(1) Includes fees of OUM, which was acquired by Withum effective on July 15, 2021.

Audit Fees. Audit fees consisted of fees billed by Withum and OUM, as applicable, for professional services rendered in connection with the audit and quarterly reviews of our consolidated financial statements and other engagements, such as review of documents filed with the SEC.SEC, including fees associated with the review of registration statements, comfort letters and consents.

Audit-Related Fees. Audit-related fees comprise fees for professional services rendered by Withum and OUM, as applicable, that are reasonably related to the performance of the audit or review of our consolidated financial statements and internal controls over financial reporting that are not reported in “Audit Fees.”In 20222023 and 2021,2022, such audit-related fees were related to out-of-pocket expenses incurred in conjunction with the performance of audits and reviews.

Tax Fees. These are fees for professional services with respect to tax compliance, tax advice and tax planning. There were no such services rendered by Withum in 2023 or OUM in 2022 and2021 that meet the abovethis category description.

All Other Fees. All other fees consisted ofare the fees associated withfor products and services other than those in the review of registration statements, comfort letters and consents performedabove three categories. There were no such services rendered by Withum and OUM, as applicable.in 2023 or 2022 that meet this category description.

All engagements for services by Withum and OUM or other independent registered public accounting firms are subject to prior approval by the Audit Committee; however, de minimis non-audit services may be approved in accordance with applicable SEC rules. The Audit Committee approved all services provided by Withum and OUM for the fiscal years ended December 31, 20222023 and December 31, 2021.

2022.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the Annual Meeting is required for ratification of this Proposal Two.

The following is the report of the Audit Committee with respect to the audited consolidated financial statements of NovaBay Pharmaceuticals, Inc. for the fiscal year ended December 31, 2022,2023, included in the Annual Report on Form 10-K for that year.

The Audit Committee has reviewed and discussed the audited financial statements of NovaBay for the fiscal year ended December 31, 20222023 with NovaBay’s management. The Audit Committee has discussed with NovaBay’s independent registered public accounting firm, Withum, the matters required to be discussed by Auditing Standard No. 61, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”).

The Audit Committee has received the written disclosures and the letter from Withum required by applicable requirements of the PCAOB regarding Withum’s communications with the Audit Committee concerning independence and has discussed with Withum the independence of Withum.

Based on the review and discussions referred to above in this report, the Audit Committee recommended to NovaBay’s Board that the audited financial statements be included in NovaBay’s Annual Report for filing with the SEC.

At the Annual Meeting, we are asking stockholders to approve, in accordance with Sections 713(a) and 713(b) of the NYSE American Company Guide (the “Company Guide”), the issuance of an aggregate of 7,615,3922,528,848 shares of Common Stock that will be issuable by the Company upon conversion or redemption of the Debentures and the exercise of the 2023Series C Warrants issued in connection with our 2023 Private Placement, including any additional sharesWarrant Reprice Transaction (as defined and described below).

On December 21, 2023, we entered into letter agreements (the “Letter Agreements”) with certain existing holders of our Series B-1 Common Stock purchase warrants (the “Series B-1 Warrants”) and our Series B-2 Common Stock purchase warrants (the “Series B-2 Warrants” and together with the Series B-1 Warrants, the “Series B Warrants”) that become issuablewere originally issued to such holders (the “2023 Warrant Reprice Participants”) pursuant to a Securities Purchase Agreement, dated April 27, 2023. Pursuant to the terms of the Letter Agreements, the 2023 Warrant Reprice Participants agreed to participate in the Warrant Exercise (as defined below), which resulted in cash proceeds to us, and as a result of applicable anti-dilution adjustments or the monthly redemptionexercise of their Series B Warrants, we issued to each 2023 Warrant Reprice Participant a Series C Warrant (as more fully described below, the Debentures in shares of Common Stock (as each are defined and described below)“2023 Warrant Reprice Transaction”).

Since our Common Stock is currently listed on the NYSE American, we are required to comply with the continued listing rules of the Company Guide. Section 713(a) of the Company Guide requires stockholder approval in connection with any transaction, other than a public offering, involving the sale, issuance, or potential issuance, of Common Stock or securities convertible into Common Stock, equal to 20.0% or more of presently outstanding stock for less than the greater of book or market value (whichever is greater). Section 713(b) of the Company Guide requires stockholder approval of a transaction, other than a public offering, involving the sale, issuance or potential issuance by an issuer of Common Stock (or securities convertible into or exercisable for Common Stock) when the issuance or potential issuance of additional shares may result in a change of control of the issuer. Since the aggregate number of shares of Common Stock underlying the Debentures (2,538,464Series C Warrants (2,528,848 shares of Common Stock) and the 2023 Warrants (5,076,928 shares of Common Stock) will collectively representrepresented approximately [347]%34.9% of the total number of shares of Common Stock currently outstanding at the time of issuance to the 2023 Warrant Reprice Participants in the 2023 Warrant Reprice Transaction, we are seeking approval of stockholders under both SectionsSection 713(a) and Section 713(b) of the Company Guide. Stockholder approval of this Proposal Three will constitute stockholder approval for purposes of both Sections 713(a) and 713(b) of the Company Guide.

In addition, as a material condition of the 2023 Private Placement,Warrant Reprice Transaction and pursuant to the terms of the Letter Agreements entered into with the 2023 Warrant Reprice Participants, we agreed to submit and recommend this Proposal Three to our stockholders. If we do not obtain the Company Guide Approvalapproval of this Proposal Three at the Annual Meeting, we have agreed to call a meeting of stockholders every twofour (4) months thereafter to seek stockholder approval until stockholder approval is obtained. These contractual obligations address the Company’s obligation to satisfy the Company Guide requirement. Approval of this Proposal Three will result in the restrictions on conversion of the Debentures and exercise of the 2023Series C Warrants to no longer beingbe effective. The Board approved the 2023 Private PlacementWarrant Reprice Transaction and the Letter Agreement and believes that satisfying our contractual obligations in those transactionsthis transaction by submitting this Proposal Three to stockholders for their approval at this Annual Meeting is in the best interests of our Company and our stockholders.

