美国
证券交易委员会
华盛顿特区 20549
表格
(标记一个)
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根据部分提交的季度报告 1934年证券交易所法案第13条或第15(d)条 |
截至2024年6月30日季度结束
或
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TRANSITION REPORt PURSUANt TO SECTION 1934年证券交易所法案第13条或第15(d)条 |
过渡期从 至
委员会文件编号
（依凭章程所载的完整登记名称）
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(成立地或组织其他管辖区) |
（联邦税号） |
(总部办公地址) （邮政编码）
申报人于2024年股东权益计划协议（以下简称“权益计划协议”）中提交的Registrant的股东权益计划（以下简称“权益计划”），已于2024年7月24日获得董事会批准。权益计划的目的是，尽可能防止公司被潜在买盘接管，并确保诚实和公平的证券接管竞标过程，以及确保董事会有足够时间评估未经请求的证券接管竞标并探索和发展最大化股东价值的替代方案。’s Telephone Number, Including Area Code: (
根据法案第12(b)条登记的证券：
|
每个班级的标题 |
交易标的（s） |
每个交易所的名称 已登记 |
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根据法案第12(g)条登记的证券：无。
标明并以核准符号表示，证券交易法 1934 年第 13 或 15(d) 条要求之申报已经登记来进行报告了，该报告需涵盖过去12个月期间 (或是公司需要进行该等报告的较短期间)，并且过去90天内已经受到相关的申报要求。
请勾选以下方框以指示公司是否在过去12个月内（或公司需要提交此类文件的较短期间内）按照S-t法规第405条的要求提交了所有互动数据文件。
请勾选该申报者是否为大型快速申报者、快速申报者、非快速申报者、小型报告公司或新兴成长公司。请参阅交易所法案第1202条中“大型快速申报者”、“快速申报者”、“小型报告公司”和“新兴成长公司”的定义。
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大型快速申报者 |
☐ |
加速披露人 |
☐ |
新兴成长型企业 |
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☒ |
小型报告公司 |
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如果是新兴成长型企业，在符合任何依据证券交易法第13(a)条所提供的任何新的或修改的财务会计准则的遵循的延伸过渡期方面，是否选择不使用核准记号进行指示。☐
检查标记指示申报人是否为空壳公司（如Exchange Act第120亿2条的定义）。 是
截至2024年11月5日，其普通股的流通股数共为
目 录
第I部分
财务信息
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项目1。 |
3 | |
| 4 | ||
| 5 | ||
| 7 | ||
| 8 | ||
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项目2。 |
46 | |
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项目3。 |
57 | |
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项目 4。 |
57 |
第二部分
其他信息
|
项目1。 |
58 | |
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项目1A。 |
58 | |
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项目2。 |
59 | |
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项目3。 |
59 | |
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项目 4。 |
59 | |
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项目5。 |
59 | |
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第6项。 |
60 | |
| 62 | ||
除非情境需要不同，本报告中所有提及的"我们"，"我们的"，"我们"，"公司"和"novabay"指的是novabay pharmaceuticals，一家特拉华州公司，如适用，也包括其以前的全资附属公司DERMAdoctor，一家密苏里州有限责任公司。
公司拥有美国的活跃商标注册，以及在其他许多国家国际间的商标注册和待申请，我们的主要商标包括“Avenova®”，“CelleRx®”，“PhaseOne®”和其它国家。 “NeutroPhase®”等商标是NovaBay直接持有。而“DERMAdoctor®”，“Kakadu C®”，“AIN’t Misbehavin’®”和“KP Duty®”是由我们前全资子公司DERMAdoctor直接持有。 “DERMAdoctor®”是由我们之前的全资子公司DERMAdoctor直接持有。
于2024年5月30日，公司实施了普通股1换35的逆向股票拆分（""）。附带的基本报表和相关附注反映了这次逆向股票拆分的追溯效应。股票合并倒数附带的基本报表和相关附注反映了这次逆向股票拆分的追溯效应。
第I部分
财务信息
|
项目 1。 |
基本报表 |
缩表合并资产负债表
（以千为单位，除每股面额金额外）
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九月三十日， 2024 |
12月31日， 2023 |
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(未经查核) |
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资产 |
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流动资产: |
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现金及现金等价物 |
$ | $ | ||||||
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应收账款净额，扣除信用损失准备（$ |
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存货净额，扣除存货过剩及淘汰存货以及成本或预估净可实现价值调整（$ |
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预付费用及其他流动资产 |
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流动资产，已中止运作 |
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全部流动资产 |
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营运租赁权使用资产 |
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物业及设备，扣除折旧后净值 |
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其他资产 |
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其他资产、停业营运 |
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总资产 |
$ | $ | ||||||
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负债及股东权益’ 股东权益 |
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负债： |
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流动负债： |
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应付账款 |
$ | $ | ||||||
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应付负债 |
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扣除折扣后的保证可转换票据 |
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扣除折扣后的无抵押可转换票据 |
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营业租赁负债 |
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流动负债，已停止营运 |
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流动负债合计 |
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认股权负债 |
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非流动营业租赁负债 |
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总负债 |
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承诺事项和或附带条件（注8） |
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股东权益： |
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优先股，面额$0.01，授权股数为5,000,000股，发行且流通股数为截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。 |
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B系列优先股; |
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C轮优先股; |
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0.01 |
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额外资本溢额* |
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累积亏损 |
( |
) | ( |
) | ||||
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股东权益总额 |
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负债合计 及股东权益 |
$ | $ | ||||||
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* |
在对1比35的逆向股票合并进行追溯生效之后 5月30日生效的逆向股票拆分。 |
附注是这些未经审计的简明综合财务报表的一个组成部分。
novabay pharmaceuticals, inc.
(未经查核)
（以千美元为单位，除每股数据外）
|
三个月结束了 九月三十日， |
截至九个月 九月三十日， |
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2024 |
2023 |
2024 |
2023 |
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销售： |
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营业收入净额 |
$ | $ | $ | $ | ||||||||||||
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其他营业收入，净额 |
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总销售额，净额 |
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营业成本 |
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毛利润 |
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营业费用： |
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研发费用 |
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销售和市场推广费用 |
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总务与行政 |
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创业子公司出售损失 |
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营业费用总计 |
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营业亏损 |
( |
) | ( |
) | ( |
) | ( |
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公允价值权证负债变动的非现金收益 |
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嵌入性衍生负债公允价值变动的非现金（亏损）收益 |
( |
) | ||||||||||||||
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可转换票据利息累积及折价摊销 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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清偿担保可转换票据 |
( |
) | ( |
) | ||||||||||||
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其他费用，净额 |
( |
) | ( |
) | ||||||||||||
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持续营运净损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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停止运作的净亏损（附注18） |
( |
) | ( |
) | ( |
) | ||||||||||
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净损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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减少：由于普通股认股权行使价调整而增加累积赤字 |
( |
) | ( |
) | ||||||||||||
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减少：由于优先股转换价格调整而增加累积赤字 |
( |
) | ( |
) | ||||||||||||
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归属于普通股股东的净亏损 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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每股基本及稀释净亏损 |
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每股继续营运净损失* |
$ | ) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
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每股已停止运作净损失* |
( |
) | ( |
) | ( |
) | ||||||||||
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归属于普通股股东的每股基本和稀释净损失* |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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用于计算每股普通股净亏损（基本和稀释）的加权平均普通股股份 |
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* |
|
附注是这些未经审计的简明综合财务报表的一个组成部分。
novabay pharmaceuticals, inc.
(未经查核)
（以千为单位）
|
优先股 |
普通股 |
额外的 已付款 在 |
累计 |
总计 股东权益 股权 |
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|
股份 |
金额 |
分享* |
金额* |
资本* |
赤字累计 |
(赤字) |
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2023年12月31日余额 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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净损失 |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
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将B系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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将C系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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调整C系列优先股转换价格 |
- | - | ( |
) | ||||||||||||||||||||||||
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与员工和董事股票奖励相关的以股票为基础的补偿费用 |
- | - | ||||||||||||||||||||||||||
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2024年3月31日止结余 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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净损失 |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
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将B系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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将C系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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修改普通股认股权证与2024认股权调价交易有关 |
- | - | ||||||||||||||||||||||||||
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发行普通股与2024认股权调价交易相关，扣除发行成本后净数 |
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将2023年12月认股权重新分类为非负债 |
- | - | ||||||||||||||||||||||||||
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将2024年3月认股权重新分类为非负债 |
- | - | ||||||||||||||||||||||||||
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重新分类嵌入式衍生负债 |
- | - | ||||||||||||||||||||||||||
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发行股份以换取 |
( |
) | ||||||||||||||||||||||||||
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与员工和董事股票奖励相关的股份报酬费用。 |
- | - | ||||||||||||||||||||||||||
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董事受限制股票奖励的授予。 |
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2024年6月30日余额 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
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净损失 |
- | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||
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在一项在证券在个单独包销中发行普通股和预资金认股权，扣除发行成本。 |
- | - | - | |||||||||||||||||||||||||
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行使预付权证 |
- | - | - | - | ||||||||||||||||||||||||
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调整普通股认股权行使价。 |
- | - | - | - | ( |
) | - | |||||||||||||||||||||
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与员工和董事股票奖励相关的股票基础薪酬费用 |
- | - | - | - | - | |||||||||||||||||||||||
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2024年9月30日结余 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
|
优先股 |
普通股 |
额外的 已付款 在 |
累计 |
总计 股东权益 股权 |
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股份 |
金额 |
分享* |
金额* |
资本* |
赤字累计 |
(赤字) |
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2022年12月31日结余 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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净损失 |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
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与员工和董事股票奖励相关的股票基础薪酬费用 |
- | - | ||||||||||||||||||||||||||
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2023年3月31日结束余额 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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净损失 |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
|
将B系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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将C系列优先股转换为普通股 |
( |
) | ( |
) | ||||||||||||||||||||||||
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普通股票认股权证的修改 |
- | - | ||||||||||||||||||||||||||
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Series b优先股转换价格的调整 |
- | - | ( |
) | ||||||||||||||||||||||||
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调整C系列优先股转换价格 |
( |
) | ||||||||||||||||||||||||||
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2023年5月Warrants的再分类 |
- | - | ||||||||||||||||||||||||||
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与员工和董事股票奖励相关的股票基础薪酬费用 |
- | - | ||||||||||||||||||||||||||
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董事受限制股票奖励的授予。 |
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2023年6月30日结余 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
|
净损失 |
- | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||
|
将B系列优先股转换为普通股 |
( |
) | ( |
) | - | - | ||||||||||||||||||||||
|
重新分类嵌入式衍生负债 |
- | - | - | - | - | |||||||||||||||||||||||
|
与员工和董事股票奖励相关的股票基础薪酬费用 |
- | - | - | - | - | |||||||||||||||||||||||
|
截至2023年9月30日的结余 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
|
* |
|
附注是这些未经审计的简明综合财务报表的一个组成部分。
novabay pharmaceuticals, inc.
(未经查核)
(以千为单位)
|
截至9月30日的九个月 |
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|
2024 |
2023 |
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营业活动： |
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|
净损失 |
$ | ( |
) | $ | ( |
) | ||
|
已中止运作的操作所导致的净损失 |
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调整为使净亏损转化为经营活动所使用现金： |
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固定资产及设备折旧 |
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与员工和董事股票奖励相关的股票基础薪酬费用 |
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非现金资产处分损失 |
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为获得担保可转债票持有人同意而发生的非现金费用 |
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普通股认股权凭证的修改，包括在其他费用净额中 |
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公允价值权证负债变动的非现金收益 |
( |
) | ( |
) | ||||
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嵌入式衍生负债公平价值变动的非现金损失（收益） |
( |
) | ||||||
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租赁使用权上的非现金摊销 |
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可转换票据的利息累计和债务折扣摊销 |
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营运资产和负债的变化： |
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应收帐款 |
( |
) | ||||||
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存货 |
( |
) | ||||||
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预付费用及其他流动资产 |
( |
) | ||||||
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其他资产 |
( |
) | ( |
) | ||||
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应付款及应计费用 |
( |
) | ( |
) | ||||
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营业租赁负债 |
( |
) | ( |
) | ||||
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持续营运中之营运活动使用的净现金 |
( |
) | ( |
) | ||||
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投资活动： |
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处分附属公司所得款项 |
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|
购买不动产和设备 |
( |
) | ( |
) | ||||
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继续营业活动中提供的（用于）投资活动的净现金 |
( |
) | ||||||
|
融资活动: |
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|
来自认股权及预资的行使所得款项 |
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|
普通股及预资认股权在承销登记直接供应中发行所得款项，扣除发行成本后净额 |
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|
有担保可转换票据及2023年5月认股权的发行所得款项，扣除折扣后净额 |
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|
有担保可转换票据的支付 |
( |
) | ( |
) | ||||
|
债券发行成本 |
( |
) | ( |
) | ||||
| 融资活动提供的净现金，持续营运 | ||||||||
|
现金、现金等价物和受限现金的净减少，持续营运 |
( |
) | ( |
) | ||||
|
现金及现金等价物的净减少，已停止营运 |
( |
) | ( |
) | ||||
|
现金、现金等价物和受限现金的净减少，合并资料 |
( |
) | ( |
) | ||||
|
现金、现金等价物和受限现金，年初，合并 |
||||||||
|
减：已停止营运之现金及现金等价物，期末 |
( |
) | ||||||
|
持续营业的现金、现金等价物和受限现金期末 |
$ | $ | ||||||
|
九个月截至九月三十日 |
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|
2024 |
2023 |
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|
现金流量资讯的补充披露： |
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|
持续营运中支付的利息 |
$ | $ | ||||||
|
停用营运中支付的利息 |
||||||||
|
截至9月30日的九个月 |
||||||||
|
2024 |
2023 |
|||||||
|
非现金信息的补充披露: |
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|
普通股转换为优先股 |
$ | $ | ||||||
|
与优先股相关的下滑回合特徵调整 |
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|
与普通股权证相关的下滑回合特徵调整 |
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|
与无担保可转换票据相关的嵌入式衍生负债发行 |
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|
权证负债转移到权益 |
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|
衍生负债转移到权益 |
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附注是这些未经审计的简明综合财务报表的一个组成部分。
novabay pharmaceuticals Inc.（"我们的,” “我们,” “我们” 或“公司”权益代理”）研发并销售经科学证实的眼部护理和伤口护理产品。我们的领先产品Avenova®抗菌眼睑和睫毛溶液，或Avenova喷雾，经实验室测试证实具有广泛的抗菌特性，可清除皮肤周围的异物，包括微生物和碎片，包括眼睫周围的皮肤。Avenova喷雾配制我们的专利稳定和纯形式次氯酸，经美国食品和药物管理局（"「监管当局」指任何国家或超国家政府机构，包括美国食品药品监督管理局（及其任何继任实体）（以下简称「FDA」）在美国、欧洲药品管理局（及其任何继任实体）（以下简称「EMA」）或欧洲委员会（及其任何继任实体，如适用）在欧盟、或日本内阁府健康福祉厅，或日本药品医疗机器等级机构（或任何继任者）（以下简称「MHLW」），在日本，英国药物和保健品监管局（以下简称「MHRA」），或任何国家的任何卫生监管当局均为本文所述国家药品的开发、商业化，以及进行监管审批负责的对应机构，包括但不限于HGRAC。Avenova Spray在美国有售。Avenova Spray主要通过线上销售渠道直接面向消费者，也可通过处方配药由眼科专家供应，用于眼睑炎和干眼症。由于干眼是一种复杂的状况，我们为家用标准治疗方案的每一步提供一系列科学开发的产品，包括Avenova润滑眼滴提供即时缓解、Avenova的NovaWipes、Avenova的温热眼罩舒缓眼睛，以及Avenova的i-Chek用于监控眼睑健康。
我们还制造和卖出我们专有的次氯酸形式，用于透过我们的NeutroPhase和PhaseOne品牌产品来进入伤口护理市场。NeutroPhase和PhaseOne用于手术程序中的清洁和灌洗，以及处理伤口、烧伤、溃疡和其他伤害。公司目前通过经销商销售这些产品。
透过我们之前的子公司DERMAdoctor，LLC（DERMAdoctor），公司提供超过30款针对常见皮肤问题的皮肤科医师研发产品，从老化和瑕疵到干燥皮肤、多汗和毛囊角化。2024年3月25日，我们宣布已出售DERMAdoctor（“DERMAdoctor出售”).
