NovaBay Pharmaceuticals Inc
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
SDEV$0.98+9.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001437749-24-015679
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001437749-24-026386
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 76 previous paragraphs and 101 current paragraphs.
47 unchanged; 23 reworded; 25 added; 5 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 2 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
NYSE American Notices
Current report
On April 18, 2024, the Company received a notification (“Initial Deficiency Letter”) from the NYSE American LLC Exchange (“NYSE American”) stating that the Company is not in compliance with Section 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).
Current report
On May 28, 2024, the Company received a letter (“Additional Deficiency Letter”) from NYSE American stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Section 1003(a)(i) of the NYSE American Company Guide. Section 1003(a)(i) of the NYSE American Company Guide requires a listed company to maintain stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years. The Company reported stockholders’ equity of $160 thousand as of March 31, 2024 and has had losses from continuing operations and net losses in each of the last three fiscal years.
Current report
Therefore, the Company has become subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide and was required to submit a plan of compliance by May 18, 2024 addressing how it intends to regain compliance with Section 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide by October 18, 2025. 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.
Current report
*Less than 1%.
Current report
Product revenue, net, decreased $1.1 million, or 32%, to $2.4 million for the three months ended June 30, 2024, from $3.5 million for the three months ended June 30, 2023.
Current report
Revenue from the Company’s wound care products decreased to a nominal amount for the three months ended June 30, 2024, from $1.3 million for the three months ended June 30, 2023. The decrease was due primarily to an unusually large order of the NeutroPhase branded wound care product in the three months ended June 30, 2023, with no comparable order in the three months ended June 30, 2024.
Current report
General and administrative expenses remained consistent for the three months ended June 30, 2024 and June 30, 2023.
Current report
Adjustments to the fair value of warrant liabilities resulted in a loss of $80 thousand for the three months ended June 30, 2024 and a gain of $216 thousand for the three months ended June 30, 2023. The warrant liabilities for the December 2023 Warrants and the March 2024 Warrant were reclassified to equity during the three months ended June 30, 2024 and 2023, respectively, and will no longer require fair value adjustments which will impact our results of operations. For additional information regarding warrant liabilities and their valuation, please see Note 11, “Common Stock Warrants”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this quarterly report.
Current report
Non-cash (loss) gain on changes in fair value of embedded derivative liability
Current report
Accretion of interest and amortization of discounts on convertible notes was $0.3 million for the three months ended June 30, 2024 and $0.5 million for the three months ended June 30, 2023.
Current report
Other expense, net decreased $363 thousand, or 84%, to $69 thousand for the three months ended June 30, 2024, from $432 thousand for the three months ended June 30, 2023. The decrease was primarily due to financing costs related to the Secured Convertible Notes in the three months ended June 30, 2023, slightly offset with financing costs related to the 2024 June Warrant Reprice transaction in the three months ended June 30, 2024.
Current report
Impact of DERMAdoctor Divestiture
Current report
Product revenue, net, decreased $0.8 million, or 14%, to $5.0 million for the six months ended June 30, 2024, from $5.9 million for the six months ended June 30, 2023.
Current report
Revenue from the Company’s wound care products decreased $1.3 million to $0.2 million for the six months ended June 30, 2024, from $1.5 million for the six months ended June 30, 2023. The decrease was due primarily to an unusually large order of the NeutroPhase branded wound care product in the six months ended June 30, 2023 with no comparable order in the six months ended June 30, 2024.
Current report
Cost of goods sold decreased $0.9 million, or 35%, to $1.6 million for the six months ended June 30, 2024, from $2.5 million for the six months ended June 30, 2023. Such decrease was due primarily to the decrease in wound care products which has lower margins slightly offset by an increase in eyecare products which has higher margins sold during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Current report
Sales and marketing
Current report
Sales and marketing expenses decreased $0.3 million, or 14%, to $2.1 million for the six months ended June 30, 2024, from $2.4 million for the six months ended June 30, 2023. The decrease was due primarily to continued digital advertising efficiencies and a decrease in related consulting costs incurred in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report
General and administrative
Current report
Non-cash (loss) gain on changes in fair value of embedded derivative liability
Current report
Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the six months ended June 30, 2024 and gain of $40 thousand for the six months ended June 30, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements”.