It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the 2023 Private PlacementWarrant Reprice Transaction (which has already been completed) or the issuance of the Debentures or the 2023Series C Warrants (which have already been issued). Instead, we are seeking your approval of the issuance of shares of Common Stock underlying the Debentures and the 2023Series C Warrants.

In our Annual Report on Form 10-K for the year ended December 31, 2022,2023, we reported that based primarily on the funds available as of December 31, 20222023, that we expected our expenses will continue to exceed our revenues, as we continue to invest in both Avenova and DERMAdoctorour commercialization efforts. Further, based on the amount of capital and liquidity that we had available at such time, we determined that our planned operations raised substantial doubt about our ability to continue as a going concern. Additionally, we noted that changing circumstances may cause us to expend cash significantly faster than currently anticipated or planned, and that we may need to spend more cash than currently expected because of circumstances beyond our control that impact the broader economy such as periods of inflation, supply chain issues, the continuation of the COVID-19national pandemic impacts and international conflicts.conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan). To help address our need for liquidity and capital to fund our planned operations, we completedentered into financing transactions during 2023, including the 2023 Private Placement as discussed below.Warrant Reprice Transaction, which resulted in our Company raising approximately $3.6 million in gross proceeds.

On April 27,December 21, 2023, we entered into a Securities Purchase Agreementthe Letter Agreements with the 2023 Warrant Reprice Participants that provided for the Warrant Exercise and the issuance of the Series C Warrants in the 2023 Warrant Reprice Transaction.

Warrant Exercise.

Pursuant to the terms of the Letter Agreements, the 2023 Warrant Reprice Participants agreed to make an initial exercise (the “Purchase Agreement”) with certain of our existing accredited institutional investors (the “Purchasers”) that provides for the issuance and sale in a private placement (the “2023 Private PlacementInitial Warrant Exercise”) of (i) $3.3 million aggregate principal amounta portion of Original Issue Discount Senior Secured Convertible Debentures Due November 1, 2024their Series B Warrants at a reduced exercise price of $0.25 (the “DebenturesReduced Exercise Price”), (ii) new long-term Series B-1 warrants to purchase Common Stock exercisable for a five-year period, as further described below (“Long-Term Warrants”), and (iii) new short-term Series B-2 warrants to purchase Common Stock exercisable for a two-year period, as further described below (“Short-Term Warrants” and, together with the Long-Term Warrants, the “2023 Warrants”). In connection with the closing of the 2023 Private Placement, Common Stock purchase warrants that the Company previously issued to the Purchasers and to other existing investors in prior private placements and warrant reprice transactions were amended to lower (as reduced from the exercise price of $1.30 as set forth in the previously issued warrants exercisable forSeries B Warrants). During the period beginning on December 21, 2023 through 5:00 p.m. New York City Time on January 26, 2024 (the “Exercise Period”), the 2023 Warrant Reprice Participants had the option to make additional exercises (the “Optional Warrant Exercises”) of their Series B Warrants at the Reduced Exercise Price up to the full number of shares of unexercised underlying shares of Common Stock. The Initial Warrant Exercise and the Optional Warrant Exercises are collectively referred to as the “Warrant Exercise”.

There was an aggregate of 1,724,4552,528,848 shares of Common Stock from $6.30 to $1.50 per share,underlying the Series B Warrants that 2023 Warrant Reprice Participants exercised as further described below.

The conversionpart of the Debentures byWarrant Exercise, which resulted in us receiving gross proceeds of approximately $0.6 million, before deducting warrant reprice agent fees and other transaction expenses. The resale of the holders into shares of Common Stock is currently limitedunderlying the Series B Warrants (the “Warrant Shares”) have been registered pursuant to a holder’s pro rata share of 19.99%registration statement on Form S-1 (File No. 333-272304) that is on file with the U.S. Securities and Exchange Commission (the “SEC”).

Any unexercised Warrant Shares underlying the 2023 Warrant Reprice Participants’ Series B Warrants after the end of the Company’s outstandingExercise Period are exercisable at the exercise price prior to entering into the Letter Agreements, which is $1.30 per share.

Issuance and Description of Series C Warrants

As a result of the Warrant Exercise, we issued a new Common Stock Series C purchase warrant (the “Series C Warrants”), to each 2023 Warrant Reprice Participant to purchase a number of shares of Common Stock or into an aggregateequal to 100% of 438,669 shares (the “Issuable Maximum”), with the remaining amount of the Debentures being convertible by the holders convertible into Common Stock only if stockholder approval of the issuance of the underlying shares of Common Stock upon conversion (2,538,464received by such 2023 Warrant Reprice Participant in the Warrant Exercise. Accordingly, in the 2023 Warrant Reprice Transaction we issued Series C Warrants to the 2023 Warrant Reprice Participants that will be exercisable in the aggregate of 2,528,848 shares of Common Stock)Stock, provided approval of this Proposal Three by the Company stockholders is obtained. obtained as required by the terms of the Series C Warrants (as discussed below).

The 2023terms of the Series C Warrants are substantially similar to the Series B Warrants, except that the Series C Warrants: (i) are not currently exercisable and will notonly be exercisable unlesson the date that Company stockholders approve this Proposal Three; (ii) have a term of exercise of five (5) years and until stockholder approval is obtainedsix (6) months from December 21, 2023; (iii) have an exercise price of $0.25 per share (equal to the Reduced Exercise Price); and (iv) provide for different consideration (other than just cash) that the issuanceholder of the underlyingSeries C Warrant would receive if such holder exercised its right to require us to purchase the Series C Warrant in the event of the consummation of a “Fundamental Transaction” (as defined in the Series C Warrant). The Series C Warrants are also subject to a provision prohibiting the exercise thereof to the extent that, after giving effect to such exercise, the holder of such Series C Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% or 9.99% of outstanding Common Stock. The Series C Warrants do not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of our Company.

