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NovaBay Pharmaceuticals Reports First Quarter 2023 Financial Results

NBY | May 11, 2023

Sales of eyecare products increased with higher sales of Avenova Spray related companion products

Sales and marketing spend reduced by 17% through optimized digital marketing programs

Launched DERMAdoctor®Comfort + JoyPsoriasis Therapeutic Moisturizing Cream

Conference call begins at 4:30 p.m. Eastern time today

NovaBay® Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three months ended March 31, 2023 and provides a business update.

“Net product revenue from our Avenova-branded eyecare products increased over the prior year driven by higher sales of Avenova Spray sold through our physician-dispensed channel and by increased interest in our Avenova companion products,” said Justin Hall, NovaBay CEO. “On the expense side, we benefitted from our focus on digital marketing optimization, which led to a 17% decline in sales and marketing costs.

“Pursuant to our ongoing strategy of capitalizing on our brand recognition and diversifying our revenue sources, so far this year we’ve introduced three new branded products and launched our first co-promoted product. Most recently, we introduced the first DERMAdoctor product formulated to relieve the itching, irritation and redness from psoriasis, a condition that afflicts about eight million Americans. In our wound care vertical, we shipped a $1 million order for NeutroPhase® Skin and Wound Cleanser to our partner China Pioneer and will record this sale in the second quarter,” he added. “Proceeds from our recent financing that closed in the second quarter of 2023 will further support our goal of achieving profitability.”

First Quarter Financial Results

Net product revenue for the first quarter of 2023 was $3.1 million, compared with $3.3 million for the prior-year period, and included $2.2 million of Avenova-branded eyecare product sales, $0.8 million of DERMAdoctor skincare product sales and $0.1 million of PhaseOne® wound care product sales.

Gross margin on net product revenue for the first quarter of 2023 improved to 62%, compared with 55% for the first quarter of 2022, with the increase primarily due to channel and product mix that favored sales of higher-margin products and the reduction of product returns when compared to the first quarter of 2022.

Total operating expenses for the first quarter of 2023 were $3.7 million, a 13% decrease from $4.2 million for the first quarter of 2022. Sales and marketing expenses for the first quarter of 2023 were $1.7 million, compared with $2.0 million in the prior year, with the decrease reflecting lower Avenova digital advertising costs. General and administrative expenses for the first quarter of 2023 were $2.0 million, compared with $2.2 million for the first quarter of 2022, with the decrease due primarily to lower variable compensation costs.

Net loss attributable to common stockholders for the first quarter of 2023 was $1.7 million, or $0.85 per share, compared with a net loss attributable to common stockholders for the first quarter of 2022 of $0.1 million, or $0.08 per share, which included a non-cash gain on changes in fair value of warrant liability of $2.1 million and a non-cash gain on changes in fair value of contingent liability of $0.2 million in the first quarter of 2022 with no similar non-cash gains in the first quarter of 2023.

NovaBay had cash and cash equivalents of $3.7 million as of March 31, 2023, compared with $5.4 million as of December 31, 2022. Subsequent to the close of the quarter, NovaBay completed a private placement of convertible debentures and warrants for aggregate gross proceeds of $3.0 million before deducting placement agent fees and other offering expenses.

Conference Call

NovaBay management will host an investment community conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results and answer questions. Participants can pre-register for the conference call here. Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.

Stockholders and other interested parties may also participate in the conference call by dialing 866-777-2509 from within the U.S. or 412-317-5413 from outside the U.S., and requesting the NovaBay Pharmaceuticals call.

A live webcast of the call will be available here and will be archived for 90 days. A replay of the call will be available beginning two hours after the call ends through June 1, 2023 by dialing 877-344-7529 from within the U.S., 855-669-9658 from Canada or 412-317-0088 from outside the U.S. and Canada, and entering the conference identification number 7090076.

