What changed in NovaBay Pharmaceuticals, Inc.'s 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of NovaBay Pharmaceuticals, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+365 added−369 removedSource: 10-K (2025-04-02) vs 10-K (2024-03-26)
Top changes in NovaBay Pharmaceuticals, Inc.'s 2024 10-K
365 paragraphs added · 369 removed · 114 edited across 9 sections
- Item 1A. Risk Factors+138 / −153 · 24 edited
- Item 1. Business+110 / −102 · 30 edited
- Item 6. [Reserved]+81 / −93 · 42 edited
- Item 7. Management's Discussion & Analysis+14 / −1 · 1 edited
- Item 1C. Cybersecurity+10 / −10 · 9 edited
Item 1. Business
Business — how the company describes what it does
30 edited+80 added−72 removed5 unchanged
Item 1. Business
Business — how the company describes what it does
30 edited+80 added−72 removed5 unchanged
2023 filing
2024 filing
Biggest changeOn December 21, 2023, the Company entered into the 2023 Warrant Reprice Transaction with certain of existing holders of the May 2023 Warrants that were issued in the 2023 Private Placement.
Biggest changeIn June 2024, the Company entered into a warrant reprice transaction (the “ 2024 Warrant Reprice Transaction ”) with certain existing holders of (i) warrants that we issued in September 2022 to purchase common stock, (ii) Series A-1 warrants issued in November 2022 to purchase common stock, (iii) Series B-1 warrants that we issued in May 2023 to purchase common stock, and (iv) Series B-2 warrants issued in May 2023 to purchase common stock (collectively (i) through (iv), the “ Participant Warrants ”).
Avenova Spray’s target market is the millions of Americans who suffer from minor irritation of the skin around the eye (commonly referred to as blepharitis) as well as anyone who suffers from dry eye (commonly described as a gritty sandy sensation while blinking). Avenova Spray is available both over-the-counter and as a prescription.
Avenova Spray’s target market is the millions of Americans who suffer from minor irritation of the skin around the eye (commonly referred to as blepharitis) as well as anyone who suffers from dry eye (commonly described as a gritty sandy sensation while blinking). The Company made Avenova Spray available both over-the-counter and as a prescription.
Our website is not part of this annual report on Form 10-K. The SEC also maintains an Internet site that contains reports, proxy, information statements and other information regarding issuers at http://www.sec.gov . 7 Table of Contents
Our website is not part of this annual report on Form 10-K. The SEC also maintains an Internet site that contains reports, proxy, information statements and other information regarding issuers at http://www.sec.gov . - 12 - Table of Contents
The rebate cards are intended to be used by patients who either do not have insurance coverage or whose insurance coverage does not cover Avenova Spray, thereby lowering the price for the patient at the pharmacy. We also have agreements with select preferred pharmacy networks through our Partner Pharmacy Program.
The rebate cards were intended to be used by patients who either do not have insurance coverage or whose insurance coverage did not cover Avenova Spray, thereby lowering the price for the patient at the pharmacy. We also had agreements with select preferred pharmacy networks through our Partner Pharmacy Program.
We primarily promote Avenova Spray directly to consumers on Amazon.com and Avenova.com. In total, this was our leading sales channel by unit sales and net revenue in 2023. Prescription Avenova Spray is available at optometrists’ and ophthalmologists’ offices, through our physician dispensed channel, and at most retail pharmacies across all 50 states.
We primarily promoted Avenova Spray directly to consumers on Amazon.com and Avenova.com. In total, this was our leading sales channel by unit sales and net revenue in 2024. Prescription Avenova Spray was made available at optometrists’ and ophthalmologists’ offices, through our physician dispensed channel, and at most retail pharmacies across all 50 states.
Our physician dispensed channel is particularly important in this regard as it gives patients the opportunity to purchase Avenova Spray conveniently and immediately upon recommendation in the doctor’s office. We believe this also creates repeat Avenova Spray customers who subsequently purchase Avenova Spray and other Avenova branded products through other channels.
Our physician dispensed channel was particularly important in this regard as it gave patients the opportunity to purchase Avenova Spray conveniently and immediately upon recommendation in the doctor’s office. We believe this also created repeat Avenova Spray customers who subsequently purchased Avenova Spray and other Avenova branded products through other channels.
We also make prescription Avenova Spray accessible nationwide in nearly all retail pharmacies across the United States through agreements with McKesson Corporation, Cardinal Health, and AmerisourceBergen Corporation. We continue to build our prescription business under a value pricing model. We maintain a rebate program for electronic payment transactions and in the form of instant rebate cards.
We also made prescription Avenova Spray accessible nationwide in nearly all retail pharmacies across the United States through agreements with McKesson Corporation, Cardinal Health, and AmerisourceBergen Corporation. We built our prescription business under a value pricing model. We maintained a rebate program for electronic payment transactions and in the form of instant rebate cards.
NeutroPhase and PhaseOne Branded Wound Care Products Our NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Chongqing Pioneer Pharma Holdings Limited and Phase One Health; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
Our former NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Pioneer and Phase One; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
Avenova Spray is available on Avenova.com, Amazon.com and Walmart.com. Support from ophthalmologists and optometrists for Avenova Spray remains strong. Continuous endorsement of medical professionals for Avenova has created a “doctor recommended” halo effect around our brand. This is a key differentiating factor in a crowded consumer space and is a result of our high quality and reliable efficacy.
Support from ophthalmologists and optometrists for Avenova Spray was strong. Continuous endorsement of medical professionals for Avenova created a “doctor recommended” halo effect around our brand. This was a key differentiating factor in a crowded consumer space and is a result of its high quality and reliable efficacy.
Research and Development We are currently not conducting substantial research and development. A majority of our research and development activities are focused on compliance with ongoing regulatory and maintenance requirements related to our existing products. For the years ended December 31, 2023 and 2022, we incurred total research and development expenses of approximately $68 thousand and $174 thousand, respectively.
As a result, we are currently not conducting research and development. A majority of previous research and development activities were focused on compliance with ongoing regulatory and maintenance requirements related to our former products. For the years ended December 31, 2024 and 2023, we incurred total research and development expenses of approximately $42 thousand and $34 thousand, respectively.
However, we believe our NeutroPhase and PhaseOne solutions have distinct competitive advantages because they are made without the toxic chemicals found in other products. NeutroPhase and PhaseOne are gentle, non-irritating, and non-sensitizing to skin and new tissue.
However, we believed our wound care solutions had distinct competitive advantages because they were made without the toxic chemicals found in other products. Our wound care products were gentle, non-irritating, and non-sensitizing to skin and new tissue.
Because dry eye is a complex condition, in addition to Avenova Spray, we offer a complementary portfolio of scientifically developed products for each step of the standard at home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.
Our Partner Pharmacy Program also ensured that proper insurance reimbursement occurred, and that our patients received the best possible price. - 9 - Table of Contents Because dry eye is a complex condition, in addition to Avenova Spray, we offered a complementary portfolio of scientifically developed products for each step of the standard at home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.
Avenova Spray is formulated with our proprietary, stable and pure form of hypochlorous acid and is cleared by the Food and Drug Administration (the “ FDA ”) for sale in the United States.
Our eyecare products sold under the Avenova brand and related assets (the “ Avenova Assets ”) were our leading products formulated with our proprietary, stable and pure form of hypochlorous acid and were cleared by the Food and Drug Administration (the “ FDA ”) for sale in the United States.
The DERMAdoctor trademark registrations and pending applications were sold as part of the DERMAdoctor Divestiture. We seek to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets and proprietary know-how and technological innovation to operate, without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights.
Prior to completing each of these transactions, we sought to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets and proprietary know-how and technological innovation to operate, without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights.
Consisting of higher concentrations of hypochlorous acid, NeutroPhase and PhaseOne are used for the cleansing and irrigation of intraoperative pocket lavage, before subcutaneous closure, stage I to IV pressure injuries, stasis ulcers, leg ulcers, diabetic foot ulcers, first-degree and second-degree burns, post-surgical wounds, grafted and donor sites, minor burns, superficial abrasions, wounds, and moistening absorbent wound dressings. 2 Table of Contents Both NeutroPhase and PhaseOne compete in a crowded wound cleanser market with many older and lower-priced products with similar uses, such as Vashe and Betadine Surgical Scrub.
Consisting of higher concentrations of hypochlorous acid, our wound care products were used for the cleansing and irrigation of intraoperative pocket lavage, before subcutaneous closure, stage I to IV pressure injuries, stasis ulcers, leg ulcers, diabetic foot ulcers, first-degree and second-degree burns, post-surgical wounds, grafted and donor sites, minor burns, superficial abrasions, wounds, and moistening absorbent wound dressings.
See also Notes 11, “Financing Activities”; 12, “Secured Convertible Notes”; 13, “Common Stock Warrants”; and 14, “Stockholders’ Equity” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
See also Notes 11, “Financing Activities;” 14, “Common Stock Warrants and Warrant Liabilities” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Financial Statements and Supplementary Data. 4 Table of Contents Government Regulation We are subject to extensive government regulation, principally by the FDA and state and local authorities in the United States and by comparable agencies in foreign countries.
We were previously subject to extensive government regulation, principally by the FDA and state and local authorities in the United States and by comparable agencies in foreign countries prior to these transactions.
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, the Company changed its name from NovaCal Pharmaceuticals, Inc. to NovaBay Pharmaceuticals, Inc.
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.
The expiration date of the Lease is July 31, 2027, unless terminated earlier pursuant to the provisions of the Lease. We believe that our office and administration facilities are suitable and adequate for our current operations and their current purpose, but we may require additional space and facilities as our business expands.
The expiration date of the Lease is July 31, 2027, unless terminated earlier pursuant to the provisions of the Lease. Prior to completing the Avenova Asset Sale, our office and administration facilities were suitable and adequate for our then current operations and purpose.
In June 2010, the Company changed the state in which it was 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.
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.
In order to maintain our trade secrets, we rely on and use reasonable business activities to protect trade secrets, such as confidentiality/invention rights agreements with employees, confidentiality agreements with manufacturers, proprietary expertise and product formulations, continuing innovation efforts and techniques, and other know-how to develop and maintain a competitive position.
We relied on and used reasonable business activities to protect trade secrets, such as confidentiality/invention rights agreements with employees, confidentiality agreements with manufacturers, proprietary expertise and product formulations, continuing innovation efforts and techniques, and other know-how to develop and maintain a competitive position. - 10 - Table of Contents Research and Development The completion of the Avenova Asset Sale, the Wound Care Divestiture and the DERMAdoctor Divestiture have all had a substantial impact on our Research and Development, as our business and operations have been significantly reduced.
