Transaction Information
NovaBay Pharmaceuticals, Inc. (NYSE American: NBY) announced it has entered into a Securities Purchase Agreement with certain institutional investors in connection with a private placement of 3,250 shares of a newly created Series C Non-Voting Convertible Preferred Stock (the "Series C Preferred Stock") at a price of $1,000 per share, Series A-1 warrants (the "Series A-1 Warrants") exercisable to purchase up to an aggregate of 18,055,557 shares of Company common stock at an exercise price of $0.18 per share and Series A-2 warrants (the "Series A-2 Warrants" and, collectively with the Series A-1 Warrants, the "Warrants") exercisable to purchase up to an aggregate of 18,055,557 shares of Company common stock at an exercise price of $0.18 per share. The Company expects to receive gross proceeds from the private placement of approximately $3.25 million. The private placement is expected to close in the fourth quarter of 2022 on or about the date of effectiveness of Stockholder Approval and the Reverse Stock Split (each as defined below) (the "Stockholder Approval Date") and subject to satisfaction of customary closing conditions in the Securities Purchase Agreement. The exercise price for the Warrants and the number of shares of Company common stock underlying the Warrants will be adjusted to reflect the Reverse Stock Split.
NovaBay intends to use the net proceeds received from the offering for working capital and general corporate purposes.
Ladenburg Thalmann & Co. Inc. acted as exclusive placement agent for the private placement and exclusive warrant solicitation agent.
The Series C Preferred Stock will initially be convertible into an aggregate of approximately 18,055,557 shares of Company common stock at a conversion price of $0.18 per share, subject to adjustment following the Reverse Stock Split. In addition, the conversion of the Series C Preferred Stock will be subject to certain ownership limitations, as provided in the Securities Purchase Agreement and in the Certificate of Designation of Preferences, Rights and Limitations of the Series C Preferred Stock, which will be filed and become effective in connection with the closing of the private placement. The Series C Preferred Stock will only be entitled to dividends in the event dividends are paid on the Company common stock and will not have any preferences over the Company common stock, including liquidation rights. As a result of the number of shares of Company common stock that may be issued upon the future conversion of the Series C Preferred Stock and exercise of the Warrants and as a condition to closing as set forth in the Securities Purchase Agreement, the Company will be required to obtain stockholder approval in accordance with the NYSE American LLC Company Guide Rule 713(a) and Rule 713(b) ("Stockholder Approval"). In addition, as a further condition to closing the private placement, the Company will take appropriate corporate action, including at a meeting of stockholders, to effect a reverse split of its common stock, as required by its governing documents and applicable law, in order to have a sufficient number of shares of Company common stock to issue upon the full conversion of the Series C Preferred Stock and the full exercise of the Warrants ("Reverse Stock Split"). After the closing of the private placement, the Series C Preferred Stock issued will be immediately convertible, the Series A-1 Warrants will be immediately exercisable and will expire six years following the closing date and the Series A-2 Warrants issued will be immediately exercisable and will expire eighteen months following the closing date.
The Company also entered into warrant reprice transactions with certain of its existing warrant holders (such holders, the "Participants") to amend previously issued Company common stock purchase warrants to reduce their exercise price, provide an opportunity to make an initial cash exercise and for such exercising holders to receive new Company common stock purchase warrant, as well as certain other terms.
The Participants in the warrant reprice transactions include warrant holders from the Company's prior warrant reprice transaction that closed on July 23, 2020 where the Company issued common stock purchase warrants ("2020 Original Warrants") to a limited number of accredited investors (the "2020 Investors") and from its prior private placement transaction that closed on November 2, 2021 where the Company issued common stock purchase warrants (the "2021 Original Warrants") to a limited number of accredited investors (the "2021 Investors"). The 2020 Original Warrants have an aggregate of 6,898,566 underlying shares of Company common stock that are currently exercisable at $1.65 per share. The 2021 Original Warrants have an aggregate of 37,500,000 underlying shares of Company common stock that are currently exercisable at $0.53 per share.
By letter agreement, dated September 9, 2022, the Company provided the 2020 Investors holding 2020 Original Warrants and the 2021 Investors holding 2021 Original Warrants with an opportunity to amend their respective warrants to reduce their exercise price to $0.18 ("Reduced Exercise Price") and, in the case of the 2021 Original Warrants, extend the term of those warrants (the "Amended Warrants"). The Amended Warrants will not be exercisable until the later of six months and the Stockholder Approval Date, except for an Initial Exercise (as defined below) by a Participant. The terms of the letter agreements also provided the Participants with the opportunity to make a cash exercise of their respective warrants at the Reduced Exercise Price (the "Initial Exercise"), and to receive a new common stock purchase warrant ("New Warrant") to purchase a number of shares of Company common stock equal the shares of Company common stock received by such Participant in its own Initial Exercise. The New Warrants will be initially exercisable on the later to occur of the six-month anniversary of the date of issuance and the Stockholder Approval Date. In addition, the New Warrants will have a term of exercise of six (6) years and an exercise price equal to $0.18. The Company will receive approximately $2 million in aggregate proceeds from the Initial Exercise.
About NovaBay Pharmaceuticals, Inc. NovaBay Pharmaceuticals, Inc. creates science-based, problem-solving, accessible solutions for improved well-being through its two brands, Avenova® and DERMAdoctor®. For more information, please visit www.novabay.com.
The information and material presented is provided for informational purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or buy any securities mentioned herein.