公司主要经营 报告的业务部门分为：(1) 眼部护理和伤口护理以及 (2) 皮肤护理。正如上文所述，于2024年3月25日，我们完成了DERMAdoctor的出售，导致了我们皮肤护理部门的销售。
该公司于2000年1月19日根据加利福尼亚州法律成立为NovaCal Pharmaceuticals, Inc. 直至2002年7月1日才开始运营，当天收购了加利福尼亚州有限责任公司NovaCal Pharmaceuticals, LLC的所有营运资产。该公司于2007年2月将其名称从NovaCal Pharmaceuticals, Inc. 更改为novabay pharmaceuticals, Inc. 该公司于2010年6月更改了其成立州（以下简称为“. 变更成立地点”），现在根据德拉瓦州法律成立。 本文件中对“公司”的所有参照均指重新设立日期前的加利福尼亚公司和重新设立日期后的特拉瓦公司。重设立”现货公司” 一词在此处指重新设立日期前的加利福尼亚公司，以及在重新设立日期后指德拉瓦公司。
公司于2024年5月30日生效实施了1比-的反向拆分。
潜在资产出售交易及清算
于2024年9月19日，公司与PRN医生推荐营养补充品有限责任公司（下称「原本的 购买协议」）签订了资产购买协议本金，根据该协议，PRN将收购公司以Avenova品牌销售的眼护产品及相关，即「Avenova资产」为何Corcept Therapeutics股票今天飙升？资产出售交易）。在2024年11月5日，公司修订了原始购买协议（“APA修正”，连同原始购买协议一起，为公司提供了，购买协议），规定了增加基本购买价格为
资产销售交易将构成本公司产生营收及营运资产的大部分；然而，PRN 不会购买本公司的任何其他产品和资产，包括与本公司的伤口护理、泌尿科或皮肤科业务有关的产品和资产。公司董事会（」董事会」) 一致通过资产出售交易，并进一步裁定，如果资产出售交易完成，最佳机会将股东最佳化价值，是根据完整清算和解散计划进行清盘和解散（解散计划」) 根据特拉华州法律，可能会导致我们的剩余资产价值分发给我们的股东（」解散”).
公司已召集股东特别会议（以下简称“董事会”），于2024年11月22日就股东批准（1）资产出售交易及（2）解散事项进行投票，惟董事会可依自行判断决定是否继续进行解散事项。特别会议”
2024年10月29日，公司宣布，董事会裁定Refresh Acquisitions BidCo LLC提出的未经请求且不具约束力的收购提议，以购买Avenova资产，为“优越提案”（如购买协议所定义）。因此，公司通知董事会已做出的裁定，以及公司打算根据条款终止购买协议，除非公司收到PRN的修订提案，以使董事会裁定Refresh无约请提议不再是“优越提案”，所有这些都应遵照购买协议所提供的程序。Refresh资产Refresh未经请求提议
2024年11月5日，公司与PRN签署APA修订原始购买协议。 APA修订提供了对原始购买协议的主要修改，包括：(i)将基本购买价格提高至$
公司于2024年11月5日签订了桥梁贷款协议，该协议规定公司将从PRN作为贷方获得最高美金资产50万美元的抵押贷款。
有关资产出售交易（包括修订PRN交易条款、APA修正和桥接贷款）、提供刷新的自愿要约和解散的更多信息，请参阅附录19“后续事项”，公司于2024年9月20日、2024年10月29日和2024年11月6日提交给证券交易委员会（“ 交易所 ”）的公司当前报告书8-k，以及公司于2024年10月16日提交给SEC的14A表格中的公司明确代理声明（可能会有补充，“美国证券交易委员会”特别会议 委托书声明”).
在2062年第四季度开始，公司停用能源业务。
2024年3月25日，公司以总售价$_______________完成DERMAdoctor的出售。
关于DERMAdoctor出售业务，公司与new age Investments, LLC签订了过渡服务协议，以提供一个常规和有序的业务过渡，其中包括new age Investments, LLC提供的仓储服务以及公司提供的履行服务，自签订过渡服务协议以来一直纳入后续期间的营运。
经营概念
公司在其大部分公司历史中持续经营亏损，预计其2024年的支出将超过2024年的收入。此外，公司预计将继续承担经营亏损和负现金流。因此，公司确定其计划的营运情况对其继续作为一个持续经营机构的能力至少存在著重大疑虑，这一疑虑持续时间至少为从此无审核条件的精简综合财务报表之发行日期起的十二个月。此外，不断变化的情况可能导致公司的现金支出速度比目前预期得快得多，并且由于公司无法控制的影响更广泛的经济情况，如通胀周期、供应链问题、全球流行病和国际冲突（例如以色列和哈马斯、俄罗斯和乌克兰以及中国和台湾之间的冲突），公司可能需要花费比目前预期更多的现金。
2024年9月16日，董事会一致批准了资产出售交易和解散，这两者都需经公司股东批准。2024年11月5日，公司签署了APA修正案，其中包括将基本购买价提高到$
为解决公司目前的流动性和短期资本需求，公司已经并将继续评估不同计划和战略交易，以筹集资金进行业务，包括：(1) 通过债务和股权融资或其他来源筹集额外资本；(2) 减少业务支出，包括减少一个或多个销售和营销计划的支出或重组业务以改变其开支结构；和/或(3) 某些业务或产品线及相关资产的出售，例如资产售出交易和DERMAdoctor 出售。如果资产售出交易和/或解散未完成，我们将继续公司的存在，董事会将继续探讨确保业务运作获得即时资金的选项，因为可用资本和流动性大幅减少，公司可选择的战略替代方案包括将资本返还给股东或者，如果缺乏任何资金或其他可行的替代方案，或者在运营所需的资本不足时，公司可能需要申请破产保护或开始类似的州法律程序。在这些战略选项方面，公司可能通过额外的定向增发交易或已注册的公开发行发行证券，包括普通股、优先股、可转换债务证券和权证，此举可能需要对证券交易委员会提交S-1表格或S-3表格的注册声明。尽管公司认为来自于2024年公开发行（定义请见注9 “融资活动”）、2024年权证重新定价交易（定义请见注9 “融资活动”）和DERMAdoctor 出售改善了公司2024年前九个月的流动性，但无法保证公司将成功完成资产售出交易和/或解散，或以其他资本筹集策略的水平来达到解决公司持续和未来现金流和流动性需求所必要的水准。随函附上的未经审计的简明合并财务报表已经准备，假定公司将继续运作，作为持续经营的基础，这意味著资产将实现，并且负债将在业务通常运作的过程中解决。这些未经审计的简明合并财务报表不包括任何调整，以反映由于与公司作为持续经营的能力相关的不确定性可能对资产的回收性和分类或可能导致的负债金额的未来影响。如果公司的股东批准解散，公司将认为清算即将来临，并根据美国一般公认会计准则采取清算基础的会计。美国通用会计原则”).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and are expressed in U.S. dollars. In management’s opinion, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its former wholly-owned subsidiary, DERMAdoctor, as of and for the nine months ended September 30, 2024. All significant intercompany balances and transactions have been eliminated in consolidation. As of March 25, 2024, the Company divested its wholly-owned subsidiary pursuant to the DERMAdoctor Divestiture. The financial results for DERMAdoctor have been presented as discontinued operations in the accompanying condensed consolidated financial statements. For the nine months ended September 30, 2024, all gains and losses on disposition, along with the sales, costs and expenses attributable to discontinued operations, have been aggregated in the captions entitled “Loss on divestiture of subsidiary” and “Net loss from discontinued operations” in our unaudited condensed consolidated statements of operations.
Financial Statement Reclassification
Certain account balances from prior periods have been reclassified in these unaudited condensed consolidated financial statements to conform to current period classifications. The prior year amounts have been modified in these unaudited condensed consolidated financial statements to properly report amounts under current operations and discontinued operations (see Note 18, “Divestiture and Discontinued Operations”).
Further, certain prior period operating lease balances on the Condensed Consolidated Statements of Cash Flows originally reported within changes in “Operating lease right-of-use assets” are now within “Non-cash right-of-use amortization” to conform to the current year presentation. These changes had no impact on the Company's net decrease in case, cash equivalents, and restricted cash in the prior year nor any of the subtotal changes of cash from operating, investing, or financing activities.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, contract liabilities related to product sales such as product returns, assumptions for valuing warrants, assumptions for valuing derivative liabilities, the fair value of contingent consideration, intangible assets, goodwill, stock-based compensation, income taxes and other contingencies.
These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Unaudited Condensed Consolidated Interim Financial Information
The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only recurring adjustments, necessary for a fair presentation.
The year-end condensed consolidated balance sheet data was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.
The condensed consolidated financial statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 26, 2024 and amended on March 29, 2024 (collectively, the “2023 Annual Report”).
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of September 30, 2024 and December 31, 2023, the Company’s cash and cash equivalents were held in a major financial institution in the United States.
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets (in thousands):
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Cash and cash equivalents, discontinued operations |
( |
) | ||||||
|
Restricted cash included in other assets |
||||||||
|
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows |
$ | $ | ||||||
The restricted cash amount included in other assets on the condensed consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.
Concentrations of Credit Risk and Major Partners
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with a major financial institution in the United States.
The Company has a significant amount of its cash balances at financial institutions which, throughout the year, regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
During the three and nine months ended September 30, 2024 and 2023, revenues from significant product categories were as follows (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Avenova Spray |
$ | $ | $ | $ | ||||||||||||
|
NeutroPhase |
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|
Other products |
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|
Total product revenue, net |
||||||||||||||||
|
Other revenue, net |
||||||||||||||||
|
Total sales, net |
$ | $ | $ | $ | ||||||||||||
During the three and nine months ended September 30, 2024 and 2023, revenues were derived primarily from sales of Avenova branded products, directly to consumers through Amazon.com and Avenova.com. Sales of Avenova Spray via Amazon comprised
As of September 30, 2024 and December 31, 2023, accounts receivable from continuing operations from our major distribution partners and major retailers greater than 10% were as follows:
|
September 30, |
December 31, |
|||||||
|
Major distribution partner |
2024 |
2023 |
||||||
|
Major U.S. Retailer A |
% | % | ||||||
|
Avenova Spray Pharmacy Distributor A |
% | % | ||||||
|
Chongqing Pioneer Pharma Holdings Limited |
* | % | % | |||||
* Less than 10%
The Company relies on contract manufacturer to produce its products. The Company does not have any manufacturing facilities and intends to continue to rely on third parties for the supply of finished goods. Our contract manufacturer may or may not be able to meet the Company’s needs with respect to timing, quantity or quality. In particular, it is possible that the Company may suffer from unexpected delays in light of global supply chain issues.
Fair Value of Financial Assets and Liabilities
The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, warrant liabilities, and contingent consideration. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.
The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities;
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and
Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
See additional information in Note 3, “Fair Value Measurements”.