Other Post-Closing Obligations and Anti-Dilution Adjustment of Series B Preferred Stock and Series C Preferred Stock

Voting Commitments. Pursuant to the terms of the Letter Agreement, each 2023 Warrant Reprice Participant agreed to vote all shares of Common Stock upon exercise (5,076,928over which such 2023 Warrant Reprice Participant has voting control that are eligible to vote at, and are held of record on, the applicable record date of a stockholders meeting in favor of any and all proposals and/or resolutions presented by the Company for purposes of obtaining approval of this Proposal Three. Accordingly, in connection with this Annual Meeting, the 2023 Warrant Reprice Participants are required to vote their shares of Common Stock).Stock in favor of this Proposal Three.

Resale Registration. In connection with the 2023 Warrant Reprice Transaction and pursuant to the terms of the Letter Agreement, we agreed to prepare and file on or prior to June 21, 2024, a registration statement with the SEC covering the resale of 100% of the shares of Common Stock underlying the Series C Warrants issued to the 2023 Warrant Reprice Participants. We agreed to use our best efforts to cause the registration statement to be declared effective by the SEC and to keep such registration statement effective at all times until the holders of the Series C Warrants no longer own such warrants or own any of the shares of Common stock issuable upon exercise of the Series C Warrants.

Anti-Dilution Adjustment to Series B Preferred Stock and Series C Preferred Stock. The 2023 Private Placement closed on May 1, 2023Certificate of Designation of Preferences, Rights and Limitations for our Series B Preferred Stock (the “Private Placement ClosingSeries B Certificate of Designation”). We received aggregate gross proceeds from and the issuanceCertificate of Designation of Preferences, Rights and saleLimitations for the Company’s outstanding Series C Preferred Stock (the “Series C Certificate of Designation”) at the time of the Debentures2023 Warrant Reprice Transaction provided for anti-dilution protections in the event that we granted any right to reprice any Company security or issue a new Company security that would entitle the holder to acquire Common Stock at an effective price per share that is lower than the conversion price of the Series B Preferred Stock and the 2023 WarrantsSeries C Preferred Stock, which is referred to as “full-ratchet” anti-dilution protection. As a result of the Purchasersconsummation of $3.0 million, before deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the 2023 Private Placement for working capitalWarrant Reprice Transaction where the 2023 Warrant Reprice Participants exercised their Series B Warrants at the Reduced Exercise Price during the Exercise Period and general corporate purposes,the Company issued to 2023 Warrant Reprice Participants Series C Warrants having an exercise price of $0.25 per share, the anti-dilution protection in the Series B Certificate of Designation and has agreed notthe Series C Certificate of Designation was triggered. Accordingly, the conversion price of each share of Series B Preferred Stock and each share of Series C Preferred Stock, which were each $1.30 convertible into 770 shares of Common Stock, both automatically adjusted downward to use such proceeds for the satisfactiona $0.25 conversion price per share convertible into 4,000 shares of any portionCommon Stock. The adjusted conversion price of the Company’s debt (other than payment of trade payables inSeries B Preferred Stock and the ordinary courseSeries C Preferred Stock is the same as the Reduced Exercise Price and the exercise price of the Company’s business and prior practices, or payments madeSeries C Warrants. Therefore, based on the Debentures), for the redemptionSeries B Preferred Stock and Series C Preferred Stock currently outstanding, there were an additional 23,407,810 shares of any Common Stock for the settlement of any outstanding litigation, or in violation of the Foreign Corrupt Practices Act of 1977, as amended, or the regulations promulgated by the Office of Foreign Assets Control of the U.S. Treasury Department.that became issuable upon conversion. 

Purchase AgreementDilutive Effect of Issuances of Common Stock

The Purchase Agreement contains representations, warranties,If stockholder approval of this Proposal Three is received and covenantsit becomes effective, then all of the Company and eachSeries C Warrants will be exercisable for an aggregate of 2,528,848 shares of Common Stock. Accordingly, an aggregate of 2,528,848 shares of Common Stock, which represented 34.9% of the Purchasers, as well as indemnification rights of the Purchasers and other obligations of the parties. Under the terms of the Purchase Agreement, the Company agreed to reserve and maintain a sufficienttotal number of shares of Common Stock upon the future conversionoutstanding as of December 21, 2023, and represents 7.0% of outstanding shares of Common Stock as of the Debentures andRecord Date, will be issuable pursuant to exercise of the 2023Series C Warrants. If the Series C Warrants in accordance with their terms. Additionally, we agreed to obtain stockholder approval in accordance with Rule 713(a) and Rule 713(b)become exercisable, then existing stockholders of the Company Guide at a meeting of stockholders within sixty (60) days of the Private Placement Closing, which approval is being sought by this Proposal Three.Towill experience dilution in their ownership interests and voting rights to the extent that the Company GuideSeries C Warrants are exercised.

Obligations Upon Failure of Stockholder Approval

If Proposal Three is not obtained, thenapproved, the Series C Warrants will not be exercisable pursuant to the terms of the Series C Warrants. In addition, the terms of the Letter Agreements we entered into with the 2023 Warrant Reprice Participants will be requiredrequire us to call a meeting of stockholderscontinue to seek stockholder approval every two (2)four months until such proposal is approved.

Rights of Series C Warrant Holders

If stockholder approval of this Proposal Three is obtainedreceived and it becomes effective, then the shares of Common Stock issuable upon the exercise of the Series C Warrants will have the same privileges and rights as all other shares of Common Stock that are currently issued and outstanding, including the right to vote on all matters presented to the holders of Common Stock.

This Proposal Three provides a description of the 2023 Warrant Reprice Transaction and the material terms of the Letter Agreements and the Series C Warrants for consideration by stockholders at this Annual Meeting. Disclosure of the 2023 Warrant Reprice Transaction, as well as forms of the Letter Agreement and Series C Warrants can be found as exhibits to our Current Report on Form 8-K as filed with the SEC on December 21, 2023. See “Where You Can Find More Information” below.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the Annual Meeting is required for approval of this Proposal Three. It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the 2023 Warrant Reprice Transaction (which has already been completed) or the Debenturesissuance of the Series C Warrants (which have already been issued).

