:29)(cid:33)(cid:1)(cid:24)(cid:34)(cid:23)(cid:40)(cid:32)(cid:25)(cid:33)(cid:39)(cid:29)(cid:33)(cid:27)(cid:1)(cid:26)(cid:21)(cid:41)(cid:34)(cid:37)(cid:21)(cid:22)(cid:31)(cid:25)(cid:1)(cid:35)(cid:21)(cid:39)(cid:29)(cid:25)(cid:33)(cid:39)(cid:1)(cid:25)(cid:43)(cid:35)(cid:25)(cid:37)(cid:29)(cid:25)(cid:33)(cid:23)(cid:25)(cid:38)(cid:1)(cid:29)(cid:33)(cid:1)(cid:21)(cid:37)(cid:39)(cid:29)(cid:23)(cid:31)(cid:25)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:38)(cid:1)(cid:37)(cid:25)(cid:31)(cid:25)(cid:21)(cid:38)(cid:25)(cid:38)(cid:46)(cid:1)(cid:20)(cid:25)(cid:1)(cid:21)(cid:24)(cid:41)(cid:25)(cid:37)(cid:39)(cid:29)(cid:38)(cid:25)(cid:1)(cid:29)(cid:33)(cid:1)(cid:32)(cid:21)(cid:30)(cid:34)(cid:37)(cid:1)(cid:29)(cid:33)(cid:24)(cid:40)(cid:38)(cid:39)(cid:37)(cid:44)(cid:1)(cid:35)(cid:40)(cid:22)(cid:31)(cid:29)(cid:23)(cid:21)(cid:39)(cid:29)(cid:34)(cid:33)(cid:38)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)
(cid:28)(cid:21)(cid:41)(cid:25)(cid:1)(cid:21)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:25)(cid:33)(cid:23)(cid:25)(cid:38)(cid:1)(cid:21)(cid:39)(cid:1)(cid:31)(cid:25)(cid:21)(cid:24)(cid:29)(cid:33)(cid:27)(cid:1)(cid:29)(cid:33)(cid:24)(cid:40)(cid:38)(cid:39)(cid:37)(cid:44)(cid:1)(cid:23)(cid:34)(cid:33)(cid:26)(cid:25)(cid:37)(cid:25)(cid:33)(cid:23)(cid:25)(cid:38)(cid:1)(cid:29)(cid:33)(cid:23)(cid:31)(cid:40)(cid:24)(cid:29)(cid:33)(cid:27)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:9)(cid:32)(cid:25)(cid:37)(cid:29)(cid:23)(cid:21)(cid:33)(cid:1)(cid:9)(cid:23)(cid:21)(cid:24)(cid:25)(cid:32)(cid:44)(cid:1)(cid:34)(cid:26)(cid:1)(cid:16)(cid:35)(cid:28)(cid:39)(cid:28)(cid:21)(cid:31)(cid:32)(cid:34)(cid:31)(cid:34)(cid:27)(cid:44)(cid:47)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:9)(cid:32)(cid:25)(cid:37)(cid:29)(cid:23)(cid:21)(cid:33)(cid:1)(cid:16)(cid:35)(cid:39)(cid:34)(cid:32)(cid:25)(cid:39)(cid:37)(cid:29)(cid:23)(cid:1)(cid:9)(cid:38)(cid:38)(cid:34)(cid:23)(cid:29)(cid:21)(cid:39)(cid:29)(cid:34)(cid:33)(cid:1)(cid:21)(cid:33)(cid:24)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)(cid:9)(cid:32)(cid:25)(cid:37)(cid:29)(cid:23)(cid:21)(cid:33)(cid:1)(cid:18)(cid:34)(cid:23)(cid:29)(cid:25)(cid:39)(cid:44)(cid:1)(cid:34)(cid:26)(cid:1)
(cid:52)(cid:77)(cid:99)(cid:77)(cid:97)(cid:77)(cid:80)(cid:99)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:68)(cid:82)(cid:83)(cid:97)(cid:77)(cid:80)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:69)(cid:100)(cid:97)(cid:85)(cid:82)(cid:97)(cid:104)(cid:3)(cid:77)(cid:93)(cid:93)(cid:100)(cid:77)(cid:90)(cid:3)(cid:80)(cid:94)(cid:93)(cid:83)(cid:82)(cid:97)(cid:82)(cid:93)(cid:80)(cid:82)(cid:98)(cid:860)(cid:3)(cid:77)(cid:98)(cid:3)(cid:102)(cid:82)(cid:90)(cid:90)(cid:3)(cid:77)(cid:98)(cid:3)(cid:77)(cid:99)(cid:3)(cid:93)(cid:100)(cid:92)(cid:82)(cid:97)(cid:94)(cid:100)(cid:98)(cid:3)(cid:72)(cid:87)(cid:98)(cid:87)(cid:94)(cid:93)(cid:3)(cid:54)(cid:103)(cid:95)(cid:94)(cid:3)(cid:92)(cid:82)(cid:82)(cid:99)(cid:87)(cid:93)(cid:85)(cid:98)(cid:3)(cid:86)(cid:82)(cid:90)(cid:81)(cid:3)(cid:77)(cid:97)(cid:94)(cid:100)(cid:93)(cid:81)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:71)(cid:857)(cid:69)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:77)(cid:93)(cid:93)(cid:94)(cid:100)(cid:93)(cid:80)(cid:82)(cid:81)(cid:3)(cid:80)(cid:90)(cid:87)(cid:93)(cid:87)(cid:80)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:77)(cid:3)(cid:92)(cid:100)(cid:90)(cid:99)(cid:87)(cid:80)(cid:82)(cid:93)(cid:99)(cid:82)(cid:97)(cid:3)
(cid:98)(cid:99)(cid:100)(cid:81)(cid:104)(cid:3)(cid:98)(cid:86)(cid:94)(cid:102)(cid:87)(cid:93)(cid:85)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:97)(cid:82)(cid:81)(cid:100)(cid:80)(cid:82)(cid:98)(cid:3)(cid:79)(cid:77)(cid:80)(cid:99)(cid:82)(cid:97)(cid:87)(cid:77)(cid:3)(cid:94)(cid:93)(cid:3)(cid:94)(cid:80)(cid:100)(cid:90)(cid:77)(cid:97)(cid:3)(cid:98)(cid:89)(cid:87)(cid:93)(cid:3)(cid:98)(cid:100)(cid:97)(cid:83)(cid:77)(cid:80)(cid:82)(cid:98)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:80)(cid:77)(cid:93)(cid:3)(cid:80)(cid:77)(cid:100)(cid:98)(cid:82)(cid:3)(cid:79)(cid:90)(cid:82)(cid:95)(cid:86)(cid:77)(cid:97)(cid:87)(cid:99)(cid:87)(cid:98)(cid:3)(cid:79)(cid:104)(cid:3)(cid:92)(cid:94)(cid:97)(cid:82)(cid:3)(cid:99)(cid:86)(cid:77)(cid:93)(cid:3)(cid:16)(cid:6)(cid:836)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:87)(cid:93)(cid:99)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:82)(cid:98)(cid:82)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:95)(cid:94)(cid:81)(cid:87)(cid:100)(cid:92)(cid:3)(cid:77)(cid:99)(cid:3)(cid:90)(cid:77)(cid:98)(cid:99)(cid:3)
(cid:104)(cid:82)(cid:77)(cid:97)(cid:877)(cid:98)(cid:3)(cid:50)(cid:98)(cid:98)(cid:94)(cid:80)(cid:87)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:68)(cid:82)(cid:98)(cid:82)(cid:77)(cid:97)(cid:80)(cid:86)(cid:3)(cid:87)(cid:93)(cid:3)(cid:72)(cid:87)(cid:98)(cid:87)(cid:94)(cid:93)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:65)(cid:95)(cid:86)(cid:99)(cid:86)(cid:77)(cid:90)(cid:92)(cid:94)(cid:90)(cid:94)(cid:85)(cid:104)(cid:3)(cid:840)(cid:50)(cid:68)(cid:72)(cid:65)(cid:841)(cid:3)(cid:80)(cid:94)(cid:93)(cid:83)(cid:82)(cid:97)(cid:82)(cid:93)(cid:80)(cid:82)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:95)(cid:90)(cid:77)(cid:93)(cid:3)(cid:99)(cid:94)(cid:3)(cid:87)(cid:93)(cid:101)(cid:82)(cid:98)(cid:99)(cid:3)(cid:87)(cid:93)(cid:3)(cid:92)(cid:94)(cid:97)(cid:82)(cid:3)(cid:80)(cid:90)(cid:87)(cid:93)(cid:87)(cid:80)(cid:77)(cid:90)(cid:3)(cid:98)(cid:99)(cid:100)(cid:81)(cid:87)(cid:82)(cid:98)(cid:3)(cid:99)(cid:86)(cid:87)(cid:98)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:99)(cid:94)(cid:3)(cid:95)(cid:97)(cid:94)(cid:101)(cid:87)(cid:81)(cid:82)(cid:3)(cid:82)(cid:104)(cid:82)(cid:3)(cid:80)(cid:77)(cid:97)(cid:82)(cid:3)(cid:98)(cid:95)(cid:82)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:98)(cid:99)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)
(cid:21)(cid:24)(cid:24)(cid:29)(cid:39)(cid:29)(cid:34)(cid:33)(cid:21)(cid:31)(cid:1)(cid:23)(cid:31)(cid:29)(cid:33)(cid:29)(cid:23)(cid:21)(cid:31)(cid:1)(cid:38)(cid:40)(cid:35)(cid:35)(cid:34)(cid:37)(cid:39)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:35)(cid:37)(cid:25)(cid:38)(cid:23)(cid:37)(cid:29)(cid:22)(cid:29)(cid:33)(cid:27)(cid:1)(cid:9)(cid:41)(cid:25)(cid:33)(cid:34)(cid:41)(cid:21)(cid:1)(cid:39)(cid:34)(cid:1)(cid:39)(cid:28)(cid:25)(cid:29)(cid:37)(cid:1)(cid:35)(cid:21)(cid:39)(cid:29)(cid:25)(cid:33)(cid:39)(cid:38)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:21)(cid:1)(cid:42)(cid:29)(cid:24)(cid:25)(cid:1)(cid:21)(cid:37)(cid:37)(cid:21)(cid:44)(cid:1)(cid:34)(cid:26)(cid:1)(cid:40)(cid:38)(cid:25)(cid:38)(cid:46)(cid:1)(cid:1)

(cid:70)(cid:94)(cid:3)(cid:83)(cid:100)(cid:97)(cid:99)(cid:86)(cid:82)(cid:97)(cid:3)(cid:98)(cid:100)(cid:95)(cid:95)(cid:94)(cid:97)(cid:99)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:860)(cid:3)(cid:102)(cid:82)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:95)(cid:100)(cid:97)(cid:98)(cid:100)(cid:87)(cid:93)(cid:85)(cid:3)(cid:92)(cid:94)(cid:93)(cid:82)(cid:99)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:87)(cid:82)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:93)(cid:94)(cid:93)(cid:889)(cid:80)(cid:94)(cid:97)(cid:82)(cid:3)(cid:77)(cid:98)(cid:98)(cid:82)(cid:99)(cid:98)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:81)(cid:87)(cid:98)(cid:99)(cid:97)(cid:87)(cid:79)(cid:100)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:77)(cid:85)(cid:97)(cid:82)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:95)(cid:90)(cid:77)(cid:80)(cid:82)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:71)(cid:857)(cid:69)(cid:857)(cid:3)
(cid:77)(cid:93)(cid:81)(cid:3)(cid:94)(cid:101)(cid:82)(cid:97)(cid:98)(cid:82)(cid:77)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:77)(cid:3)(cid:98)(cid:82)(cid:80)(cid:94)(cid:93)(cid:81)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:95)(cid:97)(cid:94)(cid:81)(cid:100)(cid:80)(cid:99)(cid:3)(cid:83)(cid:94)(cid:97)(cid:92)(cid:100)(cid:90)(cid:77)(cid:99)(cid:82)(cid:81)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:64)(cid:82)(cid:100)(cid:99)(cid:97)(cid:94)(cid:103)(cid:860)(cid:3)(cid:64)(cid:82)(cid:100)(cid:99)(cid:97)(cid:94)(cid:66)(cid:86)(cid:77)(cid:98)(cid:82)(cid:927)(cid:3)(cid:69)(cid:89)(cid:87)(cid:93)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:73)(cid:94)(cid:100)(cid:93)(cid:81)(cid:3)(cid:52)(cid:90)(cid:82)(cid:77)(cid:93)(cid:98)(cid:82)(cid:97)(cid:857)(cid:3)(cid:3)(cid:73)(cid:82)(cid:3)(cid:77)(cid:97)(cid:82)(cid:3)(cid:77)(cid:90)(cid:98)(cid:94)(cid:3)(cid:77)(cid:80)(cid:99)(cid:87)(cid:101)(cid:82)(cid:90)(cid:104)(cid:3)(cid:95)(cid:100)(cid:97)(cid:98)(cid:100)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:104)(cid:3)(cid:99)(cid:94)(cid:3)(cid:77)(cid:81)(cid:101)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)
(cid:39)(cid:28)(cid:25)(cid:1)(cid:24)(cid:25)(cid:41)(cid:25)(cid:31)(cid:34)(cid:35)(cid:32)(cid:25)(cid:33)(cid:39)(cid:1)(cid:34)(cid:26)(cid:1)(cid:9)(cid:40)(cid:37)(cid:29)(cid:23)(cid:31)(cid:34)(cid:38)(cid:25)(cid:33)(cid:25)(cid:47)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:31)(cid:25)(cid:21)(cid:24)(cid:1)(cid:35)(cid:37)(cid:34)(cid:24)(cid:40)(cid:23)(cid:39)(cid:1)(cid:23)(cid:21)(cid:33)(cid:24)(cid:29)(cid:24)(cid:21)(cid:39)(cid:25)(cid:1)(cid:22)(cid:21)(cid:38)(cid:25)(cid:1)(cid:34)(cid:33)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:38)(cid:25)(cid:23)(cid:34)(cid:33)(cid:24)(cid:1)(cid:35)(cid:21)(cid:39)(cid:25)(cid:33)(cid:39)(cid:25)(cid:24)(cid:1)(cid:39)(cid:25)(cid:23)(cid:28)(cid:33)(cid:34)(cid:31)(cid:34)(cid:27)(cid:44)(cid:47)(cid:1)(cid:9)(cid:27)(cid:21)(cid:33)(cid:34)(cid:23)(cid:29)(cid:24)(cid:25)(cid:38)(cid:50)(cid:46)(cid:1)(cid:1)(cid:18)(cid:29)(cid:32)(cid:29)(cid:31)(cid:21)(cid:37)(cid:1)(cid:39)(cid:34)(cid:1)(cid:15)(cid:25)(cid:40)(cid:39)(cid:37)(cid:34)(cid:43)(cid:47)(cid:1)(cid:39)(cid:28)(cid:29)(cid:38)(cid:1)(cid:39)(cid:25)(cid:23)(cid:28)(cid:33)(cid:34)(cid:31)(cid:34)(cid:27)(cid:44)(cid:1)(cid:32)(cid:29)(cid:32)(cid:29)(cid:23)(cid:38)(cid:1)(cid:39)(cid:28)(cid:25)(cid:1)
(cid:92)(cid:82)(cid:80)(cid:86)(cid:77)(cid:93)(cid:87)(cid:98)(cid:92)(cid:3)(cid:94)(cid:83)(cid:3)(cid:77)(cid:80)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:100)(cid:98)(cid:82)(cid:81)(cid:3)(cid:79)(cid:104)(cid:3)(cid:86)(cid:100)(cid:92)(cid:77)(cid:93)(cid:3)(cid:102)(cid:86)(cid:87)(cid:99)(cid:82)(cid:3)(cid:79)(cid:90)(cid:94)(cid:94)(cid:81)(cid:3)(cid:80)(cid:82)(cid:90)(cid:90)(cid:98)(cid:3)(cid:77)(cid:85)(cid:77)(cid:87)(cid:93)(cid:98)(cid:99)(cid:3)(cid:87)(cid:93)(cid:83)(cid:82)(cid:80)(cid:99)(cid:87)(cid:94)(cid:93)(cid:98)(cid:860)(cid:3)(cid:102)(cid:86)(cid:87)(cid:80)(cid:86)(cid:3)(cid:97)(cid:82)(cid:81)(cid:100)(cid:80)(cid:82)(cid:98)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:90)(cid:87)(cid:89)(cid:82)(cid:90)(cid:87)(cid:86)(cid:94)(cid:94)(cid:81)(cid:3)(cid:94)(cid:83)(cid:3)(cid:81)(cid:82)(cid:101)(cid:82)(cid:90)(cid:94)(cid:95)(cid:87)(cid:93)(cid:85)(cid:3)(cid:77)(cid:93)(cid:99)(cid:87)(cid:79)(cid:87)(cid:94)(cid:99)(cid:87)(cid:80)(cid:3)(cid:97)(cid:82)(cid:98)(cid:87)(cid:98)(cid:99)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:86)(cid:77)(cid:98)(cid:3)(cid:77)(cid:3)(cid:85)(cid:94)(cid:94)(cid:81)(cid:3)(cid:98)(cid:77)(cid:83)(cid:82)(cid:99)(cid:104)(cid:3)(cid:95)(cid:97)(cid:94)(cid:364)(cid:90)(cid:82)(cid:857)(cid:3)(cid:3)
(cid:62)(cid:77)(cid:99)(cid:82)(cid:3)(cid:90)(cid:77)(cid:98)(cid:99)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:102)(cid:82)(cid:3)(cid:97)(cid:82)(cid:95)(cid:94)(cid:97)(cid:99)(cid:82)(cid:81)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:50)(cid:100)(cid:97)(cid:87)(cid:80)(cid:90)(cid:94)(cid:98)(cid:82)(cid:93)(cid:82)(cid:3)(cid:59)(cid:97)(cid:97)(cid:87)(cid:85)(cid:77)(cid:99)(cid:87)(cid:93)(cid:85)(cid:3)(cid:69)(cid:94)(cid:90)(cid:100)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:81)(cid:82)(cid:92)(cid:94)(cid:93)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:81)(cid:3)(cid:98)(cid:99)(cid:77)(cid:99)(cid:87)(cid:98)(cid:99)(cid:87)(cid:80)(cid:77)(cid:90)(cid:90)(cid:104)(cid:3)(cid:98)(cid:87)(cid:85)(cid:93)(cid:87)(cid:364)(cid:80)(cid:77)(cid:93)(cid:99)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:80)(cid:90)(cid:87)(cid:93)(cid:87)(cid:80)(cid:77)(cid:90)(cid:90)(cid:104)(cid:3)(cid:92)(cid:82)(cid:77)(cid:93)(cid:87)(cid:93)(cid:85)(cid:83)(cid:100)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:95)(cid:97)(cid:82)(cid:101)(cid:82)(cid:93)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:94)(cid:83)(cid:3)(cid:100)(cid:97)(cid:87)(cid:93)(cid:77)(cid:97)(cid:104)(cid:3)(cid:80)(cid:77)(cid:99)(cid:86)(cid:82)(cid:99)(cid:82)(cid:97)(cid:3)
(cid:79)(cid:90)(cid:94)(cid:80)(cid:89)(cid:77)(cid:85)(cid:82)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:82)(cid:93)(cid:80)(cid:97)(cid:100)(cid:98)(cid:99)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:87)(cid:93)(cid:3)(cid:98)(cid:100)(cid:79)(cid:88)(cid:82)(cid:80)(cid:99)(cid:98)(cid:3)(cid:102)(cid:87)(cid:99)(cid:86)(cid:3)(cid:80)(cid:86)(cid:97)(cid:94)(cid:93)(cid:87)(cid:80)(cid:3)(cid:87)(cid:93)(cid:81)(cid:102)(cid:82)(cid:90)(cid:90)(cid:87)(cid:93)(cid:85)(cid:3)(cid:80)(cid:77)(cid:99)(cid:86)(cid:82)(cid:99)(cid:82)(cid:97)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:77)(cid:3)(cid:66)(cid:86)(cid:77)(cid:98)(cid:82)(cid:3)(cid:9)(cid:79)(cid:3)(cid:98)(cid:99)(cid:100)(cid:81)(cid:104)(cid:857)(cid:3)(cid:73)(cid:82)(cid:3)(cid:79)(cid:82)(cid:90)(cid:87)(cid:82)(cid:101)(cid:82)(cid:3)(cid:99)(cid:86)(cid:87)(cid:98)(cid:3)(cid:77)(cid:98)(cid:98)(cid:82)(cid:99)(cid:3)(cid:87)(cid:98)(cid:3)(cid:97)(cid:82)(cid:77)(cid:81)(cid:104)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:77)(cid:3)(cid:95)(cid:87)(cid:101)(cid:94)(cid:99)(cid:77)(cid:90)(cid:3)(cid:66)(cid:86)(cid:77)(cid:98)(cid:82)(cid:3)(cid:10)(cid:3)(cid:99)(cid:97)(cid:87)(cid:77)(cid:90)(cid:3)(cid:79)(cid:104)(cid:3)(cid:77)(cid:3)(cid:95)(cid:77)(cid:97)(cid:99)(cid:93)(cid:82)(cid:97)(cid:860)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:87)(cid:99)(cid:98)(cid:3)
(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:3)(cid:80)(cid:94)(cid:100)(cid:90)(cid:81)(cid:3)(cid:100)(cid:90)(cid:99)(cid:87)(cid:92)(cid:77)(cid:99)(cid:82)(cid:90)(cid:104)(cid:3)(cid:92)(cid:82)(cid:77)(cid:93)(cid:3)(cid:92)(cid:87)(cid:90)(cid:90)(cid:87)(cid:94)(cid:93)(cid:98)(cid:3)(cid:94)(cid:83)(cid:3)(cid:81)(cid:94)(cid:90)(cid:90)(cid:77)(cid:97)(cid:98)(cid:3)(cid:87)(cid:93)(cid:3)(cid:98)(cid:77)(cid:101)(cid:87)(cid:93)(cid:85)(cid:98)(cid:3)(cid:99)(cid:94)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:86)(cid:82)(cid:77)(cid:90)(cid:99)(cid:86)(cid:80)(cid:77)(cid:97)(cid:82)(cid:3)(cid:98)(cid:104)(cid:98)(cid:99)(cid:82)(cid:92)(cid:857)(cid:3)(cid:3)(cid:3)

(cid:59)(cid:93)(cid:3)(cid:80)(cid:90)(cid:94)(cid:98)(cid:87)(cid:93)(cid:85)(cid:860)(cid:3)(cid:102)(cid:82)(cid:3)(cid:77)(cid:80)(cid:80)(cid:94)(cid:92)(cid:95)(cid:90)(cid:87)(cid:98)(cid:86)(cid:82)(cid:81)(cid:3)(cid:77)(cid:3)(cid:85)(cid:97)(cid:82)(cid:77)(cid:99)(cid:3)(cid:81)(cid:82)(cid:77)(cid:90)(cid:3)(cid:94)(cid:101)(cid:82)(cid:97)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:95)(cid:77)(cid:98)(cid:99)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:86)(cid:77)(cid:101)(cid:87)(cid:93)(cid:85)(cid:3)(cid:98)(cid:100)(cid:80)(cid:80)(cid:82)(cid:98)(cid:98)(cid:83)(cid:100)(cid:90)(cid:90)(cid:104)(cid:3)(cid:99)(cid:97)(cid:77)(cid:93)(cid:98)(cid:87)(cid:99)(cid:87)(cid:94)(cid:93)(cid:82)(cid:81)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:52)(cid:94)(cid:92)(cid:95)(cid:77)(cid:93)(cid:104)(cid:3)(cid:99)(cid:94)(cid:3)(cid:83)(cid:94)(cid:80)(cid:100)(cid:98)(cid:3)(cid:94)(cid:93)(cid:3)(cid:50)(cid:101)(cid:82)(cid:93)(cid:94)(cid:101)(cid:77)(cid:3)(cid:80)(cid:94)(cid:92)(cid:92)(cid:82)(cid:97)(cid:80)(cid:87)(cid:77)(cid:90)(cid:87)(cid:106)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:860)(cid:3)(cid:82)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:82)(cid:81)(cid:3)(cid:94)(cid:93)(cid:3)(cid:77)(cid:3)
(cid:93)(cid:82)(cid:102)(cid:3)(cid:98)(cid:99)(cid:97)(cid:77)(cid:99)(cid:82)(cid:85)(cid:104)(cid:3)(cid:99)(cid:94)(cid:3)(cid:87)(cid:93)(cid:80)(cid:97)(cid:82)(cid:77)(cid:98)(cid:82)(cid:3)(cid:98)(cid:77)(cid:90)(cid:82)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:92)(cid:77)(cid:97)(cid:85)(cid:87)(cid:93)(cid:860)(cid:3)(cid:92)(cid:77)(cid:93)(cid:77)(cid:85)(cid:82)(cid:81)(cid:3)(cid:82)(cid:103)(cid:95)(cid:82)(cid:93)(cid:98)(cid:82)(cid:98)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:97)(cid:82)(cid:79)(cid:100)(cid:87)(cid:90)(cid:99)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:79)(cid:77)(cid:90)(cid:77)(cid:93)(cid:80)(cid:82)(cid:3)(cid:98)(cid:86)(cid:82)(cid:82)(cid:99)(cid:3)(cid:99)(cid:94)(cid:3)(cid:98)(cid:100)(cid:98)(cid:99)(cid:77)(cid:87)(cid:93)(cid:3)(cid:94)(cid:100)(cid:97)(cid:3)(cid:86)(cid:87)(cid:85)(cid:86)(cid:3)(cid:85)(cid:97)(cid:94)(cid:102)(cid:99)(cid:86)(cid:857)(cid:3)(cid:65)(cid:100)(cid:97)(cid:3)(cid:94)(cid:100)(cid:99)(cid:90)(cid:94)(cid:94)(cid:89)(cid:3)(cid:87)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:77)(cid:93)(cid:94)(cid:99)(cid:86)(cid:82)(cid:97)(cid:3)(cid:104)(cid:82)(cid:77)(cid:97)(cid:3)(cid:94)(cid:83)(cid:3)(cid:82)(cid:103)(cid:80)(cid:82)(cid:95)(cid:99)(cid:87)(cid:94)(cid:93)(cid:77)(cid:90)(cid:3)
(cid:35)(cid:25)(cid:37)(cid:26)(cid:34)(cid:37)(cid:32)(cid:21)(cid:33)(cid:23)(cid:25)(cid:1)(cid:29)(cid:33)(cid:1)(cid:4)(cid:2)(cid:3)(cid:7)(cid:1)(cid:42)(cid:29)(cid:39)(cid:28)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:39)(cid:34)(cid:39)(cid:21)(cid:31)(cid:1)(cid:33)(cid:25)(cid:39)(cid:1)(cid:38)(cid:21)(cid:31)(cid:25)(cid:1)(cid:25)(cid:43)(cid:35)(cid:25)(cid:23)(cid:39)(cid:25)(cid:24)(cid:1)(cid:39)(cid:34)(cid:1)(cid:37)(cid:25)(cid:21)(cid:23)(cid:28)(cid:1)(cid:49)(cid:3)(cid:8)(cid:1)(cid:32)(cid:29)(cid:31)(cid:31)(cid:29)(cid:34)(cid:33)(cid:47)(cid:1)(cid:40)(cid:35)(cid:1)(cid:6)(cid:2)(cid:45)(cid:1)(cid:26)(cid:37)(cid:34)(cid:32)(cid:1)(cid:4)(cid:2)(cid:3)(cid:6)(cid:46)(cid:1)(cid:1)(cid:20)(cid:25)(cid:1)(cid:35)(cid:31)(cid:21)(cid:33)(cid:1)(cid:39)(cid:34)(cid:1)(cid:38)(cid:40)(cid:35)(cid:35)(cid:34)(cid:37)(cid:39)(cid:1)(cid:39)(cid:28)(cid:29)(cid:38)(cid:1)(cid:27)(cid:37)(cid:34)(cid:42)(cid:39)(cid:28)(cid:1)(cid:22)(cid:44)(cid:1)(cid:25)(cid:43)(cid:25)(cid:23)(cid:40)(cid:39)(cid:29)(cid:33)(cid:27)(cid:1)(cid:34)(cid:33)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:33)(cid:34)(cid:42)(cid:1)(cid:35)(cid:37)(cid:34)(cid:41)(cid:25)(cid:33)(cid:1)(cid:38)(cid:39)(cid:37)(cid:21)(cid:39)(cid:25)(cid:27)(cid:44)(cid:1)
(cid:21)(cid:38)(cid:1)(cid:42)(cid:25)(cid:1)(cid:26)(cid:34)(cid:23)(cid:40)(cid:38)(cid:1)(cid:34)(cid:33)(cid:1)(cid:25)(cid:33)(cid:28)(cid:21)(cid:33)(cid:23)(cid:29)(cid:33)(cid:27)(cid:1)(cid:41)(cid:21)(cid:31)(cid:40)(cid:25)(cid:1)(cid:26)(cid:34)(cid:37)(cid:1)(cid:34)(cid:40)(cid:37)(cid:1)(cid:38)(cid:28)(cid:21)(cid:37)(cid:25)(cid:28)(cid:34)(cid:31)(cid:24)(cid:25)(cid:37)(cid:38)(cid:46)(cid:1)(cid:1)(cid:1)

(cid:18)(cid:29)(cid:33)(cid:23)(cid:25)(cid:37)(cid:25)(cid:31)(cid:44)(cid:47)

(cid:4)(cid:8)(cid:6)(cid:5)(cid:1)(cid:4)(cid:11)(cid:1)(cid:7)(cid:9)(cid:3)(cid:2)(cid:10)(cid:5)(cid:8)(cid:6)(cid:3)(cid:5)
(cid:63)(cid:77)(cid:97)(cid:89)(cid:3)(cid:63)(cid:857)(cid:3)(cid:69)(cid:87)(cid:82)(cid:80)(cid:106)(cid:89)(cid:77)(cid:97)(cid:82)(cid:89)
(cid:52)(cid:86)(cid:77)(cid:87)(cid:97)(cid:92)(cid:77)(cid:93)(cid:860)(cid:3)(cid:52)(cid:86)(cid:87)(cid:82)(cid:83)(cid:3)(cid:54)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:65)(cid:369)(cid:80)(cid:82)(cid:97)(cid:3)
(cid:77)(cid:93)(cid:81)(cid:3)(cid:66)(cid:97)(cid:82)(cid:98)(cid:87)(cid:81)(cid:82)(cid:93)(cid:99)