(“ Eyenovia ”) to commercialize respective prescription ophthalmic products to eyecare professionals across the US. We also manufacture and sell our proprietary form of hypochlorous acid for the wound care market through our NeutroPhase and PhaseOne branded products.
NeutroPhase and PhaseOne Branded Wound Care Products We also manufactured and sold our proprietary form of hypochlorous acid for the wound care market.
Seasonality Avenova Branded Products Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experience seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins.
This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other former Avenova branded products, experienced less seasonality and more consistent sales throughout the year ended December 31, 2024.
PhaseOne is distributed through commercial partners in the United States, and NeutroPhase is distributed in China by Chongqing Pioneer Pharma Holdings Limited, who is also a stockholder of our Company. Customers, Manufacturing and Suppliers Avenova branded products are available on Amazon.com, Walmart.com and Avenova.com. Online sales now account for the majority of Avenova Spray revenue.
Prior to selling the Wound Care Trademarks in the Wound Care Divestiture, PhaseOne was distributed through commercial partners in the United States, and NeutroPhase was distributed in China by Chongqing Pioneer Pharma Holdings Limited (“ Pioneer ”), who is also a stockholder of our Company.
Through our former subsidiary DERMAdoctor, LLC (“ DERMAdoctor ”), the Company offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. Subsequent to December 31, 2023, on March 25 , 2024, we announced that we had sold DERMAdoctor (the “ DERMAdoctor Divestiture ”).
See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Wound Care Divestiture” below. Through our former subsidiary, DERMAdoctor, we previously offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris.
NeutroPhase and PhaseOne are used for the cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. The Company currently sells these products through distributors. The Company was incorporated under the laws of the State of California on January 19, 2000, as NovaCal Pharmaceuticals, Inc.
Our wound care products are used for cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries.
Such products were distributed online, through wholesale distribution, in physical store locations and, particularly as relates to international sales, through marketing and distribution agreements with local partners. For Avenova Spray, we currently outsource manufacturing to a contract manufacturer with facilities located in the United States.
The Company made Avenova branded products available on Amazon.com, Walmart.com and Avenova.com. Online sales accounted for the majority of Avenova Spray revenue. Internationally, the Company made Avenova Spray available in Australia through a distribution partner. For Avenova Spray, we outsourced manufacturing to a contract manufacturer with facilities located in the United States.
Human Capital As of December 31, 2023, on a consolidated basis, we had a total of 26 employees, 24 of whom were full-time employees and 2 were part-time employees (which included DERMAdoctor employees no longer with the Company after the DERMAdoctor Divestiture). None of our employees are represented by labor unions or covered by collective bargaining agreements.
Since the completion of the Avenova Asset Sale, as of April 2, 2025, we have reduced the number of employees to a total of 4 employees, 3 of whom are full-time employees and 1 who is a part-time employee. None of our employees are represented by labor unions or covered by collective bargaining agreements.
These agreements provide greater control over the patient experience at consistent contract pricing. Our Partner Pharmacy Program also ensures that proper insurance reimbursement occurs, and that our patients receive the best possible price.
These agreements provided greater control over the patient experience at consistent contract pricing.
Participants agreed to exercise May 2023 Warrants exercisable for 2,528,848 shares of common stock at a reduced exercise price of $0.25 and were issued the December 2023 Warrants exercisable for 2,528,848 shares of common stock. The Company received gross proceeds of $0.6 million, before deducting placement agent fees and other offering expenses.
The participants agreed to exercise a portion of their respective Participant Warrants at a reduced exercise price of $2.50 per share. The Participant Warrants were exercised for an aggregate of 90,381 shares of common stock, resulting in gross proceeds of approximately $0.2 million.
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ITEM 1. BUSINESS NovaBay Pharmaceuticals, Inc. (the “ Company ”) develops and sells scientifically-created and clinically-proven eyecare and wound care products.
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ITEM 1. BUSINESS Overview We have undergone significant changes to our business and operations as a result of a series of completed transactions summarized below and discussed in further detail under the next section titled “Recent Developments and Stock Exchange Listing” below.
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Our leading product, Avenova® Antimicrobial Lid and Lash Solution, or Avenova Spray, is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid.
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We are also pursuing a new direction, which will have a significant impact on us in the future, which is also discussed below and elsewhere in this annual report.
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Avenova Spray is available direct to consumers primarily through online distribution channels and is also available by prescription and dispensed by eyecare professionals for blepharitis and dry eye disease.
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Accordingly, this annual report includes a significant amount of new information about us, our changed business and limited operations, our intended strategic direction and prospects, which will be important to read carefully and understand, as such new information will impact us in the near term and in the future.
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Because dry eye is a complex condition, we offer a complementary portfolio of scientifically-developed products for each step of the standard at-home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.
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As a result of completing each of the transactions discussed below, we have significantly reduced our business operations and currently have limited sources of future revenue generation. Our Company was historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products.
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We acquired DERMAdoctor in November 2021 (the “ DERMAdoctor Acquisition ”) in order to achieve overall revenue growth, cost reductions and profitability. We were unable to achieve those objectives with DERMAdoctor.
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As described in additional detail below, subsequent to December 31, 2024, on January 17, 2025, we completed the sale of the Avenova Assets to PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company (“ PRN ”), which constituted the sale of substantially all of our revenue generating and operating assets (the “ Avenova Asset Sale ”).
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The DERMAdoctor Divestiture immediately streamlined our business by reducing our cash burn and allowing us to focus on pursuing newer and stronger growth opportunities that are better aligned with our core eyecare business. For example, on March 13, 2024, we announced a co-promotion agreement with Eyenovia, Inc.
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See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Avenova Asset Sale” below. - 4 - Table of Contents We have also historically manufactured and sold a proprietary form of hypochlorous acid for the wound care market primarily under the NeutroPhase and PhaseOne brands.
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The Company was managed as two reportable segments: (1) Eyecare and Wound Care and (2) Skincare. As noted above, on March 25, 2024, we closed the DERMAdoctor Divestiture resulting in the sale of our skincare segment. Effective November 15, 2022, the Company effected a 1-for-35 reverse split of our outstanding common stock (“Reverse Stock Split”).
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Subsequent to December 31, 2024, on January 8, 2025, we completed the sale of our wound care product trademarks, NeutroPhase, PhaseOne and OmniPhase (collectively, the “ Wound Care Trademarks ”) and the sale of our wound care inventory to Phase One Health LLC, a Tennessee limited liability company (“ Phase One ”) (collectively, the “ Wound Care Divestiture ”).
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Except as otherwise specifically noted, all share numbers, share prices, exercise/conversion prices and per share amounts have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split. 1 Table of Contents Our Products and Marketing Approach We are a company focused on the sale of scientifically-created and clinically-proven eyecare and wound care products.
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Following the Wound Care Divestiture, our wound care business has been significantly reduced although we are continuing to manufacture our wound care products under remaining contractual obligations to our distribution partner in China. We anticipate fulfilling these obligations by the end of the second quarter of 2025.
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Because Avenova Spray can be purchased as both an over-the-counter and prescription product, it is available to a wide range of potential customers and addressable markets. Making it available over-the-counter capitalizes on a trend to sell pharmaceutical products directly to consumers in response to increased cost shifting to consumers through high-deductible health plans.
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On March 25, 2024, we announced the closing of the sale of DERMAdoctor (the “ DERMAdoctor Divestiture ”). With the Company having completed the sale of substantially all of its assets in the Avenova Asset Sale and the other transactions, the Company’s board of directors (the “ Board ”) evaluated the different strategic options available to the Company.
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DERMAdoctor Branded Dermatology Products Through our former subsidiary DERMAdoctor, LLC (“ DERMAdoctor ”), the Company offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. Subsequent to December 31, 2023, on March 25, 2024, we announced that we had sold DERMAdoctor.
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After consideration of various factors, including the significantly reduced remaining business, assets, revenue and operating expenses following the completion of the Avenova Asset Sale and the Wound Care Divestiture, the absence of other more favorable strategic options currently available to us, as well as the greater likelihood of receiving stockholder approval at a newly called special meeting of the stockholders, the Board determined that the best opportunity available to maximize the remaining value for our Company and to our stockholders is to wind-up the Company’s affairs and pursue a voluntary liquidation and dissolution under Delaware law (the “ Dissolution ”) pursuant to a Plan of Complete Liquidation and Dissolution (the “ Plan of Dissolution ”) that may result in distributions to our stockholders of our remaining asset value if any remains.
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The DERMAdoctor Divestiture immediately streamlined our business and we expect it to reduce our cash burn and allow us to focus on pursuing newer and stronger growth opportunities that are better aligned with our core eyecare business. NeutroPhase and PhaseOne Branded Wound Care Products We also manufacture and sell our proprietary form of hypochlorous acid for the wound care market.
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Accordingly, the Board unanimously determined that it is in the best interest of the company and its stockholders to approve and authorize the necessary action to obtain stockholder approval for the Dissolution pursuant to the Plan of Dissolution, with the Board retaining discretion to continue evaluating and determining if and when the Dissolution should be effected.
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Internationally, Avenova Spray is available in Australia through a distribution partner. NeutroPhase and PhaseOne sales rely solely on distribution partners in China and the U.S., respectively. Our DERMAdoctor branded products were sold in the United States and internationally (including in China, the Middle East, Europe and Canada).
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Concurrently with the Company pursuing the Dissolution, the Company is also evaluating other strategic alternatives that may be available to us to the extent the Dissolution does not proceed. See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Company Dissolution and Other Strategic Alternatives” and “Engagement of Financial Advisor – Lucid” below.
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For our DERMAdoctor branded products, we also used third-party contract manufacturers and suppliers to obtain substantially all raw materials, components, and packaging products and to manufacture finished products relating to the DERMAdoctor brand. We utilized several different product fillers and numerous ingredient and packaging suppliers from which we sourced and contracted the manufacture of our DERMAdoctor branded products.
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In February 2007, the Company changed its name from NovaCal Pharmaceuticals, Inc. to NovaBay Pharmaceuticals, Inc. In June 2010, the Company changed the state in which it was incorporated (the “ Reincorporation ”) and is now incorporated under the laws of the State of Delaware.
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We believe that we have a good relationships with our Avenova Spray manufacturer and that our manufacturer has adequate manufacturing capacity to satisfy our demands. Further, we believe that there are alternative sources available in the event our manufacturer is not available.
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Recent Developments and Stock Exchange Listing Avenova Asset Sale Subsequent to December 31, 2024, on January 17, 2025, we completed the sale of the Avenova Assets to PRN, which constituted substantially all of our revenue generating and operating assets; however, PRN did not purchase any of our other products or assets, including those that related to our wound care, urology or dermatology businesses.