At the Annual Meeting, we are no longer outstanding.asking stockholders to approve the issuance of an aggregate of 4,750,000 shares of Common Stock upon (i) the conversion of new unsecured convertible notes with a $525 thousand aggregate principal amount due March 25, 2026 (the “Unsecured Convertible Notes”) and (ii) the exercise of a new Series D Common Stock purchase warrant (the “Series D Warrant”).

On March 25, 2024, the Company completed the DERMAdoctor Divestiture. In order to complete the DERMAdoctor Divestiture, it was a condition to closing that the assets of DERMAdoctor, including its Membership Units (as defined below), be removed as collateral from the Secured Convertible Notes and for DERMAdoctor to be released as a guarantor of the Secured Convertible Notes (as discussed below). To satisfy this closing condition, the holders of the Secured Convertible Notes agreed to enter into the First Amendment and the Subsidiary Guarantee Consent (each as defined and described below) on March 24, 2024, and, after the closing of the DERMAdoctor Divestiture, as consideration, we issued: (a) a Series D Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of Common Stock and (b) Unsecured Convertible Notes to four (4) Secured Parties that have an aggregate principal amount of $525 thousand or will be convertible into an aggregate of 3,750,000 shares of Common Stock (collectively, the “Secured Parties Consent Transaction”).

Pursuant to the Purchase Agreement,terms of the First Amendment, the Unsecured Convertible Notes and the Series D Warrant, the Unsecured Convertible Notes are not convertible into Common Stock, and the Series D Warrant is not exercisable for Common Stock, until stockholder approval for such conversion or exercise, as applicable, is received. Approval of this Proposal Four will result in the restrictions on the conversion of the Unsecured Convertible Notes, and the exercise of the Series D Warrant, to no longer be effective. Pursuant to the terms of the Unsecured Convertible Notes (as further discussed below), if we agreeddo not obtain stockholder approval to certain other covenants afterremove this conversion restriction by September 26, 2024, then the Private Placement Closingfull amount of the Unsecured Convertible Notes, $525 thousand, will become due and payable by the Company. The Board approved the Secured Parties Consent Transaction and believes that satisfying our contractual obligations in this transaction by submitting this Proposal Four to stockholders for their approval at this Annual Meeting is in the best interests of our Company and our stockholders.

It is important to understand that we are currently applicablenot seeking stockholder approval of, and you are not being asked to us, which include:vote on, the Secured Parties Consent Transaction (which has already been completed) or the issuance of the Unsecured Convertible Notes or the Series D Warrant (which have already been issued). Instead, we are seeking your approval of the issuance of shares of Common Stock underlying the Unsecured Convertible Notes and the Series D Warrant issued to the Secured Parties.

In our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, we reported that based primarily on the funds available as of December 31, 2023 that we expected our expenses will continue to exceed our revenues, as we continue our commercialization efforts. Further, based on the amount of capital and liquidity that we had available at such time, we determined that our planned operations raised substantial doubt about our ability to continue as a going concern. Additionally, we noted that changing circumstances may cause us to expend cash significantly faster than currently anticipated or planned, and that we may need to spend more cash than currently expected because of circumstances beyond our control that impact the broader economy such as periods of inflation, supply chain issues, the national pandemic impacts and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan). In an effort to decrease our expenses, we completed the DERMAdoctor Divestiture, which required the completion of the Secured Parties Consent Transaction.

DERMAdoctor Divestiture

On March 25, 2024, we completed the sale of our wholly-owned subsidiary, DERMAdoctor, that develops, manufactures, markets, brands, distributes and sells a variety of skincare products.

The consummationDERMAdoctor Divestiture was consummated pursuant to a Membership Unit Purchase Agreement, dated as of March 12, 2024 (the “Purchase Agreement”), by and closing ofamong: (i) New Age Investments LLC, a Florida limited liability company; (ii) DERMAdoctor; and (iii) the 2023 Private Placement was subjectCompany. Pursuant to the satisfaction or waiver of, among other customary closing conditions, the accuracy of the representations and warranties in the Purchase Agreement, compliance by the parties with the covenants in the Purchase Agreement, no material adverse effect occurring with respect to the Company no suspension in the tradingsold 100% of the Common Stock,membership units (the “Membership Units”) of DERMAdoctor to New Age Investments LLC for a closing purchase price of $1,070,000, as adjusted for the payment of certain outstanding DERMAdoctor indebtedness and the execution and delivery of the Security Agreement, the Subsidiary Guarantee, the Warrant Amendments, the Voting Commitments and the Registration Rights Agreement, as described and defined below.transaction expenses.

Description of the DebenturesSecured Parties Consent Transaction

Aggregate Principal Amount and Term. The aggregate principal amountclosing of the Debentures issued inDERMAdoctor Divestiture was subject to certain conditions, which included the Company obtaining the consent of the Secured Parties to (i) amend the Security Agreement, dated April 27, 2023 Private Placement is $3.3 million (the “Aggregate Principal Amount”). The Debenture was issued at a 10% discount to the Purchasers in the 2023 Private Placement resulting in gross proceeds received by the Company of $3.0 million. The Debentures have a term of 18 months from the Private Placement Closing with a maturity date of November 1, 2024.

Secured Obligations. In connection with the 2023 Private Placement, the Company and DERMAdoctor entered into a Security Agreement (“Security AgreementSeries B Certificate of Designation”) that granted the holders of the Debentures a security interest, a lien upon and a right of set-off against all of the Company’s and DERMAdoctor’s assets as collateral security for the complete, timely payment, performance and discharge in full of all of the Company’s obligations under the Debentures. To further secure the Company’s obligations under the Debentures, DERMAdoctor also executed a Subsidiary Guarantee (the “Subsidiary Guarantee”), pursuant to which DERMAdoctor is a guarantor of the Company’s obligations owed to the Debenture holders. We are subject to continued compliance with certain representations, warranties and covenants under the terms of the Security Agreement and the Subsidiary Guarantee. The Security Agreement and the Subsidiary Guarantee are currently effective and will remain in effect until the Company’s obligations under the Debentures have been fully satisfied.