(cid:15)(cid:24)(cid:25)(cid:34)(cid:1)(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)(cid:6)(cid:30)(cid:30)(cid:36)(cid:17)(cid:28)(cid:1)(cid:13)(cid:21)(cid:32)(cid:31)(cid:33)(cid:35)(cid:1)(cid:35)(cid:31)(cid:1)(cid:14)(cid:35)(cid:31)(cid:19)(cid:27)(cid:24)(cid:31)(cid:28)(cid:20)(cid:21)(cid:33)(cid:34)(cid:1)(cid:31)(cid:22)(cid:1)(cid:11)(cid:31)(cid:37)(cid:17)(cid:7)(cid:17)(cid:40)(cid:1)(cid:12)(cid:24)(cid:17)(cid:33)(cid:29)(cid:17)(cid:19)(cid:21)(cid:36)(cid:35)(cid:25)(cid:19)(cid:17)(cid:28)(cid:34)(cid:43)(cid:1)(cid:9)(cid:30)(cid:19)(cid:42)(cid:1)(cid:19)(cid:31)(cid:30)(cid:35)(cid:17)(cid:25)(cid:30)(cid:34)(cid:1)(cid:22)(cid:31)(cid:33)(cid:38)(cid:17)(cid:33)(cid:20)(cid:1)(cid:28)(cid:31)(cid:31)(cid:27)(cid:25)(cid:30)(cid:23)(cid:1)(cid:34)(cid:35)(cid:17)(cid:35)(cid:21)(cid:29)(cid:21)(cid:30)(cid:35)(cid:34)(cid:1)(cid:35)(cid:24)(cid:17)(cid:35)(cid:1)(cid:17)(cid:33)(cid:21)(cid:1)(cid:34)(cid:36)(cid:18)(cid:26)(cid:21)(cid:19)(cid:35)(cid:1)(cid:35)(cid:31)(cid:1)(cid:33)(cid:25)(cid:34)(cid:27)(cid:34)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:36)(cid:30)(cid:19)(cid:21)(cid:33)(cid:35)(cid:17)(cid:25)(cid:30)(cid:35)(cid:25)(cid:21)(cid:34)(cid:42)(cid:1)
(cid:15)(cid:24)(cid:21)(cid:34)(cid:21)(cid:1)(cid:22)(cid:31)(cid:33)(cid:38)(cid:17)(cid:33)(cid:20)(cid:1)(cid:28)(cid:31)(cid:31)(cid:27)(cid:25)(cid:30)(cid:23)(cid:1)(cid:34)(cid:35)(cid:17)(cid:35)(cid:21)(cid:29)(cid:21)(cid:30)(cid:35)(cid:34)(cid:1)(cid:29)(cid:17)(cid:40)(cid:1)(cid:25)(cid:30)(cid:19)(cid:28)(cid:36)(cid:20)(cid:21)(cid:1)(cid:34)(cid:35)(cid:17)(cid:35)(cid:21)(cid:29)(cid:21)(cid:30)(cid:35)(cid:34)(cid:1)(cid:17)(cid:18)(cid:31)(cid:36)(cid:35)(cid:1)(cid:35)(cid:24)(cid:21)(cid:1)(cid:19)(cid:31)(cid:29)(cid:29)(cid:21)(cid:33)(cid:19)(cid:25)(cid:17)(cid:28)(cid:25)(cid:41)(cid:17)(cid:35)(cid:25)(cid:31)(cid:30)(cid:1)(cid:31)(cid:22)(cid:1)(cid:6)(cid:37)(cid:21)(cid:30)(cid:31)(cid:37)(cid:17)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:35)(cid:24)(cid:21)(cid:1)(cid:29)(cid:31)(cid:30)(cid:21)(cid:35)(cid:25)(cid:41)(cid:17)(cid:35)(cid:25)(cid:31)(cid:30)(cid:1)(cid:31)(cid:22)(cid:1)(cid:31)(cid:36)(cid:33)(cid:1)(cid:30)(cid:31)(cid:30)(cid:46)(cid:19)(cid:31)(cid:33)(cid:21)(cid:1)(cid:32)(cid:33)(cid:31)(cid:23)(cid:33)(cid:17)(cid:29)(cid:34)(cid:42)(cid:1)(cid:16)(cid:31)(cid:33)(cid:20)(cid:34)(cid:1)
(cid:34)(cid:36)(cid:19)(cid:24)(cid:1)(cid:17)(cid:34)(cid:1)(cid:44)(cid:21)(cid:34)(cid:35)(cid:25)(cid:29)(cid:17)(cid:35)(cid:21)(cid:45)(cid:43)(cid:1)(cid:44)(cid:21)(cid:39)(cid:32)(cid:21)(cid:19)(cid:35)(cid:45)(cid:43)(cid:1)(cid:44)(cid:18)(cid:21)(cid:28)(cid:25)(cid:21)(cid:37)(cid:21)(cid:45)(cid:43)(cid:1)(cid:44)(cid:17)(cid:32)(cid:32)(cid:33)(cid:31)(cid:39)(cid:25)(cid:29)(cid:17)(cid:35)(cid:21)(cid:28)(cid:40)(cid:45)(cid:43)(cid:1)(cid:44)(cid:33)(cid:21)(cid:29)(cid:17)(cid:25)(cid:30)(cid:45)(cid:43)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:31)(cid:35)(cid:24)(cid:21)(cid:33)(cid:1)(cid:38)(cid:31)(cid:33)(cid:20)(cid:34)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:37)(cid:17)(cid:33)(cid:25)(cid:17)(cid:35)(cid:25)(cid:31)(cid:30)(cid:34)(cid:1)(cid:31)(cid:22)(cid:1)(cid:35)(cid:24)(cid:21)(cid:34)(cid:21)(cid:1)(cid:38)(cid:31)(cid:33)(cid:20)(cid:34)(cid:1)(cid:35)(cid:24)(cid:17)(cid:35)(cid:1)(cid:25)(cid:29)(cid:32)(cid:28)(cid:40)(cid:1)(cid:22)(cid:36)(cid:35)(cid:36)(cid:33)(cid:21)(cid:1)(cid:21)(cid:37)(cid:21)(cid:30)(cid:35)(cid:34)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:31)(cid:32)(cid:25)(cid:30)(cid:25)(cid:31)(cid:30)(cid:34)(cid:43)(cid:1)
(cid:87)(cid:81)(cid:82)(cid:93)(cid:99)(cid:87)(cid:83)(cid:104)(cid:3)(cid:99)(cid:86)(cid:82)(cid:98)(cid:82)(cid:3)(cid:98)(cid:99)(cid:77)(cid:99)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:77)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:102)(cid:77)(cid:97)(cid:81)(cid:3)(cid:90)(cid:94)(cid:94)(cid:89)(cid:87)(cid:93)(cid:85)(cid:3)(cid:98)(cid:99)(cid:77)(cid:99)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:857)(cid:3)(cid:50)(cid:80)(cid:99)(cid:100)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:92)(cid:77)(cid:104)(cid:3)(cid:81)(cid:87)(cid:362)(cid:82)(cid:97)(cid:3)(cid:92)(cid:77)(cid:99)(cid:82)(cid:97)(cid:87)(cid:77)(cid:90)(cid:90)(cid:104)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:94)(cid:98)(cid:82)(cid:3)(cid:87)(cid:92)(cid:95)(cid:90)(cid:87)(cid:82)(cid:81)(cid:3)(cid:79)(cid:104)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:83)(cid:94)(cid:97)(cid:102)(cid:77)(cid:97)(cid:81)(cid:3)(cid:90)(cid:94)(cid:94)(cid:89)(cid:87)(cid:93)(cid:85)(cid:3)(cid:98)(cid:99)(cid:77)(cid:99)(cid:82)(cid:92)(cid:82)(cid:93)(cid:99)(cid:98)(cid:3)(cid:81)(cid:100)(cid:82)(cid:3)(cid:99)(cid:94)(cid:3)(cid:77)(cid:3)
(cid:30)(cid:36)(cid:29)(cid:18)(cid:21)(cid:33)(cid:1)(cid:31)(cid:22)(cid:1)(cid:33)(cid:25)(cid:34)(cid:27)(cid:34)(cid:1)(cid:17)(cid:30)(cid:20)(cid:1)(cid:36)(cid:30)(cid:19)(cid:21)(cid:33)(cid:35)(cid:17)(cid:25)(cid:30)(cid:35)(cid:25)(cid:21)(cid:34)(cid:42)(cid:1)(cid:12)(cid:28)(cid:21)(cid:17)(cid:34)(cid:21)(cid:1)(cid:34)(cid:21)(cid:21)(cid:1)(cid:35)(cid:24)(cid:21)(cid:1)(cid:25)(cid:30)(cid:22)(cid:31)(cid:33)(cid:29)(cid:17)(cid:35)(cid:25)(cid:31)(cid:30)(cid:1)(cid:36)(cid:30)(cid:20)(cid:21)(cid:33)(cid:1)(cid:35)(cid:24)(cid:21)(cid:1)(cid:19)(cid:17)(cid:32)(cid:35)(cid:25)(cid:31)(cid:30)(cid:1)(cid:44)(cid:9)(cid:35)(cid:21)(cid:29)(cid:1)(cid:3)(cid:6)(cid:1)(cid:13)(cid:25)(cid:34)(cid:27)(cid:1)(cid:8)(cid:17)(cid:19)(cid:35)(cid:31)(cid:33)(cid:34)(cid:45)(cid:1)(cid:25)(cid:30)(cid:1)(cid:12)(cid:17)(cid:33)(cid:35)(cid:1)(cid:9)(cid:1)(cid:31)(cid:22)(cid:1)(cid:35)(cid:24)(cid:21)(cid:1)(cid:6)(cid:30)(cid:30)(cid:36)(cid:17)(cid:28)(cid:1)(cid:13)(cid:21)(cid:32)(cid:31)(cid:33)(cid:35)(cid:1)(cid:31)(cid:30)(cid:1)(cid:8)(cid:31)(cid:33)(cid:29)(cid:1)(cid:3)(cid:2)(cid:46)(cid:10)(cid:1)(cid:25)(cid:30)(cid:19)(cid:28)(cid:36)(cid:20)(cid:21)(cid:20)(cid:1)
(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:87)(cid:98)(cid:3)(cid:9)(cid:6)(cid:8)(cid:13)(cid:3)(cid:50)(cid:93)(cid:93)(cid:100)(cid:77)(cid:90)(cid:3)(cid:68)(cid:82)(cid:95)(cid:94)(cid:97)(cid:99)(cid:3)(cid:99)(cid:94)(cid:3)(cid:69)(cid:99)(cid:94)(cid:80)(cid:89)(cid:86)(cid:94)(cid:90)(cid:81)(cid:82)(cid:97)(cid:98)(cid:3)(cid:83)(cid:94)(cid:97)(cid:3)(cid:83)(cid:77)(cid:80)(cid:99)(cid:94)(cid:97)(cid:98)(cid:3)(cid:99)(cid:86)(cid:77)(cid:99)(cid:3)(cid:80)(cid:94)(cid:100)(cid:90)(cid:81)(cid:3)(cid:80)(cid:77)(cid:100)(cid:98)(cid:82)(cid:3)(cid:77)(cid:80)(cid:99)(cid:100)(cid:77)(cid:90)(cid:3)(cid:97)(cid:82)(cid:98)(cid:100)(cid:90)(cid:99)(cid:98)(cid:3)(cid:99)(cid:94)(cid:3)(cid:81)(cid:87)(cid:362)(cid:82)(cid:97)(cid:3)(cid:92)(cid:77)(cid:99)(cid:82)(cid:97)(cid:87)(cid:77)(cid:90)(cid:90)(cid:104)(cid:3)(cid:83)(cid:97)(cid:94)(cid:92)(cid:3)(cid:99)(cid:86)(cid:94)(cid:98)(cid:82)(cid:3)(cid:77)(cid:93)(cid:99)(cid:87)(cid:80)(cid:87)(cid:95)(cid:77)(cid:99)(cid:82)(cid:81)(cid:3)(cid:87)(cid:93)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:83)(cid:94)(cid:97)(cid:102)(cid:77)(cid:97)(cid:81)(cid:3)(cid:90)(cid:94)(cid:94)(cid:89)(cid:87)(cid:93)(cid:85)(cid:3)
(cid:34)(cid:35)(cid:17)(cid:35)(cid:21)(cid:29)(cid:21)(cid:30)(cid:35)(cid:34)(cid:42)

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549      

FORM 10-K 

(Mark One) 
(cid:1409) 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2016 
OR 

(cid:1407) 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from                 to        
Commission file number 001-33678 
NOVABAY PHARMACEUTICALS, INC. 
(Exact name of registrant as specified in its charter) 

Delaware 
(State or other jurisdiction of incorporation or organization) 

68-0454536 
(I.R.S. Employer Identification No.) 

2000 Powell Street, Suite 1150, Emeryville, California 94608 
(Address of principal executive offices) (Zip Code) 
Registrant’s Telephone Number, Including Area Code: (510) 899-8800 
Securities registered pursuant to Section 12(b) of the Act: 

Title of each class 
Common Stock, $0.01 par value per share 

Name of each exchange on which registered 
NYSE MKT 

Securities registered pursuant to Section 12(g) of the Act: None   

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1407)    No (cid:1409) 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1407)    No (cid:1409) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and 
(2) has been subject to such filing requirements for the past 90 days. Yes (cid:1409)    No (cid:1407) 

Indicate  by  check  mark  whether  the  registrant  has  submitted  electronically  and  posted  on  its  corporate  Web  site,  if  any,  every 
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for 
such shorter period that the registrant was required to submit and post such files). Yes (cid:1409) No (cid:1407) 

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will 
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III 
of this Form 10-K or any amendment to this Form 10-K. (cid:1407) 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of 
the Exchange Act. (Check one): 

Large accelerated filer   (cid:1407) 
Non-accelerated filer   (cid:1407) 
(Do not check if a smaller reporting company) 

Accelerated filer  
(cid:1407) 
Smaller reporting company   (cid:1409) 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes (cid:1407) No (cid:1409) 
As of June 30, 2016, the aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to 
the last sale price of such stock as of such date on the NYSE Mkt, was approximately $7,530,005. This figure excludes an aggregate of 
6,144,900 shares of common stock held by officers and directors as of June 30, 2016. Exclusion of shares held by any of these persons 
should  not  be  construed  to  indicate  that  such  person  possesses  the  power,  direct  or  indirect,  to  direct  or  cause  the  direction  of  the 
management or policies of the registrant, or that such person is controlled by or under common control with the registrant.  

As of March 22, 2017, there were 15,288,175 shares of the registrant’s common stock outstanding. 

DOCUMENTS INCORPORATED BY REFERENCE 

Part III incorporates information by reference from the Proxy Statement for the 2017 Annual Meeting of Stockholders expected to 

be held in June 2, 2017.  

 
 
   
   
NOVABAY PHARMACEUTICALS, INC. 
ANNUAL REPORT ON FORM 10-K 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016 

TABLE OF CONTENTS 

Page 

PART I 
ITEM 1.  BUSINESS ..................................................................................................................................................... 
ITEM 1A.  RISK FACTORS ............................................................................................................................................ 
ITEM 1B.  UNRESOLVED STAFF COMMENTS ......................................................................................................... 
ITEM 2.  PROPERTIES ................................................................................................................................................. 
ITEM 3.  LEGAL PROCEEDINGS ............................................................................................................................... 
ITEM 4.  MINE SAFETY DISCLOSURES .................................................................................................................. 

PART II 
ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND 
ISSUER PURCHASES OF EQUITY SECURITIES .................................................................................. 
ITEM 6.  SELECTED FINANCIAL DATA .................................................................................................................. 
ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 

OF OPERATIONS ...................................................................................................................................... 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............................... 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................................... 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 

FINANCIAL DISCLOSURE ...................................................................................................................... 
ITEM 9A  CONTROLS AND PROCEDURES ............................................................................................................... 
ITEM 9B.  OTHER INFORMATION .............................................................................................................................. 

PART III 
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ........................................ 
ITEM 11.  EXECUTIVE COMPENSATION .................................................................................................................. 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 

  1
  6
 13
  13
  13
  13

  13
  15

  16
  25
  26

  61
  61
  61

  62
  62

RELATED STOCKHOLDER MATTERS ................................................................................................. 

  62

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 

INDEPENDENCE ...................................................................................................................................... 
ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES ................................................................................. 

  62
  62

PART IV 
ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES .............................................................................. 

  62

Unless the context requires otherwise, all references in this report to “we,” “our,” “us,” the “Company” and “NovaBay” refer 
to  NovaBay  Pharmaceuticals,  Inc.  and  its  subsidiaries.  Further,  all  references  to  “we,”  “us,”  “our,”  “the  Company,”  or 
“NovaBay” herein refer to the California corporation prior to the date of the Reincorporation (as defined below), and to the 
Delaware corporation on and after the date of the Reincorporation. 

NovaBay®,  NovaBay  Pharma®,  Avenova®,  NeutroPhase®,  CelleRx®,  AgaNase®,  Aganocide®,  AgaDerm®,  Neutrox™ and 
Going Beyond Antibiotics® are trademarks of NovaBay Pharmaceuticals, Inc. All other trademarks and trade names are the 
property of their respective owners. 

On December 18, 2015, the Company effected a 1-for-25 reverse split of its common stock. The accompanying financial 
statements and related notes give retroactive effect to this reverse stock split. 

i 

 
  
  
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
  
  
  
   
This page intentionally left blank

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This  report  contains  forward-looking  statements  that  are  based  on  our  management’s  beliefs  and  assumptions  and  on 
information  currently  available  to  our  management.  These  forward-looking  statements  include,  but  are  not  limited  to, 
statements  regarding  our  product  candidates,  market  opportunities,  competitions,  strategies,  anticipated  trends  and 
challenges in our business and the markets in which we operate, and anticipated expenses and capital requirements. In some 
cases,  you  can  identify  forward-looking  statements  by  terms  such  as  “anticipates,”  “believes,”  “could,”  “estimates,” 
“expects,”  “intends,”  “may,”  “plans,”  “potential,”  “predicts,”  “projects,”  “should,”  “will,”  “would”  and  similar 
expressions intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, 
uncertainties and other factors that may cause our actual results, performance or achievements to be materially different 
from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss 
many of these risks in greater detail under the heading “Risk Factors” in Item 1A of this report. Given these uncertainties, 
you should not place undue reliance on these forward-looking statements. You should read this report and the documents 
that we reference and have filed as exhibits thoroughly and with the understanding that our actual future results may be 
materially  different  from  what  we  expect.  Also,  forward-looking  statements  represent  our  management’s  beliefs  and 
assumptions only as of the date of this report. Except as required by law, we assume no obligation to update these forward-
looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these 
forward-looking statements, even if new information becomes available in the future. 

PART I 

ITEM 1.  BUSINESS 

Overview  

We  are  a  pharmaceutical  company  that  develops,  manufactures,  and  markets  innovative  anti-infective  products  for  a 
multitude of uses. However, we are predominantly focused on commercializing prescription Avenova® for the domestic 
eye care market in the United States. 

Avenova is the only eye care product formulated with our proprietary, stable and pure form of hypochlorous acid (marketed 
as Neutrox®). By replicating the antimicrobial chemicals used by white blood cells to fight infection, Avenova has proven in 
laboratory testing to have broad antimicrobial properties. It removes microorganisms and debris from the skin on the eyelids 
and lashes without burning or stinging. It is also the only commercial product clinically validated to reduce bacterial load on 
the ocular skin surface, the buildup of which can cause the chronic eye condition blepharitis. 

In November 2015, we introduced a new business strategy to restructure our business and focus on growing sales of Avenova 
in the United States.  This new strategy allowed us to achieve our goal of reaching adjusted positive cash flow from operations 
(excluding working capital changes) by the end of 2016. Our current three-part business strategy is comprised of: (1) focusing 
our resources on growing the commercial sales of Avenova in the U.S. eye care market, including the implementation of an 
innovative  sales  and  marketing  strategy  to  increase  product  margin  and  profitability;  (2)  significantly  reducing  expenses 
through the restructuring of our operations and other cost reduction measures; and (3) seeking additional sources of revenue 
through partnering, divesting and/or other means of monetizing non-core assets in urology, dermatology, and wound care. 

In addition to Avenova, we have also developed other commercial products containing Neutrox, including NeutroPhase® for 
the wound care market and CelleRx for the dermatology market. We have partnerships for NeutroPhase in the U.S., as well 
as select overseas markets, most notably China. 

Avenova 

Based on positive sales performance in 2015, we incrementally grew our salesforce to 49 medical sales representatives in 
2016  and  to  55  in  January  2017.  Having  previously  been  managed  through  a  professional  employer  organization,  we 
transitioned our contract salesforce to direct employees of the Company in January 2017. This marked an important milestone 
in establishing ourselves as a truly consolidated company under the direction of one management team. We believe we are 
poised for success with all our sales representatives having extensive experience with eye care products and medical devices, 
a skill set critical for rapid adoption of Avenova in the marketplace. 

1 

 
  
  
  
  
  
  
  
  
  
  
   
 
 
We currently believe our target market to be the estimated 30 million Americans who suffer from blepharitis and chronic 
dry-eye. To access our target market, our salesforce is calling on a base of prescribers that includes the approximately 17,000 
ophthalmologists and approximately 37,000 optometrists in the U.S. Our sales and marketing campaign targets major urban 
areas such as New York, Los Angeles, Boston, Atlanta, and San Francisco. 

Avenova offers distinct advantages, when compared to alternative regimens that contain soaps, bleach, and other impurities, 
as  it  removes  unwanted  microorganisms  from  the  skin  without  the  use  of  harmful  ingredients  such  as  detergents  and 
bleach.  The removal of these harmful items helps control eyelid inflammation, itching and other painful symptoms. Many 
key opinion leaders in the field of ophthalmology and optometry have embraced Avenova as a tool in the management of lid 
and lash hygiene and have joined our Ophthalmic and Optometry Advisory Boards (the “Advisory Boards”) to promote its 
use among their peers. Our Advisory Board members are essential in our goal of educating other physicians that Avenova, 
used twice daily, is well suited for treating a variety of chronic eye conditions. 

Because prescription Avenova has been shown to neutralize bacterial toxins in vitro, it was specifically designed for daily 
eyelid hygiene. It is the only commercially available product to be clinically validated in a multicenter study to significantly 
reduce the bacteria that can cause blepharitis.  Data from the clinical study showed that Avenova reduced the bacterial load 
on ocular skin surface by more than 90% (S. epidermidis by 99.5%) within 20 minutes of use without affecting the diversity 
of  the  remaining  bacteria.    Results  of  this  clinical  study  were  presented  at  the  Association  for  Research  in  Vision  and 
Ophthalmology (“ARVO”) annual meeting in May 2016. We expect to present data from additional clinical studies to further 
validate the use of Avenova in managing blepharitis and other eye conditions. Avenova may also be useful in pre- and post-
surgical settings for LASIK and cataract patients, as well as managing contact lens intolerance. We believe the total potential 
market for this product is approximately 41 million patients. 

We  expect  continued  benefit  from  the  support of  the key opinion  leaders  on  the  Advisory  Board, our  active  schedule  of 
educational and marketing programs and strong presence at major eye care conferences in the coming months, including the 
American  Academy  of  Ophthalmology,  the  American  Optometric  Association,  the  American  Society  of  Cataract  and 
Refractive Surgery Conferences and the South-Eastern Congress of Optometry, as well as numerous Vision Expo meetings 
held around the U.S. We also plan to continue advertising in leading ophthalmic and optometric trade journals. At these 
meetings, in professional publications, and in surveys, nationally prominent ophthalmologists and optometrists are reporting 
on patient improvements in eye care from the use of Avenova. 

We have distribution agreements with McKesson Corporation, Cardinal Health, and AmerisourceBergen Corporation that 
make Avenova accessible in 90% of the approximate 67,000 retail pharmacies across the U.S. Avenova also is marketed 
through the top ophthalmology and optometry networks. These include the Vision Source Independent Optometry Network, 
the largest independent optometry network in the U.S. representing 2,800 independent optometrist offices, and ALLDocs 
Optometry Group (also known as The Association of LensCrafters Leaseholding Doctors), the second largest independent 
optometry group in the U.S., which works closely with its LensCrafters partners. 

Throughout  2016  we  reported  increases  in  key  metrics,  including  the  total  number  of  prescribers,  as  well  as  growth  in 
prescription volume as reported by distributors and the number of retail pharmacies ordering Avenova, both of which have 
been confirmed by third-party prescription data providers. Increases in Avenova volume include growth of Avenova product 
reorders and new prescriptions. 

We  expect  that  our  prescription  business  will  be  the  main  driver  of  long-term  Avenova  sales  growth  and  gross  margin 
expansion.  We are focusing our primary sales efforts on building our prescription business under a value pricing model. Our 
strategy is supported by the high percentage rate of insurance reimbursement, with over 90% of Avenova prescriptions filled 
at pharmacies covered by insurance at the end of 2016. As a result of this focus, we have significantly increased the percentage 
of  total  Avenova  prescriptions.  We  are  working  to  improve  insurance  reimbursement  coverage  for  Avenova  and  we  are 
aligning our product pricing accordingly. 

We also expect to invest in systems that support prescribing physicians’ efforts to educate their patients. We have made it 
easy for doctors to get Avenova into the hands of patients by providing availability through well-known national pharmacy 
chains, specialty pharmacies, or directly through the practitioners’ office. Furthermore, in order to ensure consistent pricing, 
we  have  instituted  rebate  cards  to  ensure  the  best  price  for  the  patient  at  the  pharmacy.  This  method,  combined  with 
reimbursement under insurance plans, could provide us with potential additional revenue upside. 

2 

 
  
  
  
  
  
  
  
    
 
 
Competition 

There are many companies that sell lid and lash scrubs, most of these are surfactant (soap) based, such as lid scrubs or baby 
shampoos.  Unlike  its  competitors,  Avenova  consists  of  saline  and  0.01%  pure  hypochlorous  acid,  without  the  bleach 
impurities included in competitive offerings. While newer prescription products have recently been commercially launched, 
they all include bleach or other impurities. Because it lacks these impurities, we believe that physicians and their patients will 
choose Avenova over other competitive prescription products or over-the-counter (“OTC”) soap products. 

Strategic Alternatives and Other Assets 

The third key aspect of our business strategy is to seek additional sources of revenue through partnering, divesting and/or 
other  means  of  monetizing  non-core  assets.  We  therefore  are  in  the  process  of  seeking  additional  sources  of  revenue  by 
licensing or selling select non-core assets in urology, dermatology, and wound care, as described in more detail below. 

Aganocide Compounds 

In addition to our Neutrox family of products, we have synthesized and developed a second category of novel compounds 
also aimed at harnessing the power of white blood cell chemistry to address the global, topical anti-infective market. This 
second product category includes auriclosene, our lead clinical-stage Aganocide compound, which is a patented, synthetic 
molecule  with  a  broad  spectrum  of  uses  against  bacteria,  viruses  and  fungi.  Mimicking  the  anti-infective  chemistry  and 
mechanism  of  action  that  human  white  blood  cells  use  against  infections,  Aganocides  possess  a  significantly  reduced 
likelihood of bacteria or viruses developing resistance, which is critical for advanced anti-infectives. Auriclosene has been 
designated as a new chemical entity and granted broad composition of matter patent protection to 2028 by the U.S. Patent 
Office. 

AIS (Urology)   

Our  urology  program  utilizes  the  technology  of  our  Aganocide  compounds  and  is  in  an  advanced  stage  of  clinical 
development. Statistically significant and clinically meaningful results have been reported from two Phase 2 clinical studies 
with our Auriclosene Irrigation Solution (“AIS”) in urinary catheter blockage and encrustation (“UCBE”).  We announced 
the results of a Phase 2b clinical study in September 2016 which demonstrated that AIS, when compared with the product 
that  represents  the  current  standard  of  care,  proved  more  effective  in  reducing  urinary  blockage  in  patients  with  chronic 
indwelling  urinary  catheters  who  have  repeat  history  of  blockage.  In  this  study,  AIS  exhibited  the  potential  for  rapid 
decolonization of a range of urologic pathogens. Approximately 100,000 patients in the U.S. currently chronically suffer 
from UCBE.  We estimate that the healthcare costs to manage these patients is in the billion-dollar range. 

CelleRx (Dermatology). 

Created for cosmetic procedures, CelleRx (0.015% Neutrox) is a gentle cleansing solution that is effective for post-laser 
resurfacing, chemical peels and other cosmetic surgery procedures. Cosmetic surgeons and aesthetic dermatologists have 
found that CelleRx results in less pain, erythema, and exudate compared to Dakin solution, which contains bleach impurities. 
CelleRx is a non-alcohol formulation that doesn’t dry or stain the skin, and most importantly, has been shown to reduce the 
patient’s downtime post procedure. 

CelleRx is well positioned in the cosmetic surgery and aesthetic dermatology space as an adjunct therapy for the pre/post 
procedural phase of chemical and laser facial skin peels. Currently many generic creams and salves, as well as home-mixed 
acetic acid potions, are used for this purpose. We believe that CelleRx is clearly differentiated in this field. CelleRx is unique 
prescription product with 510(k) clearance as a skin and wound cleanser. CelleRx has proven to be safe, soothing and have 
an unusually broad spectrum  antimicrobial action  in solution.  Many  clinicians have used  the product  clinically  and  have 
reported excellent results. 

intelli-Case 

In addition to improving the eyecare of many Americans through promoting Avenova for lid and lash hygiene, we have 
developed a contact lens case that improves the safety of those contact lens wearers who use hydrogen peroxide solution to 
disinfect their lenses. In June 2015, we received FDA-clearance for the intelli-Case, a highly innovative, easy-to-use device 
for use with hydrogen peroxide disinfection solutions for soft and rigid gas permeable contact lenses. More than 24 million 
Americans disinfect their contact lenses with a multipurpose disinfection system to prevent potentially serious infections. 
Approximately two million use hydrogen peroxide as a disinfection solution. Many ophthalmologists and optometrists favor 
3 

 
  
  
  
  
  
  
  
  
  
  
  
  
the disinfection and lens material compatibility peroxide systems provide, yet side effects associated with misuse and non-
compliance minimize peroxide system use. Hydrogen peroxide in too low of a concentration does not fully disinfect lenses 
and in too high of a concentration can severely irritate the eye. 

  The  intelli-Case  monitors  the  neutralization  of  hydrogen  peroxide  during  the  disinfection  cycle  with  sophisticated 
microprocessor  electronics  embedded  in  the  cap  of  what  otherwise  looks  like  a  standard  peroxide  lens  case.  The  LED 
indicators on the lid inform the user if the lenses are safe to insert into the eyes, resulting in a disinfection system that is safe 
yet simple to use. We are seeking potential partners with the resources to make this breakthrough device available to the 
largest number of contact lens wearers as soon as possible.   

NeutroPhase (Wound Care). 

We believe that NeutroPhase is a well-suited product to treat the six million patients in the U.S. who suffer from chronic non-
healing wounds, such as pressure, venous stasis and diabetic ulcers. Consisting of 0.03% Neutrox, NeutroPhase is used to 
cleanse and remove microorganisms from any type of acute or chronic wound, and can be used with any type of wound care 
modality. Recently, NeutroPhase has been found to be an effective irrigation solution as part of the adjunct treatment for 
Necrotizing Fasciitis (“NF”). Also known as flesh-eating disease, NF typically has a high mortality and amputation rate (30% 
and  70%,  respectively)  even  with  aggressive  debridement  and  antibiotic  treatment.  In  vitro  studies  have  shown  that,  in 
solution,  NeutroPhase  both  kills  the  microorganisms  implicated  in  NF  and  neutralizes  the  toxins  secreted  by  the 
microorganisms. Success using NeutroPhase as an irrigation solution has established it as an effective part of the adjunct 
treatment for this deadly disease.  

In  March  2015,  the  National  Necrotizing  Fasciitis  Foundation  (“NNFF”)  named  NeutroPhase  its  official  “Flesh  Eating 
Disease” wound cleanser. The NNFF is a non-profit organization established in 1997 by two survivors of the disease. NNFF 
has evolved to become the world’s leading resource for information regarding necrotizing fasciitis, as well as a repository of 
cases reported worldwide.  

NeutroPhase is competing in a crowded wound cleanser market with many older and lower-priced products with similar uses. 
However, we believe NeutroPhase  has distinct  competitive  advantages  in  a  market  where  there  is  currently  no dominant 
product. In the U.S. and internationally, NeutroPhase is distributed through commercial partners, such as Pioneer Pharma 
Company Limited, or “Pioneer,” a Shanghai-based company, for the distribution of NeutroPhase throughout Southeast Asia 
and mainland China and in the U.S., by Principle Business Enterprise (“PBE”). 

U.S. FDA Regulatory Clearance of Neutrox-based Products. We are marketing Avenova, NeutroPhase, and CelleRx as 
medical devices regulated under the FDA 510(k) process. Avenova and CelleRx fall under the general intended use of skin 
and wound cleansers. NeutroPhase was cleared by the U.S. FDA “for use under the supervision of healthcare professionals 
for  cleansing  and  removal  of  foreign  material,  including  microorganisms  and  debris  from  wounds,  and  for  moistening 
absorbent wound dressings and cleaning minor cuts, minor burns, superficial abrasions, and minor irritations of the skin. It 
is also intended for moistening and debriding acute and chronic dermal lesions, such as Stage I to IV pressure ulcers, stasis 
ulcers, leg ulcers, diabetic foot ulcers, post-surgical wounds, first and second degree burns, and grafted and donor sites. 

Recent Events  

On  October  28,  2016,  the  Company  received  a  letter  from  the  NYSE  MKT  informing  it  that  the  Company  is  back  in 
compliance with the NYSE MKT continued listing standards set forth in Part 10 of the NYSE MKT Company Guide (the 
“Company  Guide”).  Specifically,  the  Company  had  resolved  the  continued  listing  deficiencies  with  respect  to  Sections 
1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the Company Guide referenced in the NYSE MKT’s letters dated April 28, 2015, 
July 10, 2015 and March 17, 2016. The Company is subject to ongoing review for compliance with NYSE MKT requirements 
as part of the NYSE MKT’s routine monitoring. 

Equity 

In February 2016, we closed a financing with accredited investors in which we raised a total of $2.8 million, or approximately 
$2.6 million in net cash proceeds after deducting a placement agent commission due to China Kington Asset Management 
(“China Kington”) and other offering costs of $0.2 million. 

4 

 
  
   
  
  
  
  
  
  
   
  
  
 
 
In May 2016, we closed the first tranche of an April 2016 financing (the “April 2016 Financing”) in which we raised a total 
of  $7.8  million,  or  approximately  $7.3  million  in  net  cash  proceeds  after  deducting  China  Kington’s  placement  agent 
commission and other offering costs of $0.5 million. 

In August 2016, we closed the second tranche of this financing, raising a total of $4.0 million, or approximately $3.8 million 
in net cash proceeds after deducting China Kington’s placement agent commission and other offering costs of $0.2 million. 

During the third quarter of 2016, certain warrant holders exercised warrants in the amount of $6.9 million, or approximately 
$6.6 million in net cash proceeds after deducting placement agent commissions and other offering costs of $0.3 million. 

During the fourth quarter of 2016, certain warrant holders exercised warrants in the amount of $0.9 million, or approximately 
$0.9 million in net cash proceeds after deducting placement agent commissions and other offering costs of approximately 
$32 thousand.  

For more information on the equity transactions, please see Note 11 to our consolidated financial statements. 

Borrowings 

In  January  2016,  in  connection  with  a  bridge  loan  (the  “Bridge  Loan”)  facilitated  by  China  Kington,  we  issued  five  (5) 
promissory notes to certain lenders between December 2015 and January 2016 for an aggregate amount of $3.0 million. 

After the closing of the first tranche of the April 2016 Financing, in May 2016, we used $2.5 million of the proceeds to repay 
the principal on the promissory notes outstanding under the $3.0 million Bridge Loan. 

After  the  closing  of  the  second  tranche  of  the  April  2016  Financing,  in  August  2016  we  repaid  the  final  $0.5  million 
outstanding under the Bridge Loan and all liens on our property and assets associated with the Bridge Loan were released. 

Office Lease  

On August 24, 2016, we entered into an Office Lease (the “Lease”), pursuant to which we leased approximately 7,799 
rentable square feet of real property located on the eleventh floor (Suite 1150) at 2000 Powell Street, Emeryville, California 
94608 from KBSIII Towers at Emeryville, LLC (the “Landlord”), for our new principal executive offices. The expiration 
date of the Lease is February 28, 2022, unless earlier terminated pursuant to any provision of the Lease. The Company has 
the option to extend the term of the Lease for one five (5)-year period upon written notice to the Landlord due no earlier 
than twelve (12) months and no later than nine (9) months prior to the expiration of the Lease.  

The Company still has a lease commitment for the laboratory facilities and office space at Suite 550, EmeryStation North 
Building,  5980  Horton  Street,  Emeryville,  California  (“EmeryStation”)  under  an  operating  lease  which  will  expire  on 
October 21, 2020. On July 11, 2016, the Company entered into a Sublease Agreement to sublease all 16,465 rentable square 
feet of real property at EmeryStation (the “Sublease Agreement”). The commencement date under the Sublease Agreement 
was  September  8,  2016.  The  expiration  date  of  the  Sublease  Agreement  is  October  21,  2020,  as  amended  (while  the 
expiration date of the Company’s master lease for the EmeryStation premises is October 31, 2020), unless earlier terminated 
pursuant to the Company terminating its master lease for EmeryStation or the Sublease Agreement.  

Employees  

As of December 31, 2016, we had 21 direct full-time employees. None of our employees are represented by labor unions or 
covered by collective bargaining agreements. We consider our relationship with our employees to be good. In January 2017, 
we internalized our contract salesforce of 58 medical sales representatives. As of February 28, 2017, we have a total of 78 
direct full time employees.  

Available Information 

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those 
reports  filed or  furnished  pursuant  to  Sections  13(a) and 15(d) of  the  Securities  Exchange  Act of 1934,  as  amended,  are 
available free of charge on our corporate website, located at www.novabay.com, as soon as reasonably practicable after we 
electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). 

5 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
ITEM 1A. RISK FACTORS 

Our business is subject to a number of risks, the most important of which are discussed below. You should consider carefully 
the following risks in addition to the other information contained in this report and our other filings with the SEC before 
deciding to buy, sell or hold our common stock. If any of the following risks actually occur, our business, financial condition 
or results of operations could be materially adversely affected, the value of our common stock could decline and you may 
lose all or part of your investment. The risks and uncertainties described below are not the only ones facing our Company. 
Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our 
business operations.  

Risks Relating to Our Liquidity  

We have a history of losses and we may never achieve or maintain sustained profitability.  

We have historically incurred net losses and we may never achieve or maintain sustained profitability. In addition, at this 
time:  

(cid:404)  we  expect  to  incur  substantial  marketing  and  sales  expenses  as  we  continue  to  attempt  to  increase  sales  of  our

Avenova product 

(cid:404)  our results of operations may fluctuate significantly;  
(cid:404)  we may be unable to develop and commercialize our product candidates; and  
(cid:404) 

it may be difficult to forecast accurately our key operating and performance metrics because of our limited operating
history. 

We will need to generate significant revenues to achieve and maintain profitability. If we cannot successfully market and sell 
Avenova, either independently or with partners, we will not be able to generate sufficient revenues to achieve or maintain 
profitability in the future. Our failure to achieve and subsequently maintain profitability could have a material adverse impact 
on the market price of our common stock.  

