NovaBay Pharmaceuticals Reports Third Quarter 2022 Financial Results

• Product revenue growth of 69% resulting from diversified revenue streams, including DERMAdoctor products in the third quarter of 2022
• DERMAdoctor^® skincare product sales at highest level since the acquisition a year ago
• Achieved continued online Avenova^® Spray unit growth
• Optimized digital marketing programs drove higher sales on lower expenses

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

NovaBay^® Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three and nine months ended September 30, 2022 and provides a business update. Financial results for the first nine months of 2022 include DERMAdoctor, which NovaBay acquired on November 5, 2021.

“Revenues grew an impressive 69% as we benefitted from the DERMAdoctor acquisition and our expanded product portfolio. Highlights of the quarter include the most DERMAdoctor product sales since the acquisition and continued year-over-year growth in online Avenova Spray unit sales. Avenova companion products and our branded wound care products also made solid contributions to revenue during the quarter,” said Justin Hall, NovaBay CEO. “Notably, we achieved this growth while optimizing our digital marketing programs, with lower sales and marketing spend over the prior year even with the additional expenses to promote DERMAdoctor products.

“We are excited about our prospects going forward,” he added. “The initiatives we put in place earlier this year are gaining traction and we received a significant order for DERMAdoctor products from a major U.S. retailer. Additionally, we expect to benefit from growing DERMAdoctor online sales in international markets, in particular in China as our digital marketing programs get underway in that country.”

Third Quarter Financial Results

Net product revenue for the third quarter of 2022 was $3.8 million, an increase of 69% from $2.3 million for the prior-year period, and included $2.2 million of Avenova-branded product sales, $1.3 million of DERMAdoctor product sales, and $0.3 million of PhaseOne^® branded wound care product sales.

Gross margin on net product revenue for the third quarter of 2022 was 62%, compared with 69% for the third quarter of 2021, with the decrease primarily due to higher sales of lower margin DERMAdoctor and wound care products.

Sales and marketing expenses were $1.8 million for the third quarter of 2022, compared with $2.1 million for the third quarter of 2021. The third quarter of 2022 included lower Avenova digital advertising and related consulting expenses, which were partially offset by sales and marketing expenses incurred for DERMAdoctor products. General and administrative (G&A) expenses for the third quarter of 2022 were $1.0 million, compared with $1.8 million for the third quarter of 2021, and included $0.2 million in DERMAdoctor G&A expenses and $0.1 million from the amortization of intangibles related to the DERMAdoctor acquisition, offset by lower variable compensation expenses. Research and development (R&D) expenses for the third quarter of 2022 were $41 thousand, compared with $10 thousand for the prior-year period.

Operating expenses for the third quarter of 2022 were $2.8 million, compared with $3.8 million for the third quarter of 2021.

For the three months ended September 30, 2022, non-cash loss on the modification of common stock warrants was $1.9 million, non-cash gain on changes in fair value of warrant liability was $2.4 million, non-cash retained earnings reduction due to adjustment to the Series B preferred stock conversion price was $5.7 million, and other expense was $171 thousand–each related to the warrant reprice transaction completed in September 2022 (the “2022 Warrant Reprice Transaction”). There were no comparable items for the three months ended September 30, 2021.

Net loss attributable to common stockholders for the third quarter of 2022 was $5.8 million, or $0.10 per share, compared with a net loss attributable to common stockholders for the third quarter of 2021 of $2.3 million, or $0.05 per share.

Nine Month Financial Results

Net product revenue for the nine months ended September 30, 2022 was $10.7 million, an increase of 53% from $7.0 million for the nine months ended September 30, 2021.

Gross margin on net product revenue for the first nine months of 2022 was 56%, compared with 69% for the first nine months of 2021.

For the nine months ended September 30, 2022, sales and marketing expenses decreased slightly and G&A expenses increased 12%, both compared with the nine months ended September 30, 2021. R&D expenses were $108 thousand for the first nine months of 2022, versus $36 thousand for the prior-year period.

For the nine months ended September 30, 2022, non-cash loss on the modification of common stock warrants was $1.9 million, non-cash retained earnings reduction due to adjustment to the Series B preferred stock conversion price was $5.7 million, and other expense was $178 thousand–each related to the 2022 Warrant Reprice Transaction. For the same period, non-cash gain on changes in fair value of warrant liability was $4.5 million, which was related to both the 2022 Warrant Reprice Transaction and the November 2021 Warrants, and non-cash gain on changes in fair value of contingent liability was $219 thousand, which was related to the DERMAdoctor acquisition.

The net loss attributable to common stockholders for the nine months ended September 30, 2022 was $8.1 million, or $0.15 per share, compared with a net loss for the nine months ended September 30, 2021 of $5.7 million, or $0.13 per share.

NovaBay had cash and cash equivalents of $3.9 million as of September 30, 2022, compared with $7.5 million as of December 31, 2021. The Company received approximately $2.1 million in gross proceeds from the 2022 Warrant Reprice Transaction completed in September 2022.

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 at https://investors.novabay.com/events/ and will be archived for 90 days. A replay of the call will be available beginning two hours after the call ends through December 5, 2022 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 1836583.

About NovaBay Pharmaceuticals, Inc.:

NovaBay Pharmaceuticals, Inc. develops and sells scientifically created and clinically proven eyecare and skincare products. NovaBay’s leading product, Avenova^® Antimicrobial Lid & Lash Solution, is often prescribed by eyecare professionals for blepharitis and dry-eye disease and is also available directly to eyecare consumers through online distribution channels such as Amazon. 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, the size of the potential market for our products, the Company’s products not being able to penetrate one or more targeted markets, the Company’s ability to regain compliance with the continued listing standards of the NYSE American, the expected timing of, our ability to complete, and impact of the reverse stock split (as recently approved by the Company’s stockholders), the Company’s ability to continue as a going concern and revenues (or the execution on capital raise opportunities such as the previously disclosed, pending private placement to sell Series C Preferred Stock and related series of warrants) 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

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