Conversion. Since issuance, the Debentures are convertible by the holders, in whole or in part, into shares of Common Stock at a conversion price equal to $1.30 per share (“Conversion Price”), subject to limitations upon conversion, including the Issuable Maximum, the beneficial ownership limitations described below and until the Company Guide Approval is obtained by the Company. Based on the current Conversion Price, the aggregate number of shares of Common Stock issuable upon conversion is 2,538,464 shares of Common Stock, which number of shares are subject to reduction for conversions and redemptions of the Debentures and to customary antidilution adjustments (the “Conversion Shares”). Until Company Guide Approval occurs, the Debenture holders may convert their Debentures only up to their pro rata share of the Issuable Maximum (an aggregate of 438,669 shares of Common Stock), which is 19.99% of outstanding shares of Common Stock immediately prior to the Private Placement Closing. The Debentures are subject to another limitation upon conversion into shares of Common Stock to the extent that, after giving effect to such conversion, the holder of a Debenture (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% or 9.99% of the outstanding Common Stock.

Dilution Protection. In the event the Company, at any time after the date of the Private Placement Closing and the Debentures are outstanding: (i) pays a dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Debenture); (ii) subdivides outstanding shares of Common Stock into a larger number of shares; (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each case the Conversion Price shall be adjusted as provided in the Debenture. Any adjustment made shall become effective immediately after the effective date of the applicable event described in subsections (i) through (iv) above. The Debentures are subject to other customary anti-dilution protections as more fully described in the Debentures, which include protections relating to the Company issuing “Purchase Rights”, making “Distributions” and/or entering into a “Fundamental Transaction” (as each is defined in the Debenture).

Redemption. The terms of the Debentures require that the Company make a monthly redemption of the Debentures (“Monthly Redemption”) beginning on June 1, 2023 of 1/18th of the Aggregate Principal Amount multiplied by 1.05 (the “Monthly Redemption Amount”) in cash; however, the Monthly Redemption, at the election of the Company can be made in shares of Common Stock at a conversion rate equal to the lower of (i) the Conversion Price or (ii) 90% of the Company’s average VWAP (as defined in the Debenture) over 10 trading days. The Debentures provide the Company with the option to redeem the then outstanding principal amount of the Debentures for cash, subject to the Company satisfying the Equity Conditions (as defined in the Debentures) on each trading day between the date notice of redemption is provided by the Company to the holders of the Debentures and the date such redemption occurs. The Debentures also provide for a mandatory redemption by the Company of a portion of the outstanding principal amount of the Debentures upon the Company completing a capital raise transaction after the Private Placement Closing. This mandatory redemption amount shall equal at least 20% of the gross proceeds received by the Company in any such capital raise transaction.

Event of Default. If any Event of Default (as defined in the Debentures) occurs, the outstanding principal amount of the Debentures, plus accrued but unpaid interest, liquidated damages and other amounts owing through the date of acceleration, shall become, at the holder’s election, immediately due and payable in cash. Commencing five days after the occurrence of any Event of Default that results in the eventual acceleration of the Debentures, the interest rate on the Debentures shall accrue at an interest rate equal to the lesser of 18% per annum and the maximum rate permitted under applicable law.

Restrictive Covenants. Under the terms of the Debentures, the Company and its subsidiaries will be subject to financial and other restrictive covenants for as long as any portion of the Debentures remain outstanding, unless the holders of at least 67% of the then outstanding principal amount of the Debentures shall have otherwise given prior written consent. These restrictive covenants provide that the Company and its subsidiary shall not, directly or indirectly: (i) incur indebtedness or borrowed money, including a guarantee, other than Permitted Indebtedness (as defined in the Debentures), (ii) enter into, incur or create any lien of any kind, other than Permitted Liens (as defined in the Debentures), (iii) amend its charter documents in a manner that materially and adversely affects the rights of any holder of the Debentures; (iv) repay or repurchase or otherwise acquire shares of Common Stock or Common Stock Equivalents or any Indebtedness (as defined in the Debentures), subject to limited exceptions; (v) pay cash dividends of distributions; or (vi) enter into a transaction with an affiliate that would be required to be disclosed in a public filing with the SEC, unless an arm’s length transaction approved by a majority of disinterested directors of the Board.

Description of 2023 Warrants

The 2023 Warrants issued in the 2023 Private Placement have an exercise price equal to $1.30, subject to customary anti-dilution adjustments as provided in the 2023 Warrants. The 2023 Warrants, however, will not be exercisable into the Warrant Shares unless and until the Company Guide Approval is obtained (the “Initial Exercise Date”). After the Initial Exercise Date, the Long-Term Warrants will be exercisable for a period of five (5) years thereafter and the Short-Term Warrants will be exercisable for a period of two (2) years thereafter. The 2023 Warrants will be exercisable for an aggregate of 5,076,928 shares of Common Stock (the “Warrant Shares”). The 2023 Warrants prohibit the exercise of such 2023 Warrants to the extent that, after giving effect to such exercise, the holder of such 2023 Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% or 9.99% of the outstanding Common Stock. The 2023 Warrants do not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of the Company.

Warrant Amendments

As a condition to the closing of the 2023 Private Placement, each Purchaser and the Company entered into a Warrant Amendment Agreement (the “Warrant Amendment Agreement”), that provided for the amendment of the Common Stock purchase warrants issued by the Company to the Purchasers in the Company’s private placements that closed in November 2022 and November 2021, and that were issued to the Purchasers in the Company’s warrant reprice transaction that closed in September 2022 (collectively, the “Purchaser Outstanding Warrants”), effective as of the Private Placement Closing. The amendment to each of the Purchaser Outstanding Warrants lowered the exercise price from $6.30 to $1.50 per share. In addition, the Company entered into additional Warrant Amendment Agreements with one other existing investor that hold previously issued Common Stock purchase warrants, which was a condition for Mr. Fu and Pioneer Pharma (Hong Kong) Company Ltd. to enter into and deliver their Voting Commitment (as described below) to the Company.