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We continually review our manufacturing needs against the capacity of our contract manufacturer to ensure that we are able to meet our production goals, reduce costs, and operate more efficiently. Intellectual Property We believe that our patents and other proprietary rights are important to our business. We rely on patents, trademarks, trade secrets and know-how to maintain our competitive position.
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The Avenova Asset Sale was consummated pursuant to the Asset Purchase Agreement, dated September 19, 2024, as amended by Amendment No. 1 to the Asset Purchase Agreement, dated November 5, 2024 (as so amended, the “ Purchase Agreement ”). - 5 - Table of Contents In accordance with the Purchase Agreement, at the closing of the Avenova Asset Sale we received the cash purchase price equal to $11.5 million, less (i) the $507,953.72 balance of a secured promissory note (the “ Bridge Loan ”) that we entered into with PRN on November 5, 2024 that was paid to PRN and the Bridge Loan was discharged with collateral released and (ii) $500,000, which amount was deposited into an escrow account (the “ Escrow ”) for up to six (6) months to be used for our indemnification obligations under the Purchase Agreement or the payment of any Net Working Capital Adjustment (as defined below) after the closing.
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The Company owns live trademark registrations in the U.S., as well as trademark registrations and pending applications in many other countries internationally, with our primary trademarks including “Avenova®”, “CelleRx®”, “PhaseOne®”, and “NeutroPhase®”, which are held directly by NovaBay. “DERMAdoctor®”, “Kakadu C®”, “AIN’T Misbehavin’®”, and “KP Duty®” are held directly by our former wholly-owned subsidiary DERMAdoctor.
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The final amount of the purchase price that we received in the Avenova Asset Sale is subject to a post-closing working capital adjustment, upward or downward, that will be limited to an amount of up to $500,000 (the “ Net Working Capital Adjustment ”).
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Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experience less seasonality and more consistent sales throughout the year. 3 Table of Contents Dermatology/Skincare Products Our DERMAdoctor branded products were sold through wholesale distribution relationships with third parties such as Costco and others; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
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The Net Working Capital Adjustment will be mutually determined by PRN and us commencing ninety (90) days after the closing of the Avenova Asset Sale based upon the difference between the amount of our Net Working Capital (as defined in the Purchase Agreement) immediately prior to the closing and the agreed upon target working capital value of $800,000.
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Sales of DERMAdoctor branded products that contained sunscreen and antiperspirants were higher in the summer seasons and sales of DERMAdoctor branded products that contain moisturizers were higher in the fall and winter months. This seasonality will no longer impact our business after the DERMAdoctor Divestiture effective March 25, 2024.
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In connection with the closing of the Avenova Asset Sale, we entered into a Transition Services Agreement, dated January 17, 2025 with PRN, pursuant to which we agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and operational support for a period of four (4) months after the closing of the Avenova Asset Sale (the “ PRN Transition Services Agreement ”).
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Our Capital Requirements and Strategic Initiatives In our Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“ SEC ”) on May 11, 2023, August 10, 2023 and November 9, 2023, and this annual report on Form 10-K, we reported that we expected our expenses will continue to exceed our revenues, as the Company continues to invest in its commercialization efforts.
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In exchange for providing such services, PRN and NovaBay agreed upon service fees to be paid to us.
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Further, based on the amount of capital and liquidity that we had available, we determined that our planned operations raised substantial doubt about our ability to continue as a going concern.
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For more information on the Avenova Asset Sale, please see Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report, the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission (the “ SEC ”) on September 20, 2024, October 29, 2024, November 6, 2024, November 22, 2024, December 19, 2024, and January 23, 2025, and the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on October 16, 2024, as supplemented, including on November 12, 2024.
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Additionally, we noted that changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control that impact the broader economy such as periods of inflation, supply chain issues, the national pandemic impacts and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan).
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Wound Care Divestiture Subsequent to December 31, 2024, on January 3, 2025, we entered into a Trademark Acquisition Agreement with Phase One that provided for the purchase by Phase One of the Company’s Wound Care Trademarks for a purchase price of $500,000 (the “ Trademark Acquisition Agreement ”).
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To help address our need for liquidity and capital to fund our planned operations, we entered into the financing transactions summarized below during 2023, which resulted in our Company raising approximately $3.6 million in gross proceeds. 2023 Financing Transactions On April 27, 2023, the Company entered into the 2023 Private Placement that provided for the issuance and sale of $3.3 million aggregate principal amount of Secured Convertible Notes and the May 2023 Warrants exercisable for 5,076,928 shares of common stock.
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In connection with the Wound Care Divestiture, we also entered into a Transition Services Agreement, dated January 3, 2025, with Phase One (the “ Phase One Transition Services Agreement ”), pursuant to which we: (i) provided limited transition services to Phase One until January 10, 2025; (ii) sold our existing wound care inventory from an outstanding purchase order to Phase One for an aggregate payment of $126,000; and (iii) provided our remaining empty wound care product bottles to Phase One.
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The 2023 Private Placement closed on May 1, 2023 and the Company received gross proceeds of $3.0 million, before deducting placement agent fees and other offering expenses.
Added
In addition, the Phase One Transition Services Agreement provided that the existing supplier and distributor relationship between NovaBay and Phase One would be terminated upon the closing of the Wound Care Divestiture. We completed the Wound Care Divestiture on January 8, 2025.
Removed
In connection with the 2023 Private Placement, certain previously issued common stock purchase warrants exercisable for 1,724,455 shares of common stock were amended to lower their exercise price from $6.30 to $1.50 per share.
Added
For more information on the Wound Care Divestiture, see the Company’s Current Report on Form 8-K filed with the SEC on January 10, 2025.
Removed
Ongoing Strategic Initiatives While the 2023 Warrant Reprice Transaction and the 2023 Private Placement provided needed capital for the continuing operation of our business, additional funding or substantial revenue growth will be needed in both the short- and long-term in order to continue the operation of our business according to our existing business plan.
Added
Company Dissolution and Other Strategic Alternatives In connection with pursuing the Avenova Asset Sale, that would result in the sale of substantially all of the assets of the Company, our Board also unanimously determined at the time that the best opportunity available to optimize value to our stockholders was to pursue the Dissolution pursuant to the Plan of Dissolution.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
24 edited+114 added−129 removed9 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
24 edited+114 added−129 removed9 unchanged
2023 filing
2024 filing
Biggest changeIf this were to occur, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● substantially impair our ability to raise additional funds; ● result in a loss of institutional investor interest and a decreased ability to issue additional securities or obtain additional financing in the future; ● a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; ● a limited amount of news and analyst coverage; and We may issue additional shares of our common stock, other series or classes of preferred stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
Biggest changeTo the extent the NYSE American delists our common stock from trading on its exchange and the Dissolution is not approved or implemented or is otherwise delayed, we will not be eligible to apply to list our securities on the NYSE American or on another national securities exchange due to our inability to currently meet the initial listing standards applicable to a newly listed company, and we could face significant material adverse consequences, including during any period between such delisting and the effective date of the Dissolution, such as reduced liquidity for our securities, limited availability of market quotations for our securities and a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities, and a substantial impairment on our ability to raise additional funds in connection with a Potential Strategic Transaction, if needed.
Our stockholders will experience significant dilution as a result of the conversion of the Series B Preferred Stock, the conversion of the Series C Preferred Stock and the potential exercise of outstanding common stock purchase warrants. We have a significant number of Company securities that are or will be convertible and/or exercisable into shares of our common stock.
Our stockholders may experience significant dilution as a result of the conversion of the Series B Preferred Stock and the potential exercise of outstanding common stock purchase warrants. We have a significant number of Company securities that are or will be convertible and/or exercisable into shares of our common stock.
If any of the following risks actually occur, our business, financial condition, results of operations and the market price of our common stock could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.
If any of the following risks actually occur, our business plan, financial condition and the market price of our common stock could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.
We also have outsourced aspects of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing independent vendor relationships with third parties who may or could have access to our confidential information.
We also have outsourced aspects of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we have managed independent vendor relationships with third parties who may or could have access to our confidential information.
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.
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. - 21 - Table of Contents
The payment of dividends on, or the repurchase of shares of, our common stock or Preferred 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.
The payment of dividends on, or the repurchase of shares of, our common stock or Series B Preferred Stock will depend on our financial condition and other business and economic factors affecting us at such time as our Board may consider relevant.
For example, sales of shares of common stock that are issuable upon conversion of the Series B Preferred Stock and the Series C Preferred Stock and/or the exercise of outstanding warrants may cause the price of our publicly traded securities to decline.
For example, sales of shares of common stock that are issuable upon conversion of the Series B Preferred Stock, the conversion of the Unsecured Convertible Notes and/or the exercise of outstanding warrants may cause the price of our publicly traded securities to decline.
Additionally, such conversion or exercise could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and/or at a price that we deem reasonable or appropriate, or at all.
Additionally, such conversion or exercise could make it more difficult for us to raise additional financing in connection with a Potential Strategic Transaction through the sale of equity or equity-related securities in the future at a time and/or at a price that we deem reasonable or appropriate, or at all.
In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property), and we deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information.
In the ordinary course of business, we have collected, stored and transmitted large amounts of confidential information (including, but not limited to, personal information and intellectual property), and we continue to deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information.
We have never paid cash dividends on, or repurchased shares of, our common stock and do not anticipate paying cash dividends or repurchasing shares of our common stock in the foreseeable future.
We have never paid cash dividends on, or repurchased shares of, our common stock and do not anticipate paying cash dividends or repurchasing shares of our common stock in the foreseeable future, unless in connection with a Potential Strategic Transaction.
Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us. Adverse U.S. or international economic and political conditions could negatively affect our business, financial condition and results of operations.
Any such interruption or breach of our systems could adversely affect us and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us.
Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
It is important to note that our past financial performance will not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
If we have experienced a change of control at any time since our formation, our 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 have experienced a change of control at any time since our formation, our NOL carryforwards and tax credits may not be available, or their utilization could be subject to an annual limitation under Section 382.
The shares of common stock underlying the shares of Series B Preferred Stock, Series C Preferred Stock and outstanding warrants represent, in the aggregate, approximately 114% of the total number of shares of common stock outstanding as of March 21, 2024.
The shares of common stock underlying the shares of Series B Preferred Stock, the Unsecured Convertible Notes and outstanding warrants represent, in the aggregate, approximately 84% of the total number of shares of common stock outstanding as of March 25, 2025.
We may issue additional shares of our common stock, other series or classes of preferred stock, in addition to our Series B Non-Voting Convertible Preferred Stock (the “ Series B Preferred Stock ” and together with the Series C Preferred Stock, the “ Preferred Stock ”) and Series C Preferred Stock, units, warrants or other equity securities of equal or senior rank in the future in order to fund our operations, provide working capital and for other purposes, including in connection with, among other things, future acquisitions, repayment of outstanding indebtedness, repricing of warrants or other outstanding securities or pursuant to our 2017 Omnibus Incentive Plan.