Allowance for Credit Losses
The Company maintains an allowance for estimated losses resulting from the inability of its customers to meet their financial obligations to the Company. The Company recognizes an allowance for credit losses based on factors such as historical experience, contract terms and general and market business conditions. The Company’s future collection experience can differ significantly from historical collection trends due to such factors as changing customer circumstances and uncertain economic and industry trends. The allowance is re-evaluated on a regular basis and adjusted as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the allowance. Management recorded a reserve for allowance for credit losses of $
Inventory
Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes and pumps; (2) goods in progress, which are normally filled but unlabeled bottles; and (3) finished goods. The Company utilizes a contract manufacturer to produce its products and the price paid to these manufacturers is included in inventory. Inventory is stated at the lower of cost or estimated net realizable value determined by the first-in, first-out method. At September 30, 2024 and December 31, 2023, management had recorded an allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets of to years for office and laboratory equipment, to years for computer equipment and software, and to years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term.
The costs of normal maintenance, repairs, and minor replacements are expensed as incurred.
Business Combinations, Goodwill and Indefinite-Lived Intangible Assets
We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires that identifiable assets acquired and liabilities assumed are recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. Intangible assets are measured at their respective fair values as of the acquisition date. Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.
Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.
Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may more likely than not be less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, management can elect to forgo the qualitative assessment and perform the quantitative test. If the qualitative assessment indicates that the quantitative analysis should be performed, or if management elects to bypass a qualitative assessment, the Company then evaluates goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. The quantitative assessment for goodwill requires management to estimate the fair value of the Company’s reporting units using either an income or market approach or a combination thereof.
Management makes critical assumptions and estimates in completing impairment assessments of goodwill and indefinite-lived intangible assets. The Company’s cash flow projections look several years into the future and include assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates.
The Company did record any goodwill or indefinite-lived asset impairment charges during the three or nine months ended September 30, 2024 or September 30, 2023.
Valuation of Contingent Consideration Resulting from a Business Combination
In connection with the DERMAdoctor acquisition, the Company was subject to paying consideration that was contingent upon the achievement of specified milestone events. The Company recorded this contingent consideration at its fair value on the acquisition date. Each quarter thereafter, the Company revalued the contingent consideration and recorded changes in fair value within the condensed consolidated statements of operations. The DERMAdoctor acquisition milestone events consisted of financial targets for calendar years 2022 and 2023 which were not met. As a result, the liability recorded for potential earn out payments in the Company’s condensed consolidated balance sheets was as of September 30, 2024 and December 31, 2023.
Long-Lived Assets
The Company’s intangible assets that do not have indefinite lives, primarily trade secrets and product formulations, are amortized over their estimated useful lives. All of the Company’s intangible assets subject to amortization and other long-lived assets, are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use are present. The Company reviews long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the condensed consolidated statements of operations.
The Company did record any long-lived asset impairments during the three or nine months ended September 30, 2024 or September 30, 2023.
Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.
The Company has elected to combine lease and non-lease components as a single component. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use assets and lease liability for leases being greater than if the policy election was not applied. Leases include variable components (e.g., common area maintenance) that are paid separately from the monthly base payment based on actual costs incurred and therefore were not included in the right-of-use assets and lease liability but are reflected as an expense in the period incurred.
The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized in the condensed consolidated balance sheets as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.
Common Stock Warrants
The Company accounts for the issuance of common stock purchase warrants issued in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging.
The Company classifies as equity any warrants that (i) require physical share settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement (physical share settlement or net-share settlement). The Company classifies as liabilities any warrants that (i) require net-cash settlement, (ii) give the counterparty a choice of net-cash physical settlement or net-share settlement. In accordance with ASC 815, the Company also classifies as liabilities any warrants during the period which the shares underlying the contract are subject to stockholder approval before the warrant can be exercised.
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. See Note 3, “Fair Value Measurements”, subheading “Black Scholes Valuation Models and Assumptions” and Note 11, “Common Stock Warrants”, subheading “Summary of Common Stock Warrant Liabilities”.
Amendments to warrant terms are recorded as a non-cash gain or loss on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black Scholes option pricing model. See Note 3, “Fair Value Measurements”, subheading “Black Scholes Valuation Models and Assumptions”.
Preferred Stock
Terms of the Company’s outstanding Preferred Stock historically included a Ratchet whereby the applicable conversion price could be adjusted (as defined and described in Note 12, “Stockholders’ Equity”). The applicable Ratchet provisions of the Company’s outstanding Preferred Stock terminated during the quarter ended March 31, 2024. When a conversion price was adjusted under the Ratchet, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend was measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). These fair values were determined using the Black Scholes option pricing model. These values are subject to a significant degree of management’s judgment. See also Note 3, “Fair Value Measurements”, subheading “Black Scholes Valuation Models and Assumptions”.
Revenue Recognition
The Company’s product revenue recognition policies are established in accordance with ASC 606, Revenue from Contracts with Customers, in accordance with the following five steps:
|
i. |
identify the contract(s) with a customer; |
|
|
ii. |
identify the performance obligations in the contract; |
|
|
iii. |
determine the transaction price; |
|
|
iv. |
allocate the transaction price to the performance obligations in the contract; and |
|
|
v. |
recognize revenue when (or as) the entity satisfies performance obligations. |
Revenue is recognized in accordance with the amount of consideration which the Company expects to receive.
Revenue generated from end consumers through third-party online retailers, such as Amazon, as well as the Company’s web store (Avenova.com) is recognized on a “sell-through” basis when control of the goods is transferred to the consumer, which generally occurs upon delivery of the products to the party fulfilling the consumer’s order. Revenue is recorded net of any discounts and estimates for refunds and product returns. Fees paid to third-party online retailers and fulfillment parties are recorded as incurred in the Company’s condensed consolidated statements of operations. Fulfillment and shipping and handling fees are recorded as product cost of goods sold. Selling commissions and advertising and promotion fees are recorded as sales and marketing expenses.
Revenue generated through major pharmacy distributors is recognized on a “sell-in” basis when control of the goods is transferred to the distributor, which generally occurs upon delivery of the products to the distributor. Revenue is recorded net of consideration for contract liabilities for distributor services, discounts, rebates, and product returns. The Company estimates returns and other contract liabilities based on historical data which is updated quarterly. Payment for products sold is typically due
Revenue generated from end consumers through the Company’s partner pharmacies is recognized on a “sell-through” basis when control of the goods is transferred to the consumer.
Revenue generated from other retailers is recognized on a “sell-through” basis, net of estimated future product returns, when control of the goods is transferred to the retailer, which generally occurs upon delivery of the products to a third-party carrier who is delivering the products to the retailer.
The Company defers recognition for pre-payments until the Company’s performance obligations are satisfied.
Cost of Goods Sold
Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, third-party fulfillment fees, and other costs associated with products sold. Cost of goods sold also includes any necessary allowances for excess and obsolete inventory as well as lower of cost and estimated net realizable value.
Research and Development Costs
The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development and regulatory activities.
Patent Costs
Patent costs are expensed in the period in which they are incurred. Patent expenses are included in general and administrative expenses in the condensed consolidated statements of operations.
Advertising Costs
Advertising costs are expensed in the period in which the costs are incurred. Advertising costs are included in sales and marketing expenses in the condensed consolidated statements of operations. Advertising expenses were $
Stock-Based Compensation
The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s condensed consolidated statements of operations based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black Scholes option pricing model. The Company accounts for RSUs issued to employees and non-employees (directors, consultants and advisory board members) based on the fair market value of the Company’s common stock on the date of issuance. See Note 13, “Equity-Based Compensation” for further information regarding stock-based compensation expense and the assumptions used in estimating the expense.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.
Net Loss per Share
The Company computes net loss per share by presenting both basic and diluted earnings (loss) per share (“EPS”) as shown in the Company’s condensed consolidated statements of operations.
Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods if their effect would be anti-dilutive.
For the three and nine months ended September 30, 2024 and 2023, the Series B Preferred Stock and Series C Preferred Stock (both as defined below) were excluded from the computation of diluted net loss per share as their inclusion on an “if converted” basis would have been anti-dilutive. The Series B Preferred Stock and Series C Preferred Stock were considered anti-dilutive because such securities did not have a contractual obligation to participate in losses of the Company.
The following outstanding preferred stock, stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive:
|
Balance at September 30, |
||||||||
|
2024* |
2023* |
|||||||
|
Common stock equivalent of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred Stock”) |
||||||||
|
Common stock equivalent of Series C Non-Voting Convertible Preferred Stock (the “Series C Preferred Stock”) |
||||||||
|
Stock options |
||||||||
|
Stock warrants |
||||||||
|
* |
|
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements that could affect our business, results of operations, financial condition, and liquidity, see Note 2, “Summary of Significant Accounting Policies” included in our 2023 Annual Report. The Company continues to evaluate the potential impact of adopting the new accounting guidance on its consolidated financial position, results of operations and cash flows.
NOTE 3. FAIR VALUE MEASUREMENTS
The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 (in thousands):
|
Fair Value Measurements Using |
||||||||||||||||
|
Quoted |
||||||||||||||||
|
Prices in |
||||||||||||||||
|
Active |
||||||||||||||||
|
Markets |
Significant |
|||||||||||||||
|
for |
Other |
Significant |
||||||||||||||
|
Balance at |
Identical |
Observable |
Unobservable |
|||||||||||||
|
September |
Items |
Inputs |
Inputs |
|||||||||||||
|
30, 2024 |
(Level 1) |
(Level 2) |
(Level 3) |
|||||||||||||
|
Assets |
||||||||||||||||
|
Restricted cash held as a certificate of deposit |
$ | $ | $ | $ | ||||||||||||
|
Fair Value Measurements Using |
||||||||||||||||
|
Quoted |
||||||||||||||||
|
Prices in |
||||||||||||||||
|
Active |
||||||||||||||||
|
Markets |
Significant |
|||||||||||||||
|
for |
Other |
Significant |
||||||||||||||
|
Balance at |
Identical |
Observable |
Unobservable |
|||||||||||||
|
December |
Items |
Inputs |
Inputs |
|||||||||||||
|
31, 2023 |
(Level 1) |
(Level 2) |
(Level 3) |
|||||||||||||
|
Assets |
||||||||||||||||
|
Restricted cash held as a certificate of deposit |
$ | $ | $ | $ | ||||||||||||
|
Liabilities |
||||||||||||||||
|
Warrant liabilities |
$ | $ | $ | $ | ||||||||||||
The Company’s restricted cash held as certificates of deposit are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
The Secured Convertible Notes and Unsecured Convertible Notes (see Note 10, “Convertible Notes”) are carried at proceeds, net of discounts, which management believes approximates fair value. As a result of certain call and put options within the Secured Convertible Notes and Unsecured Convertible Notes, the Company recorded an embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount which is netted against the face value of the Secured Convertible Notes and Unsecured Convertible Notes. The fair value of the embedded derivatives were calculated using the Black Scholes valuation model using Level 2 inputs of the fair value hierarchy.
The fair value of the December 2023 Warrants issued in conjunction with the 2023 Warrant Reprice Transaction as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Warrant Reprice Transaction were classified within Level 2.
See Note 11, “Common Stock Warrants”, subheading “Summary of Common Stock Warrant Liabilities”, for a reconciliation of the beginning and ending balances for the warrant liabilities measured at fair value on a recurring basis using significant other observable inputs (Level 2) during the three and nine months ended September 30, 2024 and 2023.
There were no transfers in or out of Level 1, Level 2 or Level 3 assets and liabilities for the three and nine months ended September 30, 2024 and 2023.
Black Scholes Valuation Models and Assumptions
The Company utilizes a Black Scholes model for various valuations as outlined throughout this report. The following tables summarize the assumptions utilized for valuations impacting results for the periods reported. See also Note 13, “Equity-Based Compensation” for related Black Scholes valuation assumptions.
