NovaBay Pharmaceuticals Announces Pricing of $3.5 Million Underwritten Public Offering

Rhea-AI Summary

NovaBay Pharmaceuticals (NYSE American: NBY) has announced the pricing of a $3.5 million underwritten public offering. The offering includes 3,200,380 shares of common stock (or pre-funded warrants) and three series of warrants (F-1, F-2, and F-3) at a combined public offering price of $1.10 per share. Each warrant series allows the purchase of up to 3,200,380 additional shares. Ladenburg Thalmann & Co. Inc. is acting as the sole bookrunning manager. The company plans to use the proceeds to redeem outstanding convertible debentures and for working capital. The offering is expected to close around July 29, 2024, subject to customary conditions.

Positive

• Raised $3.5 million in capital through public offering
• Potential for additional $0.5 million if underwriter exercises over-allotment option
• Funds to be used for debt redemption and working capital

Negative

• Potential dilution of existing shareholders due to new share issuance
• Complex warrant structure may confuse investors
• Short-term expiration of Series F-2 and F-3 warrants (6 months and 1 year respectively)

Financial Analyst

NovaBay Pharmaceuticals' $3.5 million public offering is a significant move that warrants attention. The company is issuing a complex mix of securities, including common stock, pre-funded warrants and three series of warrants (F-1, F-2 and F-3). This structure suggests a strategic approach to raising capital while potentially minimizing immediate dilution.

The pricing at $1.10 per unit and the inclusion of multiple warrant series with varying expiration dates (5 years, 6 months and 1 year) indicate a careful balancing act. The company is offering investors different timeframes for potential upside, which could attract a diverse investor base. However, the potential for future dilution is substantial if all warrants are exercised.

A critical aspect is the one-time reset feature on the warrant exercise prices. This provision, allowing for a potential downward adjustment after 60 days, could be seen as investor-friendly but also suggests uncertainty about the stock's future performance.

The intended use of proceeds to redeem outstanding convertible debentures is noteworthy. This move could improve NovaBay's balance sheet by reducing debt, but it also means that a significant portion of the raised capital won't be directly invested in growth initiatives.

Overall, while this offering provides much-needed capital, it comes at the cost of potential significant dilution and complex warrant structures that could impact future stock performance. Investors should closely monitor how effectively NovaBay utilizes these funds to drive growth and improve its financial position.

Market Research Analyst

NovaBay's public offering reflects broader trends in the biotech and pharmaceutical sectors, where smaller companies often struggle to secure funding through traditional means. The complex structure of this offering – combining common stock with multiple warrant series – is increasingly common among small-cap biotech firms seeking to attract investors in a challenging market environment.

The $3.5 million raise, while significant for NovaBay, is relatively small in the context of drug development costs. This suggests that the company may need to return to the capital markets in the future, which could lead to further dilution for existing shareholders.

The inclusion of a 45-day over-allotment option for the underwriter is standard practice but could lead to additional dilution if exercised. This flexibility allows the company to potentially raise up to $4 million, which might be necessary given the capital-intensive nature of the pharmaceutical industry.

The warrant reset feature is particularly intriguing from a market perspective. It provides a form of downside protection for warrant holders but could also be seen as a lack of confidence in maintaining the current stock price. This feature might attract more risk-averse investors but could also signal caution to the broader market.

Given the current market conditions and investor sentiment towards small-cap biotech stocks, NovaBay's ability to secure this funding, albeit with complex terms, demonstrates that there's still appetite for investment in this sector. However, the terms of this offering suggest that investors are demanding more favorable conditions and additional upside potential to compensate for the inherent risks in early-stage pharmaceutical companies.

EMERYVILLE, Calif.--(BUSINESS WIRE)-- NovaBay Pharmaceuticals, Inc. (NYSE American: NBY) (the “Company” or “NovaBay”), today announced the pricing of its underwritten public offering of 3,200,380 shares of common stock (or pre-funded warrants in lieu thereof), 3,200,380 Series F-1 warrants to purchase up to 3,200,380 shares of common stock, 3,200,380 Series F-2 warrants to purchase up to 3,200,380 shares of common stock and 3,200,380 Series F-3 warrants to purchase up to 3,200,380 shares of common stock. The combined public offering price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying Series F-1 warrant, Series F-2 warrant and Series F-3 warrant is $1.10.

In addition, the Company has granted the underwriter for the offering a 45-day option to purchase up to 477,272 additional shares of common stock and/or up to 477,272 Series F-1 warrants to purchase up to 477,272 shares of common stock, up to 477,272 Series F-2 warrants to purchase up to 477,272 shares of common stock and up to 477,272 Series F-3 warrants to purchase up to 477,272 shares of common stock or any combination thereof, as determined by the underwriter, at the public offering price, less underwriting discounts and commissions, in each case solely to cover over-allotments, if any.