Risks Relating to Owning Our Common Stock  

If we conduct offerings in the future, the price at which we offer our securities may trigger a price protection provision 
included  in  warrants  originally  issued  in  July  2011,  March  2015  and  October  2015,  reducing  the  probability  and 
magnitude of any future share price appreciation.  

As part of our October 2015 offering, we agreed to provide certain price protections affecting currently outstanding warrants 
exercisable for an aggregate of 565,695 shares of our common stock, of which 281,093 shares must be issued, if at all, by 
March 6, 2020, and 284,602 shares must be issued, if at all, by October 27, 2020 (the “Warrants”). Specifically, in the event 
that we undertake a third-party equity financing of either: (1) common stock at a sale price of less than $5.00 per share; or 
(2) convertible securities with an exercise price of less than $5.00 per share, we have agreed to reduce the exercise price of 
all Warrants to such lower price. The exercise price of the Warrants is currently set at $1.81 as a result of our February 2016 
private  placement  offering.  The  further  reduction  of  the  exercise  price  for  the  Warrants  would  limit  the  probability  and 
magnitude of future share price appreciation, if any, by placing downward pressure on our stock price if it exceeds such 
offering sale price. All of the Warrants are currently exercisable and will remain so after any exercise price adjustment. In 
the past, we have extended the expiration dates or adjusted other terms of the Warrants as consideration for certain offering 
conditions, and we cannot assure you that we will not do so in the future. Any such modifications would reduce the probability 
and magnitude of any share price appreciation during the period of the extension. We cannot guarantee that you will receive 
a return on your investment when you do sell your shares or that you will not lose the entire amount of your investment. If 
you do receive a return on your investment, it may be lower than the return you would have realized in the absence of the 
price protection provisions discussed hereof.  

6 

 
  
  
  
  
  
  
  
  
  
  
  
  
   
 
 
The price of our common stock may fluctuate substantially, which may result in losses to our stockholders.  

The  stock  prices of  many  companies  in  the  pharmaceutical  and  biotechnology  industry  have  generally  experienced  wide 
fluctuations, which are often unrelated to the operating performance of those companies. The market price of our common 
stock is likely to be volatile and could fluctuate in response to, among other things:  

the announcement of new products by us or our competitors;              
the announcement of partnering arrangements by us or our competitors;              

   (cid:404) 
   (cid:404) 
   (cid:404)  quarterly variations in our or our competitors’ results of operations;              
   (cid:404) 
(cid:404) 

announcements by us related to litigation;              
changes in our earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to 
achieve analysts’ earnings estimates;              

   (cid:404)  developments in our industry; and              

(cid:404)  general,  economic  and  market  conditions,  including  volatility  in  the  financial  markets,  a  decrease  in  consumer 
confidence and other factors unrelated to our operating performance or the operating performance of our competitors. 

The volume of trading of our common stock may be low, leaving our common stock open to the risk of high volatility.  

The number of shares of our common stock being actively traded may be very low and any stockholder wishing to sell his, 
her,  or  its  stock  may  cause  a  significant  fluctuation  in  the  price  of  our  stock.  We  have  a  number  of  large  stockholders, 
including  our principal  stockholders  China Pioneer  Pharma Holdings  Limited  (“China  Pioneer”),  Pioneer Pharma  (Hong 
Kong) Company Limited as a wholly-owned subsidiary of China Pioneer and the recipient of all of the holdings of Pioneer 
Pharma (Singapore) Pte. Ltd. pursuant to an internal corporate reorganization of China Pioneer (“Pioneer Hong Kong”) and 
Mr. Jian Ping Fu. Each of China Pioneer and Mr. Fu own 34% and 26% of our common stock, respectively. The sale of a 
substantial number of shares of common stock by such large stockholders within a short period of time could cause our stock 
price to decrease substantially. In addition, low trading volume of a stock increases the possibility that, despite rules against 
such  activity,  the  price  of  the  stock  may  be  manipulated  by  persons  acting  in  their  own  self-interest.  We  may  not  have 
adequate market makers and market making activity to prevent manipulation.  

Our  amended  and  restated  certificate  of  incorporation  and  bylaws  and  Delaware  law  contain  provisions  that  could 
discourage a third party from making a takeover offer that is beneficial to our stockholders. 

Anti-takeover  provisions  of  our  amended  and  restated  certificate  of  incorporation,  amended  and  restated  bylaws  and 
Delaware law may have the effect of deterring or delaying attempts by our stockholders to remove or replace management, 
engage in proxy contests and effect changes in control. The provisions of our charter documents include:  

a classified board so that only one of the three classes of directors on our Board of Directors is elected each year;  
elimination of cumulative voting in the election of directors;              

   (cid:404) 
   (cid:404) 
   (cid:404)  procedures for advance notification of stockholder nominations and proposals;              
   (cid:404) 
(cid:404) 

the ability of our Board of Directors to amend our bylaws without stockholder approval; and              
the ability of our Board of Directors to issue up to 5,000,000 shares of preferred stock without stockholder approval 
upon the terms and conditions and with the rights, privileges and preferences as our Board of Directors may determine. 

In addition, as a Delaware corporation, we are subject to the Delaware General Corporation Law (“DGCL”), which includes 
provisions that may have the effect of deterring hostile takeovers or delaying or preventing changes in control or management 
of  our  Company.  Provisions  of  the  DGCL  could  make  it  more  difficult  for  a  third  party  to  acquire  a  majority  of  our 
outstanding voting stock by discouraging a hostile bid, or delaying, preventing or deterring a merger, acquisition or tender 
offer in which our stockholders could receive a premium for their shares, or effect a proxy contest for control of NovaBay or 
other changes in our management.  

We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may 
be limited to the value of our stock.  

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock 
in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition 
and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. If we do 
not pay dividends, you will experience a return on your investment in our shares only if our stock price appreciates. We 
cannot assure you that you will receive a return on your investment when you do sell your shares or that you will not lose the 
entire amount of your investment. 

7 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
China Pioneer, Pioneer Hong Kong, Mr. Jian Ping Fu and/or China Kington might influence our corporate matters in a 
manner that is not in the best interest of our general stockholders.  

As of March 1, 2017, China Pioneer beneficially owns approximately 34% of our common stock. Our director Mr. Xinzhou 
“Paul” Li is the chairman of China Pioneer. Pursuant to the arrangement of our Bridge Loan, two (2) of our directors were 
nominated by China Kington, including Mr. Mijia “Bob” Wu, who is the Managing Director of China Kington and Non-
Executive Director of Pioneer Hong Kong, and Mr. Xiaoyan “Henry” Liu, who has worked closely with China Kington on 
other financial transactions in the past. Mr. Jian Ping Fu beneficially owns approximately 26% of our common stock. China 
Kington and its affiliates have served as placement agent for three purchases of Company securities by Mr. Fu during the last 
year.  

As a result, China Pioneer, Pioneer Hong Kong as a wholly-owned subsidiary of China Pioneer and China Kington have 
input on all matters before our Board of Directors and may be able to exercise significant influence over all matters requiring 
board  and  stockholder  approval.  Please  see  the  risk  factor  entitled  “We  may  be  unable  to  raise  additional  capital  on 
acceptable terms in the future, which may in turn limit our ability to develop and commercialize products and technologies.” 
China Pioneer, Pioneer Hong Kong and China Kington may choose to exercise their influence in a manner that is not in the 
best interest of our general stockholders.  

In  addition,  were  China  Pioneer,  Pioneer  Hong  Kong  and  Mr.  Fu  to  cooperate,  they  could  unilaterally  elect  all  of  their 
preferred director nominees at our 2017 Annual Meeting of Stockholders. Even with our classified board, China Pioneer, 
Pioneer Hong Kong and Mr. Fu could ensure that five (5) of our eight (8) directors are either nominees of China Pioneer, 
Pioneer Hong Kong or China Kington. In the interim, China Pioneer, Pioneer Hong Kong, China Kington and/or Mr. Fu 
could exert significant indirect influence on us and our management.  

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.  

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership 
change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the 
corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards and other pre-change tax attributes (such 
as research tax credits) to offset its post-change income may be limited. Since our formation, we have raised capital through 
the issuance of capital stock on several occasions which, combined with the purchasing shareholders’ subsequent disposition 
of those shares, may have resulted in one or more changes of control, as defined by Section 382 of the Code. We have not 
currently  completed  a  study  to  assess  whether  any  change  of  control  has  occurred,  or  whether  there  have  been  multiple 
changes of control since our formation, due to the significant complexity and cost associated with such study. If we have 
experienced a change of control at any time since its formation, its NOL carryforwards and tax credits may not be available, 
or  their  utilization  could  be  subject  to  an  annual  limitation  under  Section  382.  In  addition,  since  we  may  need  to  raise 
additional funding to finance our operations, we may undergo further ownership changes in the future. If we earn net taxable 
income, our ability to use our pre-change NOL carryforwards to offset United States federal taxable income may be subject 
to limitations, which could potentially result in increased future tax liability to us. 

Risks Relating to Our Business  

Our future success is largely dependent on the successful commercialization of Avenova.  

The future success of our business is largely dependent upon the successful commercialization of Avenova. We are dedicating 
a substantial amount of our resources to advance Avenova as aggressively as possible. If we encounter difficulties in its 
commercialization, we may not have the resources necessary to continue our business in its current form. If we are unable to 
establish and maintain adequate sales, marketing and distribution capabilities or enter into or maintain agreements with third 
parties  to  do  so,  we  may  be  unable  to  successfully  commercialize  our  products.  We  believe  we  are  creating  an  efficient 
commercial organization. However, we may not be able to correctly judge the size and experience of the sales and marketing 
force and the scale of distribution necessary to be successful. Establishing and maintaining sales, marketing, and distribution 
capabilities are expensive and time-consuming. Such expenses may be disproportionate compared to the revenues we may 
be able to generate on sales of Avenova. 

8 

 
  
  
  
  
  
  
  
  
   
  
 
 
Our commercialized products are not approved by the FDA as a drug, so we rely solely on the 510(k) clearance of Neutrox 
as a medical device.  

Our business and future growth depend on the development, use and sale of products that are subject to FDA regulation, 
clearance  and  approval.  Under  the  U.S.  Federal  Food,  Drug,  and  Cosmetic  Act  and  other  laws,  we  are  prohibited  from 
promoting our products for off-label uses. This means that we may not make claims about the safety or effectiveness of our 
products and may not proactively discuss or provide information on the use of our products, except as allowed by the FDA. 
As a medical device, our claims regarding efficacy are limited. Without claims of efficacy, market acceptance of our products 
may be slow.  

There is a risk that the FDA or other federal or state law enforcement authorities could determine that the nature and scope 
of our sales and marketing activities may constitute the promotion of our products for a non-FDA-approved use in violation 
of applicable law. We also face the risk that the FDA or other regulatory authorities might pursue enforcement based on past 
activities  that  we  have  discontinued  or  changed,  including  sales  activities,  arrangements  with  institutions  and  doctors, 
educational and training programs and other activities.  

Government investigations concerning the promotion of off-label uses and related issues are typically expensive, disruptive 
and burdensome and generate negative publicity. If our promotional activities are found to be in violation of applicable law 
or if we agree to a settlement in connection with an enforcement action, we would likely face significant fines and penalties 
and  be  required  to  substantially  change  our  sales,  promotion,  grant  and  educational  activities.  In  addition,  were  any 
enforcement actions against us or our senior officers to arise, we could be excluded from participation in U.S. government 
healthcare programs such as Medicare and Medicaid.  

We do not have our own manufacturing capacity, and we rely on partnering arrangements or third-party manufacturers 
for the manufacture of our products and potential products.  

We  do  not  currently  operate  manufacturing  facilities  for  production  of  our  product  and  product  candidates.  We  have  no 
experience in product formulation or manufacturing, and we lack the resources and the capabilities to manufacture any of 
our product candidates on a clinical or commercial scale. As a result, we have partnered and expect to partner with third 
parties to manufacture our products or rely on contract manufacturers to supply, store and distribute product supplies for our 
clinical trials. Any performance failure on the part of our commercial partners or future manufacturers could delay clinical 
development or regulatory approval of our product candidates or commercialization of our products, producing additional 
losses and reducing or delaying product revenues.  

Our products and product candidates do and will require precise, high-quality  manufacturing. The failure to achieve and 
maintain high manufacturing standards, including the incidence of manufacturing errors, could result in patient injury or 
death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that 
could seriously harm our business. Contract manufacturers and partners often encounter difficulties involving production 
yields, quality control and quality assurance, as well as shortages of qualified personnel. These manufacturers and partners 
are  subject  to  ongoing  periodic  unannounced  inspection  by  the  FDA  and  corresponding  state  agencies  to  ensure  strict 
compliance  with  Quality  Systems  Regulations,  current  Good  Manufacturing  Practice  and  other  applicable  government 
regulations and corresponding foreign standards. If any of our manufacturers or partners fails to maintain compliance, the 
production of our products could be interrupted, resulting in delays, additional costs and potentially lost revenues.  

In addition, if the FDA or other regulatory agencies approve any of our product candidates for commercial sale, we will need 
to manufacture them in larger quantities. Significant scale-up of manufacturing will require validation studies, which the 
FDA  must  review  and  approve.  If  we  are  unable  to  successfully  increase  the  manufacturing  capacity  for  a  product,  the 
regulatory approval or commercial launch of any products may be delayed or there may be a shortage in supply and our 
business may be harmed as a result.  

We  depend  on  skilled  and  experienced  personnel  and  management  leadership  to  operate  our  business  effectively  and 
maintain our investor relationships. If we are unable to retain, recruit and hire such key employees, our ability to manage 
our business will be harmed, which would impair our future revenue and profitability.  

Our success largely depends on the skills, experience and efforts of our officers and other key employees. The efforts of our 
officers and other key employees are critical to us as we continue to focus on the commercialization of our Avenova product 
with the goal of achieving positive cash flow from operations by the end of 2016. The loss of any of our senior management 
team  members  could  disrupt  our  business,  affect  key  partnerships  and  impair  our  future  revenue  and  profitability.  In 

9 

 
  
  
  
  
  
  
   
   
  
particular, our Chief Executive Officer, Mark M. Sieczkarek, is critical to our successful commercialization of Avenova, and 
we have entered into an executive employment agreement with him, expiring on May 31, 2017.  

We intend to rely on a limited number of pharmaceutical wholesalers to distribute Avenova.  

We  intend  to rely  primarily  upon  a  limited  number  of  pharmaceutical  wholesalers  in  connection  with  the  distribution of 
Avenova.  If  we  are  unable  to  establish  or  maintain  our  business  relationships  with  these  pharmaceutical  wholesalers  on 
commercially  acceptable  terms,  it  could  have  a  material  adverse  effect  on  our  sales  and  may  prevent  us  from  achieving 
profitability.  

If we grow and fail to manage our growth effectively, we may be unable to execute our business plan.  

Our  future  growth,  if  any,  may  cause  a  significant  strain  on  our  management  and  our  operational,  financial  and  other 
resources. Our ability to grow and manage our growth effectively will require us to implement and improve our operational, 
financial and management information systems and to expand, train, manage and motivate our employees. These demands 
may require the hiring of additional management personnel and the development of additional expertise by management. 
Any increase in resources devoted to research and product development without a corresponding increase in our operational, 
financial and management information systems could have a material adverse effect on our business, financial condition, and 
results of operations. 

Government agencies may establish usage guidelines that directly apply to our products or proposed products or change 
legislation or regulations to which we are subject.  

Government usage guidelines typically address matters such as usage and dose, among other factors. Application of these 
guidelines could limit the use of our products and products that we may develop. In addition, there can be no assurance that 
government regulations applicable to our products or proposed products or the interpretation thereof will not change and 
thereby prevent the marketing of some or all of our products for a period of time or permanently. The FDA’s policies may 
change and additional government regulations may be enacted that could modify, prevent or delay regulatory approval of our 
product candidates. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from 
future legislation or administrative action, either in the U.S. or in other countries.  

We and our collaborators are and will be subject to ongoing FDA obligations and continued regulatory review, such as 
continued  safety  reporting  requirements,  and  we  and  our  collaborators  may  also  be  subject  to  additional  FDA  post-
marketing obligations or new regulations, all of which may result in significant expense and which may limit our ability 
to commercialize our medical devices and drug products and candidates.  

Any regulatory approvals that we receive may also be subject to limitations on the indicated uses for which the product may 
be marketed or contain requirements for potentially costly post-marketing follow-up studies. The FDA may require us to 
commit to perform lengthy post marketing studies, which would require us to expend additional resources and thus could 
have an adverse effect on our operating results and financial condition. In addition, if the FDA approves any of our drug 
product candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for 
the drug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems 
with the drugs, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing 
of the drugs or the withdrawal of the drugs from the market. If we are not able to maintain regulatory compliance, we may 
be  subject  to  fines,  suspension  or  withdrawal  of  regulatory  approvals,  product  recalls,  seizure  of  products,  operating 
restrictions and criminal prosecution. Any of these events could prevent us from marketing any products we may develop 
and our business could suffer. 

Our past clinical trials may expose us to expensive liability claims, and we may not be able to maintain liability insurance 
on reasonable terms or at all.  

Even though we have concluded all our clinical trials, an inherent risk remains. If a claim were to arise in the future based 
on our past clinical trial activity, we would most likely incur substantial expenses. Our inability to obtain sufficient clinical 
trial  insurance  at  an  acceptable  cost  to  protect  us  against  potential  clinical  trial  claims  could  prevent  or  inhibit  the 
commercialization of our product candidates. Our current clinical trial insurance covers individual and aggregate claims up 
to $5.0 million. This insurance may not cover all claims and we may not be able to obtain additional insurance coverage at a 
reasonable cost, if at all, in the future. In addition, if our agreements with any future corporate collaborators entitle us to 
indemnification  against  product  liability  losses  and  clinical  trial  liability,  such  indemnification  may  not  be  available  or 
adequate should any claim arise. 

10 

 
   
  
  
  
  
  
  
  
  
  
The pharmaceutical and biopharmaceutical industries are characterized by patent litigation, and any litigation or claim 
against us may impose substantial costs on us, place a significant strain on our financial resources, divert the attention 
of management from our business and harm our reputation.  

There has been substantial litigation in the pharmaceutical and biopharmaceutical industries with respect to the manufacture, 
use and sale of new products that are the subject of conflicting patent rights. For the most part, these lawsuits relate to the 
validity,  enforceability  and  infringement  of  patents.  Generic  companies  are  encouraged  to  challenge  the  patents  of 
pharmaceutical products in the United States because a successful challenger can obtain six months of exclusivity as a generic 
product  under  the  Hatch-Waxman  Act.  We  expect  that  we  will  rely  upon  patents,  trade  secrets,  know-how,  continuing 
technological innovations and licensing opportunities to develop and maintain our competitive position, and we may initiate 
claims to defend our intellectual property rights as a result. Other parties may have issued patents or be issued patents that 
may prevent the sale of our products or know-how or require us to license such patents and pay significant fees or royalties 
to produce our products. In addition, future patents may be issued to third parties which our technology may infringe. Because 
patent applications can take many years to issue, there may be applications now pending of which we are unaware that may 
later result in issued patents that our products infringe.  

Intellectual  property  litigation,  regardless  of  outcome,  is  expensive  and  time-consuming,  would  divert  management’s 
attention from our business and could have a material negative effect on our business, operating results or financial condition. 
If such a dispute were to be resolved against us, we might be required to pay substantial damages, including treble damages 
and attorney’s fees if we were found to have willfully infringed a third party’s patent, to the party claiming infringement, to 
develop non-infringing  technology,  to  stop selling  any  products  we develop,  to  cease using  technology  that  contains  the 
allegedly infringing intellectual property or to enter into royalty or license agreements that may not be available on acceptable 
or commercially practical terms, if at all. Our failure to develop non-infringing technologies or license the proprietary rights 
on  a  timely  basis  could  harm  our  business.  Modification  of  any  products  we  develop  or  development  of  new  products 
thereafter could require us to conduct additional clinical trials and to revise our filings with the FDA and other regulatory 
bodies,  which  would  be  time-consuming  and  expensive.  In  addition,  parties  making  infringement  claims  may  be  able  to 
obtain an injunction that would prevent us from selling any products we develop, which could harm our business.  

If product liability lawsuits are brought against us, they could result in costly litigation and significant liabilities.  

Despite all reasonable efforts to ensure safety, it is possible that we or our collaborators will sell products, including Avenova, 
NeutroPhase, CelleRx, and intelli-Case, which are defective, to which patients react in an unexpected manner, or which are 
alleged to have side effects. The manufacture and sale of such products may expose us to potential liability, and the industries 
in which our products are likely to be sold have been subject to significant product liability litigation. Any claims, with or 
without merit, could result in costly litigation, reduced sales, significant liabilities and diversion of our management’s time 
and attention, and could have a material adverse effect on our financial condition, business and results of operations.  

If a product liability claim is brought against us, we may be required to pay legal and other expenses to defend the claim and, 
if  the  claim  is  successful,  damage  awards  may  not  be  covered,  in  whole  or  in  part,  by  our  insurance.  We  may  not  have 
sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets. We may also be 
obligated to indemnify our collaborators and make payments to other parties with respect to product liability damages and 
claims.  Defending  any  product  liability  claims,  or  indemnifying  others  against  those  claims,  could  require  us  to  expend 
significant financial and managerial resources.  

If we are unable to protect our intellectual property, our competitors could develop and market products similar to ours 
that may reduce demand for our products.  

Our success, competitive position and potential future revenues will depend in significant part on our ability to protect our 
intellectual property. We rely on the patent, trademark, copyright and trade secret laws of the U.S. and other countries, as 
well as confidentiality and nondisclosure agreements, to protect our intellectual property rights. We apply for patents covering 
our technologies as we deem appropriate.  

There  is  no  assurance  that  any  patents  issued  to  us  or  licensed  or  assigned  to  us  by  third  parties  will  not  be  challenged, 
invalidated, found unenforceable or circumvented, or that the rights granted thereunder will provide competitive advantages 
to us. If we or our collaborators or licensors fail to file, prosecute or maintain certain patents, our competitors could market 
products that contain features and clinical benefits similar to those of any products we develop, and demand for our products 
could decline as a result. Further, although we have taken steps to protect our intellectual property and proprietary technology, 
third parties may be able to design around our patents or, if they do infringe upon our technology, we may not be successful 

11 

 
  
  
  
  
  
  
  
  
or have sufficient resources in pursuing a claim of infringement against those third parties. Any pursuit of an infringement 
claim by us may involve substantial expense and diversion of management attention.  

We  also  rely  on  trade  secrets  and  proprietary  know-how  that  we  seek  to  protect  by  confidentiality  agreements  with  our 
employees, consultants and collaborators. If these agreements are not enforceable, or are breached, we may not have adequate 
remedies for any breach, and our trade secrets and proprietary know-how may become known or be independently discovered 
by competitors.  

We operate in the State of California. The laws of the State prevent us from imposing a delay before an employee who may 
have access to trade secrets and proprietary know-how can commence employment with a competing company. Although 
we may be able to pursue legal action against competitive companies improperly using our proprietary information, we may 
not be aware of any use of our trade secrets and proprietary know-how until after significant damage has been done to our 
company.  

Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of 
the  U.S.  If  our  intellectual  property  does  not  provide  significant  protection  against  foreign  or  domestic  competition,  our 
competitors, including generic manufacturers, could compete more directly with us, which could result in a decrease in our 
market share. All of these factors may harm our competitive position.   

Our current patent portfolio could leave us vulnerable to larger companies who have the resources to develop and market 
competing products.  

We aggressively protect and enforce our patent rights worldwide. However, certain risks remain. There is no assurance that 
patents will issue from any of our applications or, for those patents we have or that do issue, that the claims will be sufficiently 
broad to protect our proprietary rights, or that it will be economically possible to pursue sufficient numbers of patents to 
afford  significant  protection.  For  example,  we  do  not  have  any  composition  of  matter  patent  directed  to  the  Neutrox 
composition. This relatively weak patent portfolio leaves us vulnerable to competitors who wish to compete in the same 
marketplace with similar products. If a potential competitor introduces a formulation similar to Avenova or NeutroPhase 
with a similar composition that does not fall within the scope of the method of treatment/manufacture claims, then we or a 
potential marketing partner would be unable to rely on the allowed claims to protect its market position for the method of 
using the Avenova or NeutroPhase composition, and any revenues arising from such protection would be adversely impacted.  

If physicians and patients do not accept and use our products, we will not achieve sufficient product revenues and our 
business will suffer.  

Even if the FDA has cleared or approves product candidates that we develop, physicians and patients may not accept and use 
them. Acceptance and use of our products may depend on a number of factors including:  

(cid:404)  perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our

products;  

   (cid:404)  published studies demonstrating the cost-effectiveness of our products relative to competing products;        
availability of reimbursement for our products from government or healthcare payers; and              
   (cid:404) 
effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any. 
   (cid:404) 

The failure of any of our products to find market acceptance would harm our business and could require us to seek additional 
financing.  

12 

 
   
  
  
  
  
  
  
  
  
  
  
 
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS 

Not applicable.  

ITEM 2.  PROPERTIES  

Our  principal  executive  offices  and  administrative  operations  are  located  in  Emeryville,  California.  In  total,  we  lease 
approximately 7,799 square feet of office space in the facility pursuant to the Lease expiring on February 28, 2022. 

The  Company  also  leases  laboratory  facilities  and  office  space  at  Suite  550,  EmeryStation  North  Building,  5980  Horton 
Street, Emeryville, California (“EmeryStation”) under an operating lease which will expire on October 21, 2020. On July 11, 
2016,  the  Company  entered  into  a  Sublease  Agreement  to  sublease  16,465  rentable  square  feet  of  real  property  at 
EmeryStation (the “Sublease Agreement”). The commencement date under the Sublease Agreement was September 8, 2016. 
The expiration date of the Sublease Agreement is October 21, 2020, as amended (while the expiration date of the Company’s 
master lease, as amended, for the EmeryStation premises is October 31, 2020), unless earlier terminated pursuant to any 
provision of the Company’s master lease for EmeryStation, or the Sublease Agreement. 

ITEM 3.  LEGAL PROCEEDINGS 

We are currently not a party to, nor is our property the subject matter of, any pending or, to our knowledge, contemplated 
material legal proceedings.  From time to time, we may become party to litigation and subject to claims arising in the ordinary 
course of our business. 

ITEM 4.  MINE SAFETY DISCLOSURES 

Not Applicable. 

PART II 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS 

AND ISSUER PURCHASES OF EQUITY SECURITIES 

Market Information  

Our common stock is listed on the NYSE MKT, under the symbol “NBY.” The following table sets forth, for the periods 
indicated, the high and low sales prices for our common stock as reported by the NYSE Mkt, after giving effect to the 1 for 
25 reverse stock split: 

First Quarter .................................................................   $ 
Second Quarter .............................................................   $ 
Third Quarter ................................................................   $ 
Fourth Quarter ..............................................................   $ 

3.42     $ 
3.42    $ 
5.29    $ 
5.09    $ 

1.77     $ 
1.90     $ 
2.12     $ 
3.25    $ 

18.75     $ 
26.25     $ 
17.00    $ 
9.50     $ 

10.50  
12.75  
5.50   
1.75   

2016 

2015 

High 

Low 

High 

Low 

Holders 

As  of  March  7,  2017,  there  were  approximately  37  holders  of record  of  our  common  stock.  This  figure  does  not  reflect 
persons or entities that hold their stock in nominee or “street” name through various brokerage firms. 

Dividend Policy 

We have not paid cash dividends on our common stock since our inception. We currently expect to retain earnings primarily 
for use in the operation and expansion of our business, therefore, we do not anticipate paying any cash dividends in the near 
future.  Any  future  determination  to  pay  cash  dividends  will  be  at  the  discretion  of  our  Board  of  Directors  and  will  be 
dependent  upon  our  financial  condition,  results  of  operations,  capital  requirements,  restrictions  under  any  existing 
indebtedness and other factors the Board of Directors deems relevant. 

13 

 
  
  
  
  
  
  
  
  
  
  
  
  
                            
  
  
    
  
  
  
    
    
    
  
  
  
  
  
   
 
 
Performance Graph(1) 

The following graph compares our total stockholder returns for the past five years to two indices: the NYSE MKT Composite 
Index and the RDG MicroCap Biotechnology Index. The total return for each index assumes the reinvestment of all dividends, 
if any, paid by companies included in these indices and is calculated as of December 31, of each year. 

As  a  member  of  the  NYSE  MKT  Composite  Index,  we  are  required  under  applicable  regulations  to  use  this  index  as  a 
comparator, and we believe it is relevant since it is composed of peer companies in lines of business similar to ours. 

The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or 
endorse any predictions as to future stockholder returns. 

12/11    

12/12    

12/13    

12/14    

12/15    

12/16  

NovaBay Pharmaceuticals, Inc. ...............     
NYSE MKT Composite ............................     
RDG MicroCap Biotechnology ................     

100.00       
100.00       
100.00       

84.33      
106.15      
102.30      

91.79      
115.07      
100.33      

47.01      
118.71      
94.53      

6.03      
106.60      
63.14      

9.85  
117.67  
27.30  

(1)  This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference
in any of our filings under the Securities Act or the Exchange Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing. 

14 

 
  
  
  
  
 
  
  
     
     
     
     
     
   
  
  
  
      
        
        
        
        
        
  
  
  
  
 
 
ITEM 6.   SELECTED FINANCIAL DATA  

The following table presents selected financial information as of and for the dates and periods indicated below which have 
been derived from our audited consolidated financial statements and other information. The information set forth below is 
not necessarily indicative of results of future operations, and should be read in conjunction with “Management’s Discussion 
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report and our consolidated financial 
statements and related notes included elsewhere in this report. 

Statements of Operations Data: 
Sales: 

2016 

Year Ended December 31, 
2014 
(in thousands, except per share data) 

2013 

2015 

2012 

Product Revenue, net ........................................   $

11,617    $ 

4,146     $

684     $

223     $

14   

Other Revenue, net ...........................................     
Total Sales, net .....................................................     

280      
11,897      

235       
4,381       

370       
1,054       

3,254       
3,477       

Product Cost of Goods Sold .............................     
Gross Profit ..........................................................     

2,464      
9,433      

1,261       
3,120       

486       
568       

162       
3,315       

Operating expenses: 

Research and development ...............................     
Sales and marketing ..........................................     
General and administrative ...............................     
Total operating expenses ......................................     
Operating Loss .....................................................     
Non-cash gain (loss) on changes in fair value 

of warrant liability ..........................................     
Other income (expense), net .................................     
Loss before provision for income taxes ...............     
Provision for income taxes ...................................     

1,371      
11,809      
7,235      
20,415      
(10,982)     

(2,099)     
(68)     
(13,149)     
(2)     

5,728       
10,523       
8,006       
24,257       
(21,137)     

2,149       
17      
(18,971)     
(2)     

9,483       
1,754       
6,235       
17,472       
(16,904)     

1,664       
48       
(15,192)     
(2)     

12,461       
—      
6,366       
18,827       
(15,512)     

(555)     
27       
(16,040)     
(2)     

6,933   
6,947   

8   
6,939  

9,275   
—  
5,991   
15,266   
(8,327) 

1,439   
(137) 
(7,025) 
(2) 

Net loss  ................................................................   $

(13,151)   $ 

(18,973)   $

(15,194)   $

(16,042)   $

(7,027) 

Loss per share: 

Basic .................................................................   $
Diluted ..............................................................   $

(1.40)   $ 
(1.40)   $ 

(6.82)   $
(6.82)   $

(7.65)   $
(7.65)   $

(10.51)   $
(10.51)   $

Shares used in computing net loss per share: 

Basic (after 1 for 25 reverse stock split) ...........     
Diluted (after 1 for 25 reverse stock split) ........     

9,408      
9,408      

2,784      
2,784      

1,985      
1,985      

1,527      
1,527      

(5.97) 
(5.97) 

1,178  
1,178  

2016 

2015 

2014 
(in thousands) 

2013 

2012 

Balance Sheet Data: 
Cash, cash equivalents and short-term 

investments ........................................................   $
Working capital ....................................................     
Total assets ...........................................................     
Deferred revenue—current and non-current ........     
Common stock and additional paid-in capital ......     
Total stockholders’ equity (deficit) ......................     

9,512    $ 
10,148      
15,381      
4,053      
110,772      
7,101      

2,385     $
(106)     
5,077       
2,418       
85,422       
(5,098)     

5,429    $
3,607      
7,537      
2,425      
73,395      
1,848      

13,053    $
11,163      
15,650      
1,871      
64,884      
8,516      

16,870  
15,108  
19,235  
1,892  
54,373  
14,049  

15 

 
  
  
  
  
  
  
  
    
    
    
    
  
  
  
  
      
        
        
        
        
  
      
        
        
        
        
  
  
      
        
        
        
        
  
  
      
        
        
        
        
  
  
      
        
        
        
        
  
  
      
        
        
        
        
  
      
        
        
        
        
  
  
      
        
        
        
        
  
  
      
        
        
        
        
  
      
        
        
        
        
  
      
        
        
        
        
  
  
  
  
  
    
    
    
    
  
  
  
  
      
        
        
        
        
  
 
 
 
ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 

OPERATIONS 

The following discussion of our financial condition and results of operations should be read together with our consolidated 
financial statements and related notes included in Part II, Item 8 of this report. This discussion contains forward-looking 
statements that involve risks and uncertainties. Words such as “expects,” “anticipated,” “will,” “may,” “goals,” “plans,” 
“believes,”  “estimates,”  “concludes,”  determines,”  variations  of  these  words,  and  similar  expressions  are  intended  to 
identify these forward-looking statements. As a result of many factors, including those set forth under the section entitled 
“Risk Factors” in Item 1A and elsewhere in this report, our actual results may differ materially from those anticipated in 
these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based 
upon assumptions made that we believed to be reasonable at the time, and are subject to risks and uncertainties. Therefore, 
actual  results  may  differ  materially  and  adversely  from  those  expressed  in  any  forward-looking  statements.  Except  as 
required by law, we undertake no obligation to revise or update publicly any forward-looking statements. 

Overview  

We are a pharmaceutical company predominantly focused on eye care. We develop, manufacture and market innovative anti-
infective  products  for  a  multitude  of  uses;  however,  we  are  currently  focused  primarily  on  commercializing  prescription 
Avenova for the domestic eye care market in the United States.  

Avenova is the only eye care product formulated with our proprietary, stable and pure form of hypochlorous acid (marketed 
as Neutrox). By replicating the antimicrobial chemicals used by white blood cells to fight infection, Avenova has proven in 
laboratory testing to have broad antimicrobial properties. It removes microorganisms and debris from the skin on the eyelids 
and lashes without burning or stinging. It also is the only commercial product clinically validated to reduce bacterial load on 
ocular skin surface, the build-up of which can cause the chronic eye condition blepharitis. 