Warrant Liabilities
Various of the Company’s warrants have been subject to stockholder approval upon issuance or amendment and prior to exercise. Warrants requiring stockholder approval are recorded as a liability at fair value upon issuance or amendment and continue to be recorded as a liability at fair value at each reporting date until stockholder approval occurs at which time they are transferred to stockholders’ equity at their fair value on the date of approval. Fair value was determined using a Black Scholes model as outlined below. See Note 11, “Common Stock Warrants” for additional information and the definitions of the Company’s warrants.
|
May 2023 Warrants |
May 2023 Warrants |
December 2023 Warrants |
December 2023 Warrants |
|||||||||||||||||
|
Measurement event |
Issuance |
Stockholder Approval |
Reporting Date |
Stockholder Approval |
||||||||||||||||
|
Date |
May 1, 2023 |
June 9, 2023 |
December 31, 2023 |
May 28, 2024 |
||||||||||||||||
|
Total Value |
$ |
$ |
$ |
$ |
||||||||||||||||
|
Gain (Loss) |
not applicable |
$ |
$ |
$( |
||||||||||||||||
|
Assumptions: |
||||||||||||||||||||
|
Exercise price |
$ | $ | $ | $ | ||||||||||||||||
|
Market price |
$ |
(a) | $ | $ | $ | |||||||||||||||
|
Volatility |
% | % | % | % | ||||||||||||||||
|
Risk-free rate |
- | % | - | % | % | % | ||||||||||||||
|
Dividend yield |
% | % | % | % | ||||||||||||||||
|
Term (years) |
- | - | ||||||||||||||||||
|
March |
March |
|||||||
|
2024 |
2024 |
|||||||
|
Warrant |
Warrant |
|||||||
|
Measurement event |
Reporting Date |
Stockholder Approval |
||||||
|
Date |
March 31, 2024 |
May 28, 2024 |
||||||
|
Total Value |
$ |
$ |
||||||
|
Gain (Loss) |
$ |
$( |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | $ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (years) |
||||||||
|
(a) |
|
Warrant Modifications
Amendments to warrant terms are recorded as a non-cash gain (or loss) on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black Scholes option pricing model. Fair value was determined using a Black Scholes model as outlined below.
|
July 2020, November 2021, September 2022 & November 2022 Warrants |
||||||||||||
|
Measurement event |
Prior to amendment |
After amendment |
||||||||||
|
Date |
April 27, 2023 |
April 27, 2023 |
||||||||||
|
Total Value |
$ |
$ |
||||||||||
|
Loss |
not applicable |
$ |
||||||||||
|
Assumptions: |
||||||||||||
|
Exercise price |
$ | $ | ||||||||||
|
Market price |
$ |
(a) |
$ |
(a) | ||||||||
|
Volatility |
% | % | ||||||||||
|
Risk-free rate |
- | % | - | % | ||||||||
|
Dividend yield |
% | % | ||||||||||
|
Term (years) |
- | - | ||||||||||
|
May 2023 Warrants |
||||||||||||
|
Measurement event |
Prior to amendment |
After amendment |
||||||||||
|
Date |
December 21, 2023 |
December 21, 2023 |
||||||||||
|
Total Value |
$ |
$ |
||||||||||
|
Loss |
not applicable |
$ |
||||||||||
|
Assumptions: |
||||||||||||
|
Exercise price |
$ | $ | ||||||||||
|
Market price |
$ | $ | ||||||||||
|
Volatility |
% | % | ||||||||||
|
Risk-free rate |
- | % | - | % | ||||||||
|
Dividend yield |
% | % | ||||||||||
|
Term (years) |
- | - | ||||||||||
|
September 2022, November 2022, and May 2023 Warrants |
||||||||||||
|
Measurement event |
Prior to amendment |
After amendment |
||||||||||
|
Date |
June 14, 2024 |
June 14, 2024 |
||||||||||
|
Total Value |
$ |
$ |
||||||||||
|
Loss |
not applicable |
$ |
||||||||||
|
Assumptions: |
||||||||||||
|
Exercise price |
$ | $ | ||||||||||
|
Market price |
$ | $ | ||||||||||
|
Volatility |
% | % | ||||||||||
|
Risk-free rate |
- | % | - | % | ||||||||
|
Dividend yield |
% | % | ||||||||||
|
Term (years) |
- | - | ||||||||||
|
(a) |
|
Warrant Down Round Feature Adjustment
Terms of the Company’s outstanding 2024 July Warrants included a down round feature adjustment whereby the applicable exercise price was automatically adjusted (see Note 9, “Financing Activities”). When the exercise price was adjusted, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the 2024 July Warrants immediately prior to the conversion price adjustment and (2) the fair value of the 2024 July Warrants immediately after the conversion price adjustment. Fair value was determined using a Black Scholes model, as outlined below.
|
Series F-1 |
||||||||
|
Measurement event |
Prior to adjustment |
After adjustment |
||||||
|
Date |
September 27, 2024 |
September 27, 2024 |
||||||
|
Total value |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ |
$ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (in years) |
||||||||
|
Series F-2 |
||||||||
|
Measurement event |
Prior to adjustment |
After adjustment |
||||||
|
Date |
September 27, 2024 |
September 27, 2024 |
||||||
|
Total value |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | $ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (in years) |
||||||||
|
Series F-3 |
||||||||
|
Measurement event |
Prior to adjustment |
After adjustment |
||||||
|
Date |
September 27, 2024 |
September 27, 2024 |
||||||
|
Total value |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | $ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (in years) |
||||||||
Preferred Stock Conversion Price Adjustments
Terms of the Company’s outstanding Preferred Stock historically included a Ratchet whereby the applicable conversion price could be adjusted (see Note 12, “Stockholders’ Equity”). The applicable Ratchet provisions of the Company’s outstanding Preferred Stock terminated during the quarter ended March 31, 2024. When a conversion price was adjusted under the Ratchet, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.
|
Series B & C Preferred Stock |
||||||||
|
Measurement event |
Prior to Ratchet |
After Ratchet |
||||||
|
Date |
April 27, 2023 |
April 27, 2023 |
||||||
|
Total value (b) |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ |
(a) |
$ |
(a) | ||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (in years) |
||||||||
|
Series B & C Preferred Stock |
||||||||
|
Measurement event |
Prior to Ratchet |
After Ratchet |
||||||
|
Date |
December 21, 2023 |
December 21, 2023 |
||||||
|
Total value (b) |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | $ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (years) |
||||||||
|
Series C Preferred Stock |
||||||||
|
Measurement event |
Prior to Ratchet |
After Ratchet |
||||||
|
Date |
March 24, 2024 |
March 24, 2024 |
||||||
|
Total value (b) |
$ |
$ |
||||||
|
Deemed dividend |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | 4.77 | $ | 4.77 | ||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (in years) |
||||||||
|
(a) |
|
|
(b) |
|
Bifurcatable Derivatives
Upon issuance in March 2024, the Unsecured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 10, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.
|
Unsecured Convertible Notes derivative |
Unsecured Convertible Notes derivative |
|||||||
|
Measurement event |
Issuance |
Shareholder Approval |
||||||
|
Date |
March 25, 2024 |
May 28, 2024 |
||||||
|
Total value |
$ |
$ |
||||||
|
Gain (Loss) |
not applicable |
$( |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | $ | ||||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (years) |
||||||||
Upon issuance in May 2023, the Secured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 10, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.
|
Secured Convertible Notes derivative |
Secured Convertible Notes derivative |
|||||||
|
Measurement event |
Issuance |
Shareholder Approval |
||||||
|
Date |
April 27, 2023 |
June 9, 2023 |
||||||
|
Total value (b) |
$ |
$ |
||||||
|
Gain |
not applicable |
$ |
||||||
|
Assumptions: |
||||||||
|
Exercise price |
$ | $ | ||||||
|
Market price |
$ | (a) | $ | |||||
|
Volatility |
% | % | ||||||
|
Risk-free rate |
% | % | ||||||
|
Dividend yield |
% | % | ||||||
|
Term (years) |
||||||||
|
(a) |
|
|
(b) |
|
NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Prepaid insurance |
$ | $ | ||||||
|
Prepaid dues and subscriptions |
||||||||
|
Prepaid taxes |
||||||||
|
Prepaid inventory |
||||||||
|
Other |
||||||||
|
Prepaid expenses from discontinued operations |
( |
) | ||||||
|
Total prepaid expenses and other current assets |
$ | $ | ||||||
NOTE 5. INVENTORY
Inventory consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Raw materials and supplies |
$ | $ | ||||||
|
Finished goods |
||||||||
|
Less: Reserve for excess and obsolete inventory |
( |
) | ( |
) | ||||
|
Inventory, net of reserves, from discontinued operations |
( |
) | ||||||
|
Total inventory, net |
$ | $ | ||||||
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Office and laboratory equipment |
$ | $ | ||||||
|
Furniture and fixtures |
||||||||
|
Computer equipment and software |
||||||||
|
Leasehold improvements |
||||||||
|
Total property and equipment, at cost |
||||||||
|
Less: accumulated depreciation |
( |
) | ( |
) | ||||
|
Total property and equipment, net |
$ | $ | ||||||
Depreciation expense related to continuing operations was $
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Contract liabilities (see Note 14) |
$ | $ | ||||||
|
Employee payroll and benefits |
||||||||
|
Other |
||||||||
|
Accrued liabilities from discontinued operations |
( |
) | ||||||
|
Total accrued liabilities |
$ | $ | ||||||
NOTE 8. COMMITMENTS AND CONTINGENCIES
Indemnification Agreements
As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and may enable it to recover a portion of any future payments. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, it has not recorded any liabilities for these agreements as of September 30, 2024 or December 31, 2023.
In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, typically its clinical research organizations, investigators, clinical sites, suppliers, and others. Pursuant to these agreements, it generally indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with the use or testing of its products or product candidates or with any U.S. patent or any copyright or other intellectual property infringement claims by any third party with respect to its products. The term of these indemnification agreements is generally perpetual. The potential future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, costs related to these indemnification provisions have been immaterial. The Company also maintains various liability insurance policies that limit its exposure. As a result, it believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2024 or December 31, 2023.
Legal Matters
From time to time, the Company is subject to various legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. The ultimate outcome of any litigation or other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against the Company in a reporting period for an amount above expectations, the Company’s financial condition and operating results for that period may be adversely affected. As of September 30, 2024 and December 31, 2023, there were no legal 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. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention and other factors. The Company cannot provide assurance that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against it in the future, and these matters could relate to prior, current, or future transactions or events.
Leases
The Company leases office space for its corporate headquarters located in Emeryville, California. The current lease term expires on July 31, 2027.
Lease costs for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Operating lease – expense |
$ | $ | $ | $ | ||||||||||||
|
Operating lease from discontinued operations – expense |
||||||||||||||||
|
Operating lease – included in operating cash flow |
||||||||||||||||
|
Operating lease from discontinued operations – included in operating cash flow |
||||||||||||||||
The Company has measured its operating lease liabilities as the present value of minimum lease payments using its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate for operating leases from continuing operations are summarized as follows:
|
September 30, 2024 |
September 30, 2023 |
|||||||
|
Weighted-average remaining lease term (in years) |
||||||||
|
Weighted-average discount rate |
% | % | ||||||
Future lease payments under non-cancelable leases as of September 30, 2024 were as follows (in thousands):
|
2024 |
$ |
|||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
Total future minimum lease payments |
||||
|
Less: Imputed interest |
( |
) | ||
|
Total |
$ | |||
|
Reported as: |
||||
|
Operating lease liability |
$ | |||
|
Operating lease liability – non-current |
||||
|
Total |
$ |
NOTE 9. FINANCING ACTIVITIES
See Notes 2, “Summary of Significant Accounting Policies”; 3, “Fair Value Measurements”; 10, “Convertible Notes”; 11, “Common Stock Warrants” and 12, “Stockholders’ Equity” for certain defined terms below and additional discussion of financing activities and related accounting policies and fair value estimates.
2024 Public Offering
On July 26, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co., Inc., as the sole underwriter (the “Underwriter”), relating to the issuance and sale in a public offering (the “2024 Public Offering”) of: (i)
The Series F-1 Warrants had an exercise price of $
The July 2024 Warrants include a down round feature adjustment where the exercise price was automatically reset to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the July 2024 Warrants as applicable. Such down round feature adjustment was triggered on September 27, 2024, resulting in a reduced exercise price of $
The exercise price and number of shares of common stock issuable upon exercise of the July 2024 Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common stock and the exercise price. Subject to limited exceptions, a holder may not exercise any portion of its July 2024 Warrants to the extent that the holder would beneficially own more than
In addition, the Company granted the Underwriter a 45-day option to purchase up to
The Underwriter partially exercised this option on July 26, 2024, for (i)
The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $
2024 Warrant Reprice Transaction
In June 2024, the Company entered into a warrant reprice transaction (the “2024 Warrant Reprice Transaction”) with certain existing holders of (i) warrants 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 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 “Existing Warrants”). The participants agreed to exercise a portion of their Existing Warrants at a reduced exercise price of $
The Company also issued participants in the 2024 Warrant Reprice Transaction a new June 2024 Warrant to purchase a number of shares of common stock equal to 100% of the shares of common stock exercised. The June 2024 Warrants are substantially similar to the Existing Warrants, except that the June 2024 Warrants will (i) be initially exercisable on the six-month anniversary of the date of issuance; (ii) have an exercise price of $
The Company incurred total issuance costs of $
2024 Subsidiary Guarantee Termination
On March 24, 2024, in connection with completing certain required conditions to close the DERMAdoctor Divestiture, the Company and the holders of the Secured Convertible Notes entered into a First Amendment (the “First Amendment”) to the Company’s 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, and a Consent and Release (the “Subsidiary Guarantee Consent”), to terminate the Subsidiary Guarantee, dated April 7, 2023 (the “Subsidiary Guarantee”) (collectively, the “2024 Subsidiary Guarantee Termination”). To obtain the secured parties’ consent that resulted in the reduction of the collateral available to secure the obligations under the Secured Convertible Notes and as consideration for the secured parties taking the necessary actions to execute and deliver the First Amendment and the Subsidiary Guarantee Consent, the Company provided each secured party the option, at the Secured Party’s election, to receive only upon the closing of the DERMAdoctor Divestiture either a March 2024 Warrant (see Note 11, “Common Stock Warrants”) or an Unsecured Convertible Note (see Note 10 “Convertible Notes”).
The Company issued, based on the secured parties’ elections, (i) a March 2024 Warrant to a secured party that is exercisable for an aggregate of
The Company incurred total issuance costs of $
2023 Warrant Reprice Transaction
In December 2023, the Company entered into a warrant reprice transaction (the “2023 Warrant Reprice Transaction”) whereby the price terms of certain May 2023 Warrants exercisable for
The 2023 Warrant Reprice Transaction resulted in gross proceeds of approximately $
The Company incurred total issuance costs of $
2023 Private Placement
In May 2023, the Company closed a private placement (the “2023 Private Placement”) with existing accredited institutional investors of the Company that provided for the issuance and sale of $
The Company received gross proceeds of $
The Company incurred total issuance costs of $
NOTE 10. CONVERTIBLE NOTES
Unsecured Convertible Notes
In March 2024, the Company issued $
The Unsecured Convertible Notes may be converted or redeemed for a conversion price equal to $
Upon issuance in March 2024, the lender’s conversion option under the Unsecured Convertible Notes represented an embedded call option requiring bifurcation as an embedded derivative liability because the common stock underlying the option required stockholder approval before the option could be exercised. The fair value of the embedded derivative was determined to be $
The discount to the note recorded for the embedded derivative liability upon issuance and debt issuance costs are being amortized to interest expense using the effective interest rate method over the term of the Unsecured Convertible Notes, assuming that the Unsecured Convertible Notes will be redeemed for cash of $
Secured Convertible Notes
In May 2023, the Company issued $
Prior to being paid off, the Secured Convertible Notes could be converted or redeemed for a conversion price equal to $
Beginning June 1, 2023, the Company was required to start making a monthly redemption of 1/18th of the original principal amount of the Secured Convertible Notes. Each monthly redemption reduced the outstanding principle of the Secured Convertible Note by $
The Secured Convertible Notes also provided for a redemption equal to up to
Upon issuance in May 2023, the lender’s conversion option under the Secured Convertible Notes represented an embedded call option requiring bifurcation as an embedded derivative liability because the common stock underlying the option required stockholder approval before the option could be exercised. The fair value of the embedded derivative was determined to be $
The lender’s subsequent financing redemption option and certain events of default also represented embedded call options and the Company’s monthly share redemption option represented an embedded put option. The fair value of these options was determined to be immaterial upon issuance and at each subsequent reporting date.