If we do not proceed with the Dissolution, we may issue additional shares of our common stock, other series or classes of preferred stock, in addition to our Series B Preferred Stock, units, warrants or other equity securities of equal or senior rank in the future in order to fund our operations, provide working capital and for other purposes, including in connection with, among other things, executing upon a Potential Strategic Transaction, repricing of warrants or other outstanding securities.
The risks and uncertainties described below are not the only ones facing our Company, but those that we consider to be material. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations.
The risks and uncertainties described below are not the only ones facing our Company, but those that we consider to be material.
Accordingly, upon the conversion or exercise (as applicable) of some or all of the Series B Preferred Stock, the Series C Preferred Stock, convertible notes and common stock warrants, as well as the exercise of stock options and other equity based awards that have been or will be issued and/or granted by us, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders will experience significant dilution. 14 Table of Contents Offers or availability for sale of a substantial number of shares of our common stock, including as a result of the conversion of the Series B Preferred Stock and the Series C Preferred Stock and/or the exercise of outstanding warrants may cause the price of our publicly traded securities to decline and make it more difficult for us to raise capital in the future.
Accordingly, upon the conversion or exercise (as applicable) of some or all of the Series B Preferred Stock, convertible notes and common stock warrants, as well as the exercise of stock options and other equity based awards that have been or will be issued and/or granted by us, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders could experience significant dilution.
In addition, we do not anticipate paying any dividends or repurchasing any shares of our Preferred Stock; however, if we pay dividends on our shares of common stock, we are required to pay dividends on our Preferred Stock on an as converted basis.
If we pay dividends on our shares of common stock, we are required to pay dividends on our Series B Preferred Stock on an as converted basis.
Sales of a significant number of shares of our common stock in the public market could depress the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock.
Sales of a significant number of shares of our common stock in the public market could depress the market price of our common stock.
The stock prices of our company and many other companies in our market segments have generally experienced wide fluctuations in response to various factors, some of which are beyond our control, including those that are unrelated to our operating performance.
The stock prices of our Company and many other companies in our market segment have generally experienced wide fluctuations in response to various factors. Broad economic, market and industry factors may negatively affect the market price of our common stock.
Please also read carefully the section in this report above entitled “ Special Note Regarding Forward-Looking Statements. ” Risks Relating to Our Business There is substantial doubt about our ability to continue as a going concern. We have sustained operating losses for the majority of our corporate history.
Please also read carefully the section in this annual report above entitled “ Special Note Regarding Forward-Looking Statements. ” Risks Relating to Our Business As a result of the completion of the Avenova Asset Sale and the Wound Care Divestiture, we no longer have a significant revenue generating business.
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.
You should consider carefully the following risks in addition to the other information contained in this annual report and our other filings with the SEC (including the Company ’ s Definitive Proxy Statement on Schedule 14A filed with the SEC on March 19, 2025 (as may be supplemented, the “ Special Meeting Proxy Statement ” )) before deciding to buy, sell or hold our common stock.
If we do not pay dividends or repurchase stock, holders of our common stock will experience a return on their investment in our shares only if our stock price appreciates.
If we do not pay dividends or repurchase stock or if the Dissolution is not completed with related distributions to stockholders, holders of our common stock will experience a return on their investment in our shares only if our stock price appreciates or if part of a Potential Strategic Transaction. - 20 - Table of Contents We may issue additional shares of our common stock, other series or classes of preferred stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
As of December 31, 2023, we had 11,230,150 shares of common stock issued and outstanding. Subsequent to December 31, 2023, as of March 21, 2024, we had 30,098,150 shares of common stock issued and outstanding.
As of March 25, 2025, we had 5,816,204 shares of common stock issued and outstanding.
Removed
In fiscal 2023, our expenses exceeded our revenues, as we continue to invest in our commercialization efforts. We will need to generate significant revenues to achieve and maintain profitability, which we have not been able to achieve to date.
Added
ITEM 1A. RISK FACTORS Our Company is subject to a number of risks, the most important of which are discussed below.
Removed
Our operating cash flow currently is not sufficient to support our ongoing operations, and we expect to continue incurring operating losses and negative cash flows until revenues reach a level sufficient to support ongoing growth and operations. Accordingly, our current cash resources are not sufficient to fund operations at the expected level of activity beyond the third quarter of 2024.
Added
These risks and uncertainties take into account the completed Avenova Asset Sale and the Wound Care Divestiture under the heading “ Risks Relating to Our Business, ” as well as the potential that we will effect the Dissolution of our Company or pursue other strategic alternatives, including a Potential Strategic Transaction (as defined below) under the heading “ Risks Relating to the Potential Dissolution of our Company and Potential Strategic Transaction. ” Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business, the potential Dissolution of our Company, any other strategic alternatives, or ownership of our common stock.
Removed
As such, additional funding or substantial revenue growth will be needed in both the short- and long-term in order to pursue our business plan. We are continuing to evaluate our current business plan and potential changes to our business and strategic direction.
Added
Prior to the Avenova Asset Sale, our principal assets, product offerings and business primarily consisted of the production and commercialization of Avenova products, which was responsible for a majority of our revenue from 2015 until the completion of the Avenova Asset Sale.
Removed
If we do not raise additional capital or our revenues do not reach sufficient levels in the near term, then we may need to implement additional cost reduction measures and changes to our current business plan and strategic direction.
Added
After completion of the Avenova Asset Sale and the Wound Care Divestiture in January 2025, our business operations and ability to generate revenue has been significantly reduced with a few remaining employees, limited operations, including fulfilling remaining contractual obligations for the manufacture and delivery of wound care products and performance of the services contemplated by the PRN Transition Services Agreement.
Removed
Such changes may include altering our existing operations and/or pursuing a strategic transaction, such as a divestiture of certain business or product lines and related assets. By way of example, as part of our strategic direction, we recently sold DERMAdoctor for $1.1 million.
Added
Accordingly, until we either commence the Dissolution or complete an alternative strategic transaction, we will be generating minimal revenue and without currently having a significant underlying business to generate meaningful revenue, particularly when compared to our historic financial performance.
Removed
As a result of these circumstances, our financial statements include explanatory disclosures expressing substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern.
Added
The cash proceeds from the Avenova Asset Sale and the Wound Care Divestiture will continue to be used to fund our expenses and ongoing liabilities until we are able to commence the Dissolution or pursue another strategic alternative, which will deplete our remaining cash assets.
Removed
Future reports on our financial statements may continue to include such disclosures. If we cannot continue as a going concern, our stockholders may lose their entire investment in our securities.
Added
Until we are able to wind down our remaining business and operations through the Dissolution process or we pursue another strategic alternative available to us, which could include bankruptcy proceedings, then we will continue incurring expenses for our continuing operations, including the ongoing disclosure and compliance obligations as a public reporting company, such as the preparation and filing of this annual report, and utilize the cash on hand that is comprised primarily of the proceeds from the Avenova Asset Sale and the Wound Care Divestiture to fund those expenses and to satisfy our liabilities.
Removed
We require additional capital to finance our operations as currently conducted, which may not be available to us on acceptable terms or at all and may result in dilution to our existing stockholders.
Added
As a result, the longer it takes to complete the Dissolution or pursue another strategic alternative, the more our remaining cash assets will be depleted and limit potential distributions to stockholders, if any.
Removed
Our current cash resources are not sufficient to fund operations at the expected level of activity beyond the third quarter of 2024, and we therefore require additional capital to fund our operations. As of December 31, 2023, our cash and cash equivalents were $3.1 million and we had an accumulated deficit of $ 174.8 million.
Added
We remain liable for claims and expenses that may arise related to our business operations prior to the completion of the Avenova Asset Sale and the Wound Care Divestiture.
Removed
If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights.
Added
Pursuant to the Purchase Agreement for the Avenova Asset Sale and the Trademark Acquisition Agreement for the Wound Care Divestiture, NovaBay generally retained pre-closing liabilities related to the operation of its eye care and wound care business, which may include amounts owed to our suppliers and potential claims related to products we sold or the marketing of our products during the time we operated such business.
Removed
If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures.
Added
While we are not aware of any such liabilities that may be material and have adequately accrued for these liabilities, there can be no assurances that additional expenditures will not be incurred in resolving these liabilities, which may impact our financial condition and the amount of proceeds available (if any) in the Dissolution. - 13 - Table of Contents We are subject to contingent liabilities related to the Avenova Asset Sale and the Wound Care Divestiture that could have a material adverse effect on our financial condition.
Removed
If we are unable to obtain adequate financing on commercially reasonable terms or at all when needed, we may have to implement additional cost reduction measures and/or make changes to our current business, which may have a material adverse effect on our business, financial condition, and results of operations.
Added
Pursuant to the Purchase Agreement for the Avenova Asset Sale, the purchase price is subject to a post-closing working capital adjustment, upward or downward, that will be limited to an amount of up to $500,000.
Removed
Our future success is largely dependent on the successful commercialization of our products, particularly Avenova Spray. 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, specifically Avenova Spray.
Added
The Net Working Capital Adjustment will be mutually determined by us and PRN commencing April 17, 2025 (ninety (90) days after the closing of the Avenova Asset Sale).
Removed
While we believe we are working to create an efficient commercial organization, 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.
Added
If the Net Working Capital Adjustment is determined to be in favor of PRN, it would reduce up to the full amount of the $500,000 that was placed into an escrow account at the closing of the Avenova Asset Sale until the six (6) month anniversary of closing, or July 17, 2025.
Removed
Such expenses may be disproportionate compared to the revenues we may be able to generate on sales of Avenova Spray, which could cause our commercialization efforts to be unprofitable or less profitable than expected.
Added
As part of the Avenova Asset Sale, we also agreed to indemnify PRN for breaches of any representation, warranty, or covenant made by us in the Purchase Agreement, for losses arising out of or in connection with excluded assets or excluded liabilities, and for certain other matters, subject to, in certain cases, customary deductibles and caps and exceptions to such deductibles and caps, including in the case of fraud.
Removed
Acceptance and use of Avenova Spray by physicians, retail partners, wholesale customers and other customers may depend on a number of factors including: (i) perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our products; (ii) published studies demonstrating the cost-effectiveness of our products relative to competing products; (iii) availability of reimbursement for our products from government or commercial payers; and (iv) effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
Added
Successful indemnification claims by PRN would first reduce the Escrow, and thereafter, NovaBay would be directly responsible for any indemnification claims.