Voting Commitments

As a condition to the closing of the 2023 Private Placement, we receive voting commitments from the Company’s executive officers, directors, more than 10% stockholders, Mr. Fu and Pioneer Pharma (Hong Kong) Company Ltd. to support the vote to obtain the Company Guide Approval (the “Voting Commitments”). These Voting Commitments are currently effective and represent approximately 12% of the outstanding Common Stock as of the Record Date to support approving this Proposal Three; however, such number of shares will not be sufficient to approve this Proposal Three.

Other Post-Closing Obligations and Anti-Dilution Adjustment of Series B Preferred Stock and Series C Preferred Stock

Resale Registration. In connection with the 2023 Private Placement, the Company entered into a registration rights agreement, dated April 27, 2023 (the “Registration Rights Agreement”) that requires the Company to prepare and file a registration statement with the SEC that will cover the resale of all of the Conversion Shares and the Warrant Shares no later than 30 days after the Private Placement Closing and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than sixty (60) days (or ninety (90) days in certain circumstances) after the Private Placement Closing. The Company’s failure to satisfy certain conditions and deadlines described in the Registration Rights Agreement may subject it to payment of certain liquidated damages.

Anti-Dilution Adjustment to Series B Preferred Stock and Series C Preferred Stock. The Certificate of Designation of Preferences, Rights and Limitations for the Company’s outstanding Series C Preferred Stock (the “Series C Certificate of Designation”) at the time of the 2023 Warrant Reprice Transaction provided for anti-dilution protections in the event that we granted any right to reprice any Company security or issue a new Company security that would entitle the holder to acquire Common Stock at an effective price per share that is lower than the conversion price of the Series B Preferred Stock and the Series C Preferred Stock, which is referred to as “full-ratchet” anti-dilution protection. As a result of the consummation of the 2023 Warrant Reprice Transaction where the 2023 Warrant Reprice Participants exercised their Series B Warrants at the Reduced Exercise Price during the Exercise Period and the Company issued to 2023 Warrant Reprice Participants Series C Warrants having an exercise price of $0.25 per share, the anti-dilution protection in the Series B Certificate of Designation and the Series C Certificate of Designation was triggered. Accordingly, the conversion price of each share of Series B Preferred Stock and each share of Series C Preferred Stock, which were each $1.30 convertible into 770 shares of Common Stock, both automatically adjusted downward to a $0.25 conversion price per share convertible into 4,000 shares of Common Stock. The adjusted conversion price of the Series B Preferred Stock and the Series C Preferred Stock is the same as the Reduced Exercise Price and the exercise price of the Series C Warrants. Therefore, based on the Series B Preferred Stock and Series C Preferred Stock currently outstanding, there were an additional 23,407,810 shares of Common Stock that became issuable upon conversion. 

Dilutive Effect of Issuances of Common Stock

If stockholder approval of this Proposal Three is received and it becomes effective, then all of the Series C Warrants will be exercisable for an aggregate of 2,528,848 shares of Common Stock. Accordingly, an aggregate of 2,528,848 shares of Common Stock, which represented 34.9% of the total number of shares of Common Stock outstanding as of December 21, 2023, and represents 7.0% of outstanding shares of Common Stock as of the Record Date, will be issuable pursuant to exercise of the Series C Warrants. If the Series C Warrants become exercisable, then existing stockholders of the Company will experience dilution in their ownership interests and voting rights to the extent that the Series C Warrants are exercised.

Obligations Upon Failure of Stockholder Approval

If Proposal Three is not approved, the Series C Warrants will not be exercisable pursuant to the terms of the Series C Warrants. In addition, the terms of the Letter Agreements we entered into with the 2023 Warrant Reprice Participants will require us to continue to seek stockholder approval every four months until such proposal is approved.

Rights of Series C Warrant Holders

If stockholder approval of this Proposal Three is received and it becomes effective, then the shares of Common Stock issuable upon the exercise of the Series C Warrants will have the same privileges and rights as all other shares of Common Stock that are currently issued and outstanding, including the right to vote on all matters presented to the holders of Common Stock.

This Proposal Three provides a description of the 2023 Warrant Reprice Transaction and the material terms of the Letter Agreements and the Series C Warrants for consideration by stockholders at this Annual Meeting. Disclosure of the 2023 Warrant Reprice Transaction, as well as forms of the Letter Agreement and Series C Warrants can be found as exhibits to our Current Report on Form 8-K as filed with the SEC on December 21, 2023. See “Where You Can Find More Information” below.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the Annual Meeting is required for approval of this Proposal Three. It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the 2023 Warrant Reprice Transaction (which has already been completed) or the issuance of the Series C Warrants (which have already been issued).

At the Annual Meeting, we are asking stockholders to approve the issuance of an aggregate of 4,750,000 shares of Common Stock upon (i) the conversion of new unsecured convertible notes with a $525 thousand aggregate principal amount due March 25, 2026 (the “Unsecured Convertible Notes”) and (ii) the exercise of a new Series D Common Stock purchase warrant (the “Series D Warrant”).

On March 25, 2024, the Company completed the DERMAdoctor Divestiture. In order to complete the DERMAdoctor Divestiture, it was a condition to closing that the assets of DERMAdoctor, including its Membership Units (as defined below), be removed as collateral from the Secured Convertible Notes and for DERMAdoctor to be released as a guarantor of the Secured Convertible Notes (as discussed below). To satisfy this closing condition, the holders of the Secured Convertible Notes agreed to enter into the First Amendment and the Subsidiary Guarantee Consent (each as defined and described below) on March 24, 2024, and, after the closing of the DERMAdoctor Divestiture, as consideration, we issued: (a) a Series D Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of Common Stock and (b) Unsecured Convertible Notes to four (4) Secured Parties that have an aggregate principal amount of $525 thousand or will be convertible into an aggregate of 3,750,000 shares of Common Stock (collectively, the “Secured Parties Consent Transaction”).