The Company allocated $
The difference between the $
The discounts and debt issuance costs were amortized to interest expense using the effective interest rate method over the term of the Secured Convertible Notes. The effective interest rate on the Secured Convertible Notes was
NOTE 11. COMMON STOCK WARRANTS
See Notes 2, “Summary of Significant Accounting Policies”; 3, “Fair Value Measurements”; 9, “Financing Activities”; and 12, “Stockholders’ Equity” for certain defined terms below and additional discussion of financing activities and related accounting policies and fair value estimates.
July 2024 Pre-Funded Warrants
In July 2024, in conjunction with the 2024 Public Offering, the Company issued
As of September 30, 2024, all of the July 2024 Pre-Funded Warrants had been exercised, resulting in the Company issuing
July 2024 Warrants
In July 2024, in conjunction with the 2024 Public Offering, the Company issued new common stock purchase warrants (collectively the “July 2024 Warrants”).
|
● |
July 2024 Series F-1 Warrants exercisable for |
|
|
● |
July 2024 Series F-2 Warrants exercisable for |
|
|
● |
July 2024 Series F-3 Warrants exercisable for |
The July 2024 Warrants down round feature adjustment was triggered on September 27, 2024, resulting in a reduced exercise price of $
June 2024 Warrants
In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company issued new common stock purchase warrants (the “June 2024 Warrants”) exercisable for
March 2024 Warrant
In March 2024, the Company executed the First Amendment and Subsidiary Guarantee Consent as part of the 2024 Subsidiary Guarantee Termination with holders of the Secured Convertible Notes (see Note 10, “Convertible Notes”) in order to close the DERMAdoctor Divestiture (see additional discussion in Note 9, “Financing Activities” and Note 18, “Divestiture and Discontinued Operations”). In exchange for the consent of each holder, the option, at the holder’s election, to receive upon the closing of the DERMAdoctor sale either, a new common stock warrant (the “March 2024 Warrant”), or a new unsecured convertible note (see additional discussion in Note 18, “Divestiture and Discontinued Operations”). One holder elected the option to receive a March 2024 Warrant exercisable for
The March 2024 Warrant was initially classified as a liability from the date of issuance until Company stockholder approval on May 28, 2024, at which time it was reclassified to equity.
December 2023 Warrants
In December 2023, in conjunction with the 2023 Warrant Reprice Transaction, the Company issued new common stock purchase warrants (the “December 2023 Warrants”) exercisable for
The December 2023 Warrants were initially classified as liabilities from the date of issuance until Company stockholder approval was received on May 28, 2024, at which time it was reclassified to equity.
May 2023 Warrants
In May 2023, in conjunction with the 2023 Private Placement, the Company issued the following new common stock purchase warrants (collectively, the “May 2023 Warrants”):
|
● |
May 2023 Series B-1 Warrants exercisable for |
|
|
● |
May 2023 Series B-2 Warrants exercisable for |
In December 2023, in conjunction with the 2023 Warrant Reprice Transaction, the Company amended certain May 2023 Warrants to reduce their exercise prices to $
|
● |
May 2023 B-1 Warrants exercisable for |
|
|
● |
May 2023 B-2 Warrants exercisable for |
In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain May 2023 Warrants to reduce their exercise prices to $
|
● |
May 2023 B-1 Warrants exercisable for |
|
|
● |
May 2023 B-2 Warrants exercisable for |
For the amendments in December 2023 and June 2024, the Company recognized a loss on modification of common stock warrants related to the May 2023 Warrants of $
November 2022 Warrants
In November 2022, in conjunction with the 2022 Private Placement, the Company issued the following common stock purchase warrants (collectively, the “November 2022 Warrants”):
|
● |
November 2022 Series A-1 Warrants exercisable for |
|
|
● |
November 2022 Series A-2 Warrants exercisable for |
In May 2023, in conjunction with the 2023 Private Placement, the Company amended certain November 2022 Warrants to reduce their exercise prices from $
|
● |
November 2022 A-1 Warrants exercisable for |
|
|
● |
November 2022 A-2 Warrants exercisable for |
In May 2024, all November 2022 Series A-2 Warrants for
In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain November 2022 Warrants to reduce their exercise prices from $
|
● |
November 2022 A-1 Warrants exercisable for |
For the amendments in May 2023 and June 2024, the Company recognized a loss on modification of common stock warrants related to the November 2022 Warrants of $
September 2022 Warrants
In September 2022, in conjunction with the warrant reprice transaction (the “2022 Warrant Reprice Transaction”), the Company issued new common stock purchase warrants (the “September 2022 Warrants”) exercisable for
In May 2023, in conjunction with the 2023 Private Placement, the Company amended certain September 2022 Warrants exercisable for
In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain September 2022 Warrants exercisable for
For the amendments in May 2023 and June 2024, the Company recognized a loss on modification of common stock warrants related to the September 2022 Warrants of $
November 2021 Warrants
In November 2021, in conjunction with a private placement transaction, the Company issued new common stock purchase warrants (the “November 2021 Warrants”) exercisable for
In September 2022, in conjunction with the 2022 Warrant Reprice Transaction, the Company amended all November 2021 Warrants to reduce their exercise prices from $
In May 2023, in conjunction with the 2023 Private Placement, the Company amended certain November 2021 Warrants exercisable for
For the amendments in September 2022 and May 2023, the Company recognized a loss on modification of common stock warrants related to the November 2021 Warrants of $
July 2020 Warrants
In July 2020, in conjunction with a private placement transaction, the Company issued new common stock purchase warrants (the “July 2020 Warrants”) exercisable for
In September 2022, in conjunction with the 2022 Warrant Reprice Transaction, the Company amended certain July 2020 Warrants exercisable for
In May 2023, in conjunction with the 2023 Private Placement, the Company amended certain July 2020 Warrants exercisable for
For the amendments in September 2022 and May 2023, the Company recognized a loss on modification of common stock warrants related to the July 2020 Warrants of $
Summary of Common Stock Warrant Activity and Outstanding
Activity related to common stock warrants outstanding at September 30, 2024 and 2023 were as follows:
|
Warrants |
Weighted- Average Exercise Price |
|||||||
|
Outstanding at December 31, 2022 |
$ | |||||||
|
Warrants granted |
$ | |||||||
|
Warrants exercised |
$ | |||||||
|
Warrants expired |
$ | |||||||
|
Outstanding at September 30, 2023 |
$ | |||||||
|
Outstanding at December 31, 2023 |
$ | |||||||
|
Warrants granted |
$ | |||||||
|
Pre-funded Warrants granted |
$ | |||||||
|
Warrants exercised |
( |
) | $ | |||||
|
Pre-funded Warrants exercised |
( |
) | $ | |||||
|
Warrants expired |
( |
) | $ | |||||
|
Outstanding at September 30, 2024 |
$ | |||||||
Common stock warrants outstanding as of September 30, 2024 were as follows:
|
Series |
Exercise Price* |
Expiration Date |
Warrants* |
||||||
|
July 2020 Warrants |
$ |
|
|||||||
|
July 2020 Warrants |
$ |
|
|||||||
|
TLF Warrants |
$ |
|
|||||||
|
November 2021 Warrants |
$ |
|
|||||||
|
November 2021 Warrants |
$ |
|
|||||||
|
September 2022 Warrants |
$ |
|
|||||||
|
September 2022 Warrants |
$ |
|
|||||||
|
November 2022 A-1 Warrants |
$ |
|
|||||||
|
December 2023 Warrants |
$ |
|
|||||||
|
March 2024 Warrant |
$ |
|
|||||||
|
June 2024 Warrants |
$ |
|
|||||||
|
July 2024 F-1 Warrants |
$ |
|
|||||||
|
July 2024 F-2 Warrants |
$ |
|
|||||||
|
July 2024 F-3 Warrants |
$ |
|
|||||||
|
Outstanding at September 30, 2024 |
|||||||||
|
* |
|
Summary of Common Stock Warrant Liabilities
The following is a reconciliation of the beginning and ending balances for warrant liabilities measured at fair value on a recurring basis (in thousands). See additional information per Note 3, “Fair Value Measurements”, subheading “Black Scholes Valuation Models and Assumptions.”
|
Warrant liabilities as of December 31, 2023 |
$ | |||
|
Decrease in fair value of December 2023 Warrant liability during period |
( |
) | ||
|
Fair value of March 2024 Warrant upon issuance |
||||
|
Increase in fair value of March 2024 Warrant liability during period |
||||
|
Reclassification of December 2023 Warrant liability to equity during period |
( |
) | ||
|
Reclassification of March 2024 Warrant liability to equity during period |
( |
) | ||
|
Warrant liabilities as of September 30, 2024 |
$ |
NOTE 12. STOCKHOLDERS’ EQUITY
Authorized Share Capital
Under the Company’s Amended and Restated Certificate of Incorporation, as amended, the Company is authorized to issue up to
Reverse Stock Split
Effective May 30, 2024, the Company amended its Certificate of Incorporation to effect a 1-for-
Preferred Stock
There were two series of preferred stock of the Company outstanding during the three and nine months ended September 30, 2024 and 2023 – the Series B Non-Voting Convertible Preferred Stock (“Series B Preferred Stock”) and the Series C Non-Voting Convertible Preferred Stock (“Series C Preferred Stock”) (and combined, the “Preferred Stock”). The rights and preferences of the Series B Preferred Stock and Series C Preferred Stock are nearly identical. The Preferred Stock does not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of the Company. Each share of Preferred Stock is convertible into $
Series B Preferred Stock
The Company issued
In accordance with the Ratchet, the Series B Preferred Stock conversion price was reduced as follows (see also Notes 2, “Summary of Significant Accounting Policies” and 3, “Fair Value Measurements”):
|
● |
In September 2022, from $ |
|
|
● |
In April 2023, from $ |
|
|
● |
In December 2023, from $ |
On January 29, 2024, the Ratchet of the Series B Preferred Stock expired with no further impact because greater than
Series C Preferred Stock
The Company issued
In accordance with the Ratchet, the Series C Preferred Stock conversion price was reduced as follows (see also Notes 2, “Summary of Significant Accounting Policies” and 3, “Fair Value Measurements”):
|
● |
In April 2023, from $ |
|
|
● |
In December 2023, from $ |
|
|
● |
In March 2024, from $ |
On March 27, 2024, the Ratchet of the Series C Preferred Stock expired with no further impact because greater than
Common Stock
See Note 9, “Financing Activities” and Note 11, “Common Stock Warrants” for a description of common stock and common stock warrant-related transactions during the three and nine months ended September 30, 2024 and 2023.
NOTE 13. EQUITY-BASED COMPENSATION
Equity Compensation Plans
In October 2007, the Company adopted the 2007 Omnibus Incentive Plan (the “2007 Plan”) to provide for the granting of equity awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and stock appreciation rights to employees, directors and outside consultants, as determined by the Board. The 2007 Plan expired on March 15, 2017. Upon expiration, new awards cannot be issued pursuant to the 2007 Plan, but outstanding awards continue to be governed by its terms. Stock options granted under the 2007 Plan expire no later than years from the date of grant. All stock options outstanding under the 2007 Plan were fully vested as of December 31, 2021.
In March 2017, the Company adopted the 2017 Omnibus Incentive Plan (the “2017 Plan”), which was approved by stockholders on June 2, 2017, to provide for the granting of equity awards, such as nonqualified stock options (“NQSOs”), incentive stock options (“ISOs”), restricted stock, performance shares, stock appreciation rights (“SARs”), RSUs and other share-based awards to employees, directors, and consultants, as determined by the Board. The 2017 Plan does not affect awards previously granted under the 2007 Plan. Upon adoption, the 2017 Plan allowed for awards of up to
Under the terms of the 2017 Plan, the exercise price of NQSOs, ISOs and SARs may not be less than
Summary of Outstanding Equity Awards
The following table summarizes information about the Company’s stock options and restricted stock outstanding at December 31, 2023, and activity during the nine months ended September 30, 2024:
|
(in thousands, except years |
Awards* |
Weighted- Average Exercise Price* |
Weighted- Average Remaining Contractual Life (years) |
Aggregate Intrinsic Value |
||||||||||||
|
Outstanding at December 31, 2023 |
$ | $ | ||||||||||||||
|
Restricted stock units granted |
$ | — | ||||||||||||||
|
Options forfeited/cancelled |
( |
) | $ | |||||||||||||
|
Outstanding at September 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and expected to vest at September 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and exercisable at September 30, 2024 |
$ | $ | — | |||||||||||||
|
* |
|
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of the Company’s common stock as quoted on the NYSE American as of September 30, 2024 for options that have an exercise price that is lower than the market price. There were stock option awards exercised during the three and nine months ended September 30, 2024 and 2023.