Removed
The failure of any of our products to find market acceptance would harm our business and could require us to seek additional financing to fund our operations. 8 Table of Contents Goodwill, intangible and other assets from our 2021 DERMAdoctor Acquisition have become fully impaired, which adversely impacted our profitability in 2023 and 2022. We are required under U.S.
Added
Separately, pursuant to the Trademark Acquisition Agreement for the Wound Care Divestiture, we also agreed to provide limited indemnification to Phase One for losses arising from a third-party claim involving a material breach or nonperformance of representations, warranties, covenants, agreements and obligations of the Company contained in the Trademark Acquisition Agreement.
Removed
Generally Accepted Accounting Principles (“ GAAP ”) to test our goodwill for impairment annually or more frequently if indicators for potential impairment exist. Additionally, at least annually at year end, or more frequently at interim periods, we periodically review our intangible and other long-lived assets for impairment.
Added
Our liability for indemnification of Phase One for any such losses is limited to 50% of the purchase price for the Wound Care Trademarks, or $250 thousand.
Removed
During the fourth quarters of 2023 and 2022, we performed our annual testing for goodwill, intangible and other long-lived asset impairment which resulted in us recording goodwill, intangible and other asset impairment charges of $2.6 million and $6.7 million, relating to our DERMAdoctor business for the years ended December 31, 2023 and 2022, respectively, which significantly increased our net losses for each year.
Added
Any Net Working Capital Adjustment in favor of PRN or successful claims for indemnification made by PRN will reduce the Escrow payable to us or otherwise be payable by us from our cash assets, and any successful claims for indemnification made by Phase One will be payable by us from our cash assets, which, in any of these circumstances, would further reduce the amount of our cash assets and the amount of cash that may ultimately be available for distribution to our stockholders in the Dissolution or otherwise, if any.
Removed
We face substantial competition in the eyecare market in which we operate. Avenova Spray faces intense competition in the eyecare market, which is focused on cost-effectiveness, price, service, product effectiveness and quality, patient convenience and technological innovation.
Added
We may be subject to litigation, which is expensive and could divert our attention.
Removed
There is substantial competition in the eyecare market from companies of all sizes in the United States and abroad, including, among others, large companies such as Allergan plc and Shire plc, and against products such as Restasis, Xiidra, eye wipes, baby shampoo and soap. There are also over-the-counter products that contain hypochlorous acid that compete with Avenova Spray.
Added
As a result of having completed the Avenova Asset Sale and the Wound Care Divestiture or addressing our existing obligations and outstanding liabilities to third parties or otherwise in connection with the Dissolution, we may be subject to potential litigation, including commercial litigation or claims by holders of our securities, including securities class action litigation.
Removed
The companies that we compete against in the eyecare industry may have substantially greater financial, technical and marketing resources, longer operating histories, greater brand recognition and larger customer bases than we do and may be able to respond more effectively to changing business and economic conditions than we can.
Added
We recently settled disputes with three warrant holders of the Company that resulted in the aggregate net payment of $1,466,511 to such warrant holders, which amount reflects a reduction of the aggregate exercise price paid by such warrant holders to the Company in connection with such settlement of $348,337.
Removed
If our competitors respond more quickly to new or emerging technologies and changes in customer requirements, our products may be rendered obsolete or non-competitive. In addition, if our competitors develop more effective or affordable products, or achieve earlier intellectual property protection or product commercialization than we do, our operating results will materially suffer.
Added
Litigation could also arise from our prior operations, and related to products sold, before the completion of the Avenova Asset Sale and the Wound Care Divestiture.
Removed
Competition may increase further as existing competitors enhance their offerings or additional companies enter our markets or modify their existing products to compete directly with our products. We may not be able to sustain growth as competitive pressures, including pricing pressure from competitors, increase.
Added
Any such claims, with or without merit, or litigation initiated against us could result in substantial costs and divert our remaining management resources and attention from completing the Dissolution in a timely manner or pursuing another strategic alternative, which could increase our expenses, ultimately decrease the amount of our cash and other assets available for distribution (if any) to our stockholders as part of the Dissolution and possibly force us into a bankruptcy situation. - 14 - Table of Contents Significant disruptions of information technology systems or breaches of information security could adversely affect our businesses.
Removed
Our ability to compete depends on the continued strength of our brand and products, the success of our marketing, innovation and execution strategies, the continued diversity of our product offerings, the successful management of new product introductions and innovations, strong operational execution, including in order fulfillment, and our success in entering new markets and expanding our business in existing geographies.
Added
We relied upon information technology systems to historically operate eye care and wound care businesses, and we continue to use such systems in our performance of the PRN Transition Services Agreement.
Removed
If we are unable to continue to compete effectively, it could have a material adverse effect on our business, results of operations and financial condition. We are dependent on third parties to manufacture, supply and distribute our products.
Added
Risks Relating to the Potential Dissolution of our Company and Potential Strategic Transaction There can be no guarantees that the Dissolution will be completed and, if not completed, it may be very difficult for us to identify strategic alternatives to maximize the remaining value for NovaBay and its stockholders.
Removed
Any interruption or failure by these suppliers or other disruptions to our supply chain may materially adversely affect our business, financial condition, results of operations and cash flows. Our ability to make, move, and sell our products is critical to our success.
Added
The Dissolution is subject to approval by our stockholders, which we are seeking at the New Special Meeting.
Removed
Historically, we have predominately relied on a single product, Avenova Spray, for our primary revenue stream, which is comprised of our proprietary, stable and pure form of hypochlorous acid.
Added
While we continue to believe that the Dissolution is currently the best opportunity for us to maximize the remaining value of the Company for our stockholders, there are risks and uncertainties as to whether stockholders will approve the Dissolution at the New Special Meeting, including taking into consideration that we were not able to obtain stockholder approval for the Dissolution at our previously held special meeting of stockholders convened on November 22, 2024, and subsequently adjourned and finally reconvened on January 30, 2025.
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Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
9 edited+1 added−1 removed2 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
9 edited+1 added−1 removed2 unchanged
2023 filing
2024 filing
Biggest changeGovernance Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company employees, including our Chief Executive Officer, General Counsel and Chief Compliance Officer. Our Board of Directors addresses the Company’s cybersecurity risk management as part of its general risk oversight function.
Biggest changeGovernance Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company employees, including our Chief Executive Officer, General Counsel and Chief Compliance Officer. Our Board addresses the Company’s cybersecurity risk management as part of its general risk oversight function. The Board has access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation.
However, the sophistication of and risks from cybersecurity threats and incidents continues to increase, and the preventative actions that we have taken and continue to take to reduce the risk of cybersecurity threats and incidents and protect our systems and information may not successfully protect against all cybersecurity threats and incidents.
However, the sophistication of and risks from cybersecurity threats and incidents continues to increase, and the preventative actions that we have taken and continue to take to reduce the risk of cybersecurity threats and cybersecurity incidents and protect our information systems and information may not successfully protect against all cybersecurity threats and cybersecurity incidents.
In its oversight role, the Board of Directors is expected to specifically consider risks that relate to the reputation of the Company and the general industry in which we operate, including with respect to privacy, information technology and cybersecurity and threats to technology infrastructure. Our cybersecurity risk management processes are integrated into our overall approach to risk management.
In its oversight role, the Board is expected to specifically consider risks that relate to the reputation of the Company and the general industry in which we operate, including with respect to privacy, information technology and cybersecurity and threats to technology infrastructure. Our cybersecurity risk management processes are integrated into our overall approach to risk management.
As part of that risk management process, management identifies, assesses and evaluates risks impacting our operations across the Company, including those risks related to cybersecurity, and raises them for discussion with our employees, and where it is determined to be appropriate, issues are also raised to the Board of Directors for consideration.
As part of that risk management process, management identifies, assesses and evaluates risks impacting our operations across the Company, including those risks related to cybersecurity, and raises them for discussion with our employees, and where it is determined to be appropriate, issues are also raised to the Board for consideration.
Cybersecurity Risks As of the date of this report, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected our business strategy, results of operations or financial condition or are reasonably likely to have such a material effect.
Cybersecurity Risks As of the date of this annual report, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected our business strategy, results of operations or financial condition or are reasonably likely to have such a material effect.
In event of a cyber-security incident, we would rely upon these providers. In light of the Company's current size and relatively low cyber-risk profile, management believes that reliance upon experienced third-party providers is the most prudent and cost-effective course.
In the event of a cybersecurity incident, we would rely upon these providers. In light of the Company's current size and relatively low cyber-risk profile, management believes that reliance upon experienced third-party providers is the most prudent and cost-effective course.
We rely on standard operating systems and software from established and reliable third parties to provide security including Microsoft 365, Salesforce, and ADP. The Company does not have in-house information technology personnel. Management makes concerted efforts to select third-party software providers with a demonstrated track-record of effectively addressing cyber-security concerns.
We rely on standard operating systems and software from established and reliable third parties to provide security including Microsoft 365 and ADP. The Company does not have in-house information technology personnel. Management makes concerted efforts to select third-party software providers with a demonstrated track-record of effectively addressing cybersecurity concerns.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Many aspects of our business are dependent upon our computer systems, devices, and networks to collect, process, and store data necessary to conduct many aspects of our business, including the analysis of our products, the maintenance of our intellectual property, the recording and reporting of commercial and financial information, and payroll.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Many aspects of our business are dependent upon our computer systems, devices, and networks to collect, process, and store data necessary to conduct many aspects of our business, including the recording and reporting of commercial and financial information, and payroll.
For additional information regarding risks relating to information security, see “Item 1A—Risk Factors.”
For additional information regarding risks relating to cybersecurity, see “Item 1A—Risk Factors.” - 22 - Table of Contents
Removed
The Board of Directors has access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation.
Added
The Company will be evaluating its cybersecurity governance and practices and expects to make appropriate changes to align with our significantly reduced and changed business and operations following the completed the Avenova Asset Sale and the Wound Care Divestiture.
Item 2. Properties
Properties — owned and leased real estate
0 edited+0 added−2 removed1 unchanged
Item 2. Properties
Properties — owned and leased real estate
0 edited+0 added−2 removed1 unchanged
2023 filing
2024 filing
Removed
Prior to the DERMAdoctor Divestiture, our former wholly-owned subsidiary, DERMAdoctor, was party to a lease with Green Bay Packaging Inc., as landlord, and DERMAdoctor, as tenant, dated August 27, 2019 (the “ Subsidiary Lease ”), for 19,136 square feet of space located at 4346 Belgium Boulevard, Building 2, Riverside, Missouri, which DERMAdoctor utilized for light manufacturing, storage, distribution of products and administrative functions.