In November 2015, we introduced a new business strategy to focus on growing sales of Avenova in the U.S. market and to 
restructure  our  business.  This  new  strategy  allowed  us  to  achieve  our  goal  of  reaching  adjusted  positive  cash  flow  from 
operations (excluding working capital changes) by the end of 2016. Our current business strategy is comprised of: (1) focusing 
our resources on growing the commercial sales of Avenova in the U.S. eye care market, including the implementation of an 
innovative  sales  and  marketing  strategy  to  increase  product  margin  and  profitability;  (2)  significantly  reducing  expenses 
through the restructuring of our operations and other cost reduction measures; and (3) seeking additional sources of revenue 
through partnering, divesting and/or other means of monetizing non-core assets in urology, dermatology, and wound care.  

We have also developed additional commercial products containing Neutrox, including our NeutroPhase for the wound care 
market and CelleRx for the dermatology market. We have partnerships for NeutroPhase in the U.S., as well as select overseas 
markets, most notably China.  

In addition to our Neutrox family of products, we have synthesized and developed a second category of novel compounds 
also aimed at harnessing the power of white blood cell chemistry to address the global, topical anti-infective market. This 
second product category includes Auriclosene®, our lead clinical-stage Aganocide® compound, which is a patented, synthetic 
molecule with a broad spectrum of activity against bacteria, viruses and fungi.  

Critical Accounting Policies and Estimates  

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the 
United States. The preparation of these consolidated financial statements requires us to make estimates, assumptions and 
judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at 
the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing 
these consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving 
due  consideration  to  materiality.  On  an  ongoing  basis,  we  evaluate  our  estimates  and  judgments  related  to  revenue 
recognition, research and development costs, patent costs, stock-based compensation, income taxes and other contingencies. 
We  base  our  estimates  on  historical  experience  and  on  various  other  factors  that  we  believe  are  reasonable  under  the 
circumstances. Actual results may differ from these estimates. 

While  our  significant  accounting  policies  are  more  fully  described  in  Note  2  of  the  Notes  to  Consolidated  Financial 
Statements  (Summary  of  Significant  Accounting  Policies),  included  in  Part  II,  Item  8  of  this  report,  we  believe  that  the 
following accounting policies are most critical to fully understanding and evaluating our reported financial results. 

16 

 
  
  
  
  
  
  
  
  
  
  
  
Allowance for Doubtful Accounts 

We charge “Bad Debt” expense and set up an “Allowance for Doubtful Accounts” when management believes it unlikely a 
specific invoice will be collected. Management identified amounts due that are in dispute and it believes are unlikely to be 
collected at the end of 2016. At December 31, 2016 and 2015, management had reserved $10 thousand and $40 thousand, 
respectively, primarily based on specific amounts that are in dispute and are over 120 days past due. 

Inventory 

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes, pumps; (2) 
goods in progress, which are normally unlabeled bottles; and (3) finished goods. We utilize contract manufacturers to produce 
our  products  and  the  cost  associated  with  manufacturing  is  included  in  inventory.  At  December  31,  2016  and  2015, 
management had recorded an allowance for excess and obsolete inventory of $196 thousand and $45 thousand, respectively. 

Inventory is stated at the lower of cost or market value determined by the first-in, first-out method. 

Revenue Recognition 

We sell products through a limited number of distributors, direct medical sales representatives, and via our webstore. We 
generally  record  product  sales  upon  shipment  to  the  final  customer  for  our  webstore  sales  and  upon  shipment  from  our 
distributor to the final customers for our major distribution partners. 

We recognize product revenue when: (i) persuasive evidence that an arrangement exists, (ii) delivery has occurred and title 
has  passed,  (iii)  the  price  is  fixed  or  determinable,  and  (iv)  collectability  is  reasonably  assured.  Revenue  from  sales 
transactions where the customer has the right to return the product is recognized at the time of sale only if: (i) our price to the 
customer is substantially fixed or determinable at the date of sale, (ii) the customer has paid us, or the customer is obligated 
to pay us and the obligation is not contingent on resale of the product, (iii) the customer's obligation to us would not be 
changed in the event of theft or physical destruction or damage of the product, (iv) the customer acquiring the product for 
resale  has  economic  substance  apart  from  that  provided  by  us,  (v)  we  do  not  have  significant  obligations  for  future 
performance  to  directly  bring  about  resale  of  the  product  by  the  customer,  and  (vi)  the  amount  of  future  returns  can  be 
reasonably  estimated.  If  these  factors  were  to  vary,  the  resulting  change  could  have  a  material  effect  on  our  revenue 
recognition and on the Company’s results of operations 

Product Revenue Allowances  

Product revenue is recognized net of cash consideration paid to our customers and wholesalers, for services rendered by the 
wholesalers in accordance with the wholesalers agreements, and include a fixed rate per prescription shipped and monthly 
program management and data fees. These services are not deemed sufficiently separable from the customers' purchase of 
the product; therefore, they are recorded as a reduction of revenue at the time of revenue recognition.  

Other product revenue allowances include certain prompt pay discounts and allowances offered to our customers, program 
rebates and chargebacks. These product revenue allowances are recognized as a reduction of revenue or as a selling expense 
at the later of the date at which the related revenue is recognized or the date at which the allowance is offered.  Calculating 
certain of these items involves estimates and judgments based on sales or invoice data, contractual terms, utilization rates, 
new information regarding changes in these programs’ regulations and guidelines that would impact the amount of the actual 
rebates or chargebacks. We review the adequacy of product revenue allowances on a quarterly basis. Amounts accrued for 
product  revenue  allowances  are  adjusted  when  trends  or  significant  events  indicate  that  adjustment  is  appropriate  and  to 
reflect actual experience. 

17 

 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
The following table summarizes the activity in the accounts related to product revenue allowances (in thousands): 

Balance at January 1, 2014 ...................................................   $ 
Current provision related to sales made during current 

period  ................................................................................     
Payments ..............................................................................     
Balance at December 31, 2014 .............................................     
Current provision related to sales made during current 

period  ................................................................................     
Payments ..............................................................................     
Balance at December 31, 2015 .............................................     
Current provision related to sales made during current 

period  ................................................................................     
Payments ..............................................................................     
Balance at December 31, 2016 .............................................   $ 

Other Revenue 

Wholesaler/ 
Pharmacy 
fees 

Cash  

discounts       Rebate 
—    $ 

—    $ 

—     $ 

—      
—      
—      

(28)     
28       
—      

—      
—      
—      

(38)     
38       
—      

—       
—       
—       

—       
—       
—       

Total 

—  

—  
—  
—  

(66) 
66   
—  

(1,350)     
1,019       
(331)   $ 

(222)     
222       
—    $ 

(4,379 )     
4,871       
492     $ 

(5,951) 
6,112   
161   

License and collaboration revenue is primarily generated through agreements with strategic partners for the development and 
commercialization of our product candidates. The terms of the agreements typically include non-refundable upfront fees, 
funding of research and development activities, payments based upon achievement of certain milestones and royalties on net 
product sales. In accordance with authoritative guidance, we analyze our multiple element arrangements to determine whether 
the elements can be separated. We perform our analysis at the inception of the arrangement and as each product or service is 
delivered. If a product or service is not separable, the combined deliverables are accounted for as a single unit of accounting 
and revenue is recognized over the performance obligation period.  

Cost of Goods Sold 

Cost of goods sold includes third party manufacturing costs, shipping costs, and other costs of goods sold. Cost of goods sold 
also includes any necessary allowances for excess inventory that may expire and become unsalable.  

Research and Development Costs 

We charge research and development costs to expense as incurred. These costs include salaries and benefits for research and 
development  personnel,  costs  associated  with  clinical  trials  managed  by  contract  research  organizations,  and  other  costs 
associated with research, development and regulatory activities. Research and development costs may vary depending on the 
type of item or service incurred, location of performance or production, or lack of availability of the item or service, and 
specificity  required  in  production  for  certain  compounds.  We  use  external  service  providers  to  conduct  clinical  trials,  to 
manufacture  supplies  of  product  candidates  and  to  provide  various  other  research  and  development-related  products  and 
services. Our research, clinical and development activities are often performed under agreements we enter into with external 
service providers.  We estimate and accrue the costs incurred under these agreements based on factors such as milestones 
achieved, patient enrollment, estimates of work performed, and historical data for similar arrangements.  As actual costs are 
incurred,  we  adjust  our  accruals.    Historically,  our  accruals  have  been  consistent  with  management’s  estimates,  and  no 
material adjustments to research and development expenses have been recognized.  Subsequent changes in estimates may 
result in a material change in our expenses, which could also materially affect our results of operations. 

Stock-Based Compensation 

Stock-based compensation expense is measured at the grant date for all stock-based awards to employees and directors and 
is recognized as expense over the requisite service period, which is generally the vesting period. Forfeitures are estimated at 
the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically 
based  on  the  extent  to  which  actual  forfeitures  (Equity-Based  Compensation)  differ,  or  are  expected  to  differ,  from  the 
previous estimate. See Note 12 of the Notes to Consolidated Financial Statements for further information regarding stock-
based compensation expense and the assumptions used in estimating that expense. For stock options granted to employees, 
the fair value of the stock options is estimated using a Black-Scholes-Merton option pricing model.  

18 

 
  
  
  
    
    
  
  
  
   
  
   
  
  
  
Stock-based compensation arrangements with non-employees are recorded at their fair value on the measurement date. The 
measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instruments vest. Non-
employee stock-based compensation charges are amortized over the vesting period on a straight-line basis. For stock options 
granted to non-employees, the fair value of the stock options is estimated using a Black-Scholes-Merton option pricing model. 

Income Taxes 

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the 
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and 
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are 
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are 
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in 
income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that 
some portion or the entire deferred tax asset will not be recognized.  

Common Stock Warrant Liabilities 

For warrants that are issued or modified and there is a deemed possibility that we may have to settle them in cash, or for 
warrants we issue or modify that contain an exercise price adjustment feature that reduces the exercise price and increases 
the  number  of  shares  of  our  common  stock  eligible  for  purchase  thereunder  in  the  event  we  subsequently  issue  equity 
instruments at a price lower than the exercise price of the warrants, we record the fair value of the issued or modified warrants 
as  a  liability  at  each  balance  sheet  date  and  record  changes  in  the  estimated  fair  value  as  a  non-cash  gain  or  loss  in  the 
consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using 
the Binomial Lattice (“Lattice”) valuation model. The Lattice model provides for assumptions regarding volatility, call and 
put features and risk-free interest rates within the total period to maturity. These values are subject to a significant degree of 
our  judgment.  For  additional  information  regarding  the  Company’s  outstanding  warrants,  see  Note  10  of  the  Notes  to 
Consolidated Financial Statements (Warrant Liability). 

Recent Accounting Pronouncements 

See Note 2 of the Notes to Consolidated Financial Statements (Summary of Significant Accounting Policies) included in Part 
II, Item 8 of this report for information on recent accounting pronouncements. 

19 

 
  
  
  
  
  
  
  
 
 
Results of Operations 

Comparison of Years Ended December 31, 2016 and 2015 

Year Ended 
December 31, 

2016 

2015 

     Dollar 
     Change 

     Percent 
     Change 

(in thousands) 

Statement of Operations: 
Sales: 

Product revenue, net .................................................................   $ 
Other revenue ...........................................................................     
Total sales, net ..............................................................................     

11,617     $ 
280      
11,897      

4,146     $
235       
4,381       

7,471       
45       
7,516       

Product cost of goods sold ....................................................     
Gross profit ..................................................................................     

2,464      
9,433       

1,261       
3,120       

1,203       
6,313       

Research and development ................................................     
Sales and marketing ...........................................................     
General and administrative ................................................     
Total operating expenses ...................................................     
Operating Loss .............................................................................     

1,371      
11,809       
7,235       
20,415       
(10,982)     

5,728       
10,523      
8,006      
24,257       
(21,137)     

(4,357 )     
1,286       
(771 )     
(3,842 )     
10,155       

180 % 
19 % 
172 % 

95 % 
202 % 

(76)% 
12 % 
(10)% 
(16)% 
(48)% 

Non-cash gain (loss) on changes in fair value of warrant 

liability .......................................................................................     
Other income (expense), net .........................................................     

(2,099)     
(68)     

2,149       
17      

(4,248 )     
(85 )     

(198)% 
(500)% 

Loss before provision for income taxes .......................................     
Provision for income tax ..............................................................     
Net loss  ........................................................................................   $ 

(13,149)     
(2)     
(13,151)   $ 

(18,971)     
(2)     
(18,973)   $

5,822       
—       
5,822       

(31)% 
— % 
(31)% 

Total Net Sales, Product Cost of Goods Sold and Gross Profit  

Product revenue, net, increased by $7.5 million, or 180%, to $11.6 million from $4.1 million and other revenue, net, increased 
by $45 thousand, or 19%, to $280 thousand from $235 thousand for the year ended December 31, 2016, compared to the year 
ended December 31, 2015. The change in product revenue, net, was primarily the result of increased sales of Avenova in 
connection with the focus on product commercialization driven by unit growth and price increases. Other revenue increased 
primarily due to the recognition of deferred revenue upon the termination of a collaboration agreement. 

Product Cost of Goods Sold increased by $1.2 million, or 95%, to $2.5 million from $1.3 million for the year ended December 
31, 2016, compared to the year ended December 31, 2015. The increase in product cost of goods sold was primarily the result 
of increased in the sales of Avenova, along with increased reserves for excess and obsolete inventory. 

Gross Profit increased by $6.3 million, or 202%, to $9.4 million from $3.1 million for the year ended December 31, 2016, 
compared to the year ended December 31, 2015. The increase in gross profit was primarily the result of increased sales of 
Avenova, along with the recognition of deferred revenue upon the termination of a collaboration agreement.  

Research and Development  

Research and Development expenses decreased by $4.3 million, or 76%, to $1.4 million for the year ended December 31, 
2016,  from  $5.7  million  for  the  year  ended  December  31,  2015.  The  reduction  is  primarily  the  result  of  our  previously-
announced change in business strategy, as reflected by our reduced spending on clinical trials and our shift of capital resources 
from  research  and  development  to  the  commercialization  of  Avenova.  Also,  contributing  to  the  decrease  was  a  gain 
recognized on the sale of laboratory equipment of $232 thousand during the third quarter of 2016. 

20 

 
  
  
  
  
      
  
      
  
  
  
  
  
  
  
    
  
  
  
  
      
        
        
        
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
   
  
  
  
   
  
  
 
 
Sales and marketing  

Sales and marketing expenses increased by $1.3 million, or 12%, to $11.8 million for the year ended December 31, 2016, 
from $10.5 million for the year ended December 31, 2015. The increase was primarily due to our previously-announced 
change in business strategy, as reflected by our increase in sales representative headcount and sales and marketing activities, 
partially offset by reduced expenses associated with our out-sourced sales team.  

General and administrative  

General and administrative expenses decreased by $0.8 million, or 10%, to $7.2 million for the year ended December 31, 
2016,  from  $8.0  million  for  the  year  ended  December  31,  2015.  The  decrease  was  primarily  a  result  of  our  overall  cost 
reduction efforts, including a reduction in staff-related expense and reductions in consulting and outside services, partially 
offset by the modification of the exercise price of the warrants issued in May 2015, higher stock-based compensation, and 
costs associated with the subleasing of our former headquarters. 

Non-cash gain (loss) on changes in fair value of warrants 

The  adjustments  to  the  fair  value  of  warrants  was  a  loss  of  $2.1  million  and  a  gain  of  $2.1  million  for  the  years  ended 
December 31, 2016 and December 31, 2015, respectively. 

For  additional  information  regarding  the  Warrants  and  their  valuation,  please  see  Note  10  in  the  Notes  to  Consolidated 
Financial Statements included in Part I, Item 8 of this report. In the year ended December 31, 2016, non-cash loss on changes 
in fair value of Warrants was caused by a reduction in the exercise price of the Warrants pursuant to the price protection 
provision in such Warrants, along with an increase in the price of the Company’s common stock above the Warrants’ exercise 
prices. During the year ended December 31, 2015, we incurred a non-cash gain resulting from the re-valuation of the pre-
modified July 2011 Warrants to zero. 

Other income (expense), net 

Other  income (expense), net,  was  an  expense of $68  thousand  compared  to  income  of $17  thousand for  the  years  ended 
December 31, 2016 and December 31, 2015, respectively. The increase in expense was a result of the interest due on the 
notes the Company entered into in December 2015 and January 2016 as part of our Bridge Loan, which was fully paid off on 
August  1,  2016.  For  additional  information  regarding  the  notes  and  the  Bridge  Loan,  please  see  Note  8  in  the  Notes  to 
Consolidated Financial Statements (Related Party Notes Payable) included in Part II, Item 8 of this report.  

21 

 
   
  
  
    
  
  
   
  
   
 
 
Comparison of Years Ended December 31, 2015 and 2014 

Year Ended 
December 31, 

2015 

2014 

     Dollar 
     Change 

     Percent 
     Change 

(in thousands) 

Statement of Operations: 

Sales: 

Product revenue, net .................................................................   $ 
Other revenue ...........................................................................     
Total sales, net ..............................................................................     

4,146     $ 
235       
4,381       

684    $
370       
1,054      

3,462       
(135 )     
3,327       

Product cost of goods sold ....................................................     
Gross profit ..................................................................................     

1,261       
3,120       

486       
568       

775       
2,552       

Research and development ................................................     
Sales and marketing ...........................................................     
General and administrative ................................................     
Total operating expenses ...................................................     
Operating Loss .............................................................................     

5,728       
10,523      
8,006      
24,257       
(21,137)     

9,483       
1,754      
6,235      
17,472       
(16,904)     

(3,755 )     
8,769       
1,771       
6,785       
(4,233 )     

Non-cash gain (loss) on changes in fair value of warrant 

liability .......................................................................................     
Other income (expense), net .........................................................     

2,149       
17      

1,664       
48      

485       
(31 )     

Loss before provision for income taxes .......................................     
Provision for income tax ..............................................................     
Net loss  ........................................................................................   $ 

(18,971)     
(2)     
(18,973)   $ 

(15,192)     
(2)     
(15,194)   $

(3,779 )     
—       
(3,779 )     

506 % 
(36)% 
316 % 

159 % 
449 % 

(40)% 
500 % 
28 % 
39 % 
25 % 

29 % 
(65)% 

25 % 
— % 
25 % 

Total Net Sales, Product Cost of Goods Sold and Gross Profit 

Product revenue, net increased by $3.5 million, or 506%, to $4.1 million from $0.7 million and other revenue decreased by 
$135 thousand, or 36%, to $235 thousand from $370 thousand for the year ended December 31, 2015, compared to the year 
ended December 31, 2014. The change in the product revenue, net was primarily the result of increased sales of Avenova in 
connection with the focus on product commercialization, partially offset by a reduction in other revenue because of our de-
emphasis of technology and collaboration agreements.  

Product Cost of Goods Sold increased by $775 thousand, or 159%, to $1.3 million from $486 thousand for the year ended 
December 31, 2016, compared to the year ended December 31, 2015. The increase in product cost of goods sold was primarily 
the result of increased in the sales of Avenova. 

Gross Profit increased by $2.6 million, or 449%, to $3.1 million from $568 thousand for the year ended December 31, 2015, 
compared to the year ended December 31, 2014. This increase was primarily the result of increased sales of Avenova. 

Research and Development 

Research and Development expenses decreased by $3.8 million, or 40%, to $5.7 million for the year ended December 31, 
2015, from $9.5 million for the year ended December 31, 2014. The reduction was primarily the result of reduced spending 
on clinical trials and shifting responsibilities to production support from research and development.  

Sales and marketing  

Sales, and marketing expenses increased by $8.8 million, or 500%, to $10.5 million for the year ended December 31, 2015, 
from $1.8 million for the year ended December 31, 2014. The increase was primarily due to the increase in the number of 
sales representatives and sales and marketing activities for the launch of Avenova, which began in August of 2014. 

22 

 
  
  
  
      
  
      
  
  
  
  
  
  
  
    
  
  
  
  
      
        
        
        
  
  
      
        
        
        
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
  
  
  
    
    
  
   
  
 
 
General and administrative 

General and administrative expenses increased by $1.8 million, or 28%, to $8.0 million for the year ended December 31, 
2015, from $6.2 million for the year ended December 31, 2014. The increase was primarily due to the increase in accounting, 
consulting and legal expenses, wages and stock based compensation. 

Non-cash gain (loss) on changes in fair value of warrants 

The adjustments to the fair value of warrants were gains of $2.1 million, and $1.7 million for the years ended December 31, 
2015, and December 31, 2014, respectively. 

The non-cash gain on changes in the fair value of warrants relates primarily to warrants issued or modified as part of the 
October 2015 financing. The change in fair value was primarily the result of two factors. First, the October 2015 financing 
included the following elements that increased the fair value of the warrant liability: the term of the warrants issued in July 
2011 was extended and the exercise price adjusted to the then market price, the terms of the warrants issued in March 2015 
were similarly adjusted, which caused the March 2015 warrants to be reclassified from equity to a liability, and additional 
warrants were issued as part of the October 2015 financing. The October 2015 warrants were classified as a liability when 
they were issued. Second, the warrants issued in July 2011, March 2015 and October 2015 were all valued when they were 
issued and re-measured as of December 31, 2015, the result being a reduction in the warrant liability of $2,149 thousand. 
Please see Note 10 in the Notes to Consolidated Financial Statements (Warrant Liability) in Part II, Item 8 of this report for 
a more complete explanation. 

Other income (expense), net 

Other income, net, was $17 thousand and $48 thousand for the years ended December 31, 2015, and December 31, 2014, 
respectively. The decrease was primarily due to a general reduction in cash balance. The change is primarily the result of 
converting  investments  in  securities  to  operating  cash  during  2015,  instead  of  being  invested  in  accounts  that  generated 
returns. 

Cash Used in Operating Activities 

For the year ended December 31, 2016, cash used in operating activities was $12.1 million compared to $18.6 million for the 
year ended December 31, 2015. The decrease was primarily due to increased sales of Avenova and a decrease in operating 
expenses, partially offset by an increase in cost of sales.  

For the year ended December 31, 2015, cash used in operating activities was $18.6 million compared to $15.1 million for the 
year ended December 31, 2014. The increase in 2015 was due to increased spending on sales and marketing activities in the 
amount of $8.8 million, partially offset by a decrease in spending on clinical activity of $1.8 million. 

Cash Provided By or Used In Investing Activities 

For  the  year  ended  December 31, 2016  and  2015,  cash used  in  investing  activities  was  for  the purchase  of property  and 
equipment of $0.2 million and $0.1 million, respectively. For the year ended December 31, 2014, cash provided by investing 
activities  of  $2.6  million  was  primarily  attributable  to  the  net  effects  of  purchases,  sales  and  maturities  of  short-term 
investments. 

Cash Provided by Financing Activities 

Net cash provided by financing activities of $19.4 million for the year ended December 31, 2016 was primarily attributable 
to the net sale of $13.6 million of our common stock in our financings in February, May and August 2016, and Warrants 
exercised in a net amount of $7.4 million in August, September, October, and November 2016, and the borrowing of $1.4 
million in connection with the final tranche of the Bridge Loan, fully offset by the full repayment of $3.0 million of our 
Bridge Loan. 

Net cash provided by financing activities of $15.6 million for the year ended December 31, 2015, was primarily attributable 
to proceeds from the sale of common stock and Warrants in March, May and October, the sale of our common stock under 
our ATM agreement and the proceeds from the Bridge Loan. 

23 

 
  
   
  
  
   
  
  
  
  
  
  
   
  
  
  
Net cash provided by financing activities of $7.4 million for the year ended December 31, 2014, was primarily attributable 
to proceeds from the sale of our common stock under our ATM agreement and the sale of common stock and warrants in our 
March financing.  

Quarterly Results of Operations (unaudited)  

The  following  table  presents  unaudited  quarterly  results  of  operations  for  the  eight  most  recent  quarters  ending  with  the 
quarter ended December 31, 2016. This information has been derived from our unaudited consolidated financial statements 
and has been prepared by us on a basis consistent with our audited annual consolidated financial statements and includes all 
adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation 
of the information for the periods presented. 

   December 31,       September 30,      

2016 

2016 

June 30, 
2016 

      March 31, 

      December 31,       September 30,      

2016 

2015 

2015 

June 30, 
2015 

      March 31, 

2015 

(in thousands, except per share data) 

Quarter Ended  

Statements of 

Operations Data:         

Sales: 

Product Revenue, 

net ......................    $ 

4,046       $ 

3,262      $ 

2,654      $ 

1,655      $ 

1,587       $ 

1,136       $ 

931      $ 

31         
4,077         

176         
3,438         

9        
2,663        

64         
1,719        

48         
1,635         

64         
1,200         

77        
1,008        

808         
3,269         

566         
2,872         

479         
2,184        

611        
1,108        

591         
1,044         

269         
931         

253        
755        

156         
3,149         

4         
2,663        

278         
2,853        

933         
3,144        

1,225         
3,263        

1,563         
3,035         

1,357        
2,311        

1,994         

2,266         

1,293        

1,682        

2,742         

1715         

1,975        

5,299         
(2,030 )       

4,933         
(2,061)       

4,424        
(2,240)       

5,759        
(4,651)       

7,230         
(6,186)       

6,313         
(5,382 )       

5,643        
(4,888)       

492  

46  
538  

148  
390  

1,583  
1,914  

1,574  

5,071  
(4,681) 

Other Revenue, 

net ......................      
Total Sales, net ........      

Product Cost of 

Goods Sold ......      
Gross Profit ..............      
Operating expenses:          
Research and 

development .........      
Sales and marketing .      
General and 

administrative .......      

Total operating 

expenses ...............      
Operating loss ..........      
Non-cash gain (loss) 
on change in fair 
value of warrant 
liability .................      

Other income 

381         

(1,671 )       

(424 )       

(385 )       

1,976         

139         

—        

3        

34  

7  

(expense), net .......      

1         

(4)       

(24)       

(41)       

6        

1         

Loss before 

provision for 
income taxes .........      

Provision for income 

tax .........................      
Net loss ....................    $ 
Net loss per share: 
Basic  .......................    $ 
Diluted  ....................    $ 
Shares used in 

computing net loss 
per share: 

Basic (after effect of 
1-for-25 reverse 
stock split) ............      

Diluted (after effect 
of 1-for-25 reverse 
stock split) ............      

(1,648 )       

(3,736)       

(2,688)       

(5,077)       

(4,204)       

(5,242 )       

(4,885)       

(4,640) 

—         
(1,648 )     $ 

—        
(3,736)     $ 

(2)       
(2,690)     $ 

—        
(5,077)     $ 

—        
(4,204)     $ 

—         
(5,242 )     $ 

(2)       
(4,887)     $ 

(0.11 )     $ 
(0.13 )     $ 

(0.34)     $ 
(0.34)     $ 

(0.36)     $ 
(0.36)     $ 

(1.24)     $ 
(1.24)     $ 

(1.26)     $ 
(1.26)     $ 

(1.76 )     $ 
(1.76 )     $ 

(1.84)     $ 
(1.84)     $ 

—  
(4,640) 

(2.13) 
(2.13) 

15,148         

10,913        

7,407        

4,086        

3,337        

2,985         

2,653        

2,175  

15,459         

10,913        

7,407        

4,086        

3,337        

2,985         

2,653        

2,175  

Net Operating Losses and Tax Credit Carryforwards 

As of December 31, 2016, we had NOL carryforwards for federal and state income tax purposes of $90.2 million and $78.2 
million, respectively. If not utilized, the federal and state NOL carryforwards will begin expiring at various dates between 
2024 and 2036. As of December 31, 2016, we also had tax credit carryforwards for federal income tax purposes of $1.3 
million and $0.3 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2031. The state 
tax credits have an indefinite carryover period.  

Current federal and California tax laws include substantial restrictions on the utilization of NOL carryforwards in the event 
of an ownership change of a corporation. Accordingly, our ability to utilize NOL carryforwards may be limited as a result of 
such ownership changes and result in expiration before utilization. 

24 

 
  
  
  
  
  
  
  
  
  
  
     
     
     
     
     
     
     
  
  
  
  
           
           
           
           
           
           
           
  
        
           
           
           
           
           
           
           
  
  
        
           
           
           
           
           
           
           
  
           
           
           
           
           
           
           
  
        
           
           
           
           
           
           
           
  
        
           
           
           
           
           
           
           
  
   
  
  
Inflation and Seasonality 

We do not believe that inflation has had a material impact on our business and operating results during the periods presented, 
and we do not expect it to have a material impact in the near future, although there can be no assurances that our business 
will not be affected by inflation in the future. 

We do not believe our business is subject to seasonality or any other cyclical trends. 

Off-Balance Sheet Arrangements  

We have no off-balance sheet arrangements as of December 31, 2016, 

Contractual Obligations 

Our contractual cash commitments as of December 31, 2016, were as follows (in thousands): 

Contractual Obligations 
Operating leases ..........................................   $ 
  $ 

Total 

Less than  
1 year 

     1 - 3 years       3 - 5 years      

More than  
5 years 

4,725     $ 
4,725     $ 

987     $ 
987     $ 

2,199     $ 
2,199     $ 

1,464    $ 
1,464    $ 

75   
75  

Our commitments as of December 31, 2016, consist of two operating leases: the Lease and the lease for Emery Station. The 
total commitment for the Lease as of December 31, 2016 was $2.1 million due over the lease term, compared to zero as of 
December 31, 2015.  

The  total  commitment  of  the  Emery  Station  lease  as  of  December  31,  2016  was  $2.6  million  due  over  such  lease  term, 
compared to $3.3 million as of December 31, 2015. On July 11, 2016, we entered into a Sublease Agreement to sublease our 
former corporate headquarters. Sublease rental reimbursement is not deducted from the above table. We anticipate collecting 
$709 thousand, $609 thousand, $690 thousand, and $576 thousand in the years ending December 31, 2017, 2018, 2019, and 
2020, respectively, under the Sublease for the lease of Emery Station.  

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Our  market  risk  consists  principally  of  interest  rate  risk  on  our  cash,  cash  equivalents,  and  short-term  investments.  Our 
exposure  to  market  risk  is  limited  primarily  to  interest  income  sensitivity,  which  is  affected by  changes  in  interest rates, 
particularly because our current liquid assets at December 31, 2016 are held in cash and cash equivalents. 

Our investment policy restricts our investments to high-quality investments and limits the amounts invested with any one 
issuer, industry, or geographic area. The goals of our investment policy are as follows: preservation of capital, assurance of 
liquidity needs, best available return on invested capital, and minimization of capital taxation. Some of the securities in which 
we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount 
of  the  investment  to fluctuate.  For  example,  if we hold  a  security  that was  issued  with  an  interest rate  fixed  at  the  then-
prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To 
minimize  this  risk,  in  accordance  with  our  investment  policy,  we  maintain  our  cash  and  cash  equivalents  in  short-term 
marketable  securities,  including  money  market  mutual  funds,  Treasury  bills,  Treasury  notes,  certificates  of  deposit, 
commercial paper, and corporate and municipal bonds. The risk associated with fluctuating interest rates is limited to our 
investment portfolio. Due to the short-term nature of our investment portfolio, we believe we have minimal interest rate risk 
arising  from  our  investments.  As  of  December  31,  2016  and  2015,  a  10%  change  in  interest  rates  would  have  had  an 
immaterial effect on the value of our investment portfolio. We do not use derivative financial instruments in our investment 
portfolio. We do not hold any instruments for trading purposes. 

With most of our focus on Avenova in the domestic U.S. market, we have not had any material exposure to foreign 
currency rate fluctuations. 

25 

 
  
  
  
   
  
  
  
  
    
  
  
  
  
  
  
   
  
   
 
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

The financial statements required by this Item 8 are set forth below. Our quarterly financial information is set forth in Item 7 
of this report and is hereby incorporated into this Item 8 by reference. 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

Report of Independent Registered Public Accounting Firm ...............................................................................................  
Consolidated Balance Sheets as of December 31, 2016, and 2015 ....................................................................................  
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2016, 2015 and 

Page 
27
  28

2014 ................................................................................................................................................................................  
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2016, 2015 and 2014 ....  
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014 ..................................  
Notes to Consolidated Financial Statements ......................................................................................................................  

  29
  30
  31
  33

26 

 
  
  
   
  
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Stockholders of 

NovaBay Pharmaceuticals, Inc. 

We have audited the accompanying consolidated balance sheets of NovaBay Pharmaceuticals, Inc. as of December 31, 2016 
and 2015 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows 
for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the 
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. 

We  conducted  our  audits  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United 
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit 
of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting 
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an 
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such 
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial 
statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements audited by us present fairly, in all material respects, the consolidated 
financial position of NovaBay Pharmaceuticals, Inc. as of December 31, 2016 and 2015, and the consolidated results of its 
operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting 
principles generally accepted in the United States of America. 

/s/ OUM & CO. LLP 

San Francisco, California  
March 23,2017 

27 

 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
NOVABAY PHARMACEUTICALS, INC. 
CONSOLIDATED BALANCE SHEETS 
(in thousands) 

December 31, 

2016 

2015 

ASSETS 

Current assets: 

Cash and cash equivalents .................................................................................   $
Accounts receivable, net of allowance for doubtful accounts ($10 and $40 at 

9,512     $

2,385   

December 31 2016, and December 31, 2015, respectively) ............................     

2,120       

Inventory, net of allowance for excess and obsolete inventory ($196 and $45 

at December 31, 2016 and 2015, respectively) ................................................     
Prepaid expenses and other current assets .........................................................     
Total current assets ............................................................................................     
Property and equipment, net  ....................................................................................     
Other assets ...............................................................................................................     
TOTAL ASSETS ......................................................................................................   $

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 
Liabilities: 

Current liabilities: 

Accounts payable ...............................................................................................   $
Accrued liabilities  .............................................................................................     
Deferred revenue ................................................................................................     
Total current liabilities .......................................................................................     
Deferred revenue - non-current .................................................................................     
Deferred rent .............................................................................................................     
Notes payable, related party ......................................................................................     
Warrant liability ........................................................................................................     
Other liabilities  .........................................................................................................     
Total liabilities ...................................................................................................     

Commitments and contingencies (Note 9) 
Stockholders' equity (deficit): 

873       
1,966       
14,471       
371       
539       
15,381     $

455     $
1,801       
2,067       
4,323       
1,986       
327       
—       
1,446       
198       
8,280       

536   

1,345   
261   
4,527   
395   
155   
5,077   

2,483   
1,980   
170   
4,633   
2,248   
189   
1,655   
1,450   
—  
10,175   

Preferred stock: 5,000 shares authorized; none outstanding at December 31, 2016 

and 2015 .................................................................................................................     

—       

—  

Common stock, $0.01 par value; 240,000 shares authorized 15,269 and 3,486 

shares issued and outstanding at December 31, 2016 and 2015, respectively ........     
Additional paid-in capital ..........................................................................................     
Accumulated other comprehensive loss ....................................................................     
Accumulated deficit ..................................................................................................     
Total stockholders' equity (deficit) ....................................................................     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ................   $

153       
110,619       
—       
(103,671 )     
7,101       
15,381     $

35   
85,387   
—  
(90,520) 
(5,098) 
5,077   

The accompanying notes are an integral part of these consolidated financial statements 

28 

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

Year Ended December 31, 
2015 

2016 

2014 

Sales: 

Product Revenue, net ......................................................................   $ 
Other Revenue, net .........................................................................     
Total Sales, net ...................................................................................     