Pursuant to the terms of the First Amendment, the Unsecured Convertible Notes and the Series D Warrant, the Unsecured Convertible Notes are not convertible into Common Stock, and the Series D Warrant is not exercisable for Common Stock, until stockholder approval for such conversion or exercise, as applicable, is received. Approval of this Proposal Four will result in the restrictions on the conversion of the Unsecured Convertible Notes, and the exercise of the Series D Warrant, to no longer be effective. Pursuant to the terms of the Unsecured Convertible Notes (as further discussed below), if we do not obtain stockholder approval to remove this conversion restriction by September 26, 2024, then the full amount of the Unsecured Convertible Notes, $525 thousand, will become due and payable by the Company. The Board approved the Secured Parties Consent Transaction and believes that satisfying our contractual obligations in this transaction by submitting this Proposal Four to stockholders for their approval at this Annual Meeting is in the best interests of our Company and our stockholders.

It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the Secured Parties Consent Transaction (which has already been completed) or the issuance of the Unsecured Convertible Notes or the Series D Warrant (which have already been issued). Instead, we are seeking your approval of the issuance of shares of Common Stock underlying the Unsecured Convertible Notes and the Series D Warrant issued to the Secured Parties.

In our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, we reported that based primarily on the funds available as of December 31, 2023 that we expected our expenses will continue to exceed our revenues, as we continue our commercialization efforts. Further, based on the amount of capital and liquidity that we had available at such time, we determined that our planned operations raised substantial doubt about our ability to continue as a going concern. Additionally, we noted that changing circumstances may cause us to expend cash significantly faster than currently anticipated or planned, and that we may need to spend more cash than currently expected because of circumstances beyond our control that impact the broader economy such as periods of inflation, supply chain issues, the national pandemic impacts and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan). In an effort to decrease our expenses, we completed the DERMAdoctor Divestiture, which required the completion of the Secured Parties Consent Transaction.

DERMAdoctor Divestiture

On March 25, 2024, we completed the sale of our wholly-owned subsidiary, DERMAdoctor, that develops, manufactures, markets, brands, distributes and sells a variety of skincare products.

The DERMAdoctor Divestiture was consummated pursuant to a Membership Unit Purchase Agreement, dated as of March 12, 2024 (the “Purchase Agreement”), by and among: (i) New Age Investments LLC, a Florida limited liability company; (ii) DERMAdoctor; and (iii) the Company. Pursuant to the Purchase Agreement, the Company sold 100% of the membership units (the “Membership Units”) of DERMAdoctor to New Age Investments LLC for a closing purchase price of $1,070,000, as adjusted for the payment of certain outstanding DERMAdoctor indebtedness and transaction expenses.

Secured Parties Consent Transaction

The closing of the DERMAdoctor Divestiture was subject to certain conditions, which included the Company obtaining the consent of the Secured Parties to (i) amend the Security Agreement, dated April 27, 2023 (the “Series B Certificate of Designation”) and the Certificate of Designation of Preferences, Rights and Limitations for the Company’s outstanding Series C Non-Voting Convertible Preferred Stock (the “Series C Certificate of Designation”) providesat the time of the 2023 Warrant Reprice Transaction provided for anti-dilution protections in the event that the Company grantswe granted any right to reprice any Company security or issue a new Company security that would entitle the holder to acquire Common Stock at an effective price per share that is lower than the conversion price of the Series B Preferred Stock and the Series C Preferred Stock, which is referred to as “full-ratchet” anti-dilution protection. As a result of the consummation of the 2023 Private Placement that resulted in the issuance of the Debentures that are convertible into shares of Common Stock at a conversion price of $1.30 as well asWarrant Reprice Transaction where the 2023 Warrant Reprice Participants exercised their Series B Warrants being exercisable at the Reduced Exercise Price during the Exercise Period and the Company issued to 2023 Warrant Reprice Participants Series C Warrants having an exercise price of $1.30$0.25 per share, thisthe anti-dilution protection in the Series B Certificate of Designation and the Series C Certificate of Designation was triggered. Accordingly, the conversion price of each share of Series B Preferred Stock and each share of Series C Preferred Stock, which were each $6.30$1.30 convertible into 159770 shares of Common Stock, have both automatically adjusted downward to now be $1.30a $0.25 conversion price per share convertible into 7704,000 shares of Common Stock. The adjusted conversion price of the Series B Preferred Stock and the Series C Preferred Stock is the same as the ConversionReduced Exercise Price of the Conversion Shares for the Debentures and the exercise price of the 2023Series C Warrants. Therefore, based on the Series B Preferred Stock and Series C Preferred Stock currently outstanding, there arewere an additional 7,863,57023,407,810 shares of Common Stock that became issuable upon conversion.

Dilutive Effect of Issuances of Common Stock

If stockholder approval of this Proposal Three is received and it becomes effective, then (i)all of the Debentures will be convertible into an aggregate of up to 2,538,464 shares of Common Stock and (ii) the 2023Series C Warrants will be exercisable for an aggregate of 5,076,9282,528,848 shares of Common Stock. Accordingly, an aggregate of 7,615,3922,528,848 shares of Common Stock, [347]%which represented 34.9% of the total number of shares of Common Stock currently outstanding as of December 21, 2023, and represents 7.0% of outstanding shares of Common Stock as of the Record Date, will be issuable pursuant to exercise or conversion (as applicable) of the Debentures and the 2023 Warrants, subject to additional shares of Common Stock that become issuable as a result of any applicable anti-dilution adjustments or the monthly redemption of the Debentures in shares of Common Stock.Series C Warrants. If the Debentures become fully convertible and the 2023Series C Warrants become exercisable, then existing stockholders of the Company will experience significant dilution in their ownership interests and voting rights.rights to the extent that the Series C Warrants are exercised.

Obligations Upon Failure of Stockholder Approval

If Proposal Three is not approved, a condition to the 2023 Private Placement will not be satisfied and the Debentures will not be fully convertible and the 2023Series C Warrants will not be exercisable.exercisable pursuant to the terms of the Series C Warrants. In addition, the terms of the Securities Purchase AgreementLetter Agreements we entered into with the 2023 Warrant Reprice Participants will require us to continue to seek stockholder approval every twofour months until such proposal is approved, and we will be restricted in our ability to raise capital using Common Stock and Common Stock equivalents or to incur indebtedness.approved.