As of September 30, 2024, total unrecognized compensation cost related to unvested stock options and restricted stock units was approximately $
Equity Awards to Employees and Directors
The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards as of the date of grant by applying the Black Scholes option pricing model using the single-option valuation approach. The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note 2, “Summary of Significant Accounting Policies,” for a description of the accounting policies that the Company applied to value its stock-based awards.
During the nine months ended September 30, 2024 and 2023, the Company granted options to employees and directors to purchase an aggregate of and
The weighted-average assumptions used in determining the value of options were as follows:
|
Assumption |
For the Nine Months Ended September 30, 2023 |
|||
|
Expected price volatility |
% | |||
|
Expected term (in years) |
||||
|
Risk-free interest rate |
% | |||
|
Dividend yield |
% | |||
|
Weighted-average fair value of options granted during the period |
$ | |||
Expected Price Volatility—This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. The computation of expected volatility was based on the historical volatility of our own stock.
Expected Term—This is the period of time over which the options granted are expected to remain outstanding. The expected life assumption is based on the Company’s historical data.
Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected life of the option.
Dividend Yield—The Company has not made any dividend payments nor does the Company have plans to pay dividends in the foreseeable future.
Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.
During the nine months ended September 30, 2024, the Company granted
For the three months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $
Stock-Based Awards to Non-Employees
During the three and nine months ended September 30, 2024, the Company did grant options to non-employees in exchange for advisory and consulting services. During the three and nine months ended September 30, 2023, the Company granted
The Company did grant restricted stock to non-employees during the three and nine months ended September 30, 2024 and 2023.
For the three and nine months ended September 30, 2024 the Company recognized stock-based compensation expense of and $
Summary of Stock-Based Compensation Expense
A summary of the stock-based compensation expense included in results of operations for the options and restricted stock awards discussed above is as follows (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
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Research and development |
$ | $ | $ | $ | ||||||||||||
|
Sales and marketing |
||||||||||||||||
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General and administrative |
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Total stock-based compensation expense |
$ | $ | $ | $ | ||||||||||||
NOTE 14. DISTRIBUTION AGREEMENTS
Transactions under the Company’s major distribution agreements are recognized upon transfer of control of products sold to its major distribution partners at the amount of consideration that the Company expects to be entitled to. The Company records contract liabilities for the amounts that are estimated to be subject to significant reversal, including allowances for services, discounts, rebate programs, and product returns.
Product Sales Discounts and Allowances
The following table presents activities and ending reserve balances for each significant category of discounts and allowance, which constitute variable consideration, for the nine months ended September 30, 2024 (in thousands):
|
Chargebacks, Discounts for Prompt Payment |
Other Customer Fees |
Rebates |
Total |
|||||||||||||
|
Balance at December 31, 2023 |
$ | $ | $ | $ | ||||||||||||
|
Less discontinued operations |
( |
) | ( |
) | ||||||||||||
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Continuing operations balance at December 31, 2023 |
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Provision related to sales made in: |
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Current period |
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|
Payments and customer credits issued |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Balance at September 30, 2024 |
$ | $ | $ | $ | ||||||||||||
Avenova Spray Pharmacy Distribution Agreements and Specialty Pharmacies
Avenova Spray is made available in local pharmacies and major pharmacy retail chains under nationwide distribution agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen. The Company has also entered into direct agreements with preferred pharmacy networks as part of our Partner Pharmacy Program. During the three months ended September 30, 2024 and 2023, the Company earned $
Under these product distribution arrangements, the Company had a contract liability balance of $
Over-the-Counter Sales of Avenova Spray
Avenova Spray is offered for sale direct to U.S. customers primarily on Amazon.com, the Company’s website (Avenova.com) and Walmart.com. During the three months ended September 30, 2024 and 2023, the revenue generated from Avenova Spray in these channels was $
NOTE 15. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan covering all eligible employees. The Company provides matching contributions equal to
NOTE 16. RELATED PARTY TRANSACTIONS
The following table summarizes information about the Company’s related party revenue and cost of goods sold (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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|
2024 |
2023 |
2024 |
2023 |
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|
Chongqing Pioneer Pharma Holdings Limited: |
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|
Revenue |
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold |
||||||||||||||||
NOTE 17. SEGMENT REPORTING
The Company operates as reportable segment, Eyecare and Wound Care, which is described in further detail below. This is based on the objectives of the business and how our chief operating decision maker (“CODM”), the President and Chief Executive Officer, monitors operating performance and allocates resources.
Change in Reportable Segments
The Company previously operated in principally reportable segments, (1) Eyecare and Wound Care and (2) Skincare. During the nine months ended September 30, 2024, in connection with the previously announced strategic shift and upon the DERMAdoctor Divestiture, the Company has ceased to operate the Skincare segment. As a result, the Company changed the level of detail at which our CODM regularly reviews and manages the businesses, resulting in a change to our reportable segments.
We now manage and report our operating results through reportable segment: Eyecare and Wound Care. This change allows us to better align our business models, resources, and cost structure to the specific current and future growth of our business, while maintaining the necessary information and transparency to our stockholders. Our historical segment information has been recast to conform to the current segment structure.
NOTE 18. DIVESTITURE AND DISCONTINUED OPERATIONS
On March 12, 2024, the Company entered into an agreement to sell
On March 24, 2024, the Company and the secured parties entered into a First Amendment to the Security Agreement, to effect an amendment to the Security Agreement and a Consent and Release to terminate the Subsidiary Guarantee. To obtain the secured parties’ consent and as consideration for the secured parties taking the necessary actions to execute and deliver the First Amendment and the Subsidiary Guarantee Consent, the Company provided each secured party the option, at the secured party’s election, to receive only upon the closing of the DERMAdoctor Sale Transaction either: a March 2024 Warrant or the Unsecured Convertible Notes (see Note 10 “Convertible Notes”).
The accounting requirements for reporting the DERMAdoctor business as discontinued operations were met during the first quarter of 2024. Accordingly, the condensed consolidated financial statements and notes to the condensed consolidated financial statements reflect the results of the DERMAdoctor business as a discontinued operation for the periods presented.
In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the condensed consolidated balance sheets as of December 31, 2023, and consist of the following (in thousands):
|
Balance at December 31, 2023 |
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|
ASSETS |
||||
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Current assets: |
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Cash and cash equivalents |
$ | |||
|
Accounts receivable, net of allowance for credit losses ($ |
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Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($ |
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Prepaid expenses and other current assets |
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Total current assets, discontinued operations |
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Other assets |
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Total assets, discontinued operations |
$ | |||
|
LIABILITIES |
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Liabilities: |
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Current liabilities: |
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Accounts payable |
$ | |||
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Accrued liabilities |
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|
Operating lease liabilities |
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|
Total current liabilities, discontinued operations |
||||
|
Total liabilities, discontinued operations |
$ | |||
In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the unaudited condensed consolidated statements of operations. The results of DERMAdoctor’s operations for the nine months ended September 30, 2024 and 2023 have been reflected as discontinued operations in the unaudited condensed consolidated statements of operations and consist of the following (in thousands):
|
Nine Months Ended |
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|
2024 |
2023 |
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Sales: |
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Product revenue, net |
$ | $ | ||||||
|
Total sales, net |
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Cost of goods sold |
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Gross profit |
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Operating expenses |
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Research and development |
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Sales and marketing |
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General and administrative |
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|
Total operating expenses |
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|
Operating loss |
( |
) | ( |
) | ||||
|
Other expense, net |
( |
) | ||||||
|
Net loss from discontinued operations |
$ | ( |
) | $ | ( |
) | ||
In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the unaudited condensed consolidated statements of cash flows. The results of DERMAdoctor for the nine months ended September 30, 2024 and 2023 have been reflected as discontinued operations in the unaudited condensed consolidated statements of cash flows and consist of the following (in thousands):
|
Nine Months Ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Operating activities: |
||||||||
|
Net loss from discontinued operations |
$ | ( |
) | $ | ( |
) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
|
Amortization of intangible assets |
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|
Non-cash right-of-use amortization |
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|
Changes in operating assets and liabilities: |
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|
Accounts receivable |
( |
) | ||||||
|
Inventory |
||||||||
|
Prepaid expenses and other current assets |
( |
) | ||||||
|
Other assets |
( |
) | ||||||
|
Accounts payable and accrued liabilities |
||||||||
|
Operating lease liabilities |
( |
) | ( |
) | ||||
|
Net cash used in operating activities, discontinued operations |
( |
) | ( |
) | ||||
|
Investing activities: |
||||||||
|
Cash transferred to New Age Investments, LLC |
( |
) | ||||||
|
Purchases of property and equipment |
( |
) | ||||||
|
Net cash used in investing activities, discontinued operations |
( |
) | ( |
) | ||||
|
Net decrease in cash and cash equivalents, discontinued operations |
$ | ( |
) | $ | ( |
) | ||
NOTE 19. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the filing date of this Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the unaudited condensed consolidated financial statements as of September 30, 2024, and events which occurred subsequently but were not recognized in the unaudited condensed consolidated financial statements. Except as described below, there were no subsequent events which required recognition, adjustment to or disclosure in the unaudited condensed consolidated financial statements.
Asset Sale Transaction--Amendment to Asset Purchase Agreement and Bridge Loan
On November 5, 2024, the Company and PRN entered into the APA Amendment to the Original Purchase Agreement. The Purchase Agreement, consistent with the Original Purchase Agreement, continues to provide for the sale of the Avenova Assets to PRN, subject to meeting certain closing conditions including receiving stockholder approval of the Asset Sale Transaction. The APA Amendment provides for the Revised PRN Transaction Terms, including the following primary revisions to the Original Purchase Agreement: (i) an increase in the base purchase price to $
On November 5, 2024, the Company also entered into the Bridge Loan that provides for the Company receiving a secured loan of up to $
For more information regarding the Asset Sale Transaction (including the Revised PRN Transaction Terms, the APA Amendment and the Bridge Loan) and the Dissolution, please see the Company’s Current Reports on Form 8-K filed with the SEC on September 20, 2024, October 29, 2024 and November 6, 2024 and the Special Meeting Proxy Statement and related supplements.
|
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report, and with our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2024, as amended on March 29, 2024 (the “2023 Annual Report”). Words such as “expects,” “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” determines,” variations of these words, and similar expressions are intended to identify these forward-looking statements. As a result of many factors, including those set forth under the section entitled “Risk Factors” of this report, our 2023 Annual Report and our Special Meeting Proxy Statement (as defined below), as well as in other sections in our SEC filings, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believed to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements after the date of this report, even if new information becomes available in the future.
Overview
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.
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.
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. Therefore, we determined to divest DERMAdoctor and consummate the DERMAdoctor Divestiture, having incurred historical losses including the loss of $124 thousand for the nine months ended September 30, 2024. The DERMAdoctor Divestiture streamlined our business by reducing our cash burn and allowing us to focus on our core business.
Recent Developments
Potential Asset Sale Transaction and Dissolution
On September 19, 2024, the Company entered into an Asset Purchase Agreement (the “Original Purchase Agreement”) with PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company (“PRN”), pursuant to which PRN will acquire the Company’s eyecare products sold under the Avenova brand and the related assets (the “Avenova Assets”) (collectively, the “Asset Sale Transaction”). On November 5, 2024, the Company entered into an amendment to the Original Purchase Agreement (the “APA Amendment,” and together with the Original Purchase Agreement, the “Purchase Agreement”) that provides for, among other terms, an increase in the base purchase price to $11.5 million from $9.5 million and for PRN to provide the Company with a $1.0 million secured promissory note (the “Bridge Loan”). Pursuant to the Purchase Agreement, the Asset Sale Transaction is subject to certain closing conditions, including stockholder approval. Assuming stockholder approval is received and other closing conditions are met, the Company expects to close the Asset Sale Transaction in the fourth quarter of 2024.
The Asset Sale Transaction would constitute substantially all of the Company’s revenue generating and operating assets; however, PRN would not purchase any of the Company’s other products and assets, including those that relate to the Company’s wound care, urology or dermatology businesses. The Board unanimously approved the Asset Sale Transaction and further determined that, if the Asset Sale Transaction is completed, the best opportunity available to optimize value to our stockholders is to wind-up the Company’s affairs and pursue a liquidation and dissolution pursuant to the Plan of Dissolution under Delaware law that may result in distributions to our stockholders of our remaining asset value (the “Dissolution”). If the Asset Sale Transaction and/or the Dissolution are not completed, we will continue our corporate existence and the Board will continue to explore its options to secure immediate funding for ongoing operations due to significantly reduced available capital and liquidity, the strategic alternatives available to the Company including to return capital to stockholders or, to the extent funding or any other viable alternatives are not available, then the Company may need to file for bankruptcy protection or commence a similar state law proceeding.
The Company has called a special meeting of stockholders (the “Special Meeting”) on November 22, 2024 to approve (1) the Asset Sale Transaction and (2) the Dissolution subject to the Board’s discretion to proceed with the Dissolution.
On October 29, 2024, the Company announced that the Board determined that an unsolicited and non-binding acquisition proposal from Refresh Acquisitions BidCo LLC (“Refresh”) to purchase the Avenova Assets (the “Refresh Unsolicited Offer”) was a “Superior Proposal” (as defined in the Purchase Agreement). As a result, the Company notified PRN of the Board’s determination and the Company’s intention to terminate the Purchase Agreement pursuant to its terms, unless the Company received a revised proposal from PRN such that the Board determined the Refresh Unsolicited Offer was no longer a Superior Proposal, all in accordance with the process provided in the Purchase Agreement.