Current report
Accretion of interest and amortization of discounts on convertible notes was $0.7 million for the six months ended June 30, 2024 and $0.5 million for the six months ended June 30, 2023.
Current report
Other expense, net
Current report
Other expense, net was $0.5 million for the six months ended June 30, 2024 and $0.4 million for the six months ended June 30, 2023. Expenses were related primarily to separate and unrelated financing events recorded during the respective periods.
Current report
Net cash provided by financing activities was $2.5 million for the six months ended June 30, 2023, which included the net proceeds of $2.8 million received in the 2023 Private Placement of the Convertible Notes and the May 2023 Warrants and repayment of $0.2 million for the Monthly Redemption through June 30, 2023 on the Secured Convertible Notes.
Removed paragraphs (5)
Previous report
Product revenue, net, increased $0.3 million, or 13%, to $2.6 million for the three months ended March 31, 2024, from $2.3 million for the three months ended March 31, 2023.
Previous report
Revenue from the Company’s PhaseOne branded wound care product increased $0.1 million to $0.2 million for the three months ended March 31, 2024, from $0.1 million for the three months ended March 31, 2023.
Previous report
Accretion of interest and amortization of discounts on convertible notes was $0.4 million for the three months ended March 31, 2024 with no comparable expense for the three months ended March 31, 2023. The increase was primarily due to the amortization of discount and issuance cost related to the Secured Convertible Notes issued in May 2023 and Unsecured Convertible Notes issued in March 2024 with no comparable expenses for the three months ended March 31, 2023.
Previous report
Other expense, net was $0.5 million for the three months ended March 31, 2024 with no comparable expense for the three months ended March 31, 2023. The increase was primarily due to issuance costs incurred for the March 2024 Warrant and the Unsecured Convertible Notes issued in March 2024 with no comparable expense for the three months ended March 31, 2023.
Previous report
There was no cash used in, or provided by, financing activities from continuing operations during the three months ended March 31, 2023.
Reworded paragraphs (23)
Previous wording
We are a company focused on the development and sale of scientifically-created and clinically-proven eyecare and wound care products. 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. 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. 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. 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.
Current wording
We are a company focused on the development and sale of scientifically-created and clinically-proven eyecare and wound care products. 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. 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. 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. 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 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.
Previous wording
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.
Current wording
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 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.
Previous wording
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. On March 25, 2024, we announced the closing of the sale of DERMAdoctor (the “DERMAdoctor Divestiture”). We acquired DERMAdoctor in November 2021 in order to achieve overall revenue growth, cost reductions and profitability. We were unable to achieve those objectives with DERMAdoctor. 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. To that end, we determined to divest DERMAdoctor and consummate the DERMAdoctor Divestiture, which was not profitable, having incurred historical losses including the loss of $124 thousand for the three months ended March 31, 2024. The DERMAdoctor Divestiture streamlined our business by reducing our cash burn and allows us to focus on pursuing better growth opportunities.
Current wording
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. On March 25, 2024, we announced the closing of the sale of DERMAdoctor (the “DERMAdoctor Divestiture”). We acquired DERMAdoctor in November 2021 in order to achieve overall revenue growth, cost reductions and profitability. We were unable to achieve those objectives with DERMAdoctor. 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. To that end, we determined to divest DERMAdoctor and consummate the DERMAdoctor Divestiture, which was not profitable, having incurred historical losses including the loss of $124 thousand for the six months ended June 30, 2024. The DERMAdoctor Divestiture streamlined our business by reducing our cash burn and allows us to focus on pursuing better growth opportunities.
Previous wording
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, and a Consent and Release to effect the 2024 Subsidiary Guarantee Termination. 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 common stock purchase warrant (the “March 2024 Warrant”), or (ii) a new unsecured convertible note convertible into shares of common stock (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 March 2024 Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of common stock and (B) Unsecured Convertible 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.
Current wording
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, and a Consent and Release to effect the 2024 Subsidiary Guarantee Termination. 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 common stock purchase warrant (the “March 2024 Warrant”), or (ii) a new unsecured convertible note convertible into shares of common stock (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 March 2024 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 or will be convertible into an aggregate of 107,146 shares of common stock.
