NOTE

13.

LICENSE, COLLABORATION AND DISTRIBUTION AGREEMENTS

Virbac

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, the Company received an upfront payment and is entitled to additional support for research and development.

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 was recognized in the years ended

December 31, 2017,

2016

and

2015

related to these agreements.

The Company had deferred revenue balances of

$246

thousand in each of the years ended

December 31, 2017,

2016

and

2015,

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

January 2012,

the Company entered into a distribution agreement with 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

January 2013,

related to the submission of the

first

marketing approval for the product to the CFDA

(Chinese Food and Drug Adminstration). 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.

September 2012,

the Company entered into

two

agreements with China Pioneer: (

) an international distribution agreement (“Distribution Agreement”) and (

) 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, China 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. China Pioneer is also obligated to make certain additional payments to the Company upon receipt of the marketing approval. The Distribution Agreement further provides that China 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 China 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: (

)

800,000

units in

September 2012;

and (

)

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

million, we reallocated

$600,000

from deferred revenue to stockholders

’ equity as consideration for the purchase of the units.

December 2013,

the Company announced it had expanded its NeutroPhase commercial partnership agreement with China Pioneer. The expanded agreement includes licensing rights

to Avenova and CelleRx, which were developed internally by NovaBay. The expanded partnership agreement covers the commercialization and distribution of these products in China and

countries in Southeast Asia.

Revenue has been recognized under these agreements as follows:

	Year Ended December 31,
(in thousands)	2017		2016		2015

Amortization of upfront technology access fee	$	25	$	94	$	25
Product sales		2		324		70
Total revenue recognized	$	27	$	418	$	95

The Company had deferred revenue balances of

$1.0

million,

$1.0

million, and

$1.1

million, respectively, at

December 31, 2017,

2016

and

2015,

related to these agreements, which consisted of the unamortized balances on the upfront technology and access fee.

February 7, 2012,

the Company entered 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:

	Year Ended December 31,
(in thousands)	2017		2016		2015

Amortization of upfront technology access fee	$	75	$	21	$	5
Product sales		1,705		332		34
Total revenue recognized	$	1,780	$	353	$	39

The Company had deferred revenue balances of

$578

thousand,

$653

thousand and

$674

thousand, respectively, at

December 31, 2017,

2016

and

2015,

related to these agreements, which consisted of the unamortized balances on the upfront technology and access fee

June 1, 2013,

the Company entered 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:

	Year Ended December 31,
(in thousands)	2017		2016		2015

Amortization of upfront technology access fee	$	3	$	—	$	1
Product sales		249		22		66
Total revenue recognized	$	252	$	22	$	67

The Company had deferred revenue balances of

$191

thousand,

$194

thousand and

$195

thousand, respectively, at

December 31, 2017,

2016

and

2015,

related to these agreements, which consisted of the unamortized balances on the upfront technology and access fee

Avenova Distribution Agreements

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 signed nationwide distribution agreements with Willow Pharmacy, Allure Pharmacy, Smith Drug Company and Dakota Drug to market Avenova.

During the years ended

December 31, 2017,

2016

and

2015,

the Company earned

$13.6

million,

$7.3

million and

$947

thousand,

respectively, in net sales revenue for its Avenova product under its distribution agreements.

The Company had a deferred revenue balance of

$1.3

million,

$1.7

million and

$24

thousand as of

December 31, 2017,

2016

and

2015,

respectively, for its Avenova product

under its distribution agreements.