Removed
The lease commenced on October 1, 2019 and expires on December 31, 2024, although it was assigned and divested from the Company as a part of the DERMAdoctor Divestiture.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+4 added−0 removed0 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+4 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business.
Biggest changeExcept as described above, from time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business, prior to completing the Avenova Asset Sale, as a result of having completed the Avenova Asset Sale or as a result of matters that may otherwise arise as the Company pursues the Dissolution and/or other strategic alternatives.
As of December 31, 2023, there were no matters that, in the opinion of management, would ultimately result in liability that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
As of December 31, 2024, there were no matters that, in the opinion of management, would ultimately result in liability that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Added
ITEM 3. LEGAL PROCEEDINGS On March 6, 2025, a complaint was filed against the Company by Sabby alleging a breach of contract claim in the U.S. District Court for the Southern District of New York involving matters that were disputed by Sabby and us.
Added
As disclosed above in the section “Recent Developments and Stock Exchange Listing,” and the subheading “Settlement Agreements with Certain Warrant Holders” we recently settled our dispute with Sabby, where we made an aggregate payment of $1,125,000 to Sabby to purchase its warrants and Sabby prior to such warrant purchase exercised certain of its warrants that resulted in the Company receiving an aggregate amount of $174,168.
Added
As a result of such settlement, on March 10, 2025, Sabby dismissed the complaint filed against the Company with prejudice. The Company also settled similar disputes with two other warrant holders of the Company.
Added
Pursuant to such settlement agreements with the other two warrant holders, we made a payment of $344,924 to each of the two warrant holders to purchase their respective warrants (together with the payment to Sabby, an aggregate payment of $1,814,848) and the two warrant holders prior to the purchase of their warrants each exercised their respective warrants resulting in the Company receiving $87,084 from each warrant holder (together with the exercise by Sabby, the Company received an aggregate of $348,337 from such exercises).
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed1 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed1 unchanged
2023 filing
2024 filing
Biggest changeAny 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.
Biggest changeAny future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, restrictions under any existing indebtedness and other factors the Board deems relevant.
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 American, under the symbol “NBY.” Holders As of March 21, 2024, there were approximately 114 holders of record of our common stock.
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 American, under the symbol “NBY.” Holders As of March 25, 2025, there were approximately 94 holders of record of our common stock.
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 foreseeable future.
We currently expect to retain earnings primarily for use in the remaining operations of our business; therefore, we do not anticipate paying any cash dividends in the foreseeable future.
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
42 edited+39 added−51 removed7 unchanged
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
42 edited+39 added−51 removed7 unchanged
2023 filing
2024 filing
Biggest changeCash Used in Operating Activities Net cash used in operating activities was $4.1 million for the year ended December 31, 2023, which consisted primarily of a net loss of $9.6 million, a non-cash loss of $0.3 million on the modification of common stock warrants, a non-cash gain of $0.3 million on the change in fair value of our warrant liability, impairment of our DERMAdoctor business including goodwill, intangible assets and property and equipment totaling $2.6 million, the amortization of intangible assets and depreciation of property and equipment of $0.2 million, stock-based compensation expenses of $0.3 million, and a net decrease of $0.7 million in our net operating assets and liabilities.
Biggest changeNet cash used in operating activities from continuing operations was $4.3 million for the year ended December 31, 2023, which consisted primarily of a net loss from continuing operations of $9.6 million, adjusted by depreciation and amortization expenses of $51 thousand, stock-based compensation expenses of $0.3 million, non-cash loss on modifications of warrants of $0.3 million, non-cash gain on changes in fair value of warrant liabilities of $0.3 million, non-cash gain on changes in fair value of embedded derivative liability of $40 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and amortization of debt discounts on convertible notes of $1.7 million, and a net decrease of $0.4 million in our net operating assets and liabilities of continuing operations.
Management uses judgement in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment.
Management uses judgment in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment.
Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded such as those recorded in the fourth quarters of 2023 and 2022 to fully impair these assets related to our DERMAdoctor business as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded such as those recorded in the fourth quarter of 2023 to fully impair these assets related to our DERMAdoctor business as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
ITEM 6. [RESERVED] 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 annual report.
ITEM 6. [RESERVED] - 24 - Table of Contents 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 annual report.
Seasonality Avenova Branded Products Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experience seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins.
Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experienced seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins.
Estimates of Future Product Returns The Company records revenue in an amount that reflects the consideration which the Company expects to receive. Accordingly, revenue is reduced for estimated future product returns. The Company’s estimates for returns are updated quarterly based on historical data of actual returns.
Estimates of Future Product Returns The Company records revenue in an amount that reflects the consideration which the Company expects to receive. Accordingly, revenue is reduced for estimated future product returns. The Company’s estimates for product returns have been historically updated quarterly based on historical data of actual returns.
As of December 31, 2023, we also had tax credit carryforwards of $0.5 million for federal income tax purposes and $0.1 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2031.
As of December 31, 2023, we also had tax credit carryforwards of $0.5 million for federal income tax purposes and $0.1 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.
The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2024 and $44.4 million that will carry forward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028.
The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2025 and $59.6 million generated after December 31, 2017, that will carry forward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028.
Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experience less seasonality with demands, with more consistent sales throughout the year.
Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experienced less seasonality and more consistent sales throughout the year.
The state tax credits have an indefinite carryover period. 23 Table of Contents Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. Accordingly, our ability to utilize net operating loss carryforwards may be limited as a result of such ownership changes.
Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. Accordingly, our ability to utilize net operating loss carryforwards may be limited as a result of such ownership changes.
Dermatology/Skincare Products Our DERMAdoctor branded products were sold through wholesale distribution relationships with third parties such as Costco and others; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
Our former NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Pioneer and Phase One; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
As a result of many factors, including those set forth under the section entitled “ Risk Factors ” in Item 1A. and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.
As a result of the Avenova Asset Sale, the Wound Care Divestiture and future strategic direction of our Company, as well as many other factors, including those set forth under the section entitled “ Risk Factors ” in Part I, Item 1A. and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.
Cash Used in Investing Activities Net cash used in investing activities for the purchase of property and equipment was $19 thousand and $112 thousand for the years ended December 31, 2023 and 2022, respectively.
Net cash used in investing activities for the purchase of property and equipment from continuing operations was $19 thousand for the year ended December 31, 2023.
Non-cash gain on changes in fair value of embedded derivative liability The adjustments to the fair value of the embedded derivative liability resulted in a gain of $40 thousand for the year ended December 31, 2023.
Non-cash gain on changes in fair value of warrant liability Adjustments to the fair value of warrant liabilities resulted in a gain of $114 thousand for the year ended December 31, 2024 and $272 thousand for the year ended December 31, 2023.
For additional information, see Notes 11, “Financing Activities” and 13, “Common Stock Warrants and Warrant Liabilities”, in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report. Other expense, net Other expense, net increased $1.8 million to $2.1 million for the year ended December 31, 2023, from $0.3 million for the year ended December 31, 2022.
For additional information, see Notes 11, “Financing Activities” and 14, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report. Other expense, net Other expense, net was $0.6 million for the year ended December 31, 2024 and $0.4 million for the year ended December 31, 2023.
Total Net Sales and Cost of Goods Sold Product revenue, net, increased by $0.3 million, or 2%, to $14.7 million for the year ended December 31, 2023, from $14.4 million for the year ended December 31, 2022.
Total Net Sales and Cost of Goods Sold Product revenue, net, decreased by $0.7 million, or 7%, to $9.7 million for the year ended December 31, 2024, from $10.5 million for the year ended December 31, 2023.
Such a limitation could result in the expiration of carryforwards before they are utilized. Inflation Our costs are subject to fluctuations, particularly due to changes in the price of raw and packing materials and the cost of labor, transportation and operating supplies.
Such a limitation could result in the expiration of carryforwards before they are utilized. - 31 - Table of Contents Inflation Our costs and operating expenses are subject to fluctuations, particularly historically due to changes in the cost of labor and service providers.
Cash Provided by Financing Activities Net cash provided by financing activities was $1.9 million for the year ended December 31, 2023, including $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $2.8 million of net proceeds from the 2023 Private Placement.
Net cash provided by financing activities was $1.9 million for the year ended December 31, 2023, including $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $3.0 million of net proceeds from the 2023 Private Placement. The proceeds were partially offset by repayments of $1.5 million on the Secured Convertible Notes issued in the 2023 Private Placement.
The fair values of these warrants are determined using the Black-Scholes option pricing model. These values are subject to a significant degree of management’s judgment.
The fair values of these warrants are determined using the Black-Scholes option pricing model.
Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this annual report, even if new information becomes available in the future. Overview NovaBay Pharmaceuticals, Inc. (the “ Company ”) develops and sells scientifically-created and clinically-proven eyecare and wound care products.
Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this annual report, even if new information becomes available in the future.
We also manufacture and sell our proprietary form of hypochlorous acid for the wound care market through our NeutroPhase and PhaseOne branded products. NeutroPhase and PhaseOne are used for the cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. The Company currently sells these products through distributors.
We have also historically manufactured and sold a proprietary form of hypochlorous acid for the wound care market primarily under the NeutroPhase and PhaseOne brands. Our wound care products are used for cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries.
Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
As a result of our recent changes to our business and reduced operations, our future business results will depend, in part, on our continued ability to manage these fluctuations through cost savings projects and sourcing decisions. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
Financial Overview and Outlook We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses in the future as we continue to commercialize our products. Our net losses were $9.6 million and $10.6 million for the years ended December 31, 2023 and 2022, respectively.
Financial Overview and Outlook We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses as we pursue our strategic initiatives, including the Dissolution. Our net losses from continuing operations were $7.2 million and $6.1 million for the years ending December 31, 2024 and 2023, respectively.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements at December 31, 2023 or December 31, 2022 as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements at December 31, 2024 or December 31, 2023 as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. Seasonality In connection with the Avenova Asset Sale, the Wound Care Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations.
Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets We review goodwill, indefinite-lived intangible assets and long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate.
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results for the periods set forth in this annual report. - 26 - Table of Contents Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets We review goodwill, indefinite-lived intangible assets and long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate.
For additional information regarding the warrant liabilities and related valuations, see Note 13, “Common Stock Warrants and Warrant Liabilities”, in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
See additional discussion in Note 13, “Convertible Notes,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Avenova Spray is formulated with our proprietary, stable and pure form of hypochlorous acid and is cleared by the Food and Drug Administration (the “ FDA ”) for sale in the United States.
We were historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products. Our Avenova Assets were our leading products formulated with our proprietary, stable and pure form of hypochlorous acid and were cleared by the Food and Drug Administration for sale in the United States.
Information regarding our obligations under lease and convertible note arrangements are provided in Notes 10 and 12, respectively.