Previous wording
The Company incurred total issuance costs of $130 thousand in conjunction with the 2024 Subsidiary Guarantee Termination. The Company allocated $19 thousand of the issuance costs to the Unsecured Convertible Notes which was recorded as a discount in the Company’s unaudited condensed consolidated balance sheet as of March 31, 2024. The remaining $111 thousand was allocated to the embedded derivative liability and warrant liability and expensed as “Other expense, net” in the Company’s condensed consolidated statements of operations, during the three months ended March 31, 2024. For additional information regarding the March 2024 Warrant and the Unsecured Convertible Notes that we issued, see also Notes 9, “Financing Activities”; 10, “Convertible Notes”; 11, “Common Stock Warrants”; and 12, “Stockholders’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Current wording
The Company incurred total issuance costs of $130 thousand in conjunction with the 2024 Subsidiary Guarantee Termination. The Company allocated $19 thousand of the issuance costs to the Unsecured Convertible Notes which was recorded as a discount in the Company’s unaudited condensed consolidated balance sheet as of June 30, 2024. The remaining $111 thousand was allocated to the embedded derivative liability and warrant liability and expensed as “Other expense, net” in the Company’s unaudited condensed consolidated statements of operations, during the six months ended June 30, 2024. For additional information regarding the March 2024 Warrant and the Unsecured Convertible Notes that we issued, see also Notes 9, “Financing Activities”; 10, “Convertible Notes”; 11, “Common Stock Warrants”; and 12, “Stockholders’ (Deficit) Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Previous wording
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 $3.2 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $178.4 million, total current assets of $3.6 million and total assets of $5.4 million.
Current wording
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 $1.6 million and $4.0 million for the three months ended June 30, 2024 and 2023, respectively. In addition, our net losses were $5.2 million and $5.8 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $180.0 million, total current assets of $2.3 million and total assets of $3.9 million.
Previous wording
We revalue any outstanding contingent obligations to pay future consideration related to business combinations at the end of each quarter and record increases or decreases in their fair value within our condensed consolidated statements of operations. Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. See additional information in Note 2, “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Current wording
We revalue any outstanding contingent obligations to pay future consideration related to business combinations at the end of each quarter and record increases or decreases in their fair value within our unaudited condensed consolidated statements of operations. Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. See additional information in Note 2, “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Previous wording
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the condensed consolidated statements of operations. 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.
Current wording
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the unaudited condensed consolidated statements of operations. 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.
Previous wording
The financial results of DERMAdoctor beginning from January 1, 2024 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in the report have been aggregated in the captions entitled “Loss on divestiture of subsidiary” and “Net loss from discontinued operations” for the three months ended March 31, 2024 (see Note 17, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). The discussions below and throughout this section apply only to results from continuing operations except as otherwise noted.
Current wording
The financial results of DERMAdoctor beginning from January 1, 2024 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this report have been aggregated in the captions entitled “Loss on divestiture of subsidiary” and “Net loss from discontinued operations” for the three and six months ended June 30, 2024 (see Note 18, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). The discussions below and throughout this section apply only to results from continuing operations except as otherwise noted.
Previous wording
Cost of goods sold increased by $0.1 million, or 13%, to $0.8 million for the three months ended March 31, 2024, from $0.7 million for the three months ended March 31, 2023 primarily due to the increase in eyecare and wound care products sold during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Current wording
Cost of goods sold decreased $1.0 million, or 55%, to $0.8 million for the three months ended June 30, 2024, from $1.8 million for the three months ended June 30, 2023. Such decrease was due primarily to the decrease in wound care products which has lower margins slightly offset by an increase in eyecare products which has higher margins sold during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.
Previous wording
Sales and marketing expenses decreased by $0.1 million, or 15%, to $1.1 million for the three months ended March 31, 2024, from $1.2 million for the three months ended March 31, 2023. The decrease was due primarily to continued lower digital advertising and related consulting costs incurred in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Sales and marketing expenses decreased $0.2 million, or 13%, to $1.0 million for the three months ended June 30, 2024, from $1.2 million for the three months ended June 30, 2023. The decrease was due primarily to continued efficiencies in digital advertising costs and a decrease in professional services fees incurred in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Previous wording
Adjustments to the fair value of embedded derivative liability resulted in a gain of $65 thousand for the three months ended March 31, 2024 with no comparable adjustment for the three months ended March 31, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements”.