About NovaBay Pharmaceuticals, Inc.:

NovaBay Pharmaceuticals, Inc. develops and sells scientifically created and clinically proven eyecare, skincare and wound care products. NovaBay’s leading product, Avenova® Antimicrobial Lid & Lash Solution, 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 Antimicrobial Lid & Lash Solution is available direct to consumer primarily through online distribution channels such as Amazon, and is also available by prescription and dispensed by eyecare professionals for blepharitis and dry-eye disease. DERMAdoctor® offers more than 30 OTC dermatologist-developed skincare products through the DERMAdoctor website, well-known traditional and digital beauty retailers, and international distributors. NovaBay also manufactures and sells effective, yet gentle and non-irritating wound care products. The PhaseOne® brand is distributed through commercial partners in the U.S. for professional use only, and the NeutroPhase® brand is distributed in China by Pioneer Pharma (Hong Kong) Company Ltd.

Forward-Looking Statements

This release contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts. Such forward-looking statements are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our business strategies, commercial progress, current and potential future product offerings, the continuing integration of DERMAdoctor, expanded access to our products, and any future revenue, and the timing of such revenue, that may result from selling these products, as well as generally the Company’s expected future financial results. These statements involve risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to the integration of DERMAdoctor’s business with the Company’s business (and further related impairments to goodwill and intangible assets), the size of the potential market for our products, the Company’s products not being able to penetrate one or more targeted markets and the Company’s ability to continue as a going concern and revenues (or the execution on capital raise opportunities) not being sufficient to meet the Company’s cash needs. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay’s latest Form 10-K/Q filings with the Securities and Exchange Commission, especially under the heading “Risk Factors.” The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

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Avenova Purchasing Information
For NovaBay Avenova purchasing information:
Please call 800-890-0329 or email sales@avenova.com
Avenova.com

DERMAdoctor Purchasing Information
For DERMAdoctor purchasing information:
Please call 877-337-6237 or email service@dermadoctor.com
DERMAdoctor.com

NOVABAY PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value amounts)

	March 31,			December 31,
	2023			2022
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	3,746		$	5,362
Accounts receivable, net of allowance for credit losses ($3 and $19 at March 31, 2023 and December 31, 2022, respectively)		1,835			1,973
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($488 and $499 at March 31, 2023 and December 31, 2022, respectively)		3,797			3,437
Prepaid expenses and other current assets		516			560
Total current assets		9,894			11,332
Operating lease right-of-use assets		1,744			1,831
Property and equipment, net		119			119
Goodwill		348			348
Other intangible assets, net		2,242			2,280
Other assets		478			489
TOTAL ASSETS	$	14,825		$	16,399

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	1,148		$	1,080
Accrued liabilities		2,809			2,724
Operating lease liabilities		466			453
Total current liabilities		4,423			4,257
Operating lease liabilities-non-current		1,512			1,588
Total liabilities		5,935			5,845
Commitments & contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized;
Series B Preferred Stock; 12 shares issued and outstanding at March 31, 2023 and December 31, 2022		570			570
Series C Preferred Stock; 2 shares issued and outstanding at March 31, 2023 and December 31, 2022		2,403			2,403
Common stock, $0.01 par value; 150,000 shares authorized, 2,035 shares issued and outstanding at March 31, 2023 and December 31, 2022		652			652
Additional paid-in capital		165,156			165,081
Accumulated deficit		(159,891	)		(158,152	)
Total stockholders’ equity		8,890			10,554
TOTAL LIABILITIESAND STOCKHOLDERS’ EQUITY	$	14,825		$	16,399

NOVABAY PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)

	Three Months Ended March 31,
	2023			2022
Sales:
Product revenue, net	$	3,117		$	3,267
Other revenue, net		7			6
Total sales, net		3,124			3,273

Product cost of goods sold		1,188			1,459
Gross profit		1,936			1,814
Operating expenses:
Research and development		26			28
Sales and marketing		1,653			1,985
General and administrative		1,991			2,183
Total operating expenses		3,670			4,196
Operating loss		(1,734	)		(2,382	)

Non-cash gain on changes in fair value of warrant liability		—			2,056
Non-cash gain on changes in fair value of contingent liability		—			219
Other expense, net		(5	)		(4	)

Net loss	$	(1,739	)	$	(111	)

Net loss per share attributable to common stockholders (basic and diluted)	$	(0.85	)	$	(0.08	)
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock (basic and diluted)		2,035			1,431