Product Cost of Goods Sold ........................................................     
Gross Profit ........................................................................................     

Research and development ..........................................................     
Sales and marketing ....................................................................     
General and administrative .........................................................     
Total Operating Expenses ...........................................................     

11,617     $
280       
11,897       

2,464       
9,433       

1,371       
11,809       
7,235       
20,415       

4,146     $
235       
4,381       

1,261       
3,120       

5,728       
10,523       
8,006       
24,257       

684   
370   
1,054   

486   
568   

9,483   
1,754   
6,235   
17,472   

Operating Loss ...................................................................................     

(10,982)     

(21,137 )     

(16,904 ) 

Non-cash gain (loss) on changes in fair value of warrant liability  ....     
Other income (expense), net ...............................................................     

(2,099)     
(68)     

2,149       
17       

Loss before provision for income taxes .............................................     
Provision for income tax ....................................................................     
Net loss ...............................................................................................     

(13,149)     
(2)     
(13,151)     

Change in Unrealized gains on available for sale securities ...............     
Comprehensive loss ...........................................................................   $ 

—      
(13,151)   $

(18,971 )     
(2 )     
(18,973 )     

—       
(18,973 )   $

1,664   
48   

(15,192 ) 
(2 ) 
(15,194 ) 

15   
(15,179 ) 

Loss per share (basic and diluted) ......................................................   $ 

(1.40)   $

(6.82 )   $

(7.65 ) 

Basic and Diluted Shares used in loss per share calculation ..............     

9,408       

2,784       

1,985   

The accompanying notes are an integral part of these consolidated financial statements 

29 

 
  
  
  
  
  
  
    
    
  
  
      
        
        
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
  
  
  
 
 
NOVABAY PHARMACEUTICALS, INC. 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) 
(in thousands) 

     Accumulated 

Common Stock 

Shares 

     Amount 

     Additional       
Paid-In 
     Capital 

Other  

Total  

     Comprehensive        Accumulated        Stockholders'     
     Equity (Deficit)   
8,516   
(15,194) 

(56,353)   $ 
(15,194)    

(15)   $ 
—     

Deficit  

Loss 

—     

64,866    $ 

Balance at December 31, 2013  ................     
Net loss .......................................................    

Change in unrealized gains (losses) on 

investments .......................................     

Issuance of common stock in connection 

with shelf offering, net of offering costs .     
Issuance of stock to Pioneer .......................     
Issuance of stock for option exercises ........     
Issuance of stock to consultants for 

services ....................................................     
Employee bonus paid in common stock ....     
Stock-based compensation expense related 

to employee and director stock options...     

Stock-based compensation expense related 

to non-employee stock options ................     

Vesting of employee restricted stock 

awards ......................................................     
Balance at December 31, 2014  ................     
Net loss .......................................................     
Issuance of common stock in connection 

with shelf offering, net of offering costs .     

Issuance of stock and warrants, net of 

offering costs ...........................................     
Equity transferred to warrant liability ........     
Issuance of stock to consultants for 

services ....................................................     
Employee bonus paid in common stock ....     
Stock-based compensation expense related 

to employee and director stock options...     

Stock-based compensation expense related 

to non-employee stock options ................     
Balance at December 31, 2015  ................     
Net loss .......................................................     
Issuance of common stock in connection 

Fair market value of warrants transferred 

to equity upon exercise ............................     
Warrant modification .................................     
Issuance of stock to consultants for 

services ....................................................     

Vesting of employee restricted stock 

awards ......................................................     

Vesting of non-employee restricted stock 

awards ......................................................     

Shares retired as a result of the 1 for 25 

reverse stock split ....................................     

Stock-based compensation expense related 

to employee and director stock options...     

Stock-based compensation expense related 

to non-employee stock options ................     
Balance at December 31, 2016 .................     

1,785     $ 
—      

—       

275       
—       
2       

2       
1       

—       

—       

1       
2,066       
—       

18    $ 
—     

—      

3      
—      
—      

—      
—      

—      

—      

—      
21      
—      

—      

7,122      
205      
34      

28      
77      

853      

189      

—      
73,374      
—      

85       

1      

1,176      

1,328       
—       

4       
3       

—       

—       
3,486       
—       

13      
—      

—      
—      

—      

—      
35      
—      

11,505      
(2,175)     

63      
62      

1,194      

188      
85,387      
—      

—       
—       

2       

73       

41       

(2 )     

—       

—      
—      

—      

1      

—      

—      

2,103      
270      

8      

173      

133      

—      

—      

1,316      

with shelf offering, net of offering costs .     

7,692       

77      

13,571      

Issuance of stock and warrants, net of 

offering costs ...........................................     

3,977       

40      

7,389      

15      

—      
—      
—      

—      
—      

—      

—      

—      
—      
—      

—      

—      
—      

—      
—      

—      

—      
—      
—      

—      

—      

—      
—      

—      

—      

—      

—      

—      

—      

—      
—      
—      

—      
—      

—      

—      

—      
(71,547)     
(18,973)     

—      

—      
—      

—      
—      

—      

—      
(90,520)     
(13,151)     

—      

—      

—      
—      

—      

—      

—      

—      

—      

15   

7,125   
205   
34   

28   
77   

853   

189   

—  
1,848   
(18,973) 

1,177   

11,518  
(2,175) 

63   
62   

1,194   

188   
(5,098) 
(13,151) 

13,648   

7,429  

2,103  
270  

8   

174   

133   

—  

1,316   

269   
7,101  

—       
15,269     $ 

—      
153    $ 

269      
110,619    $ 

—      
—    $ 

—      
(103,671)   $ 

The accompanying notes are an integral part of these consolidated financial statements. 

30 

 
  
  
    
  
      
  
      
  
      
  
      
  
  
  
    
  
      
  
      
  
    
  
  
  
    
  
  
    
    
  
    
 
 
NOVABAY PHARMACEUTICALS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands) 

Year Ended December 31. 
2015 

2016 

2014 

(13,151)   $

(18,973 )   $

(15,194 ) 

114       
—      
(219)     

164       
—       
(1 )     

Cash flows from operating activities: 
Net loss ...............................................................................................   $ 
Adjustments to reconcile net loss to net cash used in operating 

activities: 

Depreciation and amortization ...........................................................     
Net realized loss on sales of short-term investments ..........................     
Gain on sale and disposal of property and equipment ........................     
Stock-based compensation expense for options and stock issued to 

employees and directors ...................................................................     

1,316       

1,194       

Stock-based compensation expense for options and stock issued to 

non-employees .................................................................................     
Issuance of RSUs to employees .........................................................     
Issuance of RSUs to non-employees ..................................................     
Warrant modification .........................................................................     
Note receivable impairment ...............................................................     
Non-cash (gain) loss on change in fair value of warrant liability  ......     
Property and equipment impairment ..................................................     
Changes in operating assets and liabilities: 
(Increase) decrease in accounts receivable .........................................     
Increase (decrease) in inventory .........................................................     
(Increase) decrease in prepaid expenses and other assets ...................     
Increase in other assets long-term ......................................................     
Increase (decrease) in accounts payable and accrued liabilities .........     
Increase in deferred rent .....................................................................     
Increase in accrued taxes ....................................................................     
Increase (decrease) in deferred revenue .............................................     
Increase in other liabilities long-term  ................................................     
Net cash used in operating activities ..................................................     
Cash flows from investing activities: 
Purchases of property and equipment ................................................     
Proceeds from disposal of property and equipment ...........................     
Purchases of short-term investments ..................................................     
Proceeds from maturities and sales of short-term investments ..........     
Net cash provided (used) by investing activities ................................     
Cash flows from financing activities: 
Proceeds from common stock issuances, net .....................................     
Proceeds from exercise of options and warrants ................................     
Proceeds from borrowings .................................................................     
Repayment of borrowings ..................................................................     
Proceeds from shelf offering, net .......................................................     
Net cash provided by financing activities ..........................................     
Net increase (decrease) in cash and cash equivalents .........................     
Cash and cash equivalents, beginning of period ................................     
Cash and cash equivalents, end of period ...........................................   $ 

129       
173       
133      
270       
91      
2,099      
70      

(1,585)     
472      
(1,470)     
(474 )     
(2,162 )     
327      
87      
1,447      
198      
(12,135)     

(160)     
—      
—      
—      
(160)     

13,648      
7,429      
1,365      
(3,020 )     
—      
19,422       
7,127      
2,385       
9,512     $

188       
—       
—       
—       
—       
(2,149 )     
—       

(299 )     
(751 )     
402       
—       
1,655       
17       
—       
(6 )     
—       
(18,559 )     

(123 )     
37       
—       
—       
(86 )     

11,519       
1,250       
1,655       
—       
1,177       
15,601       
(3,044 )     
5,429       
2,385     $

The accompanying notes are an integral part of these consolidated financial statements. 

31 

232   
40   
(54 ) 

853   

189   
—   
—   
—   
—   
(1,664 ) 
—   

555   
(451 ) 
102   
—   
(252 ) 
36   
—   
553   
—   
(15,055 ) 

(68 ) 
128   
(4,012 ) 
6,550   
2,598   

227   
34   
—   
—   
7,125   
7,386   
(5,071 ) 
10,500   
5,429   

 
  
  
  
  
  
  
    
    
  
  
      
        
        
  
      
        
        
  
      
        
        
  
      
        
        
  
      
        
        
  
      
        
        
  
  
  
   
 
 
NOVABAY PHARMACEUTICALS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued 
(in thousands) 

Year Ended December 31. 
2015 

2016 

2014 

Supplemental disclosure of non-cash information: 
Bonus paid in stock ............................................................................   $
Stock issued to consultants for services .............................................   $
Property and equipment purchases, included in accounts payable 

and accrued liabilities ......................................................................   $
Cash paid for interest .........................................................................   $
Options exercised ...............................................................................   $
Warrant liability transferred to (from) equity .....................................   $
Exchange of equipment for services ..................................................   $
Severance paid in RSU to non-employees  ........................................   $

—    $ 
8    $ 

60    $ 
51    $ 
—    $ 
2,103    $ 
279    $ 
140    $ 

62     $ 
63     $ 

—    $ 
—    $ 
(4)   $ 
(2,175)   $ 
—    $ 
—    $ 

54   
7   

—   
—   
—   
—   
—   
—   

The accompanying notes are an integral part of these consolidated financial statements. 

32 

 
  
  
  
  
  
  
    
    
  
  
      
        
        
  
      
        
        
  
  
  
  
  
 
 
NOVABAY PHARMACEUTICALS, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1. ORGANIZATION 

NovaBay  Pharmaceuticals,  Inc.  (the  “Company”)  is  a  pharmaceutical  company  focused  on  commercializing  prescription 
Avenova® daily lid and lash hygiene in the domestic eye care market. 

The Company was incorporated under the laws of the State of California on January 19, 2000, as NovaCal Pharmaceuticals, 
Inc. It had no operations until July 1, 2002, on which date it acquired all of the operating assets of NovaCal Pharmaceuticals, 
LLC, a California limited liability company. In February 2007, it changed its name from NovaCal Pharmaceuticals, Inc. to 
NovaBay  Pharmaceuticals,  Inc.  In  August  2007,  it  formed  two  subsidiaries––NovaBay  Pharmaceuticals  Canada,  Inc.,  a 
wholly-owned subsidiary incorporated under the laws of British Columbia (Canada), which was formed to conduct research 
and development in Canada and was dissolved in July 2012, and DermaBay, Inc., a wholly-owned U.S. subsidiary, which 
may  explore  and  pursue  dermatological  opportunities  (“DermaBay”).  In  June  2010,  it  changed  the  state  in  which  it  is 
incorporated (the “Reincorporation”), and is now incorporated under the laws of the State of Delaware. All references to “the 
Company” herein refer to the California corporation prior to the date of the Reincorporation, and to the Delaware corporation 
on and after the date of the Reincorporation. Historically, the Company operated as four business segments. At the direction 
of its Board of Directors, the Company is focused primarily on commercializing prescription Avenova for managing hygiene 
of the eyelids and lashes in the United States and is now managed as a single business and not four segments. 

Effective December 11, 2015, the Company effected a 1-for-25 reverse split of its outstanding common stock (“Reverse 
Stock Split”) (See Note 11).  

Liquidity 

With the funds available at December 31, 2016, the Company believes these resources will be sufficient to fund its operations 
into 2018. The Company has sustained operating losses for the majority of its corporate history and expects that its 2017 
expenses will exceed its 2017 revenues, as we continue to re-invest in our Avenova commercialization efforts. The Company 
expects  to  continue  incurring  operating  losses  and  negative  cash  flows  until  revenues  reach  a  level  sufficient  to  support 
ongoing growth and operations. Accordingly, the Company’s planned operations raise doubt about its ability to continue as 
a going concern. The Company’s liquidity needs will be largely determined by the success of operations in regards to the 
commercialization  of  Avenova.  The  Company’s  plans  to  alleviate  the  doubt  of  its  going  concern,  which  are  being 
implemented to mitigate these conditions, primarily include its ability to control the timing and spending on its sales and 
marketing programs and raising additional funds through equity financings. The Company also may consider other plans to 
fund operations  including:  (1) out-licensing  rights  to  certain of  its products  or  product candidates,  pursuant  to  which  the 
Company would receive cash milestones or an upfront fee; (2) raising additional capital through debt financings or from 
other sources; (3) reducing spending on one or more its sales and marketing programs; and/or (4) restructuring operations to 
change its overhead structure. The Company may issue securities, including common stock and warrants through private 
placement  transactions  or  registered  public  offerings,  which  would  require  the  filing  of  a  Form  S-1  or  S-3  registration 
statement  with  the  Securities  and  Exchange  Commission  (“SEC”).  The  Company’s  future  liquidity  needs,  and  ability  to 
address those needs, will largely be determined by the success of the commercialization of Avenova. The accompanying 
financial  statements  have  been  prepared  assuming  the  Company  will  continue  to  operate  as  a  going  concern,  which 
contemplates the realization of assets and the settlement  of liabilities in the normal course of business. The consolidated 
financial  statements  do  not  include  any  adjustments  to  reflect  the  possible  future  effects  on  the  recoverability  and 
classification of assets or the amounts of liabilities that may result from uncertainty related to its ability to continue as a going 
concern. 

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Basis of Presentation 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally 
accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars.  

33 

 
  
  
  
  
  
  
  
  
  
   
 
 
Reclassifications 

Prior period amounts in the accompanying consolidated balance sheets have been reclassified to conform to current period 
presentation. The reclassifications did not change total assets, total liabilities, or total stockholders’ equity. Additionally, prior 
period amounts in the accompanying consolidated statement of operations and comprehensive loss and have been reclassified 
to conform to current period presentation. The reclassifications did not change the net loss or loss per share 

Principles of Consolidation 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, 
DermaBay, which was dissolved by the Company in April 2016. All inter-company accounts and transactions have been 
eliminated in consolidation. 

Use of Estimates 

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates, assumptions 
and  judgments  that  affect  the  amounts  reported  in  the  consolidated  financial  statements  and  accompanying  notes.  These 
estimates include useful lives for property and equipment and related depreciation calculations, estimated amortization period 
for payments received from product development and license agreements as they relate to revenue recognition, assumptions 
for valuing options and warrants, and income taxes. Actual results could differ from those estimates. 

Cash and Cash Equivalents and Short-Term Investments 

The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to 
be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of December 31, 2016, 
and December 31, 2015, the Company’s cash and cash equivalents were held in three highly-rated, major financial institutions 
in the United States. 

The  Company  classifies  all  highly-liquid  investments  with  a  stated  maturity  of  greater  than  three  months  at  the  date  of 
purchase as short-term investments. Short-term investments generally consist of municipal and corporate debt securities. The 
Company has classified its short-term investments as available-for-sale. The Company does not intend to hold securities with 
stated maturities greater than twelve months until maturity. These securities are carried at fair value, with the unrealized gains 
and losses reported as a component of other comprehensive loss until realized. Realized gains and losses from the sale of 
available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value below 
cost of any available-for-sale security that is determined to be other-than-temporary results in a revaluation of its carrying 
amount to fair value and an impairment charge to earnings, resulting in a new cost basis for the security. No such impairment 
charges were recorded for the periods presented. The interest income and realized gains and losses are included in other 
expense, net, within the consolidated statements of operations and comprehensive loss. Interest income is recognized when 
earned. As of December 31, 2016 and December 31, 2015, the Company had no short-term investments.  

Concentrations of Credit Risk, Major Partners and Customers, and Suppliers 

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash 
equivalents.  The  Company  maintains  deposits  of  cash  and  cash  equivalents  with  three  highly-rated,  major  financial 
institutions in the United States. 

Deposits  in  these  banks  may  exceed  the  amount  of federal  insurance  provided on  such deposits.  The  Company  does  not 
believe it is exposed to significant credit risk due to the financial position of the financial institutions in which these deposits 
are held.  

During the years ended December 31, 2016 and 2015 revenues were derived primarily from sales of Avenova directly to 
doctors through the Company’s webstore and to three major distribution partners. During the year ended December 31, 2014 
revenues were derived primarily from one collaboration partner, service revenues and sales of NeutroPhase.  

34 

 
  
  
  
  
  
  
  
  
  
  
  
  
   
 
 
As  of  December  31,  2016,  December  31,  2015  and  December  31,  2014  revenues  from  our  major  distribution  or 
collaboration partners greater than 10% are as follows: 

Major distribution or collaboration partner  
Distributer A ......................................................................................     
Distributer B .......................................................................................     
Distributer C .......................................................................................     
Collaborator D ....................................................................................     

Year Ended December 31,  
2015 

2014 

2016 

20 %    
22 %    
16 %    
*        

*      
*      
*      
*      

*   
*   
*   
15 %

*Not greater than 10% 

As  of  December  31,  2016,  and  December  31,  2015  accounts  receivable  from  our  major  distribution  or  collaboration 
partners greater than 10% are as follows: 

Major distribution or collaboration partner 
Distributer A ...............................................................................................................     
Distributer B ................................................................................................................     
Distributer C ................................................................................................................     

Year Ended December 31,  

2016 

2015 

22%     
24%     
31%     

36% 
11%  
*  

*Not greater than 10% 

The Company relies on two third party sole source manufacturers to produce its finished goods. The Company does not have 
any manufacturing facilities and intends to continue to rely on third parties for the supply of finished goods. Third party 
manufacturers may not be able to meet the Company’s needs with respect to timing, quantity or quality.  

Fair Value of Financial Assets and Liabilities 

Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are 
carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. Our 
warrant liability is carried at fair value. 

The Company measures the fair value of financial assets and liabilities based on U.S. GAAP guidance, which defines fair 
value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. 

Under U.S. GAAP, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability 
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market 
participants on the measurement date. A fair value hierarchy is also established, which requires an entity to maximize the use 
of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs 
that may be used to measure fair value: 

Level 1 – quoted prices in active markets for identical assets or liabilities; 
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; 
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions). 

Allowance for Doubtful Accounts 

The  Company  charges  bad  debt  expense  and  records  an  allowance  for  doubtful  accounts  when  management  believes  it 
unlikely  a  specific  invoice  will  be  collected.  Management  identifies  amounts  due  that  are  in  dispute  and  it  believes  are 
unlikely to be collected at the end of 2016. At December 31, 2016 and December 31, 2015, management had reserved $10 
thousand and $40 thousand, respectively, primarily based on specific amounts that are in dispute and or are over 120 days 
past due. 

Inventory 

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes, pumps; (2) 
goods in progress, which are normally unlabeled bottles; and (3) finished goods. We utilize contract manufacturers to produce 

35 

 
  
  
  
  
  
     
    
  
  
  
  
  
  
  
  
     
  
  
  
  
  
  
  
  
  
  
  
  
our  products  and  the  cost  associated  with  manufacturing  is  included  in  inventory.  At  December  31,  2016  and  2015, 
management had recorded an allowance for excess and obsolete inventory of $196 thousand and $45 thousand, respectively. 

Inventory is stated at the lower of cost or market value determined by the first-in, first-out method. 

Property and Equipment 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using 
the straight-line method over the estimated useful lives of the related assets of five to seven years for office and laboratory 
equipment,  three  years  for  computer  equipment  and  software  and  seven  years  for  furniture  and  fixtures.  Leasehold 
improvements are amortized over the shorter of seven years or the lease term.  

The costs of normal maintenance, repairs, and minor replacements are charged to operations when incurred. 

In September 2016, the Company sub-leased its former headquarters and determined that its leasehold improvements were 
impaired. This resulted in a $66 thousand impairment charge recorded to general and administrative expense for the third 
quarter of 2016, and is reflected in the results for the year ended December 31, 2016.  

Impairment of Long-Lived Assets 

The Company accounts for long-lived assets in accordance with U.S. GAAP, which requires that companies consider whether 
events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived 
assets held for use are present. Management periodically evaluates the carrying value of long-lived assets. During the first 
quarter of fiscal year 2016, the Company impaired a note receivable which was deemed to no longer be collectable, as the 
originator of the loan is not in business and the collateral held against the loan did not possess value in an amount sufficient 
to satisfy the loan. As a result, a $91 thousand impairment charge was recorded to research and development expense for the 
first  quarter  of  fiscal  year  2016,  and  is  reflected  in  the  results  for  the  year  ended  December  31,  2016.  Determination  of 
recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual 
disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the 
assets are written down to their estimated fair values and the loss is recognized in the statements of operations. 

Comprehensive Income (Loss) 

ASC 220, Comprehensive Income, requires that an entity’s change in equity or net assets during a period from transactions 
and other events from non-owner sources be reported. The Company reports unrealized gains and losses on its available-for-
sale securities as other comprehensive income (loss). 

Revenue Recognition 

The Company sells products through a limited number of distributors and via its webstore. The Company generally records 
product sales upon shipment to the final customer for its webstore sales and upon shipment from its distributor to the final 
customers for its major distribution partners. 

The Company recognizes product revenue when: (i) persuasive evidence that a sale arrangement exists; (ii) delivery has 
occurred and title has passed; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured. Revenue 
from sales transactions where the customer has the right to return the product is recognized at the time of sale only if: (i) the 
Company’s price to the customer is substantially fixed or determinable at the date of sale; (ii) the customer has paid the 
Company, or the customer is obligated to pay the Company and the obligation is not contingent on resale of the product; (iii) 
the customer's obligation to the Company would not be changed in the event of theft or physical destruction or damage of 
the  product;  (iv)  the  customer  acquiring  the  product  for  resale  has  economic  substance  apart  from  that  provided  by  the 
Company; (v) the Company does not have significant obligations for future performance to directly bring about resale of the 
product by the customer; and (vi) the amount of future returns can be reasonably estimated. If these factors were to vary, the 
resulting change could have a material effect on our revenue recognition and on the Company’s results of operations 

Product Revenue Allowances  

Product revenue is recognized, net of cash consideration paid to the Company’s customers and wholesalers, for services 
rendered by wholesalers in accordance with such wholesalers’ agreements and includes a fixed rate per prescription shipped 

36 

 
   
  
  
  
  
  
  
  
  
  
   
  
  
  
and monthly program management and data fees. These services are not deemed sufficiently separable from the customers' 
purchase of the product; therefore, they are recorded as a reduction of revenue at the time of revenue recognition.  

Other product revenue allowances include certain prompt pay discounts and allowances offered to the Company’s customers, 
program rebates and chargebacks. These product revenue allowances are recognized as a reduction of revenue or as a selling 
expense at the later of the date at which the related revenue is recognized or the date at which the allowance is offered.  

Other Revenue 

License and collaboration revenue is primarily generated through agreements with strategic partners for the development and 
commercialization  of  the  Company’s  product  candidates.  The  terms  of  the  agreements  typically  include  non-refundable 
upfront fees, funding of research and development activities, payments based upon achievement of certain milestones and 
royalties on net product sales. In accordance with authoritative guidance, we analyze our multiple element arrangements to 
determine whether the elements can be separated. We perform our analysis at the inception of the arrangement and as each 
product or service is delivered. If a product or service is not separable, the combined deliverables are accounted for as a single 
unit  of  accounting  and  revenue  is  recognized  over  the  performance  obligation  period.  Revenue  is  recognized  when  the 
following criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred and risk of loss has 
passed; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. If these factors were 
to vary the resulting change could have a material effect on our revenue recognition and on our results of operations. 

Cost of Goods Sold 

Cost of goods sold includes third party manufacturing costs, shipping costs, and other costs of goods sold. Cost of goods sold 
also includes any necessary allowances for excess inventory that may expire and become unsalable.  

Research and Development Costs 

The Company charges research and development costs to expense as incurred. These costs include salaries and benefits for 
research and development personnel, costs associated with clinical trials managed by contract research organizations, and 
other  costs  associated  with  research,  development  and  regulatory  activities.  Research  and  development  costs  may  vary 
depending on the type of item or service incurred, location of performance or production, or lack of availability of the item 
or service, and specificity required in production for certain compounds. The Company uses external service providers to 
conduct clinical trials, to manufacture supplies of product candidates and to provide various other research and development-
related  products  and  services.  The  Company’s  research,  clinical  and  development  activities  are  often  performed  under 
agreements it enters into with external service providers.  The Company estimates and accrues the costs incurred under these 
agreements based on factors such as milestones achieved, patient enrollment, estimates of work performed, and historical 
data for similar arrangements.  As actual costs are incurred, the Company adjusts its accruals.  Historically, the Company’s 
accruals  have  been  consistent  with  management’s  estimates,  and  no  material  adjustments  to  research  and  development 
expenses have been recognized.  Subsequent changes in estimates may result in a material change in the Company’s expenses, 
which could also materially affect its results of operations. 

Patent Costs 

Patent costs, including legal expenses, are expensed in the period in which they are incurred. Patent expenses are included in 
general and administrative expenses in the consolidated statements of operations and comprehensive loss. 

Stock-Based Compensation 

The Company accounts for stock-based compensation under the provisions of Accounting Standards Updates (“ASU”) No. 
2014-12,  Compensation-Stock  Compensation  (Topic  718).  Under  the  fair  value  recognition  provisions,  stock-based 
compensation expense is measured at the grant date for all stock-based awards to employees and directors and is recognized 
as expense over the requisite service period, which is generally the vesting period. Non-employee stock-based compensation 
charges are amortized over the vesting period on a straight-line basis. For stock options granted, the fair value of the stock 
options is estimated using a Black-Scholes-Merton option pricing model. See Note 12 for further information regarding stock-
based compensation expense and the assumptions used in estimating that expense. The Company accounts for restricted stock 
unit awards issued to employees and non-employees (consultants and advisory board members) based on the fair market 
value of the Company’s common stock as of the date of issuance.  

37 

 
   
  
  
   
  
  
  
  
  
  
  
   
 
 
Income Taxes 

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized 
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets 
and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities 
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences 
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized 
in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that 
some portion or the entire deferred tax asset will not be recognized. 

Common Stock Warrant Liabilities 

For warrants that are newly issued or modified and there is a deemed possibility that the Company may have to settle them 
in cash, or for warrants it issues or modifies that contain an exercise price adjustment feature, the Company records the fair 
value of the issued or modified warrants as a liability at each balance sheet date and records changes in the estimated fair 
value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these 
warrants  have  been  determined  using  the  Binomial  Lattice  (“Lattice”)  valuation  model.  The  Lattice  model  provides  for 
assumptions regarding volatility, call and put features and risk-free interest rates within the total period to maturity. These 
values are subject to a significant degree of our judgment.   

Net Income (Loss) per Share 

The Company computes net income (loss) per share by presenting both basic and diluted earnings (loss) per share (“EPS”). 

Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of 
common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding 
during the period, including stock options and warrants, using the treasury stock method. In computing, diluted EPS, the 
average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of 
stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in 
net loss periods because their effect would be anti-dilutive. During years ended December 31, 2016, 2015 and 2014, there is 
no difference between basic and diluted net loss per share. The following table sets forth the reconciliation between basic 
EPS and diluted EPS, after giving effect to the reverse stock split. 

Year Ended December 31,  

(in thousands, except per share data) 

2016 

2015 

2014 

Net loss ...............................................................................................   $ 

(13,151)   $

(18,973 )   $

(15,194 ) 

Basic shares ........................................................................................     
Add: shares issued upon assumed exercise of stock options and 

warrants ...........................................................................................     
Diluted shares .....................................................................................     

Basic EPS ...........................................................................................   $ 
Diluted EPS ........................................................................................   $ 

9,408       

2,784       

—      
9,408       

(1.40)   $
(1.40)   $

—       
2,784       

(6.82 )   $
(6.82 )   $

1,985   

—   
1,985   

(7.65 ) 
(7.65 ) 

The following outstanding stock options and stock warrants were excluded from the diluted EPS computation as their effect 
would have been anti-dilutive:  

(in thousands) 
Stock options ................................................................................      
Stock warrants ..............................................................................      

Year Ended December 31,  
2015 

2014 

2016 

1,489      
565      

388      
1,458      

323  
197  

38 

 
  
    
  
  
  
  
  
  
  
  
  
      
        
        
  
  
    
    
  
  
      
        
        
  
  
      
        
        
  
  
      
        
        
  
   
   
  
  
  
  
    
    
  
   
 
 
Recent Accounting Pronouncements 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with 
Customers (Topic 606). In August 2015 and March, April, May and December 2016, the FASB issued additional amendments 
to the new revenue guidance relating to reporting revenue on a gross versus net basis, identifying performance obligations, 
licensing arrangements, collectability, noncash consideration, presentation of sales tax, transition, and clarifying examples. 
This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The 
new revenue recognition guidance provides a unified model to determine how revenue is recognized. The core principle of 
the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in 
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 
In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may 
include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the 
transaction price, and allocating the transaction price to each performance obligation. ASU 2014-09 as amended is effective 
for interim and annual reporting periods beginning after December 15, 2017 but permitted the Company to adopt the standard 
early, but not before the original effective date of December 15, 2016. The Company plans to adopt the new standard effective 
January 1, 2018 with a modified retrospective transition applying the new guidance to the most current period presented with 
the cumulative effect of changes reflected in the opening balance of retained earnings in the most current period presented.  

While the Company is still in the process of assessing the potential impact of this new standard on its consolidated 
financial  statements,  the  Company  has  identified  that  transactions  which  under  current  guidance  are  recognized  upon 
shipment from its distributor to the final customers for its major distribution partners will be recognized upon transfer of 
control to its major distribution partners at the amount of consideration that the Company expects to be entitled to. As a result, 
the Company will record contract liabilities for the invoiced amounts that are estimated to be subject to significant reversal, 
including  product  revenue  allowances  for  cash  consideration  paid  to  customers  for  services,  discounts,  rebate  programs, 
chargebacks,  and  product  returns.  The  constraint  on  variable  consideration  for  product  returns  will  be  a  new  estimation 
resulting from the earlier recognition under the new guidance. 

The Company has also identified that license and collaboration revenue that is currently accounted for as a combined 
unit of accounting because products or services are not separable, may be identified as separate performance obligations that 
are capable of being distinct under the new guidance. As a result, the transaction price under these arrangements, including 
upfront fees and milestone payments, may be allocated differently to performance obligations, which may each be recognized 
at earlier points in time or with a different pattern of performance over time.  

The Company is still evaluating its major distribution agreements and its license and collaboration agreements and 
assessing the impact of adoption of the new standard to its consolidated financial statements. The company will continue to 
monitor  additional  modifications,  clarifications  or  interpretations  undertaken  by  the  FASB  that  may  impact  its  current 
conclusions,  and  will  expand  its  analysis  to  include  any  new  or  modified  revenue  arrangements  prior  to  adoption.  The 
Company expects to complete the efforts by the fourth quarter of 2017.  

In August 2014, FASB issued ASU 2014-15,  Presentation of Financial Statements – Going Concern (Subtopic 205-40): 
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This new standard provides guidance 
around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a 
going concern and to provide related footnote disclosure if substantial doubt exists. The new standard is effective for annual 
periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. 
The Company adopted ASU 2014-15 and for adoption impact see Note1 to the financial statements under “liquidity” 

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which 
changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable 
value.  ASU  No.  2015-11  defines  net  realizable  value  as  estimated  selling  prices  in  the  ordinary  course  of  business,  less 
reasonably predictable costs of completion, disposal, and transportation. The new guidance must be applied on a prospective 
basis and is effective for the Company in the first quarter of fiscal year 2017, with early adoption permitted. The Company 
is still evaluating, but does not believe the implementation of this guidance will result in a material impact to its consolidated 
financial statements.  

39 

 
  
  
  
  
  
  
  
  
 
 
In  January  2016,  the  FASB  issued  ASU  2016-01,  Financial  Instruments  –  Overall  (Subtopic  825-10):  Recognition  and 
Measurement  of  Financial  Assets  and  Financial  Liabilities,  which  provides  guidance  for  the  recognition,  measurement, 
presentation, and disclosure of financial assets and liabilities. This guidance will be effective for the Company beginning in 
the first quarter of fiscal year 2018. The Company is evaluating the effects of the adoption of this guidance to its consolidated 
financial statements. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements 
in Leases (Topic 840). ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for 
leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a 
right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and 
amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. 
The  guidance  also  requires  qualitative  and  specific  quantitative  disclosures  to  supplement  the  amounts  recorded  in  the 
financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant 
judgments  and  changes  in  judgments.  This  guidance  is  effective  beginning  in  the  first  quarter  of  fiscal  year  2019.  The 
Company is evaluating the effects of the adoption of this guidance on its consolidated financial statements.  

In  March  2016,  the  FASB  issued  ASU  2016-09,  Compensation  –  Stock  Compensation  (Topic  718):  Improvements  to 
Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based 
payment  transactions,  including  the  income  tax  consequences,  classification  of  awards  as  either  equity  or  liabilities,  and 
classification on the statement of cash flows. This guidance is effective beginning in the first quarter of fiscal year 2017 and 
early adoption is permitted in an interim period with any adjustments reflected as of the beginning of the fiscal year that 
includes such interim period. The Company is still evaluating, but does not believe the implementation of this guidance will 
result in a material impact to its consolidated financial statements. 

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), 
which addresses eight specific issues regarding the treatment of cash flow. This update is effective for the Company for its 
fiscal year 2018. The Company is currently evaluating the effects of the adoption of ASU 2016-15 to its consolidated financial 
statements. 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), that will require entities to show 
the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash 
flows. This update is effective for the Company for its fiscal year 2018. The Company is currently evaluating the effects of 
the adoption of ASU 2016-18 to its consolidated financial statements. 

NOTE 3. FAIR VALUE MEASUREMENTS  

The Company measures the fair value of financial assets and liabilities based on authoritative guidance that defines fair value, 
establishes  a  framework  consisting  of  three  levels  for  measuring  fair  value,  and  requires  disclosures  about  fair  value 
measurements. Fair value is defined as the exchange price that would be receive for an asset or paid to transfer a liability (an 
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market 
participants on the measurement date.  

The Company’s cash equivalents and investments are classified within Level 1 or Level 2 of the fair value hierarchy because 
they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with 
reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value 
hierarchy include money market securities and certificates of deposits. The types of investments that are generally classified 
within Level 2 of the fair value hierarchy include corporate securities and U.S. government securities. 