Current wording
Adjustments to the fair value of embedded derivative liability resulted in a loss of $83 thousand for the three months ended June 30, 2024 and a gain of $40 thousand for the three months ended June 30, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements”.
Previous wording
General and administrative expenses increased by $0.6 million, or 35%, to $2.3 million for the three months ended March 31, 2024, from $1.7 million for the three months ended March 31, 2023, primarily due to an increase in legal costs primarily related to non-recurring strategic initiatives, including the DERMAdoctor Divestiture, ongoing during the three months ended March 31, 2024.
Current wording
General and administrative expenses increased $0.6 million, or 19%, to $3.9 million for the six months ended June 30, 2024, from $3.3 million for the six months ended June 30, 2023, was due primarily to an increase in legal costs primarily related to non-recurring strategic initiatives, including the DERMAdoctor Divestiture, ongoing during the six months ended June 30, 2024.
Previous wording
As a result of the closing of the DERMAdoctor Divestiture on March 25, 2024, we incurred a loss of $0.9 million for the three months ended March 31, 2024 with no comparable activity for the three months ended March 31, 2023. For additional information regarding the loss on divestiture of subsidiary, please see Note 17, “Divestiture and Discontinued Operations”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report
Current wording
As a result of the closing of the DERMAdoctor Divestiture on March 25, 2024, we incurred a loss of $0.9 million for the six months ended June 30, 2024 with no comparable activity for the six months ended June 30, 2023. For additional information regarding the loss on divestiture of this subsidiary, please see Note 18, “Divestiture and Discontinued Operations”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report.
Previous wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $0.2 million for the three months ended March 31, 2024 with no comparable adjustment for the three months ended March 31, 2023. For additional information regarding warrant liabilities and their valuation, please see Note 11, “Common Stock Warrants”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report.
Current wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $114 thousand for the six months ended June 30, 2024 and $216 thousand for the six months ended June 30, 2023. The warrant liabilities for the December 2023 Warrants and the March 2024 Warrant were reclassified to equity during the six months ended June 30, 2024, and will no longer require fair value adjustments which will impact our results of operations. For additional information regarding warrant liabilities and their valuation, please see Note 11, “Common Stock Warrants”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report.
Previous wording
As of March 31, 2024, our cash and cash equivalents were $1.8 million, compared to $2.9 million as of December 31, 2023. Our cash and cash equivalents as of March 31, 2024 includes $1.1 million of net proceeds from the DERMAdoctor Divestiture. 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 (both as defined in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). Under the terms of the Secured Convertible Notes issued in the 2023 Private Placement, we are required to make a monthly redemption of the principal amount of the Secured Convertible Notes (“Monthly Redemption”) over an 18-month period, which began on June 1, 2023 in an amount equal to $193 thousand per month, unless such Monthly Redemption is eligible under the terms of the Secured Convertible Notes to instead be settled through the issuance of our common stock. We have paid the Monthly Redemption in cash to date, and as of March 31, 2024, the remaining outstanding principal amount of the Secured Convertible Note was $1.3 million. On March 25, 2024, the Company issued Unsecured Convertible 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. 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 or an acceleration of the Unsecured Convertible Note occurs if we do not obtain stockholder approval for the issuance of the shares of common stock that may be issued upon conversion of the Unsecured Convertible Note within six months of March 25, 2024. For additional information regarding the 2023 Private Placement, the Secured Convertible Notes and the Unsecured Convertible Notes, see Note 9 “Financing Activities, Note 10 “Convertible Notes,” and Note 12 “Stockholders’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Current wording
