NovaBay Pharmaceuticals Inc

2024 Warrant Reprice Transaction

On June 14, 2024, we entered into the letter agreements, or the 2024 letter agreements, with existing holders of our (i) warrants issued in September 2022, or the September 2022 warrants, to purchase shares of common stock; (ii) Series A-1 common stock purchase warrants, or the Series A-1 warrants, to purchase shares of common stock; (iii) Series B-1 common stock purchase warrants, or the Series B-1 warrants, to purchase shares of common stock; and (iv) Series B-2 common stock purchase warrants, or the Series B-2 warrants, to purchase shares of common stock. We collectively refer to the September 2022 warrants, the Series A-1 warrants, the Series B-1 warrants and the Series B-2 warrants as the “repriced warrants” and the transaction to reprice such warrants as the “warrant reprice transaction”. Pursuant to the terms of the 2024 letter agreements, such existing holders agreed to exercise a portion of their respective repriced warrants, for approximately an aggregate of 90,381 shares of common stock, at a reduced exercise price of $2.50, which resulted in cash proceeds to us of $225,953, before deducting warrant reprice agent fees and other transaction expenses.

As a result of the exercise of these repriced warrants, we issued to each such holder, Series E common stock purchase warrants, or the Series E warrants, to purchase shares of common stock equal to 100% of the shares of common stock received by such holder upon exercise of their repriced warrants. Accordingly, in the warrant reprice transaction, we issued Series E warrants to such holders that will be exercisable for a five (5) year period beginning on December 17, 2024 (the six-month anniversary of the date of issuance) for an aggregate of 90,381 shares of common stock and having an exercise price of $2.57 per share. The Series E warrants are subject to a limitation upon exercise of such Series E warrants to the extent that, after giving effect to such exercise, the holder of such Series E warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% or 9.99% of the outstanding common stock. The Series E warrants do not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of the Company.

2024 Reverse Stock Split

At the 2024 Annual Meeting of Stockholders held on May 28, 2024, or the 2023 Annual Meeting, our stockholders approved a Certificate of Amendment to our Amended and Restated Certificate of Incorporation, as amended, or the Certificate of Incorporation, to effect a reverse stock split, subject to the reverse split ratio being established by our Board of Directors. On May 29, 2024, we announced that our Board of Directors established the reverse stock split ratio of 1-for-35 and filed the Certificate of Amendment with the Secretary of the State of the State of Delaware to effect the reverse stock split, which became effective on May 30, 2024. On May 31, 2024, the common stock began trading on a split-adjusted basis.

NYSE American Notices

On April 18, 2024, we received a notification from the NYSE American LLC, or the NYSE American, stating that the Company is not in compliance with Sections 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and $6.0 million or more if the Company has reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively). On May 28, 2024, we received a further notification from the NYSE American, stating that the Company is not in compliance with Section 1003(a)(i) of the NYSE American Company Guide (requiring stockholders’ equity of $2.0 million or more if the Company has reported losses from continuing operations and/or net losses in two of the three most recent fiscal years). Therefore, the Company has become subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide and submitted a plan of compliance to the NYSE American addressing how it intends to regain compliance with the stockholders’ equity requirements in the NYSE American Company Guide. On June 4, 2024, the Company received notice from the NYSE American that it had accepted the Company’s plan of compliance and granted a plan period through October 18, 2025. During the plan period, the Company will be subject to quarterly monitoring for compliance with the plan. If the Company does not regain compliance with the NYSE American’s listing standards by October 18, 2025, or if the Company does not make progress consistent with its plan, then the NYSE American may initiate delisting procedures.

DERMAdoctor Divestiture

On March 12, 2024, we entered into a Membership Unit Purchase Agreement that provided for the sale of 100% of the membership units of DERMAdoctor to New Age Investments, LLC. At the closing of the DERMAdoctor Divestiture on March 25, 2024, as contemplated by the Membership Unit Purchase Agreement, the Company sold the DERMAdoctor membership units to New Age Investments, LLC for a purchase price of $1,070,000. 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.

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, or the secured parties, of our Original Discount Senior Secured Convertible Debentures due November 1, 2024, or the Secured Convertible Notes, to (i) amend the Security Agreement, dated April 27, 2023, or the Security Agreement, to remove the DERMAdoctor membership units and any assets of DERMAdoctor as collateral for our obligations pursuant to the Secured Convertible Notes and for DERMAdoctor to be removed as a party to the Security Agreement, or the Security Agreement Amendment, and (ii) terminate the Subsidiary Guarantee, dated April 27, 2023, or the Subsidiary Guarantee, which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes, or the Subsidiary Guarantee Termination.

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, or the First Amendment, and a Consent and Release to effect the Subsidiary Guarantee Termination, or the Subsidiary Guarantee Consent. 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, we 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 common stock purchase warrant, or the Series D warrant, to purchase shares of common stock, or (ii) a new unsecured convertible note that would be convertible into shares of common stock, or the Unsecured Convertible Notes. 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 28,572 shares of common stock and (B) Unsecured Convertible Notes to four (4) secured parties that have an aggregate principal amount of $525,000, which may be converted into an aggregate of 107,146 shares of common stock based on the current conversion price. The principal amount of the Unsecured Convertible Notes does not accrue interest and is payable to the secured parties upon maturity in March 2026, unless earlier converted into common stock.

Series B Preferred Stock & Series C Preferred Stock

As of June 20, 2024, 131 shares of the Company’s Series B Non-Voting Convertible Preferred Stock, par value $0.01 per share, or Series B Preferred Stock, were outstanding, and no shares of Series C Non-Voting Convertible Preferred Stock, par value $0.01 per share, or Series C Preferred Stock, are outstanding. As of January 29, 2024, the anti-dilution protection has expired.