The Company’s warrant liability is classified within level 3 of the fair value hierarchy because the value is calculated using 
significant judgment based on our own assumptions in the valuation of this liability. 

40 

 
    
  
  
  
  
  
  
  
  
  
 
 
The  following  table  presents  the  Company’s  assets  and  liabilities  measured  at  fair  value  on  a  recurring  basis  as  of  
December 31, 2016: 

Fair Value Measurements Using 

(in thousands) 
Assets 
Cash equivalents ................................................................   $ 
Restricted cash held as a certificate of deposit ..................     
Deposit held as a certificate of deposit ..............................     
Total assets ........................................................................   $ 

Quoted 
Prices in  
Active 
Markets  
for Identical 
Items  
(Level 1) 

Significant  
Other  
Observable  
Inputs  
(Level 2) 

Significant  
Unobservable 
Inputs  
(Level 3) 

Balance at  
December 31, 
2016 

100     $ 
324       
150       
574    $ 

100     $ 
324      
150      
574    $ 

—    $ 
—      
—      
—    $ 

—  
—  
—  
—  

Liabilities 
Warrant liability ................................................................   $ 
Total liabilities ..................................................................   $ 

1,446    $ 
1,446     $ 

—    $ 
—    $ 

—    $ 
—    $ 

1,446  
1,446   

The  following  table  presents  the  Company’s  assets  and  liabilities  measured  at  fair  value  on  a  recurring  basis  as  of  
December 31, 2015: 

Fair Value Measurements Using 

(in thousands) 
Assets 
Cash equivalents ................................................................   $ 
Total assets ........................................................................   $ 

Quoted 
Prices in  
Active 
Markets  
for Identical 
Items  
(Level 1) 

Significant  
Other  
Observable  
Inputs  
(Level 2) 

Significant  
Unobservable 
Inputs  
(Level 3) 

Balance at  
December 31, 
2015 

2,385     $ 
2,385    $ 

2,385    $ 
2,385    $ 

—    $ 
—    $ 

—  
—  

Liabilities 
Warrant liability ................................................................   $ 
Total liabilities ..................................................................   $ 

1,450    $ 
1,450     $ 

—    $ 
—    $ 

—    $ 
—    $ 

1,450   
1,450   

For the year ended December 31, 2016, as a result of the fair value adjustment of the warrant liability, the Company recorded 
a non-cash loss on a change in the fair value of $2.1 million in its consolidated statements of operations and comprehensive 
loss.  See Note 10 for further discussion on the calculation of the fair value of the warrant liability. 

(in thousands) 
Fair value of warrant liability at January 1 ...............................................................   $ 
Fair value of warrants issued ....................................................................................     
Fair value of warrants transferred (to) from equity upon exercise ...........................     
Increase (decrease) in fair value on exercise date and December 31 .......................     
Fair value of warrant liability at December 31 .........................................................   $ 

2016 

2015 

1,450     $ 
—       
(2,103 )     
2,099       
1,446     $ 

173  
1,251  
2,175  
(2,149) 
1,450  

41 

 
  
  
  
  
  
    
    
    
  
    
  
        
        
        
  
  
    
  
        
        
        
  
    
  
        
        
        
  
  
  
  
  
  
  
    
    
    
  
    
  
        
        
        
  
  
    
  
        
        
        
  
    
  
        
        
        
  
  
  
  
    
  
  
  
 
 
NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS 

Prepaid expenses and other current assets consisted of the following: 

(in thousands) 
Prepaid sales rebates ....................................................................................................   $ 
Prepaid outsourced sales team ......................................................................................     
Rent receivable .............................................................................................................     
Prepaid research and development services .................................................................     
Prepaid rent ..................................................................................................................     
Other.............................................................................................................................     
Total prepaid expenses and other current assets ...........................................................   $ 

December 31, 
2016 

December 31,  
2015 

658     $ 
606       
165       
123       
120      
294      
1,966     $ 

—  
—  
—  
—  
—  
261  
261  

NOTE 5. INVENTORY  

Inventory consisted of the following: 

(in thousands) 
Raw materials and supplies ......................................................................................   $ 
Goods in process ......................................................................................................     
Finished goods .........................................................................................................     
Less: Reserve for excess and obsolete inventory .....................................................     
Total inventory, net ..................................................................................................   $ 

December 31, 
2016 

December 31,  
2015 

514    $ 
—      
555      
(196)     
873    $ 

660  
248  
482  
(45) 
1,345  

NOTE 6. PROPERTY AND EQUIPMENT  

Property and equipment consisted of the following: 

(in thousands) 
Office and laboratory equipment ..................................................................................   $ 
Furniture and fixtures ...................................................................................................     
Computer equipment and software ...............................................................................     
Production equipment ..................................................................................................     
Leasehold improvements ..............................................................................................     
Total property and equipment, at cost ..........................................................................     
Less: accumulated depreciation and amortization ........................................................     
Total property and equipment, net ...............................................................................   $ 

December 31, 
2016 

December 31,  
2015 

24     $ 
153       
170       
105       
68      
520       
(149)     
371     $ 

1,528  
169  
122  
105  
173  
2,097  
(1,702) 
395  

In the quarter ended September 30, 2016, the Company sub-leased its prior headquarters and determined that its leasehold 
improvements were impaired. This resulted in a $66 thousand impairment charge recorded to general and administrative 
expense in the consolidate statement of operation and comprehensive loss for the year ended December 31, 2016.  

In  the  quarter  ended  September  30,  2016,  the  Company  transferred  title  to  a  significant  portion  of  its  lab  equipment  in 
exchange for research and development services. As a result, the Company recognized a $232 thousand gain on the sales of 
these  assets,  which  was  recorded  to  research  and  development  expense  in  the  consolidate  statement  of  operation  and 
comprehensive loss for the year ended December 31, 2016. 

In the quarter ended December 31 2016, the Company disposed of damaged, unusable and full depreciated property and 
equipment.  As  a  result,  the Company  recognized  a $13  thousand  loss  on  the  disposal of  these  assets,  and  a  $4  thousand 
impairment charge, which were recorded to general and administrative expense in the consolidate statement of operation and 
comprehensive loss for the year ended December 31, 2016. 

Depreciation and amortization expense was $114 thousand, $164 thousand, $232 thousand for the years ended December 31, 
2016, 2015 and 2014, respectively. 

42 

 
  
  
  
    
  
  
  
  
  
    
  
   
  
  
  
    
  
  
  
  
  
  
NOTE 7. ACCRUED LIABILITIES  

Accrued liabilities consisted of the following: 

(in thousands) 
Research and development ...........................................................................................   $ 
Employee payroll and benefits .....................................................................................     
Severance pay...............................................................................................................     
Sales rebates .................................................................................................................     
Outsourced sales team ..................................................................................................     
Inventory ......................................................................................................................     
Other.............................................................................................................................     
Total accrued liabilities ................................................................................................   $ 

December 31,  
2016 

December 31,  
2015 

2    $ 
763       
250       
166      
333      
75      
212      
1,801    $ 

394  
414  
790  
150  
—  
—  
232  
1,980  

NOTE 8. RELATED PARTY NOTES PAYABLE  

Beginning on December 30, 2015, the Company entered into a series of agreements pursuant to a loan (the “Loan”) facilitated 
by China Kington Asset Management Co. Ltd. (“China Kington”). In connection with the Loan, the Company issued five 
(5)  promissory  notes  (the  “Notes”)  payable  to  Mr.  Mark  Sieczkarek,  the  Gail  J.  Maderis  Revocable  Trust,  Dr.  T.  Alex 
McPherson,  Mr.  Jian  Ping  Fu,  and  Pioneer  Pharma  (Singapore)  Pte.  Ltd.  (“Pioneer  Singapore”)  (collectively,  the 
“Lenders”),  loaning  the  Company  an  aggregate  of  $3.0  million.  Specifically,  Mr.  Sieczkarek,  Chairman  of  the  Board  of 
Directors of the Company (the “Board”) and President and Chief Executive Officer of the Company, loaned the Company 
$199  thousand;  the  Gail  J.  Maderis  Revocable  Trust,  on  behalf  of  Ms.  Maderis,  a  Director  of  the  Company,  loaned  the 
Company  $71  thousand;  Dr.  McPherson,  a  Director  of  the  Company,  loaned  the  Company  $20  thousand;  Pioneer 
Singapore loaned the Company $1.4 million; and Mr. Fu loaned the Company $1.4 million. China Pioneer, Pioneer Hong 
Kong (who now holds all of the holdings of Pioneer Singapore due to a recent internal corporate reorganization) and Mr. Fu 
are the Company's two largest stockholders. All Notes were issued on December 30, 2015 except the Note payable to Mr. 
Fu, which was issued on January 12, 2016. 

The proceeds from the Notes were used for general corporate purposes. Minimum quarterly payments of principal and interest 
began on March 31, 2016 and were scheduled to continue on the last day of each of June, September, December and March 
thereafter. The entire principal sum and any and all accrued and unpaid interest was payable in full upon the Company’s next 
financing, subsequent to the dates of the Notes, but in no event would the term of the Loan extend beyond December 30, 
2018, except for the loan by Mr. Fu, the term of which was to extend three (3) years from the date of issuance. The Notes 
carried an interest rate of six percent (6%) per annum and could be prepaid in whole or in part at any time without premium 
or penalty.  

In connection with the Notes, China Kington agreed to act as collateral agent for the benefit of the Lenders, in accordance 
with the terms of a collateral agency and intercreditor agreement (the “Collateral Agency Agreement”), which was entered 
into on December 30, 2015 between China Kington and the Lenders. To secure the Notes, China Kington perfected a security 
interest in all tangible and intangible assets of the Company, pursuant to a security agreement (the “Security Agreement”) 
between the Company and China Kington, which was entered into on December 30, 2015. 

As consideration to China Kington for facilitating the Loan, the Company agreed to the following: (1) the grant of a first 
right of refusal for China Kington (or its designee that shall be acceptable to the Company in its reasonable discretion) to 
lead financings for the Company for a period that is the shorter of two (2) years or the day that the Company’s cash flow has 
been  equal  to  or  greater  than  $0  in  each  month  for  three  (3)  consecutive  months,  subject  to  certain  limitations;  (2)  the 
participation of Mr. Sieczkarek as a Lender in the financing; (3) the participation of the Board, management and investors 
that  the  Board  and  management  provide,  to  contribute  an  aggregate  nine  percent  (9%)  of  funds  in  the  Company’s  next 
financing; (4) the appointment of two new members to the Company’s Board by China Kington; and (5) the Company’s 
agreement to reasonably cooperate with reasonable requests made by an auditor engaged, and paid for, by China Kington, 
subject to certain limitations. Upon the recommendation of China Kington, and after reviewing their relevant experiences 
and  background  and  discussing  the  same,  on  January 26, 2016  the  Board of Directors unanimously  appointed  Mr. Mijia 
“Bob” Wu and Mr. Xiaoyan “Henry” Liu to serve as Class I and Class III members of the Board, respectively. Because Bob 
Wu is the Managing Director of China Kington, China Kington became a related party upon his appointment to the Board. 

43 

 
  
  
  
    
  
  
  
  
  
  
  
Upon closing the first tranche of an $11.8 million private placement on May 6, 2016 and by agreement with the Lenders, the 
Company used $2.5 million of the proceeds from the private placement to repay principal on the Notes issued to the Lenders.  

Upon  closing  the  second  tranche  of  such  $11.8  million  private  placement  on  August  1,  2016,  the  Company  repaid  the 
remaining principal on the Notes in the amount of $520 thousand. 

As of December 31, 2016, outstanding amounts under these Notes was zero. 

NOTE 9. COMMITMENTS AND CONTINGENCIES  

Operating Leases 

On  August  24,  2016,  the  Company  entered  into  an  Office  Lease  (the  “Lease”),  pursuant  to  which  the  Company  leased 
approximately 7,799 rentable square feet of real property located on the eleventh floor (Suite 1150) at 2000 Powell Street, 
Emeryville, California 94608 (the “Premises”) from KBSIII Towers at Emeryville, LLC (the “Landlord”), for the Company’s 
new principal executive offices. The expiration date of the Lease is February 28, 2022, unless earlier terminated pursuant to 
any provision of the Lease. The Company also has the option to extend the term of the Lease for one five (5)-year period 
upon written notice to the Landlord which is no earlier than twelve (12) months and no later than nine (9) months prior to the 
expiration of the then current term. The effective monthly base rental rate for the first twelve (12) months of the Lease is 
$4.15  per  square  foot  ($338,390  annually),  and  increases  approximately  three  percent  (3%)  every  eleven  (11)  months 
thereafter beginning with the thirteenth (13th) month of the Lease, with a maximum monthly rental rate of $4.81 per square 
foot ($450,250 annually) for months sixty-one (61) to sixty-three (63) of the Lease. The Company will also be responsible 
for its share of the direct expenses of the Premises, or 2.16%, which includes certain additional operating expenses, utilities 
costs and tax expenses. The Landlord has agreed to abate all of the Company’s monthly base rental payments for the first 
three (3) full calendar months of the Lease. The Company was also required to provide a standby letter of credit (the “Letter 
of Credit”) as security for performance of its obligations and for all losses and damages the Landlord may suffer as a result 
of any default by the Company under the Lease in the initial amount of $323,658, which is secured by a certificate of deposit 
and is recorded in other assets. Provided that no default occurs under the terms of the Lease, and certain financial requirements 
are  met,  the  Company  will  be  entitled  to  periodically  reduce  the  amount  of  the  Letter  of  Credit  down  to  a  maximum  of 
approximately $151,823 as of the last day of the sixtieth (60th) full calendar month of the Lease. 

The  Company  also  leases  laboratory  facilities  and  office  space  at  Suite  550,  EmeryStation  North  Building,  5980  Horton 
Street, Emeryville, California (“EmeryStation”) under an operating lease which will expire on October 21, 2020. On July 11, 
2016,  the  Company  entered  into  a  Sublease  Agreement  to  sublease  all  16,465  rentable  square  feet  of  real  property  at 
EmeryStation (the “Sublease Agreement”) that the Company currently leases at Emery Station. The commencement date 
under the Sublease Agreement was September 8, 2016. The expiration date of the Sublease Agreement is October 21, 2020, 
the expiration date of the Company’s lease for the Emery Station Premises, unless earlier terminated pursuant to any provision 
of the Company’s lease for EmeryStation, as amended, or the Sublease Agreement. As a result of the sublease, the Company 
recorded  a  non-cash  loss  of  $40  thousand,  and  an  impairment  to  leasehold  improvements  of  $66  thousand,  which  were 
recorded to general and administrative expense. 

Rent expense, net was $938 thousand, $1,008 thousand, and $1,045 thousand for the years ended December 31, 2016, 2015 
and 2014, respectively. The future minimum lease payments under these non-cancellable operating leases were as follows as 
of December 31, 2016: 

(in thousands) 
Year ending December 31: 

Lease 
Commitment 

2017 .......................................................................................................................................................   $ 
2018 .......................................................................................................................................................     
2019 .......................................................................................................................................................     
2020 .......................................................................................................................................................     
2021 .......................................................................................................................................................     
Thereafter ..............................................................................................................................................     
Total lease commitment ............................................................................................................................   $ 

987   
1,083   
1,116   
1,026   
438   
75   
4,725   

44 

 
   
   
  
  
  
  
  
  
  
  
      
  
   
 
 
The Company’s monthly rent payments fluctuate under the master lease agreements. In accordance with U.S. GAAP, the 
Company recognizes rent expense on a straight-line basis, and records deferred rent for the difference between the amounts 
paid and recorded as expense. At December 31, 2016 and 2015, the Company had $327 thousand and $189 thousand of 
deferred rent, respectively.  

Sub-lease rental reimbursement in not deducted from the above table. The Company anticipates collecting $709 thousand, 
$609  thousand,  $690  thousand,  and  $576  thousand  in  the  years  ending  December  31,  2017,  2018,  2019,  and  2020, 
respectively. 

Directors and Officers Indemnity 

As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for 
certain events or occurrences while the officer or director is or was serving at the Company’s request in such capacity. The 
term  of  the  indemnification  period  is  for  the  officer’s  or  director’s  lifetime.  The  maximum  amount  of  potential  future 
indemnification is unlimited; however, the Company has a director or officer insurance policy that limits its exposure and 
may enable it to recover a portion of any future payments. The Company believes the fair value of these indemnification 
agreements is minimal. Accordingly, it has not recorded any liabilities for these agreements as of December 31, 2016. 

In the normal course of business, the Company provides indemnifications of varying scope under its agreements with other 
companies, typically its clinical research organizations, investigators, clinical sites, suppliers and others. Pursuant to these 
agreements, it generally indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or 
incurred by the indemnified parties in connection with use or testing of its products or product candidates or with any U.S. 
patent or any copyright or other intellectual property infringement claims by any third party with respect to its products. The 
term  of  these  indemnification  agreements  is  generally  perpetual.  The  potential  future  payments  the  Company  could  be 
required to make under these indemnification agreements is unlimited. Historically, costs related to these indemnification 
provisions have been immaterial. The Company also maintains various liability insurance policies that limit its exposure. As 
a result, it believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded 
any liabilities for these agreements as of December 31, 2016.  

Legal Matters 

From time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business. 
There are no matters at December 31, 2016, that, in the opinion of management, would have a material adverse effect on our 
financial position, results of operations or cash flows. 

NOTE 10. WARRANT LIABILITY  

In  July  2011,  the  Company  sold  common  stock  and  warrants  in  a  registered  direct  financing.  As  part  of  this 
transaction, 139,520 warrants were issued with an exercise price of $33.25 and were exercisable from January 1, 2012 to July 
5, 2016. The terms of the warrants require registered shares to be delivered upon each warrant’s exercise and also require 
possible cash payments to the warrant holders (in lieu of the warrant’s exercise) upon specified fundamental transactions 
involving  the  Company’s  common  stock,  such  as  in  an  acquisition  of  the  Company.  Under  ASC  480,  Distinguishing 
Liabilities  from  Equity,  the  Company’s  ability  to  deliver  registered  shares  upon  an  exercise  of  the  warrants  and  the 
Company’s  potential  obligation  to  cash-settle  the  warrants  if  specified  fundamental  transactions  occur  are  deemed  to  be 
beyond  the  Company’s  control.  The warrants  contain  a provision  according  to which  the warrant holder would have  the 
option to receive cash, equal to the Black Scholes fair value of the remaining unexercised portion of the warrant, as cash 
settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition 
or stock transfer activities). Due to this provision, ASC 480 requires that these warrants be classified as liabilities. The fair 
values  of  these  warrants  have  been  determined  using  the  Lattice  valuation  model,  and  the  changes  in  the  fair  value  are 
recorded in the consolidated statement of operations and comprehensive loss. The Lattice model provides for assumptions 
regarding volatility and risk-free interest rates within the total period to maturity. In addition, after January 5, 2012, and if 
the closing bid price per share of the common stock in the principal market equals or exceeds $66.50 for any ten trading days 
(which do not have to be consecutive) in a period of fifteen consecutive trading days, the Company has the right to require 
the exercise of one-third of the warrants then held by the warrant holders.  

In October 2015, the holders of all warrants issued pursuant to the Company’s securities purchase agreement dated March 3, 
2015 (the “2015 Securities Purchase Agreement”) agreed to reduce the length of notice required to such investors prior to the 
Company’s issuance of new securities from twenty business days to two business days, for the remainder of such investors’ 
pre-emptive  right  period  (which  expired  March  3,  2016).  The  Company  entered  into  these  agreements  to  enable  it  to 
45 

 
   
  
  
  
  
  
  
  
  
expeditiously raise capital in the October 2015 Offering (as described below) and future offerings. As consideration for these 
agreements,  the  Company  amended  certain  provisions  of  both  the  warrants  with  a  15-month  term  (the  “Short-Term 
Warrants”) and warrants with a five-year term (the “Long-Term Warrants”) issued pursuant to the 2015 Securities Purchase 
Agreement (together, the “March 2015 Warrants”) and the warrants issued pursuant to the placement agent agreement dated 
June 29, 2011 (the “July 2011 Warrants”). Specifically, the amendments decreased the exercise price for both the March 
2015 Warrants and the July 2011 Warrants to $5.00 per share. In addition, the amendments extended the exercise expiration 
date for the Short-Term Warrants and the July 2011 Warrants to March 6, 2020. A price protection provision also was added 
to both the July 2011 Warrants and March 2015 Warrants, such that if the Company subsequently sells or otherwise disposes 
of Company common stock at a lower price per share than $5.00 or any securities exchangeable for common stock with a 
lower exercise price than $5.00, the exercise price of such warrants will be reduced to that lower price.  

In October 2015, the Company also entered into an underwriting agreement with Roth Capital Partners, LLC, relating to the 
public  offering  and  sale  of  up  to  (i)  492,000  shares  of  the  Company’s  common  stock;  and  (ii)  warrants  to  purchase  up 
to 442,802 shares of the Company’s common stock (the “October 2015 Warrants”) with an exercise price of $5.00 per share 
(the “October 2015 Offering”).  

In February 2016, the strike price of the July 2011, March 2015 and October 2015 warrants was reduced to $1.81 per share, 
pursuant to the price protection provisions in such warrants, because the Company sold common stock to Mr. Jian Ping Fu 
at that price. 

The Company evaluated the change in terms of the July 2011 Warrants and noted that the change in terms resulted in a 
revaluation at the time of the change. The warrants were re-issued and valued as of October 27, 2015 at $360,821 with the 
new terms, and a modification expense was recorded for the difference between the fair value of the warrants at their new 
terms after modification on October 27, 2015 and the fair value of the warrants at their original terms prior to modification 
as of October 27, 2015. The fair values of these warrants have been determined using the Lattice valuation model, and the 
changes in the fair value are recorded in the consolidated statement of operation and comprehensive loss. 

The key assumptions used to value the warrants after the modification at October 27, 2015 were as follows: 

Assumption 
Expected price volatility ............................................................................................................................     
Expected term (in years) ...........................................................................................................................     
Risk-free interest rate ................................................................................................................................     
Dividend yield ...........................................................................................................................................     
Weighted-average fair value of warrants ..................................................................................................   $ 

80.00% 
4.36  
1.23% 
0.00% 
2.60  

The shares of common stock and warrants were issued separately. Each warrant was exercisable immediately upon issuance 
and will expire 60 months from the date of issuance. The price to the public in the October 2015 Offering was $5.00 per share 
of common stock and related warrant. The net proceeds to the Company were approximately $2.1 million after deducting 
underwriting discounts and commissions and offering expenses.  

The key assumptions used to value the warrant at December 31, 2016 and December 31, 2015 were as follows: 

Assumption 
Expected price volatility ..............................................................................................     
Expected term (in years) .............................................................................................     
Risk-free interest rate ..................................................................................................     
Dividend yield .............................................................................................................     
Weighted-average fair value of warrants ....................................................................   $ 

Year Ended December 31,  

2016 

2015 

102.00%     
3.18       
1.51%     
0.00%     
2.55     $ 

80.00% 
4.18  
1.58% 
0.00% 
1.10  

In March 2015, the Company issued both the Short-Term Warrants ($15.00 per share exercise price) and the Long-Term 
Warrants ($16.25 per share exercise price). At that time, the Company determined that these warrants qualified for equity 
accounting and did not contain embedded derivatives that required bifurcation. After the Company’s agreement to modify 
the terms of the March 2015 Warrants and July 2011 Warrants in October 2015, the Company evaluated the change in terms 
of the March 2015 Warrants and noted that the change in terms resulted in liability classification of both the Short-Term and 
Long-Term Warrants. The March 2015 Warrants were re-issued and valued as of October 27, 2015 at a total of $1.8 million 
with the new terms, and a modification expense was recorded at the difference between the fair value of the warrants on their 
new  terms  after  modification  as  of  October  27,  2015  and  the  fair  value  of  the  warrants  on  their  original  terms  prior  to 
46 

 
   
  
  
   
   
      
  
  
  
  
  
  
  
  
     
  
   
modification as of October 27, 2015. The fair values of these warrants have been determined using the Lattice valuation 
model, and the changes in the fair value are recorded in the consolidated statement of operations and comprehensive loss. 

The key assumptions used to value the Short-Term and Long-Term Warrants after modification at October 27, 2015 were as 
follows: 

Assumption 
Expected price volatility ................................................................................................................................     
Expected term (in years) ...............................................................................................................................     
Risk-free interest rate ....................................................................................................................................     
Dividend yield ...............................................................................................................................................     
Weighted-average fair value of warrants ......................................................................................................   $

80.00%
4.36  
1.23%
0.00%
2.78  

The key assumptions used to value the Short-Term Warrants as of December 31, 2016, and December 31, 2015 were as 
follows: 

Period Ended  

Assumption 
Expected price volatility ..................................................................................................     
Expected term (in years) .................................................................................................     
Risk-free interest rate ......................................................................................................     
Dividend yield .................................................................................................................     
Weighted-average fair value of warrants ........................................................................   $ 

December 31, 
2016 

December 31, 
2015 

102.00%    
3.18       
1.51%    
0.00%    
2.47     $ 

80.00 %
4.18   
1.58 %
0.00 %
1.16   

The key assumptions used to value the Long-Term Warrants  as of December 31, 2016, and December 31, 2015 were as 
follows: 

Period Ended  

Assumption 
Expected price volatility ..................................................................................................     
Expected term (in years) .................................................................................................     
Risk-free interest rate ......................................................................................................     
Dividend yield .................................................................................................................     
Weighted-average fair value of warrants ........................................................................   $ 

December 31, 
2016 

December 31, 
2015 

102.00%    
3.18       
1.51%    
0.00%    
2.55     $ 

80.00 %
4.18   
1.58 %
0.00 %
1.16   

As noted above, the Company issued warrants in connection with the October 2015 Offering. The Company evaluated the 
terms of the October 2015 Warrants and noted that under ASC 480, the Company’s potential obligation to cash-settle the 
warrants if specified fundamental transactions occur are deemed to be beyond the Company’s control. Due to this provision, 
ASC 480 requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using 
the Lattice valuation model, and the changes in the fair value are recorded in the consolidated statement of operations and 
comprehensive loss. The fair value of the warrants at issuance on October 27, 2015 was $1.3 million. 

The key assumptions used to initially value the October 2015 warrants at October 27, 2015 were as follows: 

Assumption 
Expected price volatility .............................................................................................................................      
Expected term (in years) ............................................................................................................................      
Risk-free interest rate .................................................................................................................................      
Dividend yield ............................................................................................................................................      
Weighted-average fair value of warrants ...................................................................................................    $ 

75.50% 
5.00  
1.38% 
0.00% 
2.82  

47 

 
   
  
      
  
  
  
  
  
  
  
     
  
  
  
  
  
  
  
     
  
  
  
  
      
  
  
 
 
The key assumptions used to value the warrants as of December 31, 2016, and December 31, 2015 were as follows: 

Period Ended  

Assumption 
Expected price volatility ..............................................................................................     
Expected term (in years) .............................................................................................     
Risk-free interest rate ..................................................................................................     
Dividend yield .............................................................................................................     
Weighted-average fair value of warrants ....................................................................   $ 

December 31,  
2016 

December 31, 
2015 

96.00%     
3.83       
1.66%     
0.00%     
2.60     $ 

77.50% 
4.83  
1.72% 
0.00% 
1.21  

During the third quarter of 2016, a total of 3,613,284 warrants to purchase 3,613,284 shares of common stock were exercised 
related to the July 2011, March 2015 and October 2015 warrants resulting in gross proceeds of $6.9 million. Upon exercise, 
the warrant liability associated with these warrants was adjusted to its fair value as of the date of exercise of $1.6 million, 
with any change in fair value recorded in the consolidated income statement and comprehensive loss. The $1.6 million fair 
value was subsequently transferred to equity as of the date of their exercise.  

During the fourth quarter of 2016, a total of 363,523 warrants to purchase 363,523 shares of common stock were exercised 
related to the October 2011, November 2015 and December 2015 warrants resulting in gross proceeds of $0.9 million. Upon 
exercise, the warrant liability associated with these warrants was adjusted to its fair value as of the date of exercise of $0.5 
million,  with  any  change  in  fair  value  recorded  in  the  consolidated  income  statement  and  comprehensive  loss.  The  $0.5 
million fair value was subsequently transferred to equity as of the date of their exercise.  

The details of all outstanding warrant liability as of December 31, 2016, were as follows: 

Shares and dollars in thousands 
July 2011 Warrants ......................................................................................................     
Long-Term Warrants ....................................................................................................     
Short-Term Warrants ...................................................................................................     
October 2015 Warrants ................................................................................................     

Shares 

Warrant  
Liability 

49    $ 
105      
127       
284       
565     $ 

126  
267  
312  
741  
1,446  

NOTE 11. STOCKHOLDERS’ EQUITY (DEFICIT) 

Amendments to Articles of Incorporation – Reverse Stock Split 

Effective December 11, 2015, the Company amended its Certificate of Incorporation to effect a 1-for-25 reverse split of its 
outstanding common stock which was approved by our stockholders on December 11, 2015. The accompanying financial 
statements and related notes give retroactive effect to this reverse stock split. 

Preferred Stock 

Under the Company’s amended articles of incorporation, the Company is authorized to issue of up to 5,000,000 shares of 
preferred  stock  in  such  series  and with  such  rights  and preferences  as  may  be  approved  by  the board of directors. As of 
December 31, 2016 and December 31, 2015, there were no shares of preferred stock outstanding. 

Common Stock 

On March 25, 2014, the Company closed a public offering for the sale of 224,000 units, each unit consisting of (i) one share 
of common stock and (ii) one warrant to purchase 6.25 shares of common stock (or a total of 56,000 shares), at a purchase 
price of $30.00 per unit. The warrants were immediately exercisable for $39.00 per share expired eighteen months from the 
date of issuance. All of the shares of common stock and warrants issued in the offering (and the shares of common stock 
issuable  upon  exercise  of  the  warrants)  were  offered  pursuant  to  a  shelf  registration  statement  filed  with,  and  declared 
effective by, the Securities and Exchange Commission. The shares of common stock and the warrants were immediately 
separable and were issued separately, but were purchased together.  The Company raised a total of $6.7 million from this 
offering, or approximately $6.0 million in net proceeds after deducting underwriting commissions of $470 thousand and other 
offering costs of $211 thousand.  

48 

 
  
  
  
  
  
     
  
  
   
  
  
  
    
  
  
    
  
  
  
  
  
  
  
On October 16, 2014, the Company entered into an At-The-Market Offering Agreement (the “2014 ATM Agreement”) with 
Ascendiant under which it may offer and sell its common stock having aggregate sales proceeds of up to $10.0 million from 
time to time through Ascendiant as its sales agent. Sales of Company common stock through Ascendiant are made by means 
of ordinary brokers’ transactions on the NYSE MKT or otherwise at market prices prevailing at the time of sale, in block 
transactions, or as otherwise agreed upon by the Company and Ascendiant. Ascendiant uses commercially reasonable efforts 
to sell Company common stock from time to time, based upon instructions from it (including any price, time or size limits or 
other customary parameters or conditions it may impose). The Company pays Ascendiant a commission of 3.0% of the gross 
sales  proceeds  of  any  common  stock  sold  through  Ascendiant  under  the  2014  ATM  Agreement.  The  Company  has  also 
provided Ascendiant with customary indemnification rights. In connection with the 2014 ATM Agreement, the Company 
terminated its existing At-The-Market Offering Agreement with Ascendiant dated November 13, 2013. The Company is not 
obligated to make any sales of common stock under the 2014 ATM Agreement. The offering of shares of the Company’s 
common stock pursuant to the 2014 ATM Agreement will terminate upon the earlier of (i) the sale of all common stock 
subject to the 2014 ATM Agreement, or (ii) termination of the 2014 ATM Agreement in accordance with its terms. 

Pursuant  to  the  2014  ATM  Agreement,  the  Company  sold  1.3  million  shares  for  gross  proceeds  of  $1.2  million,  or 
approximately $1.1 million in net proceeds after deducting offering costs and commissions of $81 thousand.   

On March 6, 2015, the Company closed a private placement offering of an aggregate of 370,993 immediately separable units, 
which included 370,933 shares of the Company’s common stock, 278,200 Long-Term Warrants and 370,933 Short-Term 
Warrants (the “March Offering”). The per unit purchase price was $12.50 for outside investors and $15.00 for Company 
insiders,  and  the  exercise  prices  for  the  15-month  warrants  and  5-year  warrants  were  $15.00  and  $16.25  per  share, 
respectively. Also on March 6, 2015, the Company entered into a registration rights agreement with the purchasers, pursuant 
to which the Company agreed to file as many registration statements with the Securities and Exchange Commission (the 
“SEC”) as may be necessary to cover the resale of the shares of Company common stock issued in the offering, including 
those shares underlying the March 2015 Warrants, and to keep such registration statements effective for the terms defined 
therein. The Company raised a total of $4.7 million from this offering, or approximately $4.5 million in net proceeds after 
deducting offering costs of $200 thousand.  

On May 22, 2015, the Company closed a private placement offering of an aggregate of 435,746 shares of the Company’s 
common stock and 217,873 warrants with a 12-month term (the “May Offering”). The purchase price for a share of Company 
common stock and related warrant was $15.75, and the exercise price for the warrants was $19.50 per share.  On May 18, 
2015, the Company entered into a registration rights agreement with the purchasers, pursuant to which the Company agreed 
to use best efforts to file as many registration statements with the SEC as may be necessary to cover the resale of the shares 
of  Company  common  stock  issued  in  the  offering,  including  those  shares  underlying  the  warrants,  and  to  keep  such 
registration statements effective for the terms defined therein. In connection with the May Offering, the Company agreed to 
enter into an additional definitive securities purchase agreement with the purchasers in the March Offering. In exchange for 
a  waiver  of  certain  pre-emptive  rights  granted  to  the  purchasers  in  the  March  Offering,  an  additional  635,000  shares  of 
Company common stock were issued to such purchasers (other than entities affiliated with the Company). The Company 
raised a total of $7.3 million from this offering, or approximately $6.4 million in net proceeds after deducting offering costs 
of $900 thousand. China Kington Asset Management Co. Ltd. served as placement agent in exchange for a commission equal 
to six percent (6%) of the gross proceeds received by the Company upon closing pursuant to the purchases non US citizens. 
The amount of such commission was approximately $408 thousand, and was included in the offering costs noted above. 

On October 27, 2015, pursuant to an underwriting agreement with Roth Capital Partners, LLC, the Company closed a public 
offering of (i) 492,000 shares of the Company’s common stock; and (ii) warrants to purchase up to 468,280 shares of the 
Company’s common stock with an exercise price of $5.00 per share (the “October 2015 Warrants”). The shares of common 
stock and October 2015 Warrants were issued separately. Each October 2015 Warrant was exercisable immediately upon 
issuance and will expire 60 months from the date of issuance. The price to the public in this offering was $5.00 per share of 
common  stock  and  related  October  2015  Warrant.  The  Company  raised  a  total  of  $2.3  million  from  this  offering,  or 
approximately $1.9 million in net proceeds after deducting underwriting discounts and offering costs of $400 thousand.  