As of June 30, 2024, our cash and cash equivalents were $0.8 million, compared to $2.9 million as of December 31, 2023. Our cash and cash equivalents as of June 30, 2024 includes $0.2 million of net proceeds from the 2024 Warrant Reprice Transaction and $1.1 million of net proceeds from the DERMAdoctor Divestiture. 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 (both as defined in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). Under the terms of the Secured Convertible Notes issued in the 2023 Private Placement, we are required to make a monthly redemption of the principal amount of the Secured Convertible Notes (“Monthly Redemption”) over an 18-month period, which began on June 1, 2023 in an amount equal to $193 thousand per month, unless such Monthly Redemption is eligible under the terms of the Secured Convertible Notes to instead be settled through the issuance of our common stock. We have paid the Monthly Redemption in cash to date, and as of June 30, 2024, the remaining outstanding principal amount of the Secured Convertible Note was $0.8 million. On March 25, 2024, the Company issued Unsecured Convertible Notes to four (4) Secured Parties that have an aggregate principal amount of $525,000 or will be convertible into an aggregate of 107,146 shares of common stock. 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. For additional information regarding the 2023 Private Placement, the Secured Convertible Notes and the Unsecured Convertible Notes, see Note 9 “Financing Activities, Note 10 “Convertible Notes,” and Note 12 “Stockholders’ (Deficit) Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Previous wording
The Company’s long-term liquidity needs will be largely determined by the success of our commercialization efforts. To address the Company’s current liquidity and capital needs, the Company has and continues to evaluate different plans and strategic transactions to fund operations, including: (1) raising additional capital through debt and equity financings or from other sources; (2) reducing spending on operations, including reducing spending on one or more of its sales and marketing programs or restructuring operations to change its overhead structure; (3) out-licensing rights to certain of its products or product candidates, pursuant to which the Company would receive cash milestones or an upfront fee; and/or (4) entering into license agreements to sell new products. The Company may issue securities, including common stock, preferred stock, convertible debt securities and warrants through additional private placement transactions or registered public offerings, which may require the filing of a Form S-1 or Form S-3 registration statement with the SEC. There is no assurance that the Company will be successful in executing additional capital raising strategies at levels necessary to address the Company’s ongoing and future cash flow and liquidity needs. Accordingly, the Company continues to evaluate different plans and strategies to address the Company’s capital and liquidity needs, as well as evaluating several potential other strategic alternatives and transactions, including potential additional divestiture transactions or strategic acquisition transactions. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to its ability to continue as a going concern.
Current wording
The Company’s long-term liquidity needs will be largely determined by the success of our commercialization efforts. To address the Company’s current liquidity and capital needs, the Company has and continues to evaluate different plans and strategic transactions to fund operations, including: (1) raising additional capital through debt and equity financings or from other sources; (2) reducing spending on operations, including reducing spending on one or more of its sales and marketing programs or restructuring operations to change its overhead structure; (3) out-licensing rights to certain of its products or product candidates, pursuant to which the Company would receive cash milestones or an upfront fee; and/or (4) entering into license agreements to sell new products. The Company may issue securities, including common stock, preferred stock, convertible debt securities and warrants through additional private placement transactions or registered public offerings, which may require the filing of a Form S-1 or Form S-3 registration statement with the SEC. There is no assurance that the Company will be successful in executing additional capital-raising strategies at levels necessary to address the Company’s ongoing and future cash flow and liquidity needs. Accordingly, the Company continues to evaluate different plans and strategies to address the Company’s capital and liquidity needs, as well as evaluating several potential other strategic alternatives and transactions, including potential additional divestiture transactions or strategic acquisition transactions. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to its ability to continue as a going concern.
Previous wording
Net cash used in operating activities from continuing operations was $1.6 million for the three months ended March 31, 2024, which consisted primarily of a net loss from continuing operations of $3.1 million, adjusted by depreciation and amortization expenses of $12 thousand, stock-based compensation expenses related to employee and director stock awards of $60 thousand, non-cash loss on divestiture of $0.9 million, non-cash expense for consent of Secured Note holders of $0.4 million, non-cash gain on changes in fair value of warrant liability of $0.2 million, non-cash gain on changes in fair value of embedded derivative liability of $65 thousand, accretion of interest and amortization of debt discounts on convertibles notes of $0.4 million, and a net increase of $57 thousand in our net operating assets and liabilities of continuing operations.