Information regarding our obligations under lease and convertible note arrangements are provided in Notes 10 and 13, respectively, in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
See also Notes 11, “Financing Activities”; 12, “Secured Convertible Notes”; 13, “Common Stock Warrants”; and 14, “Stockholders’ Equity” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
For additional information regarding the 2023 Private Placement and the Unsecured Convertible Notes, see Note 11 “Financing Activities,” Note 13 “Convertible Notes,” and Note 15 “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.
Cost of goods sold increased by $0.2 million, or 3%, to $6.8 million for the year ended December 31, 2023, from $6.6 million for the year ended December 31, 2022. The increase was slightly higher than the percentage increase in overall product revenue due to the relative increase in sales of lower-margin wound care products.
Cost of goods sold decreased $1.1 million, or 25%, to $3.3 million for the year ended December 31, 2024, from $4.4 million for the year ended December 31, 2023. The decrease was due primarily to the decrease in lower margin NeutroPhase sales, partially offset by the increase in higher-margin eyecare products sales during the comparable periods.
Sales and marketing Sales and marketing expenses decreased by $1.3 million, or 17%, to $6.5 million for the year ended December 31, 2023, from $7.8 million for the year ended December 31, 2022. The decrease was due primarily to continued lower digital and other advertising costs and related consulting costs incurred in 2023 compared to 2022.
The decrease was due primarily to continued digital advertising efficiencies, a decrease in the cost of marketing samples and lower marketing consulting costs incurred in the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Based primarily on the funds available on December 31, 2023, the Company believes that the Company’s existing cash and cash equivalents and cash flows generated from product sales will be sufficient to fund its existing operations, meet its planned operating expenses and to meet the Monthly Redemption of the Secured Convertible Notes into at least the third quarter of 2024.
Based on our funds available on December 31, 2024, together with the net proceeds subsequently received from the Avenova Asset Sale, management believes that the Company’s existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through April 2, 2026.
Additional information on Financing Activities can be found in Notes 11 to 14 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report. Net Operating Losses and Tax Credit Carryforwards As of December 31, 2023, we had net operating loss carryforwards for federal and state income tax purposes of $139.3 million and $117.4 million, respectively.
Additional information on Financing Activities can be found in Notes 11 to 15 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Revenue from Avenova Spray increased by $0.2 million to $7.8 million for the year ended December 31, 2023 from $7.6 million for the year ended December 31, 2022.
Revenue from eyecare products increased $0.6 million to $9.7 million for the year ended December 31, 2024, from $9.1 million for the year ended December 31, 2023. The increase was primarily due to a continued overall increase in Avenova Spray sold through online channels.
General and administrative General and administrative expenses decreased $1.2 million to $6.3 million for the year ended December 31, 2023, from $7.5 million for the comparable period in 2022. The 2023 results reflect lower overall average general and administrative headcount as compared to the 2022 period.
General and administrative General and administrative expenses increased $1.9 million, or 35%, to $7.4 million for the year ended December 31, 2024, from $5.4 million for the year ended December 31, 2023.
Refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report for further information on the impairment of our DERMAdoctor business. Subsequent to December 31, 2023, on March 25, 2024, we closed the DERMAdoctor Divestiture. See additional information above under the subheading “Overview”.
For additional information regarding the loss on divestiture of this subsidiary, please see Note 21, “DERMAdoctor Divestiture and Discontinued Operations,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Through our former subsidiary DERMAdoctor, LLC (“ DERMAdoctor ”), the Company offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. DERMAdoctor branded products were marketed and sold through the DERMAdoctor website, well-known traditional and digital beauty retailers, and a network of international distributors.
See also Note 22, “Wound Care Divestiture and Held-for-Sale Assets” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report. Through our former subsidiary, DERMAdoctor, we previously offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris.
We expect to grow commercial sales of Avenova branded products primarily through an expansion of domestic market penetration of our online channels as well expanded product offerings through partnerships with other eyecare product providers. 19 Table of Contents Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
Our cash and cash equivalents as of December 31, 2023 includes $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $2.8 million of net proceeds from the 2023 Private Placement.
Our net losses from continuing operations were $7.2 million and $6.1 million for the years ending December 31, 2024 and 2023, respectively. As of December 31, 2024, our cash and cash equivalents were $430 thousand, compared to $2.9 million as of December 31, 2023.
We have paid the Monthly Redemption in cash to date. For additional information regarding the 2023 Warrant Reprice Transaction and 2023 Private Placement and the Secured Convertible Notes, see Notes 11, “Financing Activities” and 12, “Secured Convertible Notes” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Goodwill, indefinite-lived intangible assets and long-lived assets related to our DERMAdoctor business were fully impaired as of December 31, 2023. For further details refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
See additional discussion in Note 22, “Wound Care Divestiture and Held-for-Sale Assets,” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.
The increase was primarily due to the amortization of discounts and issuance costs related to the Secured Convertible Notes issued in May 2023 with no comparable expense for the year ended December 31, 2022. For additional information, see Note 12, “Secured Convertible Notes” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
See additional discussion in Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Removed
Our leading product, Avenova® Antimicrobial Lid and Lash Solution, or Avenova Spray, is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid.
Added
Overview of Significant Changes and Strategic Direction We have undergone significant changes to our business and operations beginning in March 2024 as a result of a series of completed transactions, which changes are discussed below and summarized in further detail in this annual report under the section “Recent Developments and Stock Exchange Listing” in Part I, Item 1 above.
Removed
Avenova Spray is available direct to consumers primarily through online distribution channels and is also available by prescription and dispensed by eyecare professionals for blepharitis and dry eye disease.
Added
As a result of completing these transactions, we are pursuing a new direction that may result in the Dissolution of our Company or another strategic alternative transaction, which are also discussed below and elsewhere in this annual report.
Removed
Because dry eye is a complex condition, we offer a complementary portfolio of scientifically-developed products for each step of the standard at-home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.
Added
Due to the significant changes that have already occurred to our business and operations and the future changes that will occur as we pursue the Dissolution or another strategic alternative, our historic financial condition, results of operations, and prospects discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” will be materially different than our future financial condition, results of operations and prospects in the near term and in the future.
Removed
We acquired DERMAdoctor in November 2021 (the “ DERMAdoctor Acquisition ”), and since completing this transaction we worked to integrate and expand the DERMAdoctor business in order to achieve strategic objectives contemplated by the DERMAdoctor acquisition, including revenue growth, cost reductions and overall profitability.
Added
Accordingly, it will be important to read about our recent developments and new strategic direction when reading our Management’s Discussion and Analysis of Financial Condition and Results of Operations. As a result of each of the completed transactions discussed below and elsewhere in this annual report, we have significantly reduced our business operations with limited sources of revenue generation.
Removed
We were not able to achieve these objectives in fiscal 2023, although our overall operating loss attributable to the skin care segment declined significantly in 2023 compared to fiscal 2022. We continue to evaluate strategies for our entire Company, to maximize revenue growth and profitability and minimize operating losses while addressing our capital and liquidity needs.
Added
As described in additional detail below, subsequent to December 31, 2024, on January 17, 2025, we sold the Avenova Assets to PRN in the Avenova Asset Sale, which constituted the sale of substantially all of our revenue generating and operating assets.
Removed
To that end, we determined to divest DERMAdoctor and entered into a Membership Unit Purchase Agreement with New Age Investments, LLC (“ New Age ”) dated March 12, 2024 to buy DERMAdoctor from us which closed on March 25, 2024. 18 Table of Contents Recent Developments DERMAdoctor Divestiture On March 12, 2024, we entered into a Membership Unit Purchase Agreement (the “ Purchase Agreement ”) by and among: (i) New Age; (ii) DERMAdoctor; and (iii) the Company.
Added
See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Avenova Asset Sale” in Part I, Item 1 above. See also Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Removed
Pursuant to the Purchase Agreement, the Company sold 100% of the membership units (the “ Membership Units ”) of DERMAdoctor (the “ DERMAdoctor Divestiture ”), which was the Company’s wholly-owned subsidiary that developed, manufactured, marketed, branded, distributed, and sold a variety of skincare products.
Added
Subsequent to December 31, 2024, on January 8, 2025, we sold our Wound Care Trademarks and our wound care inventory to Phase One in the Wound Care Divestiture. Following the Wound Care Divestiture, our wound care business has been significantly reduced although we continue to manufacture our wound care products under remaining contractual obligations to our distribution partner in China.
Removed
Upon the closing of the DERMAdoctor Divestiture on March 25, 2024 as contemplated by the Purchase Agreement, the Company sold the Membership Units to New Age for a purchase price of $1,070,000, streamlining our business and allowing us to focus on pursuing better growth opportunities.
Added
We anticipate fulfilling these obligations by the end of the second quarter of 2025. See the additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Wound Care Divestiture” in Part I, Item 1 above.
Removed
Amendment to the Security Agreement and Consent to Terminate the Subsidiary Guarantee The closing of the DERMAdoctor Divestiture was subject to certain conditions, which included the Company obtaining the consent of the holders (the “ Secured Parties ”) of the Company’s Original Discount Senior Secured Convertible Debentures due November 1, 2024 (the “ Secured Convertible Notes ”), to (i) amend the Security Agreement, dated April 27, 2023 (the “ Security Agreement ”), to remove the Membership Units and any assets of DERMAdoctor as collateral for the Company’s obligations pursuant to the Secured Convertible Notes and for DERMAdoctor to be removed as a party to the Security Agreement (the “ Security Agreement Amendment ”) and (ii) terminate the Subsidiary Guarantee, dated April 27, 2023 (the “ Subsidiary Guarantee ”), which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes (the “ Subsidiary Guarantee Termination ”).
Added
On March 25, 2024, we announced the closing of the sale of DERMAdoctor pursuant to the DERMAdoctor Divestiture.
Removed
On March 24, 2024, the Company and the Secured Parties entered into a First Amendment to the Security Agreement to effect the Security Agreement Amendment (the “ First Amendment ”), and a Consent and Release to effect the Subsidiary Guarantee Termination (the “ Subsidiary Guarantee Consent ”).
Added
See also Note 21, “DERMAdoctor Divestiture and Discontinued Operations” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report. - 25 - Table of Contents With the Company having completed the sale of substantially all of its assets in the Avenova Asset Sale, as well as the other transactions discussed above, the Board, after evaluating the different strategic options available to the Company, determined that the best opportunity available to maximize the remaining value for our Company and to our stockholders is to wind-up the Company’s affairs and pursue the Dissolution pursuant to the Plan of Dissolution, which may result in distributions to our stockholders of our remaining asset value to the extent any remains.