In February 2016, the Company entered into three securities purchase agreements (the “Purchase Agreements”) for the sale 
of an aggregate of 1,518,567 shares of the Company’s common stock (the “Common Stock”) to accredited investors for a 
total of $2.8 million. The Company entered into the first purchase agreement with Mr. Jian Ping Fu (the “Fu Agreement”), 
pursuant to which the Company agreed to issue and sell to Mr. Fu 696,590 shares of Common Stock, at a per share price of 
$1.81, which was a five percent (5%) discount to the closing price of the Common Stock on February 16, 2016, the date of 
the  Fu  Agreement.  The  Company  entered  into  the  second  purchase  agreement  with  Pioneer  Singapore  (the  “Pioneer 
Agreement”), pursuant to which the Company agreed to issue and sell to Pioneer Singapore 696,590 shares of Common  

49 

 
  
   
  
  
  
 
Stock, at a per share price of $1.91, which was the closing price of the Common Stock on February 16, 2016 with no discount. 
The Company entered into a third purchase agreement with Mark M. Sieczkarek (the “Sieczkarek Agreement”), pursuant to 
which the Company agreed to issue and sell to Mr. Sieczkarek 125,387 shares of Common Stock, at a per share price of 
$1.91, which was the closing price of the Common Stock on February 16, 2016 with no discount. The Common Stock issued 
by the Company pursuant to the Purchase Agreements has not been registered under the Securities Act and may not be offered 
or sold in the United States absent registration or an applicable exemption from registration requirements. 

China Kington Asset Management Co. Ltd. served as placement agent in exchange for a commission equal to six percent 
(6%) of the gross proceeds received by the Company upon closing pursuant to the purchases by Pioneer Singapore and Mr. 
Fu. The amount of such commission was approximately $155 thousand. 

On April 4, 2016, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) for the 
sale of an aggregate 6,173,299 shares of Common Stock, par value $0.01 per share and warrants (the “April 2016 Warrants”) 
exercisable  for  3,086,651  Shares  to  accredited  investors  for  an  aggregate  purchase  price  of  $11.8  million  (the  “Private 
Placement”). The warrants have a 4-year term and an exercise price of $1.91, callable by the Company if the closing price of 
the Common Stock, as reported on the NYSE MKT, is $4.00 or greater for five sequential trading days. The Private Placement 
closed in two tranches, the first of which closed on May 5, 2016, resulting in proceeds to the Company of $7.8 million (the 
“Primary Closing”), and the second of which closed on August 1, 2016, resulting in proceeds of $4.0 million to the Company 
(the “Secondary Closing”). In the Primary Closing, the Company issued 4,079,058 shares of Common Stock and April 2016 
Warrants  exercisable  for  2,039,530  shares  of  Common  Stock.  In  the  Secondary  Closing,  the  Company  issued  2,094,241 
shares of Common Stock and April 2016 Warrants exercisable for 1,047,121 shares of Common Stock. Both the Primary 
Closing and the Secondary Closing were subject to the same terms, containing customary representations, warranties and 
agreements  by  the  Company,  customary  conditions  to  closing,  indemnification  obligations  of  the  Company  and  the 
Purchasers (as defined below) and other obligations of the parties and termination provisions.  

China Kington Asset Management Co. Ltd. served as placement agent in exchange for a commission equal to six percent 
(6%) of the gross proceeds received by the Company upon closing pursuant to the purchases by certain investors. The amount 
of such commission was approximately $618 thousand. 

Also  on  April  4,  2016,  the  Company  entered  into  a  separate  registration  rights  agreement  (the  “Registration  Rights 
Agreement”) with Messrs. Andros and Geckler, Dr. Rider, and the Children’s Brain Disease Foundation (the “Participating 
Purchasers”), pursuant to which the Company agreed to file as many registration statements with the SEC as may be necessary 
to cover the resale of the shares and the April 2016 Warrants held by the Participating Purchasers, to use its commercially 
reasonable efforts to have all such registration statements declared effective within the time frames set forth in the Securities 
Purchase Agreement and the Registration Rights Agreement, and to keep such registration statements effective for the terms 
defined therein. The Company filed such Registration Statement to cover the resale of the shares and April 2016 Warrants 
held by the Participating Purchasers with the SEC on June 9, 2016 and received effectiveness of such Registration Statement 
on June 20, 2016 (Registration Number 333-211943). 

During the third quarter of 2016, the Company recorded $6.6 million in net proceeds upon the exercise of 3,613,284 of the 
Company’s warrants for 3,613,284 shares of the Company’s Common Stock, including all of the warrants issued in May 
2016 and August 2016. As consideration for the facilitation of the exercise of certain of these warrants held by non-U.S. 
citizens domiciled outside of the United States, China Kington received a six percent (6%) commission on the aggregate 
proceeds to the Company pursuant to such exercises. The amount of such commission was approximately $338 thousand.  

During the fourth quarter of 2016, the Company recorded $0.9 million in net proceeds upon the exercise of 363,523 of the 
Company’s  warrants  for  363,523  shares  of  the  Company’s  Common  Stock.  As  consideration  for  the  facilitation  of  the 
exercise of certain of these warrants held by non-U.S. citizens domiciled outside of the United States, China Kington received 
a six percent (6%) commission on the aggregate proceeds to the Company pursuant to such exercises. The amount of such 
commission was approximately $32 thousand.  

Stock Warrants  

In July 2011, 139,520 warrants were issued in connection with our July 2011 registered direct financing. These warrants were 
issued with an exercise price of $33.25 and were set to expire on July 5, 2016. In October 2015, the exercise expiration date 
was extended until March 6, 2020. Outstanding warrants were exercisable at December 31, 2016. See Note 10 for further 
details on these warrants. 

50 

 
   
  
  
  
  
  
  
  
   
In March 2015, the Company issued 278,200 Long-Term Warrants and 370,933 Short-Term Warrants. Outstanding March 
2015 Warrants were exercisable at December 31, 2016. See Note 10 for further details on these warrants. 

In May 2015, the Company issued 217,873 warrants with a 12-month term and an exercise price of $19.50 per share. The 
warrants became exercisable at any time on or after November 22, 2015, six months from the date of issuance, and will 
continue to be exercisable for one year thereafter. These outstanding warrants were exercisable at December 31, 2015. See 
Note 10 for further details on these warrants. 

In October 2015, the Company issued warrants to purchase up to 442,800 shares of the Company’s common stock with an 
exercise price of $5.00 per share. Each warrant was exercisable immediately upon issuance and will expire 60 months from 
the date of issuance. A price protection provision was included in such warrants, such that if the Company subsequently sells 
or otherwise disposes of Company common stock at a lower price per share than $5.00 or any securities exchangeable for 
common stock with a lower exercise price than $5.00, the exercise price of such warrants will be reduced to that lower price. 
See Note 10 for further details on these warrants.  

In February 2016, the strike prices of the July 2011, March 2015 Short-Term and Long-Term, and October 2015 warrants 
were reduced to $1.81 per share, pursuant to the price protection provisions in such warrants, because the Company sold 
common stock to Mr. Jian Ping Fu at that price. 

In May 2016, the Company issued 2,039,530 warrants at the Primary Closing pursuant to the Securities Purchase Agreement. 
Please see the preceding subsection, “Common Stock,” for further details. 

In  August  2016,  the  Company  issued  1,047,121  warrants  at  the  Secondary  Closing  pursuant  to  the  Securities  Purchase 
Agreement. Please see the preceding subsection, “Common Stock,” for further details. 

Effective  September 29, 2016,  the  Company  modified  the  exercise price  of  all warrants  issued pursuant  to  the  securities 
purchase agreement, dated May 18, 2015, from $19.50 to $3.15 per share, which reflected a discount of approximately sixteen 
percent (16%) to the closing price of the Company’s Common Stock on September 27, 2016. The Company has estimated 
the value of warrant modification as of the date of the modification by applying the Black-Scholes-Merton option pricing 
model using the single-option valuation approach. As a result of this modification, the Company recorded a non-cash loss of 
$270 thousand in general and administrative expense in the consolidate statement of operation and comprehensive loss. 

The following table summarizes information about the Company’s warrants outstanding at December 31, 2016, 2015 and 
2014, and activity during the three years then ended.   

   Warrants 

(in thousands) 
Outstanding at December 31, 2013 ..............................................................................     
Warrants granted ...................................................................................................     
Warrants expired ...................................................................................................     
Outstanding at December 31, 2014 ..............................................................................     
Warrants granted ...................................................................................................     
Warrants expired ...................................................................................................     
Outstanding at December 31, 2015 ..............................................................................     
Warrants granted ...................................................................................................     
Warrants exercised ................................................................................................     
Warrants expired ...................................................................................................     
Outstanding at December 31, 2016 ..............................................................................     

Weighted- 
Average  
Exercise  
Price 

192    $ 
55    $ 
(50)   $ 
197    $ 
1,317    $ 
(56)   $ 
1,458    $ 
3,087    $ 
(3,977)   $ 
(3)   $ 
565    $ 

43.00  
39.00  
68.75  
35.23  
7.40  
39.00  
5.19  
1.91  
1.95  
78.13  
1.81  

51 

 
  
  
  
  
  
  
   
  
    
  
  
 
 
NOTE 12. EQUITY-BASED COMPENSATION 

Equity Compensation Plans  

In October 2007, the Company adopted the 2007 Omnibus Incentive Plan (the “2007 Plan”) to provide for the granting of 
stock awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and 
stock appreciation rights to employees, directors and outside consultants, as determined by the board of directors. At the 
inception of the 2007 Plan, 40,000 shares were reserved for issuance under the 2007 Plan.   

For the years from 2009 to 2012, the number of shares of common stock authorized for issuance under the 2007 Plan increased 
annually in an amount equal to the lesser of (a) 40,000 shares; (b) 4% of the number of shares of the Company’s common 
stock outstanding on the last day of the preceding year; or (c) such lesser number as determined by the Board.  Accordingly, 
an additional 40,000, 37,427, and 37,207 shares of common stock were authorized for issuance under the 2007 Plan in January 
2012, 2011 and 2010, respectively. Beginning in 2013, the shareholders voted to remove the 40,000 share cap and the 2007 
Plan increases annually by 4% of the number of shares of the Company’s common stock outstanding on the last day of the 
preceding year. Accordingly, an additional 32,646 and 59,157 shares of common stock were authorized for issuance under 
the 2007 Plan in January 2014 and 2013, respectively. On March 30th, 2015, the Company filed a registration statement to 
add an additional 82,461 shares to the 2007 Plan. In January 2016, the Company added 139,449 shares to the Plan, per the 
Plan’s evergreen provision. On May 26, 2016, the stockholders of the Company approved an amendment to the 2007 Plan to 
increase  the  number  of  shares  of  Company  common  stock  reserved  for  issuance  thereunder  by  1,124,826  shares.  The 
aggregate reserved number of shares available under the 2007 Plan is 2,318,486 shares. As of December 31, 2016, there were 
53,587 shares available for future grant under the 2007 Plan. 

Under the terms of the 2007 Plan, the exercise price of incentive stock options may not be less than 100% of the fair value 
of the common stock on the date of grant and, if granted to an owner of more than 10% of the Company’s stock, then not less 
than 110%. Stock options granted under the 2007 Plan expire no later than ten years from the date of grant. Stock options 
granted to employees generally vest over four years, while options granted to directors and consultants typically vest over a 
shorter period, subject to continued service. Any options granted prior to October 2007 include early exercise provisions that 
allow for full exercise of the option prior to the option vesting, subject to certain repurchase provisions. The Company issues 
new shares to satisfy option exercises under the plans.  

52 

 
  
  
   
  
   
 
 
6.6      

422   

6.3      

23  

6.2      

19  

8.7    $ 

702   

691   

—  

—  

Stock Based Compensation Summary 

The following table summarizes information about the Company’s stock options and restricted stock outstanding at December 
31, 2016, 2015 and 2014, and activity during the three years then ended: 

Weighted-
Average 
Exercise 
Price 

Weighted-
Average 
Remaining 
Contractual 
Life (years) 

     Aggregate 
Intrinsic 
Value 

Options 

(in thousands, except years and per share data) 
Outstanding at December 31, 2013 ......................................     
Options granted .............................................................     
Restricted stock units granted .......................................     
Options exercised ..........................................................     
Restricted stock units vested .........................................     
Options forfeited/cancelled ...........................................     
Outstanding at December 31, 2014 ......................................     
Options granted .............................................................     
Restricted stock units granted .......................................     
Options exercised ..........................................................     
Restricted stock units vested .........................................     
Options forfeited/cancelled ...........................................     
Restricted stock units cancelled ....................................     
Outstanding at December 31, 2015 ......................................     
Options granted .............................................................     
Restricted stock units granted .......................................     
Options exercised ..........................................................     
Restricted stock units vested .........................................     
Options forfeited/cancelled ...........................................     
Restricted stock units cancelled ....................................     
Outstanding at December 31, 2016 ......................................     

287     $ 
68     $ 
3     $ 
(2)   $ 
(4)   $ 
(29)   $ 
323     $ 
85     $ 
16     $ 
-    $ 
(6)   $ 
(28)   $ 
(2)   $ 
388     $ 
1,227     $ 
104     $ 
-    $ 
(114)   $ 
(116)   $ 
-    $ 
1,489     $ 

42.00       
22.50       
—      
14.00       
—      
36.50       
38.25       
11.20       
—      
—      
—      
30.58       
—      
32.03       
2.74       
—      
—      
—      
28.27       
—      
8.38       

Vested and expected to vest at December 31, 2016 .............     

1,466     $ 

8.45       

8.6    $ 

Vested at December 31, 2016 ..............................................     

402     $ 

22.45       

6.6    $ 

Exercisable at December 31, 2016 .......................................     

402     $ 

22.45       

6.6    $ 

For options that have a quoted market price in excess of the exercise price (“in-the-money options”), the aggregate intrinsic 
value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market 
price of the Company’s common stock as quoted on the NYSE MKT as of December 31, 2016. There were no stock options 
exercised during the year ended December 31, 2016. The Company received no cash payments for the exercise of stock 
options during the years ended December 31, 2016 and December 31, 2015. The Company received $34 thousand in cash 
payments for the exercise of stock options during the year ended December 31, 2014. The aggregate intrinsic value of stock 
option awards exercised was $0, $4 thousand and $32 thousand for the years ended December 31, 2016, 2015 and 2014, 
respectively, as determined at the date of option exercise. 

As of December 31, 2016, total unrecognized compensation cost related to unvested stock options and restricted stock was 
$1.5 million. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated 
statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.02 years. 

Stock Option Awards to Employees and Directors  

The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the 
market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards 
as of the date of grant by applying the Black-Scholes-Merton option pricing model using the single-option valuation approach. 
The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note 2 for a 
description of the accounting policies that the Company applies to value its stock-based awards. 

53 

 
  
  
    
    
  
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
  
      
        
        
        
  
  
      
        
        
        
  
  
      
        
        
        
  
  
  
  
  
During the years ended December 31, 2016, 2015 and 2014, the Company granted options to employees and directors to 
purchase an aggregate of 1,139,000, 59,000 and 52,000 shares of common stock, respectively.  

The weighted average assumptions used in determining the value of options granted and a summary of the methodology 
applied to develop each assumption are as follows:  

Assumption 
Expected price volatility ..............................................................     
Expected term (in years) .............................................................     
Risk-free interest rate ..................................................................     
Dividend yield .............................................................................     
Weighted-average fair value of options granted during the 

Year Ended December 31,  
2015 

2014 

2016 

84.47%     
7.03       
1.57%     
0.00%     

77.22%     
6.8       
1.76%     
0.00%     

76.88% 
6.5  
2.06% 
0.00% 

period ........................................................................................   $ 

2.06      $ 

7.35      $ 

15.25   

Expected Price Volatility—This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. 
The computation of expected volatility was based on the historical volatility of our own stock and comparable companies 
from a representative peer group selected based on industry and market capitalization data.  

Expected Term—This is the period of time over which the options granted are expected to remain outstanding. The expected 
life assumption is based on the Company’s historical data.  

Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected 
life of the option.  

Dividend Yield—We have not made any dividend payments nor do we have plans to pay dividends in the foreseeable future.  

Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate 
is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous 
estimate.  

Additionally, during the years ended December 31, 2016, 2015 and 2014, the Company issued 64,000, 16,000 and 2,000 
shares of common stock to employees, respectively.  

For  the  years  ended  December  31,  2016,  2015  and  2014,  we  recognized  stock-based  compensation  expense  of  $1,489 
thousand, $1,193 thousand and $853 thousand, respectively, for option awards to employees and directors.  

In the second quarter of 2015, the Company modified stock options owned by two of its directors, Mr. Cashion and Mr. 
Wicks, each of whom retired at the Company’s 2015 annual meeting of stockholders in June 2015. All outstanding stock 
options held by Mr. Cashion and Mr. Wicks became fully vested upon retirement, and the option exercise period for Mr. 
Cashion and Mr. Wicks was extended from three months to four years, calculated from the date of retirement. Options with 
an expiration date prior to the end of the exercise period maintained the same expiration date. In connection with the stock 
option modification, the Company recognized stock-based compensation expense of $185 thousand.  

During the second and third quarters of 2016, the Company modified stock options held by two of its directors, Mr. Radaelli 
and  Mr.  McPherson,  each  of  whom  resigned  as  directors  of  the  Company,  effective  May  6,  2016  and  August  24,  2016, 
respectively. All outstanding stock options held by Mr. Radaelli and Mr. McPherson became fully vested upon retirement, 
and the option exercise period for Mr. Radaelli and Mr. McPherson was extended from three months to four years, calculated 
from each former director’s respective date of resignation. Options with an expiration date prior to the end of the exercise 
period maintained the same expiration date. In connection with the stock option modification, the Company recognized stock-
based compensation expense of $58 thousand. 

54 

 
  
  
  
  
  
  
     
     
  
  
     
  
  
  
  
  
  
  
   
 
 
Stock-Based Awards to Non-Employees  

During the years ended December 31, 2016, 2015 and 2014, the Company granted options to purchase an aggregate of 89,000, 
27,000, and 14,000 shares of common stock, respectively, to non-employees in exchange for advisory and consulting services. 
The stock options are recorded at their fair value on the measurement date and recognized over the respective service or 
vesting period. The fair value of the stock options granted was calculated using the Black-Scholes-Merton option pricing 
model based upon the following assumptions: 

Assumption 
Expected price volatility ..............................................................     
Expected term (in years) .............................................................     
Risk-free interest rate ..................................................................     
Dividend yield .............................................................................     
Weighted-average fair value of options granted during the 

Year Ended December 31,  
2015 

2014 

2016 

87.68%     
10.0       
1.61%     
0.00%     

83.77%     
9.6       
2.18%     
0.00%     

79.10% 
8.6  
2.28% 
0.00% 

period ........................................................................................   $ 

2.29      $ 

7.15      $ 

15.25   

In addition, the Company granted restricted stock to non-employees totaling 41,000, 500 and 600 shares of common stock in 
the years ended December 31, 2016, 2015 and 2014, respectively, in exchange for advisory and consulting services.   

For the years ended December 31, 2016, 2015 and 2014, the Company recognized stock-based compensation expense of 
$262 thousand, $188 thousand and $189 thousand, respectively, related to non-employee options and restricted stock grants.  

In November 2015, Dr. Ron Najafi resigned from his position as President as CEO of the Company. As part of his separation 
agreement, in December 2016, the Company paid him a portion of the amount due under the agreement via a combination of 
registered shares and cash during fiscal year 2016. The expense related to this separation agreement was accrued for and 
expensed  in  the  year  ended  December  31,  2015,  and  the  shares  were  issued  to  him  via  fully  vested  restricted  stock  in 
December 2016. In January 2017, the remaining portion of the amount due under the agreement was paid via a combination 
or registered shard and cash. 

In March 2016, Roy Wu left the Company as Senior Vice President of Business Development. As part of his separation 
agreement, in March 2016, the Company paid him a combination of stock and cash. The expense related to this separation 
agreement was accrued for and expensed in the year ended December 31, 2015 based upon the known terms, and the shares 
were issued to him via fully vested restricted stock in March 2016. 

Summary of Stock-Based Compensation Expense 

A  summary  of  the  stock-based  compensation  expense  included  in  results  of  operations  for  the  option  and  stock  awards 
discussed above is as follows: 

(in thousands) 
Research and development .......................................................    $ 
Sales and Marketing .................................................................      
General and administrative .......................................................      
Total stock-based compensation expense .................................    $ 

Year Ended December 31,  
2015 

2014 

2016 

195     $ 
132       
1,424       
1,751     $ 

449     $ 
-      
933       
1,382     $ 

376   
-  
666   
1,042   

Since the Company has operating losses and net operating loss carryforwards, there are no tax benefits associated with stock-
based compensation expense. 

NOTE 13. LICENSE, COLLABORATION AND DISTRIBUTION AGREEMENTS 

Virbac 

In April 2012, the Company entered into a feasibility and option agreement with Virbac, a global animal health company, for 
the development and potential commercialization of Aganocides for a number of veterinary uses for companion animals. 
Under the terms of the agreement, NovaBay received an upfront payment and is entitled to additional support for research 
and development.  

55 

 
  
  
  
  
  
  
     
     
  
  
  
  
  
  
  
  
  
  
  
  
    
    
  
  
  
  
  
In April 2013,  the  Company  entered  into  a  collaboration and  license  agreement  with Virbac.  Under  this  new  agreement, 
Virbac acquired exclusive worldwide rights to develop the Company’s proprietary compound, auriclosene (NVC-422), for 
global veterinary markets for companion animals.  The Company received an option exercise fee and may receive future 
development and pre-commercial milestone payments as a result of the collaboration.  

Revenue has been recognized under the agreement as follows: 

(in thousands) 
Materials, Equipment, and Contract Study Costs .........................    $ 

Year Ended December 31, 
2015 

2014 

2016 

—    $ 

—    $ 

39  

The Company had deferred revenue balances of $246 thousand in each of the years ended December 31, 2016, 2015 and 
2014, related to these agreements, which consisted of the unamortized balances on the upfront technology and access fee and 
the support for ongoing research and development. 

NeutroPhase Distribution Agreements 

In  January 2012,  the  Company  entered  into  a distribution  agreement  with  China Pioneer Pharma  Holdings,  Ltd.  (“China 
Pioneer”), a Shanghai-based company that markets high-end pharmaceutical products into China and an affiliate of Pioneer 
Singapore, for the commercialization of NeutroPhase in this territory. Under the terms of the agreement, NovaBay received 
an upfront payment of $312,500. NovaBay also received $312,500 in January 2013, related to the submission of the first 
marketing approval for the product to the CFDA. The deferred revenue was recognized as the purchase discounts were earned, 
with the remaining deferred revenue recognized ratably over the product distribution period. During the year ended December 
31, 2014, NovaBay received $625,000 upon receipt of a marketing approval of the product from the CFDA.  

In  September  2012,  the  Company  entered  into  two  agreements  with  Pioneer:  (1)  an  international  distribution  agreement 
(“Distribution Agreement”) and (2) a unit purchase agreement (“Purchase Agreement”). These agreements were combined 
and accounted for as one arrangement with one unit of accounting for revenue recognition purposes. 

Pursuant  to  the  terms  of  the  Distribution  Agreement,  Pioneer  has  the  right  to  distribute  NeutroPhase,  upon  a  marketing 
approval from a Regulatory Authority, in certain territories in Asia (other than China). Upon execution of the Distribution 
Agreement, the Company received an upfront payment, which was recorded as deferred revenue. Pioneer is also obligated to 
make  certain  additional  payments  to  the  Company  upon  receipt  of  the  marketing  approval.  The  Distribution  Agreement 
further  provides  that  Pioneer  is  entitled  to  a  cumulative  purchase  discount  not  to  exceed  $500,000  upon  the  purchase  of 
NeutroPhase product, payable in NovaBay unregistered restricted common stock. 

Pursuant  to  the  Purchase  Agreement,  we  also  received  $2.5  million  from  Pioneer  for  the  purchase  of  restricted  units 
(comprising one share of common stock and a warrant for the purchase of one share of common stock). The unit purchase 
was completed in two tranches: (1) 800,000 units in September 2012; and (2) 1,200,000 units in October 2012, with both 
tranches at a purchase price of $1.25 per unit. The fair value of the total units sold was $3.5 million, based upon the trading 
price of our common stock on the dates the units were purchased and the fair value of the warrants based on the Black-
Scholes Merton option pricing model. Because the aggregate fair value of the units on the dates of purchase exceeded the 
$2.5 million in proceeds received from the unit purchase by approximately $1 million, we reallocated $600,000 from deferred 
revenue to stockholders’ equity as consideration for the purchase of the units.   

In  December  2013,  the  Company  announced  it  had  expanded  its  NeutroPhase  commercial  partnership  agreement  with 
Pioneer.  The  expanded  agreement  includes  licensing  rights  to  two  new  products,  Avenova  and  CelleRx,  which  were 
developed internally by NovaBay. The expanded partnership agreement covers the commercialization and distribution of 
these products in China and 11 countries in Southeast Asia.  

Revenue has been recognized under these agreements as follows: 

(in thousands) 

Year Ended December 31, 
2015 

2014 

2016 

Amortization of upfront technology access fee ............................    $ 
Product sales ................................................................................      
  $ 

94    $ 
324      
418    $ 

25    $ 
70      
95    $ 

47  
161   
208  

56 

 
  
  
  
  
  
  
    
    
  
  
  
  
  
  
  
  
   
  
  
  
  
    
    
  
  
      
        
        
  
  
The Company had deferred revenue balances of $1.0 million, $1.1 million, and $1.2 million, respectively, at December 31, 
2016, 2015 and 2014, related to these agreements, which consisted of the unamortized balances on the upfront technology 
and access fee and the support for ongoing research and development. 

On February 7, 2012 the Company to enter into a distribution agreement with Integrated Healing Technologies, LLC, (“IHT”) 
to distribute NeutroPhase. NovaBay received an upfront payment of $750,000. 

Revenue has been recognized under this agreement as follows: 

(in thousands) 

Year Ended December 31, 
2015 

2014 

2016 

Amortization of upfront technology access fee ............................    $ 
Product sales ................................................................................      
  $ 

21    $ 
332      
353    $ 

5    $ 
34      
39    $ 

7  
101  
108  

The Company had deferred revenue balances of $653 thousand, $674 thousand, and $679 thousand, respectively, at December 
31, 2016, 2015 and 2014, related to these agreements, which consisted of the unamortized balances on the upfront technology 
and access fee and the support for ongoing research and development. 

On June 1, 2013 the Company to enter into a distribution agreement with Principal Business Enterprise Inc., (“PBE”) to 
distribute NeutroPhase. NovaBay received an upfront payment of $200,000. 

Revenue has been recognized under this agreement as follows: 

(in thousands) 

Year Ended December 31, 
2015 

2016 

2014 

Amortization of upfront technology access fee ............................    $ 
Product sales ................................................................................      
  $ 

—    $ 
22      
22    $ 

1    $ 
66       
67    $ 

4  
104   
108  

The Company had deferred revenue balances of $194 thousand, $195 thousand, and $196 thousand, respectively, at December 
31, 2016, 2015 and 2014, related to these agreements, which consisted of the unamortized balances on the upfront technology 
and access fee and the support for ongoing research and development. 

Avenova Distribution Agreements 

In  November  2014,  the  Company  signed  a  nationwide  distribution  agreement  for  its  Avenova  product  with  McKesson 
Corporation  (“McKesson”)  as  part  of  the  Company’s  commercialization  strategy.  McKesson  makes  Avenova  widely 
available in local pharmacies and major retail chains across the U.S., such as Wal-Mart, Costco, CVS and Target. [In January 
2015, the Company signed a nationwide distribution agreement with Cardinal Health. In April 2015, the Company also signed 
a nationwide distribution agreement with AmerisourceBergen to market Avenova. Since December 2015, the Company has 
signed nationwide distribution agreements with Willow Pharmacy, Allure Pharmacy, Smith Drug Company and Dakota Drug 
to market Avenova. 

During  the  years  ended  December  31,  2016,  2015  and,  2014,  the  Company  earned  $7.3  million,  $947  thousand  and  $4 
thousand, respectively, in net sales revenue for its Avenova product from its distribution agreements. 

The Company had a deferred revenue balance of $1,924 thousand and $24 thousand as of December 31, 2016 and December 
31, 2015, respectively, for its Avenova product from its distribution agreements. 

NOTE 14. EMPLOYEE BENEFIT PLAN  

We have a 401(k) plan covering all eligible employees. We are not required to contribute to the plan and have made no 
contributions through December 31, 2016.  

57 

 
  
  
  
  
  
  
  
    
    
  
  
      
        
        
  
  
  
  
  
  
  
  
  
  
    
    
  
  
      
        
        
  
  
  
  
  
  
   
  
  
  
 
 
NOTE 15. INCOME TAXES  

The federal and state income tax provision is summarized as follows (in thousands): 

(in thousands) 
Current 

Federal ............................................................................   $ 
State ................................................................................     
Other ...............................................................................     
Total current tax expense .......................................................     

Deferred 

Federal ............................................................................     
State ................................................................................     
Other ...............................................................................     
Total deferred tax expense .....................................................     

Income tax provision ..............................................................   $ 

2016 

Year Ending December 31 
2015 

2014 

—    $ 
2      
—      
2      

—      
—      
—      
—      

2    $ 

—    $ 
2      
—      
2      

—      
—      
—      
—      

2    $ 

—  
2  
—  
2  

—  
—  
—  
—  

2  

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and 
liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax 
credit carryforwards. 

The tax effects of significant items comprising the Company's deferred taxes as of December 31, are as follows: 

(in thousands) 
Deferred tax assets: 

December 31 

2016 

2015 

Net operating losses ..............................................................................................   $ 
Accruals ................................................................................................................     
Deferred revenue ..................................................................................................     
Stock options ........................................................................................................     
Other deferred tax assets .......................................................................................     
Total deferred tax assets .........................................................................     

34,902     $ 
287       
829       
1,894       
765       
38,677       

31,464   
403   
954   
1,558  
652   
35,031  

Deferred tax liabilities: 

Property and equipment ........................................................................................     
Total deferred tax liabilities ...................................................................     

(32 )     
(32 )     

(28) 
(28) 

Valuation allowance .................................................................................................     
Net deferred taxes ....................................................................................................   $ 

(38,645 )     
—     $ 

(35,003) 
—  

The Company records the tax benefit of net operating loss carryforwards and temporary differences as an asset to the extent 
that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the 
Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent 
history  of  operating  losses,  management  believes  that  recognition  of  the  deferred  tax  assets  is  currently  not  likely  to  be 
realized and, accordingly, has provided a valuation allowance. 

The valuation allowance increased by the following amounts (in thousands):  

2016 

2015 

2014 

$ 

3,642    $ 

8,101     $ 

6,286  

58 

 
  
  
  
  
  
  
    
    
  
      
        
        
  
  
      
        
        
  
      
        
        
  
  
      
        
        
  
  
  
  
  
  
  
  
    
  
      
        
  
  
      
        
  
  
      
        
  
      
        
  
  
      
        
  
  
   
  
    
    
  
  
 
 
In  accordance  with  ASC  718  Compensation  –  Stock  Compensation,  the  Company  has  excluded  from  deferred  tax  assets 
benefits attributable to employee stock option exercises. Therefore, these amounts are not included in gross or net deferred 
tax assets. The benefit of these NOL carryforwards, totaling $1.1 million and $0.7 million at December 31, 2016 for federal 
and California tax, respectively, will only be recorded to equity when they reduce cash taxes payable. 

NOL and tax credit carryforwards as of December 31, 2016, are as follows (in thousands): 

Net operating losses, federal ...................................................................................    $ 
Net operating losses, state .......................................................................................    $ 
Tax credits, federal ..................................................................................................    $ 
Tax credits, state ......................................................................................................    $ 

Amount 

90,165     
78,219     
1,316     
282    

Expiration 
Years 
2024 - 2036 
2028 - 2036 
2031 - 2036 
do not expire 

Under U.S. federal tax law, the amount and availability of tax benefits are subject to a variety of interpretations and restrictive 
tests. Utilization of the NOL carryforwards may be subject to a substantial annual limitation due to ownership changes that 
have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, 
and similar state provisions. Ownership changes may limit the amount of NOL carryforwards that can be utilized annually to 
offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from 
transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 
percentage  points  over  a  three-year  period.  Since  the  Company’s  formation,  the  Company  has  raised  capital  through  the 
issuance of capital stock on two occasions which, combined with the purchasing shareholders’ subsequent disposition of 
those shares, may have resulted in one or more changes of control, as defined by Section 382. The Company has not currently 
completed a study to assess whether any change of control has occurred, or whether there have been multiple changes of 
control since the Company’s formation, due to the significant complexity and cost associated with the study. If the Company 
has  experienced  a  change  of  control  at  any  time  since  its  formation,  its  NOL  carryforwards  and  tax  credits  may  not  be 
available, or their utilization could be subject to an annual limitation under Section 382. A full valuation allowance has been 
provided against the Company’s NOL carryforwards, and if an adjustment is required, this adjustment would be offset by an 
adjustment to the valuation allowance. Accordingly, there would be no impact on the consolidated balance sheet or statement 
of operations and comprehensive loss if an adjustment is required. 

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows: 

(in thousands) 

2016 

Year Ending December 31 
2015 

2014 

Income tax provision (benefit) at federal statutory rate .........   $ 
State tax ..................................................................................     
ISO-related expense for GAAP ..............................................     
Change in valuation allowance...............................................     
Revaluation of warrant liability ..............................................     
Tax credits ..............................................................................     
Other.......................................................................................     
Total .......................................................................................   $ 

(4,471)   $ 
(157)     
52       
3,641      
806      
(31)     
162       
2     $ 

(6,439 )   $ 
(1,060 )     
164       
8,101       
(731 )     
(123 )     
90       
2     $ 

(5,154) 
(818) 
144   
6,286   
(565) 
(44) 
153   
2   

Uncertain Income Tax Positions 

The Company adopted the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, on January 1, 2007. 
There was no impact on our consolidated financial position, results of operations and cash flows as a result of adoption. A 
reconciliation of the beginning and ending balances of the unrecognized tax benefits during the years ended December 31, 
2016 and 2015 is as follows: 

(in thousands) 
Unrecognized benefit - beginning of period .............................................................   $ 
Gross increases - current period tax positions ..........................................................     
Unrecognized benefit - end of period .......................................................................   $ 

Year ended December 31, 
2015 
2016 

957     $ 
17       
974     $ 

811   
76   
957   

59 

 
  
  
  
      
    
  
  
 
    
  
  
  
  
  
  
  
  
  
  
  
  
    
    
  
  
      
        
        
  
   
  
  
  
  
  
  
    
  
  
The  Company’s policy will  be  to  recognize  interest  and penalties  related  to  income  taxes  as  a  component of  income  tax 
expense. It is subject to income tax examinations for U.S. incomes taxes and state income taxes from 2004 and 2006 forward 
respectively. It does not anticipate that total unrecognized tax benefits will significantly change in the next 12 months.  