Current wording
Net cash used in operating activities from continuing operations was $2.2 million for the six months ended June 30, 2024, which consisted primarily of a net loss from continuing operations of $4.7 million, adjusted by depreciation and amortization expenses of $23 thousand, stock-based compensation expenses related to employee and director stock awards of $115 thousand, non-cash loss on divestiture of $0.9 million, non-cash expense for consent of Secured Note holders of $0.4 million, non-cash loss on modifications of warrants of $69 thousand, non-cash gain on changes in fair value of warrant liabilities of $114 thousand, non-cash loss on changes in fair value of embedded derivative liability of $18 thousand, non-cash right-of-use amortization of $168 thousand, accretion of interest and amortization of debt discounts on convertibles notes of $0.7 million, and a net increase of $0.3 million in our net operating assets and liabilities of continuing operations.
Previous wording
Net cash used in operating activities from continuing operations was $1.2 million for the three months ended March 31, 2023, which consisted primarily of a net loss from continuing operations of $1.3 million, adjusted by depreciation and amortization expenses of $13 thousand, stock-based compensation expenses of $75 thousand, and a net change of $70 thousand in our net operating assets and liabilities of continuing operations.
Current wording
Net cash used in operating activities from continuing operations was $2.9 million for the six months ended June 30, 2023, which consisted primarily of a net loss from continuing operations of $3.8 million, adjusted by depreciation and amortization expenses of $26 thousand, stock-based compensation expenses of $139 thousand, non-cash loss on modifications of warrants of $285 thousand, non-cash gain on changes in fair value of warrant liabilities of $216 thousand, non-cash gain on changes in fair value of embedded derivative liability of $40 thousand, non-cash right-of-use amortization of $140 thousand, accretion of interest and amortization of debt discounts on convertibles notes of $0.5 million, and a net decrease of $0.6 million in our net operating assets and liabilities of continuing operations.
Previous wording
Net cash provided by investing activities from continuing operations was $1.1 million for the three months ended March 31, 2024, which included the DERMAdoctor Divestiture proceeds of $1.1 million and purchase of property and equipment in a nominal amount. Net cash used in investing activities for the purchase of property and equipment was $13 thousand for the three months ended March 31, 2023.
Current wording
Net cash provided by investing activities from continuing operations was $1.1 million for the six months ended June 30, 2024, which included the DERMAdoctor Divestiture proceeds of $1.1 million and purchase of property and equipment in a nominal amount. Net cash used in investing activities for the purchase of property and equipment was $15 thousand for the six months ended June 30, 2023.
Previous wording
Cash Provided by Financing Activities
Current wording
Cash (Used in) Provided by Financing Activities
Previous wording
Net cash used in financing activities from continuing operations was $597 thousand for the three months ended March 31, 2024, which included repayment of $578 thousand for the Monthly Redemption through March 31, 2024 on the Secured Convertible Notes issued and debt issuance cost of $19 thousand.
Current wording
Net cash used in financing activities from continuing operations was $1.1 million for the six months ended June 30, 2024, which included repayment of $1.2 million for the Monthly Redemption through June 30, 2024 on the Secured Convertible Notes and the net proceeds of $0.2 million from the 2024 Warrant Repice transaction.
Previous wording
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. 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.
Current wording
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. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost-saving 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.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Non-cash (loss) gain on change in fair value of warrant liabilities
Current report — wording carried from elsewhere
Comparison of the Six Months Ended June 30, 2024 and 2023 (dollars in thousands)
Current report — wording carried from elsewhere
The financial results of DERMAdoctor beginning from January 1, 2024 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this report have been aggregated in the captions entitled “Loss on divestiture of subsidiary” and “Net loss from discontinued operations” for the six months ended June 30, 2024 (see Note 18, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). The discussions below and throughout this section apply only to results from continuing operations except as otherwise noted.
Current report — wording carried from elsewhere
Total Net Sales and Cost of Goods Sold
Current report — wording carried from elsewhere
Revenue from eyecare products, including Avenova Spray, increased $0.4 million to $4.8 million for the six months ended June 30, 2024, from $4.4 million for the six months ended June 30, 2023. The increase was due to an overall increase in Avenova branded products sold through online channels.
Current report — wording carried from elsewhere
Accretion of interest and amortization of discounts on convertible notes
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Non-cash gain on changes in fair value of embedded derivative liability