Subsequent to this Board determination, in accordance with the process in the Purchase Agreement, the Company negotiated in good faith with PRN, and, as a result of these negotiations, PRN proposed amending the terms of the Original Purchase Agreement by entering into the APA Amendment, which provides for the following primary revisions to the Original Purchase Agreement: (i) an increase in the base purchase price to $11.5 million from $9.5 million; (ii) the removal of debt financing contingencies and related PRN representations, while adding a new PRN representation that it has sufficient funding for the $11.5 million purchase price; (iii) PRN providing the Company with the Bridge Loan; and (iv) PRN providing the Company with an equity funding commitment letter (the “Equity Commitment Letter”) from Roundtable Healthcare Partners V, L.P. that provides for up to $13.0 million in financing to be used by PRN’s parent company, Acumen Intermediate Holdings, LLC, and contributed to PRN for payment of the purchase price at the closing of the Asset Sale Transaction (with such updated terms, the “Revised PRN Transaction Terms”). On November 4, 2024, after considering the Revised PRN Transaction Terms, the Board determined that the Refresh Unsolicited Offer was no longer a “Superior Proposal” and that it was advisable and in the best interests of stockholders to enter into the APA Amendment and the Bridge Loan.
On November 5, 2024, the Company entered into the APA Amendment and the Bridge Loan. The Bridge Loan provides for the Company to receive a secured loan of up to $1.0 million from PRN as lender that will be funded in two tranches of $0.5 million each upon the Company providing written notice to PRN on or after November 22, 2024 and on or after December 6, 2024. The amounts borrowed under the Bridge Loan are required to be used for working capital purposes, will bear interest at a rate of 10% per annum and be secured by all of the Company’s assets as collateral. The Bridge Loan is to be repaid upon the earlier of the closing of the Asset Sale Transaction (to be repaid from the purchase price), immediately upon termination of the Purchase Agreement or February 28, 2025. If the Asset Sale Transaction is not consummated, the Purchase Agreement is terminated and the Company is required to repay the full amount borrowed pursuant to the Bridge Loan, the Company may not have the necessary capital resources available at the time to repay the Bridge Loan absent the Company raising additional capital.
For more information regarding the Asset Sale Transaction (including the Revised PRN Transaction Terms, the APA Amendment and the Bridge Loan) and the Dissolution, please see the Company’s Current Reports on Form 8-K filed with the SEC on September 20, 2024, October 29, 2024 and November 6, 2024 and the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on October 16, 2024 (as may be supplemented, the “Special Meeting Proxy Statement”).
2024 Public Offering
On July 26, 2024, the Company entered into the Underwriting Agreement with Ladenburg, as the sole underwriter, relating to the issuance and sale in a public offering (the “2024 Public Offering”) of: (i) 1,158,566 shares of common stock and 2,041,814 July 2024 Pre-Funded Warrants, in lieu of shares of common stock, (ii) 3,200,380 Series F-1 Warrants, (iii) 3,200,380 Series F-2 Warrants, and (iv) 3,200,380 Series F-3 Warrants. The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $3.9 million, without taking into account any underwriting discounts and commissions. A portion of the proceeds were used towards repaying the Secured Convertible Notes, which were repaid in full during the third quarter of 2024.
DERMAdoctor Divestiture
On March 12, 2024, we entered into a Membership Unit Purchase Agreement (the “DERMAdoctor Purchase Agreement”) by and among: (i) New Age Investments, LLC; (ii) DERMAdoctor; and (iii) the Company that provided for the sale of 100% of the membership units (the “Membership Units”) of DERMAdoctor.
Upon the closing of the DERMAdoctor Divestiture on March 25, 2024 as contemplated by the DERMAdoctor Purchase Agreement, the Company sold the Membership Units to New Age Investments, LLC for a purchase price of $1.1 million. For additional information regarding the DERMAdoctor Divestiture, see also Note 18, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
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 (see Note 10, “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 and (ii) terminate the Subsidiary Guarantee, dated April 27, 2023, which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes.
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 (28,572 shares post-Reverse Stock Split) 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 (107,146 shares post-Reverse Stock Split).
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 September 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 nine months ended September 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’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
NYSE American Notices
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).
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.
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.
Additionally, the Asset Sale Transaction (to the extent completed) may cause the NYSE American to delist our shares of common stock and the Company may not meet NYSE American’s continued listing requirements. To the extent the NYSE American does not delist our shares after completion of the Asset Sale Transaction and the Board determines to effect the Dissolution, the Company plans to request that our common stock stop trading on the NYSE American on the effective date of the Dissolution or as soon thereafter as is reasonably practicable.
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 $2.2 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively. In addition, our net losses were $7.4 million and $7.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $182.2 million, total current assets of $2.3 million and total assets of $3.9 million.
To date, our plan 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 has been unsuccessful. However, in an effort to maximize stockholder value, our Board unanimously determined to pursue the Asset Sale Transaction and the Dissolution, both of which are subject to stockholder approval at the Special Meeting. See “Potential Asset Sale Transaction and Dissolution” above for additional information regarding the Asset Sale Transaction and the Dissolution.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these unaudited condensed consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates.
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of 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. 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. This includes cash flow projections that look several years into the future and assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates. 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 as further described in Note 2, “Summary of Significant Accounting Policies” included in our 2023 Annual Report.
Valuation of Contingent Consideration Resulting from a Business Combination
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.
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. Actual future returns experience may differ significantly from historical data and could result in significant future adjustments, including a reduction of revenue recognized.
Common Stock Warrant Liabilities
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.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023 (dollars in thousands)
|
Three Months Ended September 30, |
Dollar |
Percent |
||||||||||||||
|
2024 |
2023 |
Change |
Change |
|||||||||||||
|
Statement of Operations |
||||||||||||||||
|
Sales: |
||||||||||||||||
|
Product revenue, net |
$ | 2,424 | $ | 2,471 | $ | (47 | ) | (2 | )% | |||||||
|
Other revenue, net |
17 | 10 | 7 | 70 | % | |||||||||||
|
Total sales, net |
2,441 | 2,481 | (40 | ) | (2 | )% | ||||||||||
|
Cost of goods sold |
848 | 819 | 29 | 4 | % | |||||||||||
|
Gross profit |
1,593 | 1,662 | (69 | ) | (4 | )% | ||||||||||
|
Operating expenses |
||||||||||||||||
|
Research and development |
4 | 4 | — | 0 | % | |||||||||||
|
Sales and marketing |
947 | 1,263 | (316 | ) | (25 | )% | ||||||||||
|
General and administrative |
1,703 | 1,093 | 610 | 56 | % | |||||||||||
|
Total operating expenses |
2,654 | 2,360 | 294 | 12 | % | |||||||||||
|
Operating loss |
(1,061 | ) | (698 | ) | (363 | ) | 52 | % | ||||||||
|
Accretion of interest and amortization of discounts on convertible notes |
(138 | ) | (655 | ) | 517 | (79 | )% | |||||||||
|
Extinguishment of Secured Convertible Notes |
(13 | ) | — | (13 | ) | (100 | )% | |||||||||
|
Net loss from continuing operations |
(1,212 | ) | (1,353 | ) | 141 | (10 | )% | |||||||||
|
Net loss from discontinued operations |
— | (404 | ) | 404 | (100 | )% | ||||||||||
|
Net loss |
$ | (1,212 | ) | $ | (1,757 | ) | $ | 545 | (31 | )% | ||||||
Impact of DERMAdoctor Divestiture
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 nine months ended September 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.
Total Net Sales and Cost of Goods Sold
Product revenue, net, decreased $0.1 million, or 2%, to $2.4 million for the three months ended September 30, 2024, from $2.5 million for the three months ended September 30, 2023.
Revenue from eyecare products, including Avenova Spray, was $2.4 million for both the three months ended September 30, 2024 and September 30, 2023.
Revenue from the Company’s wound care products decreased to a nominal amount for the three months ended September 30, 2024, from $0.1 million for the three months ended September 30, 2023.
Cost of goods sold remained consistent for the three months ended September 30, 2024 and September 30, 2023 at $0.8 million.
Sales and marketing
Sales and marketing expenses decreased $0.4 million, or 25%, to $0.9 million for the three months ended September 30, 2024, from $1.3 million for the three months ended September 30, 2023. The decrease was due primarily to continued digital marketing efficiencies and a decrease in related consulting costs incurred in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
General and administrative
General and administrative expenses increased $0.6 million, or 56%, to $1.7 million for the three months ended September 30, 2024, from $1.1 million for the three months ended September 30, 2023, due primarily to an increase in legal costs related to non-recurring strategic initiatives, including the 2024 Public Offering, the Asset Sale Transaction and the Dissolution, ongoing during the three months ended September 30, 2024.
Accretion of interest and amortization of discounts on convertible notes
Accretion of interest and amortization of discounts on convertible notes was $0.1 million for the three months ended September 30, 2024 and $0.7 million for the three months ended September 30, 2023.
Extinguishment of Secured Convertible Notes
Extinguishment of Secured Convertible Notes was $13 thousand for the three months ended September 30, 2024, with no comparable activity for the three months ended September 30, 2023.
Comparison of the Nine Months Ended September 30, 2024 and 2023 (dollars in thousands)
|
Nine Months Ended September 30, |
Dollar |
Percent |
||||||||||||||
|
2024 |
2023 |
Change |
Change |
|||||||||||||
|
Statement of Operations |
||||||||||||||||
|
Sales: |
||||||||||||||||
|
Product revenue, net |
$ | 7,435 | $ | 8,326 | $ | (891 | ) | (11 | )% | |||||||
|
Other revenue, net |
37 | 28 | 9 | 32 | % | |||||||||||
|
Total sales, net |
7,472 | 8,354 | (882 | ) | (11 | )% | ||||||||||
|
Cost of goods sold |
2,493 | 3,353 | (860 | ) | (26 | )% | ||||||||||
|
Gross profit |
4,979 | 5,001 | (22 | ) | * | % | ||||||||||
|
Operating expenses |
||||||||||||||||
|
Research and development |
32 | 36 | (4 | ) | (11 | )% | ||||||||||
|
Sales and marketing |
3,021 | 3,674 | (653 | ) | (18 | )% | ||||||||||
|
General and administrative |
5,611 | 4,385 | 1,226 | 28 | % | |||||||||||
|
Loss on divestiture of subsidiary |
865 | — | 865 | 100 | % | |||||||||||
|
Total operating expenses |
9,529 | 8,095 | 1,434 | 18 | % | |||||||||||
|
Operating loss |
(4,550 | ) | (3,094 | ) | (1,456 | ) | 47 | % | ||||||||
|
Non-cash gain on changes in fair value of warrant liabilities |
114 | 216 | (102 | ) | (47 | )% | ||||||||||
|
Non-cash (loss) gain on change in fair value of embedded derivative liability |
(18 | ) | 40 | (58 | ) | (145 | )% | |||||||||
|
Accretion of interest and amortization of discounts on convertible notes |
(871 | ) | (1,156 | ) | 285 | (25 | )% | |||||||||
|
Extinguishment of Secured Convertible Notes |
(13 | ) | — | (13 | ) | (100 | )% | |||||||||
|
Other expense, net |
(549 | ) | (432 | ) | (117 | ) | 27 | % | ||||||||
|
Net loss from continuing operations |
(5,887 | ) | (4,426 | ) | (1,461 | ) | 33 | % | ||||||||
|
Net loss from discontinued operations |
(124 | ) | (1,106 | ) | 982 | (89 | %) | |||||||||
|
Net loss |
$ | (6,011 | ) | $ | (5,532 | ) | $ | (479 | ) | 9 | % | |||||
*Less than 1%.
Impact of DERMAdoctor Divestiture
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 nine months ended September 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.
Total Net Sales and Cost of Goods Sold
Product revenue, net, decreased $0.9 million, or 11%, to $7.4 million for the nine months ended September 30, 2024, from $8.3 million for the nine months ended September 30, 2023.
Revenue from eyecare products, including Avenova Spray, increased $0.5 million to $7.2 million for the nine months ended September 30, 2024, from $6.7 million for the nine months ended September 30, 2023. The increase was due to an overall increase in Avenova branded products sold through online channels.
Revenue from the Company’s wound care products decreased $1.3 million to $0.3 million for the nine months ended September 30, 2024, from $1.6 million for the nine months ended September 30, 2023. The decrease was due primarily to a large one-time order of the NeutroPhase branded wound care product in the nine months ended September 30, 2023, with no comparable order in the nine months ended September 30, 2024.
Cost of goods sold decreased $0.9 million, or 26%, to $2.5 million for the nine months ended September 30, 2024, from $3.4 million for the nine months ended September 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 nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
Sales and marketing
Sales and marketing expenses decreased $0.7 million, or 18%, to $3.0 million for the nine months ended September 30, 2024, from $3.7 million for the nine months ended September 30, 2023. The decrease was due primarily to continued digital advertising efficiencies and a decrease in related consulting costs incurred in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
General and administrative
General and administrative expenses increased $1.2 million, or 28%, to $5.6 million for the nine months ended September 30, 2024, from $4.4 million for the nine months ended September 30, 2023, was due primarily to an increase in legal costs primarily related to non-recurring strategic initiatives, including the DERMAdoctor Divestiture, the 2024 Public Offering, the Asset Sale Transaction and the Dissolution, ongoing during the nine months ended September 30, 2024.
Loss on divestiture of subsidiary
As a result of the closing of the DERMAdoctor Divestiture on March 25, 2024, we incurred a loss of $0.9 million for the nine months ended September 30, 2024 with no comparable activity for the nine months ended September 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.
Non-cash gain on change in fair value of warrant liabilities
Adjustments to the fair value of warrant liabilities resulted in a gain of $114 thousand for the nine months ended September 30, 2024 and $216 thousand for the nine months ended September 30, 2023. The warrant liabilities for the December 2023 Warrants and the March 2024 Warrant were reclassified to equity during the nine months ended September 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.