NOTE 16. RELATED PARTY TRANSACTIONS       

Related Party Loans 

See Note 8, “Related Party Notes Payable” for a description of the Loan with the following related parties: Mr. Sieczkarek, 
Chairman of the Board, President and Chief Executive Officer of the Company; the Gail J. Maderis Revocable Trust, on 
behalf of Ms. Maderis, a Director of the Company; Dr. McPherson, a Director of the Company; and Pioneer China, Pioneer 
Singapore as a wholly-owned subsidiary of Pioneer China and recipient of all of the holdings of Pioneer Singapore as a result 
of a recent internal corporate reorganization, and Mr. Fu, the Company’s two largest stockholders. The Loan was fully paid 
off as of August 1, 2016. 

Related Party Financing 

See  Note  11,  “Stockholders’  Equity  (Deficit)”  –  “Common  Stock”  for  a  description  of  the  February  2016  Purchase 
Agreements and April 2016 Securities Purchase Agreement. The following related parties participated in both transactions: 
Mr. Sieczkarek, Chairman of the Board, President and Chief Executive Officer of the Company; and Pioneer Singapore and 
Mr. Fu, the Company’s two largest stockholders. 

Related Party Revenue  

The Company recognized related party revenues from product sales and license and collaboration fees of $418 thousand, $95 
thousand, and $208 thousand for the years ended December 31 2016, 2015 and 2014, respectively. The Company had related 
party accounts receivable of $75 thousand and $0 as of December 31, 2016 and December 31, 2015, respectively. See Note 
13, “License, Collaboration and Distribution Agreements - NeutroPhase Distribution Agreements,” for additional information 
regarding the Company’s distribution agreements with Pioneer, one of the Company’s largest stockholder. 

Related Party Expenses  

The Company recognized related party commission fees of $1.1 million, $408 thousand, and $0 for the years ended December 
31 2016, 2015, and 2014, respectively. These fees were paid to China Kington, representing the commission on sale of the 
Company’s common stock and the exercise of the Company’s warrants. See Note 11, “Stockholders’ Equity (Deficit)” – 
“Common Stock” for additional information regarding such commissions. 

60 

 
  
  
  
  
  
  
  
  
  
 
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 

FINANCIAL DISCLOSURE 

None. 

ITEM 9A.  CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures 

As  of  the  end  of  the  period  covered  by  this  report,  we  carried  out  an  evaluation,  under  the  supervision  and  with  the 
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of 
our  disclosure  controls  and  procedures  pursuant  to  Rule  13a-15  and  15d-15  of  the  Securities  Exchange  Act  of  1934,  as 
amended (the Exchange Act).  

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the 
objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource 
constraints, and the benefits of controls must be considered relative to their costs. Assessing the costs and benefits of such 
controls and procedures necessarily involves the exercise of judgment by management. Because of the inherent limitations 
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, 
if any, have been detected. 

As disclosed in our 10-Q for the period ended September 30, 2016, we determined there was a material weakness in our 
internal controls over financial reporting. During the fourth quarter of fiscal 2016, we remediated the material weakness by 
implementing procedures to ensure that complex warrant liability matters associated with the exercise of those warrants are 
appropriately analyzed and recorded in the financial statements We enhanced the design of our control procedures to require 
that these matters be thoroughly researched and documented and, when necessary, engage technical expertise on complex 
accounting matters to support the accounting and finance team and the internal control environment. As a result of these 
measures, we have  concluded  that  the  material  weakness  that existed  in  the  design  of  our  internal control  over  financial 
reporting at September 31, 2016 has been remediated as of December 31, 2016 

Based upon that evaluation at December 31, 2016, our Chief Executive Officer and our Chief Financial Officer concluded 
that  our  disclosure  controls  and  procedures  were  effective  to  ensure,  at  the  reasonable  assurance  level,  that  information 
required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized 
and reported within the time periods specified in the SEC’s rules and forms and were effective in ensuring that information 
required  to  be  disclosed  by  us  in  the  reports  that  we  file  or  submit  under  the  Exchange  Act  was  accumulated  and 
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to 
allow timely decisions regarding required disclosure. 

Management’s Report on Internal Control over Financial Reporting. 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such 
term  is  defined  in  Exchange  Act  Rules  13a-15(f)  and  15d-15(f). Under  the  supervision  and  with  the  participation of our 
management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the 
effectiveness of our internal control over financial reporting as of December 31, 2016.  Our management utilized the criteria 
set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the 
Treadway  Commission  to  conduct  an  assessment  of  the  effectiveness  of  our  internal  control  over  financial  reporting  as 
of December 31, 2016. Our management has concluded that, as of December 31, 2016, our internal control over financial 
reporting was effective based on these criteria. 

Changes in Internal Control Over Financial Reporting 

Except for the remediation of the material weakness described above, there were no changes in our internal control over 
financial  reporting  which  has  materially  affected,  or  are  reasonably  likely  to  materially  affect,  our  internal  control  over 
financial reporting. 

ITEM 9B.  OTHER INFORMATION 

None. 

61 

 
  
   
  
  
  
  
  
  
  
  
  
  
  
  
PART III 

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

The information required by this item will be included in our Proxy Statement for the 2017 Annual Meeting of Stockholders 
(the “2017 Proxy Statement”) and is incorporated herein by reference. 

ITEM 11.  EXECUTIVE COMPENSATION 

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 

RELATED STOCKHOLDER MATTERS 

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 

INDEPENDENCE 

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES 

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. 

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES 

PART IV 

(a) Documents filed as part of this report: 

(1) Financial Statements. The financial statements listed in the Index for Item 8 hereof are filed as part of this 

report. 

(2)  Financial  Statement  Schedules.  All  schedules  have  been  omitted  because  they  are  not  required  or  the 

required information is included in our consolidated financial statements and notes thereto. 

(3) Exhibits. See the Exhibit Index which follows the signature page of this report, which is incorporated herein 

by reference. 

62 

 
  
  
   
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
(cid:3)(cid:15)(cid:2)(cid:17)(cid:5)(cid:1)(cid:15)(cid:7)(cid:1)(cid:5)(cid:10)(cid:17)(cid:6)(cid:4)(cid:19)(cid:15)(cid:17)(cid:18)(cid:53)
(cid:16)(cid:26)(cid:44)(cid:36)(cid:1)(cid:6)(cid:52)(cid:1)(cid:7)(cid:41)(cid:30)(cid:33)(cid:37)(cid:26)(cid:38)(cid:54)(cid:1)(cid:16)(cid:32)(cid:52)(cid:5)(cid:52)
(cid:20)(cid:44)(cid:36)(cid:37)(cid:46)(cid:37)(cid:44)(cid:36)(cid:37)(cid:44)(cid:49)(cid:1)(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:33)(cid:35)(cid:37)(cid:50)(cid:49)(cid:41)(cid:35)(cid:33)(cid:42)(cid:1)(cid:26)(cid:47)(cid:45)(cid:38)(cid:37)(cid:48)(cid:48)(cid:41)(cid:45)(cid:44)(cid:33)(cid:42)(cid:1)(cid:33)(cid:44)(cid:36)(cid:1)(cid:14)(cid:45)(cid:44)(cid:48)(cid:50)(cid:42)(cid:49)(cid:33)(cid:44)(cid:49)(cid:1)

(cid:23)(cid:33)(cid:38)(cid:48)(cid:32)(cid:39)(cid:44)(cid:1)(cid:50)(cid:16)(cid:26)(cid:44)(cid:36)(cid:51)(cid:1)(cid:12)(cid:33)
(cid:14)(cid:40)(cid:33)(cid:41)(cid:47)(cid:43)(cid:33)(cid:44)(cid:1)(cid:33)(cid:44)(cid:36)(cid:1)(cid:16)(cid:53)(cid:37)(cid:35)(cid:50)(cid:49)(cid:41)(cid:51)(cid:37)(cid:1)(cid:15)(cid:41)(cid:47)(cid:37)(cid:35)(cid:49)(cid:45)(cid:47)
(cid:14)(cid:40)(cid:41)(cid:44)(cid:33)(cid:1)(cid:26)(cid:41)(cid:45)(cid:44)(cid:37)(cid:37)(cid:47)(cid:1)(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:33)(cid:1)(cid:19)(cid:45)(cid:42)(cid:36)(cid:41)(cid:44)(cid:39)(cid:48)(cid:1)(cid:22)(cid:41)(cid:43)(cid:41)(cid:49)(cid:37)(cid:36)

(cid:23)(cid:33)(cid:26)(cid:39)(cid:47)(cid:26)(cid:38)(cid:1)(cid:50)(cid:9)(cid:30)(cid:38)(cid:41)(cid:47)(cid:51)(cid:1)(cid:12)(cid:33)(cid:44)
(cid:15)(cid:41)(cid:47)(cid:37)(cid:35)(cid:49)(cid:45)(cid:47)
(cid:12)(cid:44)(cid:49)(cid:1)(cid:14)(cid:33)(cid:46)(cid:41)(cid:49)(cid:33)(cid:42)(cid:1)(cid:26)(cid:49)(cid:54)(cid:1)(cid:22)(cid:49)(cid:36)(cid:58)

(cid:8)(cid:26)(cid:33)(cid:36)(cid:1)(cid:13)(cid:26)(cid:29)(cid:30)(cid:41)(cid:33)(cid:42)(cid:54)(cid:1)(cid:13)(cid:52)(cid:3)(cid:52)(cid:2)(cid:52)(cid:1)
(cid:66)(cid:97)(cid:82)(cid:98)(cid:87)(cid:81)(cid:82)(cid:93)(cid:99)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:52)(cid:86)(cid:87)(cid:82)(cid:83)(cid:3)(cid:54)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:65)(cid:369)(cid:80)(cid:82)(cid:97)
(cid:12)(cid:44)(cid:49)(cid:41)(cid:51)(cid:33)(cid:1)(cid:13)(cid:41)(cid:45)(cid:28)(cid:35)(cid:41)(cid:37)(cid:44)(cid:35)(cid:37)(cid:48)(cid:59)(cid:1)(cid:20)(cid:44)(cid:35)(cid:58)

(cid:24)(cid:39)(cid:38)(cid:31)(cid:32)(cid:26)(cid:39)(cid:1)(cid:50)(cid:4)(cid:26)(cid:41)(cid:36)(cid:51)(cid:1)(cid:13)(cid:26)(cid:54)(cid:1)(cid:16)(cid:32)(cid:52)(cid:5)(cid:52)
(cid:17)(cid:45)(cid:50)(cid:44)(cid:36)(cid:37)(cid:47)(cid:59)(cid:1)(cid:25)(cid:52)(cid:44)(cid:37)(cid:47)(cid:1)(cid:33)(cid:44)(cid:36)(cid:1)(cid:26)(cid:47)(cid:37)(cid:48)(cid:41)(cid:36)(cid:37)(cid:44)(cid:49)
(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:28)(cid:49)(cid:33)(cid:49)(cid:48)(cid:59)(cid:1)(cid:22)(cid:49)(cid:36)(cid:58)

(cid:13)(cid:26)(cid:41)(cid:35)(cid:1)(cid:13)(cid:52)(cid:1)(cid:18)(cid:33)(cid:30)(cid:28)(cid:48)(cid:35)(cid:26)(cid:41)(cid:30)(cid:35)(cid:54)(cid:1)(cid:13)(cid:52)(cid:3)(cid:52)(cid:2)(cid:52)
(cid:52)(cid:86)(cid:87)(cid:82)(cid:83)(cid:3)(cid:54)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:65)(cid:369)(cid:80)(cid:82)(cid:97)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:52)(cid:86)(cid:77)(cid:87)(cid:97)(cid:92)(cid:77)(cid:93)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:51)(cid:94)(cid:77)(cid:97)(cid:81)
(cid:24)(cid:45)(cid:51)(cid:33)(cid:13)(cid:33)(cid:54)(cid:1)(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:33)(cid:35)(cid:37)(cid:50)(cid:49)(cid:41)(cid:35)(cid:33)(cid:42)(cid:48)(cid:59)(cid:1)(cid:20)(cid:44)(cid:35)(cid:58)

(cid:13)(cid:33)(cid:34)(cid:33)(cid:26)(cid:1)(cid:50)(cid:3)(cid:39)(cid:27)(cid:51)(cid:1)(cid:22)(cid:44)(cid:54)(cid:1)(cid:13)(cid:52)(cid:3)(cid:52)(cid:2)(cid:52)
(cid:23)(cid:33)(cid:44)(cid:33)(cid:39)(cid:41)(cid:44)(cid:39)(cid:1)(cid:15)(cid:41)(cid:47)(cid:37)(cid:35)(cid:49)(cid:45)(cid:47)
(cid:14)(cid:40)(cid:41)(cid:44)(cid:33)(cid:1)(cid:21)(cid:41)(cid:44)(cid:39)(cid:49)(cid:45)(cid:44)(cid:1)(cid:12)(cid:48)(cid:48)(cid:37)(cid:49)(cid:1)(cid:23)(cid:33)(cid:44)(cid:33)(cid:39)(cid:37)(cid:43)(cid:37)(cid:44)(cid:49)(cid:1)
(cid:28)(cid:40)(cid:33)(cid:44)(cid:39)(cid:40)(cid:33)(cid:41)(cid:1)(cid:14)(cid:37)(cid:49)(cid:45)(cid:44)(cid:1)(cid:20)(cid:44)(cid:51)(cid:37)(cid:48)(cid:49)(cid:43)(cid:37)(cid:44)(cid:49)(cid:1)(cid:23)(cid:33)(cid:44)(cid:33)(cid:39)(cid:37)(cid:43)(cid:37)(cid:44)(cid:49)(cid:1)(cid:14)(cid:45)(cid:58)(cid:1)(cid:22)(cid:49)(cid:36)(cid:58)

(cid:24)(cid:45)(cid:44)(cid:60)(cid:16)(cid:53)(cid:37)(cid:35)(cid:50)(cid:49)(cid:41)(cid:51)(cid:37)(cid:1)(cid:15)(cid:41)(cid:47)(cid:37)(cid:35)(cid:49)(cid:45)(cid:47)
(cid:14)(cid:40)(cid:41)(cid:44)(cid:33)(cid:1)(cid:26)(cid:41)(cid:45)(cid:44)(cid:37)(cid:37)(cid:47)(cid:1)(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:33)(cid:1)(cid:19)(cid:45)(cid:42)(cid:36)(cid:41)(cid:44)(cid:39)(cid:48)(cid:1)(cid:22)(cid:41)(cid:43)(cid:41)(cid:49)(cid:37)(cid:36)

(cid:19)(cid:39)(cid:29)(cid:29)(cid:1)(cid:25)(cid:26)(cid:45)(cid:39)(cid:29)(cid:38)(cid:33)(cid:28)(cid:35)
(cid:26)(cid:47)(cid:37)(cid:48)(cid:41)(cid:36)(cid:37)(cid:44)(cid:49)(cid:59)(cid:1)(cid:20)(cid:44)(cid:49)(cid:37)(cid:47)(cid:44)(cid:33)(cid:49)(cid:41)(cid:45)(cid:44)(cid:33)(cid:42)
(cid:32)(cid:16)(cid:22)(cid:29)(cid:20)(cid:27)(cid:1)(cid:12)(cid:37)(cid:48)(cid:49)(cid:40)(cid:37)(cid:49)(cid:41)(cid:35)(cid:48)(cid:59)(cid:1)(cid:20)(cid:44)(cid:35)(cid:58)

(cid:19)(cid:17)(cid:2)(cid:14)(cid:18)(cid:7)(cid:6)(cid:17)(cid:1)(cid:2)(cid:8)(cid:6)(cid:14)(cid:19)(cid:1)(cid:2)(cid:14)(cid:5)(cid:1)(cid:17)(cid:6)(cid:8)(cid:10)(cid:18)(cid:19)(cid:17)(cid:2)(cid:17)
(cid:71)(cid:857)(cid:69)(cid:857)(cid:3)(cid:63)(cid:77)(cid:87)(cid:90)(cid:3)(cid:52)(cid:94)(cid:97)(cid:97)(cid:82)(cid:98)(cid:95)(cid:94)(cid:93)(cid:81)(cid:82)(cid:93)(cid:80)(cid:82)(cid:859)
(cid:66)(cid:857)(cid:65)(cid:857)(cid:3)(cid:51)(cid:65)(cid:74)(cid:3)(cid:10)(cid:6)(cid:8)(cid:14)(cid:6)(cid:3)
(cid:52)(cid:94)(cid:90)(cid:90)(cid:82)(cid:85)(cid:82)(cid:3)(cid:69)(cid:99)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:860)(cid:3)(cid:70)(cid:74)(cid:3)(cid:14)(cid:14)(cid:15)(cid:11)(cid:9)

(cid:65)(cid:101)(cid:82)(cid:97)(cid:93)(cid:87)(cid:85)(cid:86)(cid:99)(cid:3)(cid:52)(cid:94)(cid:97)(cid:97)(cid:82)(cid:98)(cid:95)(cid:94)(cid:93)(cid:81)(cid:82)(cid:93)(cid:80)(cid:82)(cid:859)
(cid:10)(cid:34)(cid:32)(cid:35)(cid:40)(cid:39)(cid:25)(cid:37)(cid:38)(cid:28)(cid:21)(cid:37)(cid:25)(cid:1)(cid:19)(cid:37)(cid:40)(cid:38)(cid:39)(cid:1)(cid:10)(cid:34)(cid:32)(cid:35)(cid:21)(cid:33)(cid:44)(cid:47)(cid:1)(cid:15)(cid:46)(cid:9)(cid:46)
(cid:4)(cid:3)(cid:3)(cid:1)(cid:17)(cid:40)(cid:21)(cid:31)(cid:29)(cid:39)(cid:44)(cid:1)(cid:10)(cid:29)(cid:37)(cid:23)(cid:31)(cid:25)(cid:47)(cid:1)(cid:18)(cid:40)(cid:29)(cid:39)(cid:25)(cid:1)(cid:4)(cid:3)(cid:2)
(cid:52)(cid:94)(cid:90)(cid:90)(cid:82)(cid:85)(cid:82)(cid:3)(cid:69)(cid:99)(cid:77)(cid:99)(cid:87)(cid:94)(cid:93)(cid:860)(cid:3)(cid:70)(cid:74)(cid:3)(cid:3)(cid:14)(cid:14)(cid:15)(cid:11)(cid:12)

(cid:10)(cid:14)(cid:21)(cid:6)(cid:18)(cid:19)(cid:15)(cid:17)(cid:1)(cid:4)(cid:15)(cid:14)(cid:19)(cid:2)(cid:4)(cid:19)
(cid:11)(cid:39)(cid:29)(cid:47)(cid:1)(cid:4)(cid:26)(cid:33)(cid:38)
(cid:28)(cid:37)(cid:44)(cid:41)(cid:45)(cid:47)(cid:1)(cid:30)(cid:41)(cid:35)(cid:37)(cid:1)(cid:26)(cid:47)(cid:37)(cid:48)(cid:41)(cid:36)(cid:37)(cid:44)(cid:49)
(cid:22)(cid:19)(cid:12)
(cid:4)(cid:3)(cid:4)(cid:3)(cid:1)(cid:12)(cid:51)(cid:37)(cid:44)(cid:50)(cid:37)(cid:1)(cid:45)(cid:38)(cid:1)(cid:49)(cid:40)(cid:37)(cid:1)(cid:28)(cid:49)(cid:33)(cid:47)(cid:48)(cid:59)(cid:1)(cid:28)(cid:50)(cid:41)(cid:49)(cid:37)(cid:1)(cid:4)(cid:11)(cid:9)(cid:2)
(cid:22)(cid:45)(cid:48)(cid:1)(cid:12)(cid:44)(cid:39)(cid:37)(cid:42)(cid:37)(cid:48)(cid:59)(cid:1)(cid:14)(cid:12)(cid:1)(cid:11)(cid:2)(cid:2)(cid:8)(cid:9)
(cid:56)(cid:5)(cid:3)(cid:2)(cid:57)(cid:1)(cid:8)(cid:11)(cid:3)(cid:60)(cid:9)(cid:3)(cid:2)(cid:2)

(cid:6)(cid:23)(cid:6)(cid:4)(cid:20)(cid:19)(cid:10)(cid:21)(cid:6)(cid:1)(cid:12)(cid:6)(cid:2)(cid:5)(cid:6)(cid:17)(cid:18)(cid:9)(cid:10)(cid:16)
(cid:13)(cid:26)(cid:41)(cid:35)(cid:1)(cid:13)(cid:52)(cid:1)(cid:18)(cid:33)(cid:30)(cid:28)(cid:48)(cid:35)(cid:26)(cid:41)(cid:30)(cid:35)(cid:54)(cid:1)(cid:13)(cid:52)(cid:3)(cid:52)(cid:2)(cid:52)
(cid:52)(cid:86)(cid:87)(cid:82)(cid:83)(cid:3)(cid:54)(cid:103)(cid:82)(cid:80)(cid:100)(cid:99)(cid:87)(cid:101)(cid:82)(cid:3)(cid:65)(cid:369)(cid:80)(cid:82)(cid:97)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:52)(cid:86)(cid:77)(cid:87)(cid:97)(cid:92)(cid:77)(cid:93)(cid:3)(cid:94)(cid:83)(cid:3)(cid:99)(cid:86)(cid:82)(cid:3)(cid:51)(cid:94)(cid:77)(cid:97)(cid:81)

(cid:19)(cid:32)(cid:39)(cid:37)(cid:26)(cid:42)(cid:1)(cid:16)(cid:26)(cid:44)(cid:36)(cid:42)(cid:39)(cid:38)(cid:54)(cid:1)(cid:13)(cid:52)(cid:3)(cid:52)(cid:2)(cid:52)
(cid:52)(cid:86)(cid:87)(cid:82)(cid:83)(cid:3)(cid:55)(cid:87)(cid:93)(cid:77)(cid:93)(cid:80)(cid:87)(cid:77)(cid:90)(cid:3)(cid:65)(cid:369)(cid:80)(cid:82)(cid:97)

(cid:11)(cid:44)(cid:42)(cid:43)(cid:33)(cid:38)(cid:1)(cid:9)(cid:26)(cid:36)(cid:36)(cid:54)(cid:1)(cid:6)(cid:42)(cid:40)(cid:52)
(cid:28)(cid:37)(cid:44)(cid:41)(cid:45)(cid:47)(cid:1)(cid:30)(cid:41)(cid:35)(cid:37)(cid:1)(cid:26)(cid:47)(cid:37)(cid:48)(cid:41)(cid:36)(cid:37)(cid:44)(cid:49)(cid:1)(cid:55)(cid:1)(cid:18)(cid:37)(cid:44)(cid:37)(cid:47)(cid:33)(cid:42)(cid:1)(cid:14)(cid:45)(cid:50)(cid:44)(cid:48)(cid:37)(cid:42)

(cid:10)(cid:14)(cid:5)(cid:6)(cid:16)(cid:6)(cid:14)(cid:5)(cid:6)(cid:14)(cid:19)(cid:1)(cid:17)(cid:6)(cid:8)(cid:10)(cid:18)(cid:19)(cid:6)(cid:17)(cid:6)(cid:5)(cid:1)
(cid:16)(cid:20)(cid:3)(cid:12)(cid:10)(cid:4)(cid:1)(cid:2)(cid:4)(cid:4)(cid:15)(cid:20)(cid:14)(cid:19)(cid:10)(cid:14)(cid:8)(cid:1)(cid:7)(cid:10)(cid:17)(cid:13)
(cid:15)(cid:20)(cid:13)(cid:1)(cid:49)(cid:1)(cid:4)(cid:39)(cid:52)(cid:1)(cid:12)(cid:12)(cid:16)
(cid:8)(cid:2)(cid:3)(cid:1)(cid:14)(cid:33)(cid:42)(cid:41)(cid:38)(cid:45)(cid:47)(cid:44)(cid:41)(cid:33)(cid:1)(cid:28)(cid:49)(cid:47)(cid:37)(cid:37)(cid:49)(cid:59)(cid:1)(cid:28)(cid:50)(cid:41)(cid:49)(cid:37)(cid:1)(cid:3)(cid:10)(cid:2)(cid:2)
(cid:28)(cid:33)(cid:44)(cid:1)(cid:17)(cid:47)(cid:33)(cid:44)(cid:35)(cid:41)(cid:48)(cid:35)(cid:45)(cid:59)(cid:1)(cid:14)(cid:12)(cid:1)(cid:11)(cid:6)(cid:3)(cid:2)(cid:10)
(cid:56)(cid:6)(cid:3)(cid:7)(cid:57)(cid:1)(cid:6)(cid:5)(cid:6)(cid:60)(cid:5)(cid:9)(cid:6)(cid:6)

(cid:4)(cid:15)(cid:20)(cid:14)(cid:18)(cid:6)(cid:12)
(cid:18)(cid:40)(cid:44)(cid:33)(cid:41)(cid:30)(cid:1)(cid:16)(cid:26)(cid:43)(cid:43)(cid:39)(cid:38)(cid:1)(cid:3)(cid:39)(cid:31)(cid:31)(cid:42)(cid:1)(cid:50)(cid:20)(cid:18)(cid:51)(cid:1)(cid:12)(cid:12)(cid:16)
(cid:4)(cid:7)(cid:7)(cid:2)(cid:1)(cid:23)(cid:1)(cid:28)(cid:49)(cid:47)(cid:37)(cid:37)(cid:49)(cid:59)(cid:1)(cid:24)(cid:31)
(cid:31)(cid:33)(cid:48)(cid:40)(cid:41)(cid:44)(cid:39)(cid:49)(cid:45)(cid:44)(cid:59)(cid:1)(cid:15)(cid:14)(cid:1)(cid:4)(cid:2)(cid:2)(cid:2)(cid:5)(cid:9)
(cid:56)(cid:4)(cid:2)(cid:4)(cid:57)(cid:1)(cid:6)(cid:7)(cid:9)(cid:60)(cid:8)(cid:2)(cid:2)(cid:2)

(cid:4)(cid:15)(cid:17)(cid:16)(cid:15)(cid:17)(cid:2)(cid:19)(cid:6)(cid:1)(cid:15)(cid:7)(cid:7)(cid:10)(cid:4)(cid:6)
(cid:14)(cid:39)(cid:45)(cid:26)(cid:3)(cid:26)(cid:47)(cid:1)(cid:16)(cid:32)(cid:26)(cid:41)(cid:37)(cid:26)(cid:28)(cid:30)(cid:44)(cid:43)(cid:33)(cid:28)(cid:26)(cid:36)(cid:42)(cid:54)(cid:1)(cid:10)(cid:38)(cid:28)(cid:52)
(cid:4)(cid:2)(cid:2)(cid:2)(cid:1)(cid:26)(cid:45)(cid:52)(cid:37)(cid:42)(cid:42)(cid:1)(cid:28)(cid:49)(cid:47)(cid:37)(cid:37)(cid:49)(cid:59)(cid:1)(cid:28)(cid:50)(cid:41)(cid:49)(cid:37)(cid:1)(cid:3)(cid:3)(cid:7)(cid:2)
(cid:16)(cid:43)(cid:37)(cid:47)(cid:54)(cid:51)(cid:41)(cid:42)(cid:42)(cid:37)(cid:59)(cid:1)(cid:14)(cid:12)(cid:1)(cid:11)(cid:6)(cid:8)(cid:2)(cid:10)
(cid:56)(cid:7)(cid:3)(cid:2)(cid:57)(cid:1)(cid:10)(cid:11)(cid:11)(cid:60)(cid:10)(cid:10)(cid:2)(cid:2)
(cid:52)(cid:52)(cid:52)(cid:58)(cid:44)(cid:45)(cid:51)(cid:33)(cid:34)(cid:33)(cid:54)(cid:58)(cid:35)(cid:45)(cid:43)

(cid:1)

(cid:7)(cid:25)(cid:31)(cid:12)(cid:5)(cid:12)(cid:34)(cid:37)(cid:28)(cid:1)(cid:4)(cid:31)(cid:16)(cid:24)(cid:25)(cid:31)(cid:12)(cid:1)(cid:1)(cid:12)(cid:15)(cid:15)(cid:27)(cid:16)(cid:28)(cid:28)(cid:16)(cid:28)(cid:1)(cid:12)(cid:24)
(cid:30)(cid:24)(cid:15)(cid:16)(cid:27)(cid:28)(cid:16)(cid:27)(cid:31)(cid:16)(cid:15)(cid:1)(cid:10)(cid:35)(cid:8)(cid:35)(cid:1)(cid:23)(cid:12)(cid:27)(cid:21)(cid:16)(cid:29)(cid:1)(cid:29)(cid:19)(cid:12)(cid:29)(cid:1)(cid:32)(cid:16)
(cid:16)(cid:28)(cid:29)(cid:20)(cid:23)(cid:12)(cid:29)(cid:16)(cid:1)(cid:29)(cid:25)(cid:1)(cid:13)(cid:16)(cid:1)(cid:12)(cid:27)(cid:25)(cid:30)(cid:24)(cid:15)(cid:1)(cid:3)(cid:2)(cid:1)(cid:23)(cid:20)(cid:22)(cid:22)(cid:20)(cid:25)(cid:24)
(cid:26)(cid:12)(cid:29)(cid:20)(cid:16)(cid:24)(cid:29)(cid:28)(cid:35)(cid:1)(cid:9)(cid:25)(cid:15)(cid:12)(cid:34)(cid:1)(cid:32)(cid:16)(cid:1)(cid:19)(cid:12)(cid:31)(cid:16)(cid:1)(cid:13)(cid:12)(cid:27)(cid:16)(cid:22)(cid:34)(cid:1)
(cid:28)(cid:14)(cid:27)(cid:12)(cid:29)(cid:14)(cid:19)(cid:16)(cid:15)(cid:1)(cid:29)(cid:19)(cid:16)(cid:1)(cid:28)(cid:30)(cid:27)(cid:17)(cid:12)(cid:14)(cid:16)(cid:1)(cid:25)(cid:17)(cid:1)(cid:29)(cid:19)(cid:20)(cid:28)(cid:1)(cid:22)(cid:12)(cid:27)(cid:18)(cid:16)
(cid:92)(cid:77)(cid:97)(cid:89)(cid:82)(cid:99)(cid:3)(cid:77)(cid:93)(cid:81)(cid:3)(cid:86)(cid:77)(cid:101)(cid:82)(cid:3)(cid:77)(cid:3)(cid:98)(cid:87)(cid:85)(cid:93)(cid:87)(cid:364)(cid:80)(cid:77)(cid:93)(cid:99)(cid:3)(cid:83)(cid:100)(cid:99)(cid:100)(cid:97)(cid:82)(cid:3)
(cid:18)(cid:27)(cid:25)(cid:32)(cid:29)(cid:19)(cid:1)(cid:25)(cid:26)(cid:26)(cid:25)(cid:27)(cid:29)(cid:30)(cid:24)(cid:20)(cid:29)(cid:34)(cid:35)(cid:1)(cid:11)(cid:20)(cid:29)(cid:19)(cid:1)(cid:12)(cid:1)(cid:13)(cid:30)(cid:28)(cid:20)(cid:24)(cid:16)(cid:28)(cid:28)
(cid:28)(cid:29)(cid:27)(cid:12)(cid:29)(cid:16)(cid:18)(cid:34)(cid:1)(cid:29)(cid:19)(cid:12)(cid:29)(cid:1)(cid:20)(cid:28)(cid:1)(cid:12)(cid:22)(cid:27)(cid:16)(cid:12)(cid:15)(cid:34)(cid:1)(cid:15)(cid:16)(cid:22)(cid:20)(cid:31)(cid:16)(cid:27)(cid:20)(cid:24)(cid:18)
(cid:27)(cid:16)(cid:28)(cid:30)(cid:22)(cid:29)(cid:28)(cid:36)(cid:1)(cid:32)(cid:16)(cid:1)(cid:12)(cid:24)(cid:29)(cid:20)(cid:14)(cid:20)(cid:26)(cid:12)(cid:29)(cid:16)(cid:1)(cid:14)(cid:25)(cid:24)(cid:29)(cid:20)(cid:24)(cid:30)(cid:20)(cid:24)(cid:18)(cid:1)(cid:29)(cid:25)(cid:1)
(cid:18)(cid:27)(cid:25)(cid:32)(cid:1)(cid:28)(cid:19)(cid:12)(cid:27)(cid:16)(cid:19)(cid:25)(cid:22)(cid:15)(cid:16)(cid:27)(cid:1)(cid:31)(cid:12)(cid:22)(cid:30)(cid:16)(cid:35)(cid:1)(cid:6)(cid:1)(cid:22)(cid:25)(cid:25)(cid:21)(cid:1)(cid:29)(cid:25)(cid:1)(cid:25)(cid:30)(cid:27)(cid:1)
(cid:17)(cid:30)(cid:29)(cid:30)(cid:27)(cid:16)(cid:1)(cid:32)(cid:20)(cid:29)(cid:19)(cid:1)(cid:16)(cid:33)(cid:14)(cid:20)(cid:29)(cid:16)(cid:23)(cid:16)(cid:24)(cid:29)(cid:1)(cid:12)(cid:24)(cid:15)(cid:1)(cid:25)(cid:26)(cid:29)(cid:20)(cid:23)(cid:20)(cid:28)(cid:23)(cid:35)

(cid:28)(cid:1)(cid:8)(cid:16)(cid:25)(cid:22)(cid:1)(cid:12)(cid:21)(cid:19)(cid:17)(cid:26)(cid:22)(cid:16)(cid:25)(cid:19)(cid:22)(cid:27)(cid:1)(cid:3)(cid:20)(cid:16)(cid:21)(cid:25)(cid:23)(cid:16)(cid:24)(cid:1)(cid:16)(cid:24)(cid:18)(cid:1)(cid:3)(cid:4)(cid:10)

(cid:1)

(cid:24)(cid:45)(cid:51)(cid:33)(cid:13)(cid:33)(cid:54)(cid:1)(cid:26)(cid:40)(cid:33)(cid:47)(cid:43)(cid:33)(cid:35)(cid:37)(cid:50)(cid:49)(cid:41)(cid:35)(cid:33)(cid:42)(cid:48)(cid:1)
(cid:4)(cid:2)(cid:2)(cid:2)(cid:1)(cid:26)(cid:45)(cid:52)(cid:37)(cid:42)(cid:42)(cid:1)(cid:28)(cid:49)(cid:47)(cid:37)(cid:37)(cid:49)
(cid:28)(cid:50)(cid:41)(cid:49)(cid:37)(cid:1)(cid:3)(cid:3)(cid:7)(cid:2)
(cid:16)(cid:43)(cid:37)(cid:47)(cid:54)(cid:51)(cid:41)(cid:42)(cid:42)(cid:37)(cid:59)(cid:1)(cid:14)(cid:12)(cid:1)(cid:11)(cid:6)(cid:8)(cid:2)(cid:10)
(cid:44)(cid:45)(cid:51)(cid:33)(cid:34)(cid:33)(cid:54)(cid:58)(cid:35)(cid:45)(cid:43)