Ladenburg Thalmann & Co. Inc. is acting as sole bookrunning manager for the offering.

Each share of common stock (and each pre-funded warrant in lieu thereof) is being sold together with one Series F-1 warrant to purchase one share of common stock, one Series F-2 warrant to purchase one share of common stock, and one Series F-3 warrant to purchase one share of common stock. The Series F-1 warrants have an exercise price of $1.10 per share, are exercisable immediately upon issuance, and will expire five years following the date of issuance. The Series F-2 warrants have an exercise price of $1.10 per share, are exercisable immediately upon issuance, and will expire six months following the date of issuance. The Series F-3 warrants have an exercise price of $1.10 per share, are exercisable immediately upon issuance, and will expire one year following the date of issuance. The pre-funded warrants will be immediately exercisable at a nominal exercise price of $0.01 per share and may be exercised at any time until all of the pre-funded warrants are exercised in full. The Series F-1 warrants, the Series F-2 warrants and the Series F-3 warrants will each include a one-time reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the five-day volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the Series F-1 warrants, the Series F-2 warrants and the Series F-3 warrants, as applicable.

The aggregate gross proceeds from the offering will be approximately $3.5 million, or $4.0 million if the underwriter exercises its over-allotment option in full, before deducting underwriting discounts and commissions and other offering expenses and excluding any proceeds that may be received upon the exercise of the Series F-1 warrants, Series F-2 warrants, and Series F-3 warrants. No assurance can be given that any of the warrants will be exercised. NovaBay currently intends to use the net proceeds of the offering to redeem the outstanding principal amount of its Original Discount Senior Secured Convertible Debentures due November 1, 2024 and for working capital and general corporate purposes.

The offering is expected to close on or about July 29, 2024, subject to the satisfaction of customary closing conditions.

The offering is being conducted pursuant to NovaBay’s registration statement on Form S-1 (File No. 333-280423) previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) on July 25, 2024 (the “registration statement”). The offering is being made only by means of a prospectus forming part of the effective registration statement relating to the offering. A preliminary prospectus describing the terms of the offering has been filed with the SEC and is available on the SEC’s website located at http://www.sec.gov and a final prospectus relating to the offering will be filed with the SEC. Electronic copies of the final prospectus, when available, may be obtained on the SEC’s website at http://www.sec.gov and may also be obtained, when available, by contacting Ladenburg Thalmann & Co. Inc., Prospectus Department, 640 5th Avenue, 4th Floor, New York, NY 10019 (telephone number 1-800-573-2541) or by emailing prospectus@ladenburg.com.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About NovaBay Pharmaceuticals, Inc.

NovaBay’s leading product Avenova^® Antimicrobial Lid & Lash Solution is often recommended by eyecare professionals for blepharitis and dry eye disease. Manufactured in the U.S., Avenova spray is formulated with NovaBay's patented, proprietary, stable and pure form of hypochlorous acid. All Avenova products are available directly to consumers through online distribution channels such as Amazon.com and Avenova.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements that are based upon management's current expectations, assumptions, estimates, projections and beliefs. The use of words such as, but not limited to, “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “preliminary,” “should,” “target,” “will,” or “would” and similar words or expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the timing and completion of the offering, and the intended use of net proceeds therefrom. These statements are based on information available to the Company as of the date of this press release and are subject to numerous important factors that involve known and unknown 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 the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. Other risks relating to the Company’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 the Company’s latest Form 10-Q/K filings and registration statement, as may be amended from time to time, filing with the SEC, especially under the heading “Risk Factors.” The forward-looking statements in this release speak only as of this date, and the Company disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725797972/en/

NovaBay

Justin Hall

Chief Executive Officer and General Counsel

510-899-8800

jhall@novabay.com

Investor Relations

LHA Investor Relations

Jody Cain

310-691-7100

jcain@lhai.com

Source: NovaBay Pharmaceuticals, Inc.

FAQ

What is the size of NovaBay's (NBY) recent public offering?

NovaBay Pharmaceuticals (NBY) has priced an underwritten public offering of $3.5 million, with potential to increase to $4.0 million if the underwriter's over-allotment option is fully exercised.

How will NovaBay (NBY) use the proceeds from its July 2024 offering?

NovaBay intends to use the net proceeds to redeem the outstanding principal amount of its Original Discount Senior Secured Convertible Debentures due November 1, 2024, and for working capital and general corporate purposes.

What types of securities are included in NovaBay's (NBY) July 2024 offering?

The offering includes common stock (or pre-funded warrants), Series F-1 warrants with a 5-year term, Series F-2 warrants with a 6-month term, and Series F-3 warrants with a 1-year term, all priced at $1.10 per share.

When is NovaBay's (NBY) July 2024 public offering expected to close?

The offering is expected to close on or about July 29, 2024, subject to the satisfaction of customary closing conditions.