Non-cash (loss) gain on changes in fair value of embedded derivative liability
Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the nine months ended September 30, 2024 and gain of $40 thousand for the nine months ended September 30, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements”.
Accretion of interest and amortization of discounts on convertible notes
Accretion of interest and amortization of discounts on convertible notes was $0.9 million for the nine months ended September 30, 2024 and $1.2 million for the nine months ended September 30, 2023.
Extinguishment of Secured Convertible Notes
Extinguishment of Secured Convertible Notes was $13 thousand for the nine months ended September 30, 2024, with no comparable activity for the nine months ended September 30, 2023.
Other expense, net
Other expense, net was $0.5 million for the nine months ended September 30, 2024 and $0.4 million for the nine months ended September 30, 2023. Expenses were related primarily to separate and unrelated financing events recorded during the respective periods.
Financial Condition, Liquidity and Capital Resources
As of September 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 September 30, 2024 includes $2.9 million of net proceeds from the 2024 Public Offering, $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 were 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 paid the Monthly Redemption in cash every month until the Secured Convertible Notes were repaid in full during the third quarter of 2024.
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 (107,146 shares post-Reverse Stock Split). 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’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
On September 16, 2024, the Board unanimously approved the Asset Sale Transaction and Dissolution, both of which are subject to the approval of the Company’s stockholders. On November 5, 2024, the Company entered into the APA Amendment that provides for, among other terms, an increase in the base purchase price to $11.5 million from $9.5 million and for PRN to provide the Company with the Bridge Loan. The Bridge Loan provides for the Company to receive funding in two tranches of $0.5 million each upon the Company providing written notice to PRN on or after November 22, 2024 and on or after December 6, 2024. The amounts borrowed under the Bridge Loan are required to be used by the Company for working capital purposes, will bear interest at a rate of 10% per annum and be secured by all of the Company’s assets as collateral. The Bridge Loan is a short term secured loan which is to be repaid upon the earlier of the closing of the Asset Sale Transaction (to be repaid from the purchase price), immediately upon termination of the Purchase Agreement or February 28, 2025. The Company is holding the Special Meeting on November 22, 2024 to obtain stockholder approval of the Asset Sale Transaction and the Dissolution, pursuant to the Special Meeting Proxy Statement.
Based primarily on the funds available on September 30, 2024, 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 and meet its planned operating expenses into at least the first quarter of 2025. The Company has sustained operating losses for the majority of its corporate history and expects that its 2024 expenses will exceed its 2024 revenues. Additionally, the Company expects to continue incurring operating losses and negative cash flows. Accordingly, the Company has determined that its planned operations raise substantial doubt about its ability to continue as a going concern for a period of at least twelve months from the date of issuance of these unaudited condensed consolidated financial statements. Additionally, 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, global pandemics and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan).
To address the Company’s current liquidity and near term 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; and/or (3) the divestiture of certain business or product lines and related assets such as the Asset Sale Transaction and the DERMAdoctor Divestiture. If the Asset Sale Transaction and/or the Dissolution are not completed, we will continue our corporate existence and the Board will continue to explore its options to secure immediate funding for ongoing operations due to significantly reduced available capital, the strategic and alternatives available to the Company, including returning capital to stockholders or, to the extent any funding or other viable alternatives are not available or there is not sufficient capital remaining at the time to fund operations, then, the Company may need to file for bankruptcy protection or commence a similar state law proceeding. In connection with such strategic options, 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. While the Company believes that the proceeds from the 2024 Public Offering and the DERMAdoctor Divestiture improved the Company’s liquidity in the first nine months of 2024, there is no assurance that the Company will be successful in completing the Asset Sale Transaction and/or the Dissolution or otherwise executing on alternative capital-raising strategies at levels necessary to address the Company’s ongoing and future cash flow and liquidity needs. 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. If the Company’s stockholders approve the Dissolution, the Company would consider liquidation to be imminent and apply liquidation basis of accounting pursuant to U.S. GAAP.
Cash Used in Operating Activities
Net cash used in operating activities from continuing operations was $4.2 million for the nine months ended September 30, 2024, which consisted primarily of a net loss from continuing operations of $6.0 million, adjusted by depreciation and amortization expenses of $32 thousand, stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash loss on divestiture of $0.9 million, non-cash expense for consent of Secured Convertible 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 $0.1 million, non-cash loss on changes in fair value of embedded derivative liability of $18 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and amortization of debt discounts on convertibles notes of $0.9 million, and a net decrease of $0.8 million in our net operating assets and liabilities of continuing operations.
Net cash used in operating activities from continuing operations was $3.5 million for the nine months ended September 30, 2023, which consisted primarily of a net loss from continuing operations of $5.5 million, adjusted by depreciation and amortization expenses of $39 thousand, stock-based compensation expenses of $0.2 million, non-cash loss on modifications of warrants of $0.3 million, non-cash gain on changes in fair value of warrant liabilities of $0.2 million, non-cash gain on changes in fair value of embedded derivative liability of $40 thousand, non-cash right-of-use amortization of $0.2 million, accretion of interest and amortization of debt discounts on convertibles notes of $1.1 million, and a net decrease of $0.7 million in our net operating assets and liabilities of continuing operations.
Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities from continuing operations was $1.1 million for the nine months ended September 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 from continuing operations was $16 thousand for the nine months ended September 30, 2023.
Cash Provided by Financing Activities
Net cash provided by financing activities from continuing operations was $1.0 million for the nine months ended September 30, 2024, which included repayment of $2.0 million for the Secured Convertible Notes through September 30, 2024, net proceeds of $2.9 million from the 2024 Public Offering transaction, and the net proceeds of $0.2 million from the 2024 Warrant Repice transaction.
Net cash provided by financing activities from continuing operations was $1.9 million for the nine months ended September 30, 2023, which included the net proceeds of $2.8 million received in the 2023 Private Placement of the Secured Convertible Notes and the May 2023 Warrants and repayment of $0.8 million for the Monthly Redemption through September 30, 2023 on the Secured Convertible Notes.
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. 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. 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.
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. 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. 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.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements at September 30, 2024 or December 31, 2023 as defined in Item 303(a)(4)(ii) of Regulation S-K.
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. 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.
NeutroPhase and PhaseOne Branded Wound Care Products
Our NeutroPhase and PhaseOne branded products are sold through wholesale distribution relationships with third parties such as Chongqing Pioneer Pharma Holdings Limited and Phase One Health; therefore, we receive periodic large orders that result in large chunks of revenue that are received in irregular intervals during the year.
Contractual Obligations
In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations under lease and convertible note arrangements are provided in Note 8 “Commitments and Contingencies,” and Note 10 “Convertible Notes” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our market risk consists principally of interest rate risk on our cash and cash equivalents. 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 September 30, 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. The goals of our investment policy are as follows: preservation of capital, assurance of liquidity needs, best available return on invested capital, and minimization of capital taxation. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with an interest rate fixed at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk, in accordance with our investment policy, we maintain our cash and cash equivalents in short-term marketable securities, including money market mutual funds, Treasury bills, Treasury notes, certificates of deposit, commercial paper, and corporate and municipal bonds. The risk associated with fluctuating interest rates is limited to our investment portfolio. Due to the short-term nature of our investment portfolio, we believe we have minimal interest rate risk arising from our investments. As of September 30, 2024 and December 31, 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. We 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.
|
ITEM 4. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Assessing the costs and benefits of such controls and procedures necessarily involves the exercise of judgment by management. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Based upon that evaluation at September 30, 2024, our Chief Executive Officer and our Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure, at the reasonable assurance level, that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act was accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the current quarter which has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
|
ITEM 1. |
LEGAL PROCEEDINGS |
From time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business. As of September 30, 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.
|
ITEM 1A. |
RISK FACTORS |
For information regarding factors that could affect our business, results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A included in our 2023 Annual Report, under Part II, Item 1A included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which was filed with the SEC on May 9, 2024, and in the risk factors related to the Asset Sale Transaction and the Dissolution in the Special Meeting Proxy Statement (as may be supplemented). We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide updated quarterly information under this Item.
|
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
|
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
None.
|
ITEM 4. |
MINE SAFETY DISCLOSURES |
Not Applicable.
|
ITEM 5. |
OTHER INFORMATION |
Rule 10b5-1 Trading Arrangements
During the nine months ended September 30, 2024, of our directors or Section 16 officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408 of Regulation S-K.
|
ITEM 6. |
EXHIBITS |
The following exhibits are filed with or incorporated by reference into this report.
EXHIBIT INDEX
|
Incorporation by Reference |
Filed Herewith |
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|
Exhibit Number |
Exhibit Description |
Form |
File Number |
Exhibit/ Form 8-K Item Reference |
Filing Date |
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|
2.1 |
8-K |
001-3678 |
2.1 |
9/28/2021 |
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|
2.2 |
8-K |
001-33678 |
2.1 |
3/14/2024 |
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|
2.3 |
8-K |
001-33678 |
2.1 |
9/20/2024 |
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| 2.4 | Amendment No. 1 to Asset Purchase Agreement, dated as of November 5, 2024, between PRN Physician Recommended Nutriceuticals, LLC and NovaBay Pharmaceuticals, Inc. | 8-K | 001-33678 | 2.1 | 11/6/2024 | |
|
2.5 |
Plan of Complete Liquidation and Dissolution of NovaBay Pharmaceuticals, Inc. |
8-K |
001-33678 |
2.2 |
9/20/2024 |
|
|
3.1 |
Amended and Restated Certificate of Incorporation of NovaBay Pharmaceuticals, Inc. |
10-K |
001-33678 |
3.1 |
3/21/2018 |
|
|
3.2 |
Amendment to the Amended and Restated Certificate of Incorporation, dated June 4, 2018 |
8-K |
001-33678 |
3.1 |
6/4/2018 |
|
|
3.3 |
Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 27, 2020 |
8-K |
001-33678 |
3.1 |
5/28/2020 |
|
|
3.4 |
Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 24, 2021 |
8-K |
001-33678 |
3.1 |
5/24/2021 |
|
|
3.5 |
8-K |
001-33678 |
3.1 |
2/1/2022 |
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|
3.6 |
Amendment to Amended and Restated Certificate of Incorporation, as amended, dated November 14, 2022 |
8-K |
001-33678 |
3.1 |
11/18/2022 |
|
|
3.7 |
Amendment to Amended and Restated Certificate of Incorporation, as amended, dated May 30, 2024 |
8-K |
001-33678 |
3.1 |
5/31/2024 |
|
|
3.8 |
8-K |
001-33678 |
3.1 |
11/1/2021 |
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|
3.9 |
8-K |
001-33678 |
3.2 |
11/18/2022 |
||
|
3.10 |
8-K |
001-33678 |
3.1 |
6/14/2023 |
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|
4.1 |
8-K |
001-33678 |
4.1 |
5/18/2020 |
||
|
4.2 |
8-K |
001-33678 |
4.1 |
7/21/2020 |
||
|
4.3 |
8-K |
001-33678 |
4.1 |
9/13/2022 |
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|
4.4 |
8-K |
001-33678 |
4.2 |
9/13/2022 |
||
|
4.5 |
8-K |
001-33678 |
4.3 |
9/13/2022 |
||
|
4.6 |
8-K |
001-33678 |
4.4 |
9/13/2022 |
||
|
4.7 |
8-K |
001-33678 |
4.5 |
9/13/2022 |
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|
4.8 |
Form of Original Issue Discount Secured Senior Convertible Debenture |
8-K |
007-33678 |
4.1 |
4/27/2023 |
|
|
4.9 |
8-K |
001-33678 |
4.2 |
4/27/2023 |
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|
4.10 |
8-K |
001-33678 |
4.3 |
4/27/2023 |
||
|
4.11 |
8-K |
001-33678 |
4.4 |
4/27/2023 |
||
|
4.12 |
8-K |
001-33678 |
4.1 |
12/21/2023 |
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|
4.13 |
8-K |
001-33678 |
4.2 |
3/25/2024 |
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|
4.14 |
8-K |
001-33678 |
4.1 |
6/14/2024 |
||
|
4.15 |
8-K |
001-33678 |
4.3 |
3/25/2024 |
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|
4.16 |
8-K |
001-33678 |
4.4 |
3/25/2024 |
||
|
4.17 |
8-K |
001-33678 |
4.1 |
7/29/2024 |
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|
4.18 |
8-K |
001-33678 |
4.2 |
7/29/2024 |
||
|
4.19 |
8-K |
001-33678 |
4.3 |
7/29/2024 |
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|
10.1 |
8-K |
001-33678 |
4.3 |
7/29/2024 |
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|
10.2 |
8-K |
001-33678 |
10.1 |
7/29/2024 |
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| 10.3 | Secured Promissory Note, dated as of November 5, 2024, between NovaBay Pharmaceuticals, Inc., as borrower, and PRN Physician Recommended Nutriceuticals, as lender. | 8-K | 001-33678 | 10.1 | 11/6/2024 | |
|
31.1 |
X |
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31.2 |
X |
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32.1 |
X |
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32.2 |
X |
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101.INS |
Inline XBRL Instance Document |
X |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
X |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
X |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
X |
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101.LAB |
Inline XBRL Taxonomy Extension Labels Linkbase Document |
X |
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|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
X |
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|
104 |
The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments) |
X |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: November 7, 2024 |
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By: |
/s/ Justin Hall |
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|
Justin Hall Chief Executive Officer, General Counsel and Director (principal executive officer) |
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Date: November 7, 2024 |
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|
By: |
/s/ Tommy Law |
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Tommy Law Interim Chief Financial Officer (principal financial officer) |
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