Removed
As consideration for the Secured Parties executing and delivering the First Amendment and the Subsidiary Guarantee Consent, which reduced the collateral available to secure the obligations under the Secured Convertible Notes, the Company provided each Secured Party the option, at the Secured Party’s election, to receive upon the closing of the DERMAdoctor Divestiture either: (i) a new Series D warrant (the “ Series D Warrants ”) to purchase shares of the Company’s common stock, or (ii) a new unsecured convertible note convertible into shares of common stock (the “ Unsecured Convertible Notes ”).
Added
Concurrent with pursuing the Dissolution, the Company is also evaluating other strategic alternatives that may be available to us to the extent the Dissolution does not proceed. See the additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Company Dissolution and Other Strategic Alternatives” and “Engagement of Financial Advisor—Lucid” in Part I, Item 1 above.
Removed
Based on the Secured Parties’ elections and as a result of the closing of the DERMAdoctor Divestiture, the Company issued: (A) a Series D Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of common stock and (B) New Notes to four (4) Secured Parties that have an aggregate principal amount of $525,000 or will be convertible into an aggregate of 3,750,000 shares of common stock. 2023 Financing Transactions On April 27, 2023, the Company entered into the 2023 Private Placement that provided for the issuance and sale of $3.3 million aggregate principal amount of Secured Convertible Notes and the May 2023 Warrants exercisable for 5,076,928 shares of common stock.
Added
As of December 31, 2024, we had an accumulated deficit of $183.5 million, total current assets of $1.9 million and total assets of $3.4 million.
Removed
The 2023 Private Placement closed on May 1, 2023 and the Company received gross proceeds of $3.0 million, before deducting placement agent fees and other offering expenses.
Added
Subsequent to December 31, 2024, on January 17, 2025, we completed the Avenova Asset Sale for which we received net proceeds of approximately $10.5 million and on January 8, 2025, and we completed the Wound Care Divestiture for which we received net proceeds of $0.5 million.
Removed
In connection with the 2023 Private Placement, certain previously issued common stock purchase warrants exercisable for 1,724,455 shares of common stock were amended to lower their exercise price from $6.30 to $1.50 per share.
Added
Based on our funds available on December 31, 2024, as well as the net proceeds from the Avenova Asset Sale and the Wound Care Divestiture, management believes that the Company’s existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through April 2, 2026.
Removed
On December 21, 2023, the Company entered into the 2023 Warrant Reprice Transaction with certain existing holders of the May 2023 Warrants that were issued in the 2023 Private Placement.
Added
However, there is uncertainty with respect to our strategic direction, as the Dissolution is subject to stockholder approval and we are also exploring other potential strategic alternatives that may be available to us, and, as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the Company to expend cash significantly faster than currently anticipated because of factors beyond its control.
Removed
Participants agreed to exercise May 2023 Warrants exercisable for 2,528,848 shares of common stock at a reduced exercise price of $0.25 and were issued the December 2023 Warrants exercisable for 2,528,848 shares of common stock. The Company received gross proceeds of $0.6 million, before deducting placement agent fees and other offering expenses.
Added
Actual future product returns experienced by us could differ significantly from historical data. As a result of having completed the Avenova Asset Sale, the impact of product returns has been significantly reduced, in particular due to PRN assuming the liability for returns of Avenova products that occur after the closing date of January 17, 2025.
Removed
As of December 31, 2023, we had an accumulated deficit of $174.8 million, total current assets of $7.2 million and total assets of $9.0 million. Included in our net losses for the years ended December 31, 2023 and 2022, was an impairment of our DERMAdoctor business of approximately $2.6 million and $6.8 million, respectively.
Added
These values are subject to a significant degree of management’s judgment. - 27 - Table of Contents Results of Operations Comparison of Years Ended December 31, 2024 and 2023 (in thousands) For the Years Ended December 31, Dollar Percent 2024 2023 Change Change Statement of Operations Sales: Product revenue, net $ 9,747 $ 10,455 $ (708 ) (7 %) Other revenue, net 34 — 34 100 % Total sales, net 9,781 10,455 (674 ) (6 %) Cost of goods sold 3,300 4,371 (1,071 ) (25 %) Gross profit 6,481 6,084 398 7 % Research and development 42 34 8 24 % Sales and marketing 4,034 4,705 (671 ) (14 %) General and administrative 7,379 5,447 1,932 35 % Loss on divestiture of subsidiary 865 — 865 — Total operating expenses 12,320 10,186 2,134 21 % Operating loss (5,839 ) (4,102 ) 1,737 42 % Non-cash gain on changes in fair value of warrant liability 114 272 (158 ) (58 %) Extinguishment of Secured Convertible Note (13 ) — (13 ) — Non-cash gain (loss) on change in fair value of embedded derivative liability (18 ) 40 (58 ) (145 %) Accretion of interest and amortization of discounts on convertible notes (904 ) (1,694 ) (790 ) (47 %) Non-cash loss on modification of common stock warrants — (292 ) 292 (100 %) Other expense, net (550 ) (369 ) (181 ) 49 % Net loss from continuing operations (7,210 ) (6,145 ) (1,065 ) 17 % Net profit from held-for-sale assets (Note 22) 111 404 (293 ) (73 %) Net loss from discontinued operations (Note 21) (124 ) (3,899 ) 3,775 (97 %) Net loss $ (7,223 ) $ (9,640 ) $ 2,417 (25 %) Impact of Held-for-Sale Assets and Discontinued Operations Financial results related to the Company’s wound care products sold under the Wound Care Trademarks from January 1, 2023 through December 31, 2024 are set forth in the table above and as set forth in this annual report have been aggregated in the caption entitled “Net profit from held-for-sale assets” for the years ended December 31, 2024 and 2023.
Removed
Approximately $2.6 million and $6.7 million of the total impairment was reflected in the goodwill, intangible and other asset impairment caption in our consolidated statements of operations for each of those years, respectively, and approximately $0.1 million was reflected in the general and administrative caption in our consolidated statements of operations for the year ended December 31, 2022.
Added
The Wound Care Divestiture, resulting in the sale of the Wound Care Trademarks, was unanimously approved by the Board on December 30, 2024 and closed subsequent to December 31, 2024, on January 8, 2025.
Removed
The impact of the DERMAdoctor impairment on our consolidated balance sheet as of December 31, 2023 was reflected by a right-of-use asset reduction to $1.3 million by $0.1 million, a goodwill reduction to zero by $0.3 million and other intangible assets, net was fully reduced to zero by $2.1 million.
Added
The financial results of DERMAdoctor beginning from January 1, 2023 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this annual report have been aggregated in the caption entitled “Net loss from discontinued operations” for the years ended December 31, 2024 and 2023.
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
1 edited+13 added−0 removed0 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
1 edited+13 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 60 ITEM 9A. CONTROLS AND PROCEDURES 60
Biggest changeITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 33 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 84 ITEM 9A. CONTROLS AND PROCEDURES 84 ITEM 9B. OTHER INFORMATION 84 ITEM 9C.
Added
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 84 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 85 ITEM 11. EXECUTIVE COMPENSATION 88 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 93 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 94 ITEM 14.
Added
PRINCIPAL ACCOUNTANT FEES AND SERVICES 95 PART IV ITEM 15.
Added
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 96 Unless the context requires otherwise, all references in this annual report to “we,” “our,” “us,” the “Company” and “NovaBay” refer to NovaBay Pharmaceuticals, Inc., a Delaware corporation, and, where applicable, also its former wholly-owned subsidiary, DERMAdoctor, LLC, a Missouri limited liability company (“ DERMAdoctor ”).
Added
The Company previously owned live trademark registrations in the U.S., as well as trademark registrations and pending applications in many other countries internationally. We sold our primary trademark, “Avenova®”, to PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company, effective on January 17, 2025.
Added
We sold our “PhaseOne®” and “NeutroPhase®” U.S. trademarks to Phase One Health LLC, a Tennessee limited liability company effective on January 8, 2025. The “DERMAdoctor®”, trademark is held directly by our former wholly-owned subsidiary DERMAdoctor. On May 30, 2024, we effected a 1-for-35 reverse stock split of our common stock (the “ Reverse Stock Split ”).
Added
Except as otherwise specifically noted, all share numbers, share prices, exercise/conversion prices and per share amounts in this annual report have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split. - 3 - Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This annual report on Form 10-K contains “ forward-looking statements ” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “ Securities Act ” ), and Section 21E of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ” ), that are based on our management's current expectations, assumptions, estimates, projections and beliefs and on information currently available to our management.
Added
Forward-looking statements are predictions based on expectations and projections about future events, are not statements of historical fact, and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different and adverse from any future results, performances or achievements expressed or implied by the forward-looking statements.
Added
These forward-looking statements and related risks, uncertainties, factors and assumptions include, but are not limited to statements regarding: our business plan and strategy after completing the Avenova Asset Sale (as defined below) and Wound Care Divestiture (as defined below), including maximizing stockholder value by completing the Dissolution (as defined below) or pursuing other strategic alternatives, our anticipated expenses and capital requirements, the expected timing of, our ability to complete, and impact of the Dissolution or other strategic alternatives, the amount of distributions to stockholders (if any) in connection with effecting the Dissolution, and any impact as a result of failing to complete the Dissolution and/or other strategic alternatives.
Added
In some cases, you can identify forward-looking statements by terms such as “ anticipates, ” “ believes, ” “ continues, ” “ could, ” “ estimates, ” “ expects, ” “ intends, ” “ may, ” “ might, ” “ plans, ” “ potential, ” “ predicts, ” “ projects, ” “ should, ” “ targets, ” “ will, ” “ would ” and similar expressions intended to identify forward-looking statements.
Added
No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties.
Added
We discuss many of these risks in greater detail under the heading “ Risk Factors ” in Item 1A of this annual report, and in cautionary language contained elsewhere in this annual report. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements in this annual report.
Added
You should read this annual report and the documents that we reference and have filed as exhibits thoroughly and with the understanding that forward-looking statements represent our management ’ s beliefs, expectations and assumptions only as of the date of this annual report and our actual future results may be materially different from what we expect.
Added
Except as required by law, we assume no obligation to update these forward-looking statements publicly after the date of this annual report. PART I
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−0 removed4 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−0 removed4 unchanged
2023 filing
2024 filing
Biggest changeWe do not hold any instruments for trading purposes. With most of our focus on the domestic U.S. market, we have not had any material exposure to foreign currency rate fluctuations. 25 Table of Contents
Biggest changeWe do not hold any instruments for trading purposes. With most of our historical focus on the domestic U.S. market, we have not had any material exposure to foreign currency rate fluctuations. - 32 - Table of Contents
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, 2023 were 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.
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, 2024 were 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.
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, 2023 and 2022, 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.
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, 2024 and 2023, 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.