Rights of PurchasersSeries C Warrant Holders

If stockholder approval of this Proposal Three is received and it becomes effective, then the shares of Common Stock issuable upon the conversion of the Debentures and the exercise of the 2023Series C Warrants will have the same privileges and rights as all other shares of Common Stock that are currently issued and outstanding, including the right to vote on all matters presented to the holders of Common Stock.

This Proposal Three provides a description of the 2023 Private PlacementWarrant Reprice Transaction and the material terms of the Purchase Agreement, the Debentures, the 2023 Warrants, the Security Agreement, the Subsidiary Guarantee, the Warrant Amendments, the Voting CommitmentsLetter Agreements and the Registration Rights AgreementSeries C Warrants for consideration by stockholders.stockholders at this Annual Meeting. Disclosure of the 2023 Private Placement and related transactionsWarrant Reprice Transaction, as well as forms of the PurchaseLetter Agreement the Debentures, the 2023and Series C Warrants the Security Agreement, the Subsidiary Guarantee, the Warrant Amendments, the Voting Commitments and the Registration Rights Agreement can be found as exhibits to our Current Report on Form 8-K as filed with the SEC on April 27,December 21, 2023. See "Where“Where You Can Find More Information"Information” below.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the Annual Meeting is required for approval of this Proposal Three. It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the 2023 Private PlacementWarrant Reprice Transaction (which has already been completed) or the issuance of the Debentures or the 2023Series C Warrants (which have already been issued).

At the Annual Meeting, we are asking stockholders to approve the issuance of an aggregate of 4,750,000 shares of Common Stock upon (i) the conversion of new unsecured convertible notes with a $525 thousand aggregate principal amount due March 25, 2026 (the “Unsecured Convertible Notes”) and (ii) the exercise of a new Series D Common Stock purchase warrant (the “Series D Warrant”).

On March 25, 2024, the Company completed the DERMAdoctor Divestiture. In order to complete the DERMAdoctor Divestiture, it was a condition to closing that the assets of DERMAdoctor, including its Membership Units (as defined below), be removed as collateral from the Secured Convertible Notes and for DERMAdoctor to be released as a guarantor of the Secured Convertible Notes (as discussed below). To satisfy this closing condition, the holders of the Secured Convertible Notes agreed to enter into the First Amendment and the Subsidiary Guarantee Consent (each as defined and described below) on March 24, 2024, and, after the closing of the DERMAdoctor Divestiture, as consideration, we issued: (a) a Series D Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of Common Stock and (b) Unsecured Convertible Notes to four (4) Secured Parties that have an aggregate principal amount of $525 thousand or will be convertible into an aggregate of 3,750,000 shares of Common Stock (collectively, the “Secured Parties Consent Transaction”).

Pursuant to the terms of the First Amendment, the Unsecured Convertible Notes and the Series D Warrant, the Unsecured Convertible Notes are not convertible into Common Stock, and the Series D Warrant is not exercisable for Common Stock, until stockholder approval for such conversion or exercise, as applicable, is received. Approval of this Proposal Four will result in the restrictions on the conversion of the Unsecured Convertible Notes, and the exercise of the Series D Warrant, to no longer be effective. Pursuant to the terms of the Unsecured Convertible Notes (as further discussed below), if we do not obtain stockholder approval to remove this conversion restriction by September 26, 2024, then the full amount of the Unsecured Convertible Notes, $525 thousand, will become due and payable by the Company. The Board approved the Secured Parties Consent Transaction and believes that satisfying our contractual obligations in this transaction by submitting this Proposal Four to stockholders for their approval at this Annual Meeting is in the best interests of our Company and our stockholders.

It is important to understand that we are not seeking stockholder approval of, and you are not being asked to vote on, the Secured Parties Consent Transaction (which has already been completed) or the issuance of the Unsecured Convertible Notes or the Series D Warrant (which have already been issued). Instead, we are seeking your approval of the issuance of shares of Common Stock underlying the Unsecured Convertible Notes and the Series D Warrant issued to the Secured Parties.

In our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, we reported that based primarily on the funds available as of December 31, 2023 that we expected our expenses will continue to exceed our revenues, as we continue our commercialization efforts. Further, based on the amount of capital and liquidity that we had available at such time, we determined that our planned operations raised substantial doubt about our ability to continue as a going concern. Additionally, we noted that changing circumstances may cause us to expend cash significantly faster than currently anticipated or planned, and that we may need to spend more cash than currently expected because of circumstances beyond our control that impact the broader economy such as periods of inflation, supply chain issues, the national pandemic impacts and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan). In an effort to decrease our expenses, we completed the DERMAdoctor Divestiture, which required the completion of the Secured Parties Consent Transaction.

DERMAdoctor Divestiture

On March 25, 2024, we completed the sale of our wholly-owned subsidiary, DERMAdoctor, that develops, manufactures, markets, brands, distributes and sells a variety of skincare products.

The DERMAdoctor Divestiture was consummated pursuant to a Membership Unit Purchase Agreement, dated as of March 12, 2024 (the “Purchase Agreement”), by and among: (i) New Age Investments LLC, a Florida limited liability company; (ii) DERMAdoctor; and (iii) the Company. Pursuant to the Purchase Agreement, the Company sold 100% of the membership units (the “Membership Units”) of DERMAdoctor to New Age Investments LLC for a closing purchase price of $1,070,000, as adjusted for the payment of certain outstanding DERMAdoctor indebtedness and transaction expenses.

Secured Parties Consent Transaction

The closing of the DERMAdoctor Divestiture was subject to certain conditions, which included the Company obtaining the consent of the Secured Parties 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 (the “Security Agreement Amendment”) and (ii) remove DERMAdoctor as a guarantor of the Secured Convertible Notes and terminate the Subsidiary Guarantee, dated April 27, 2023 (the “Subsidiary Guarantee”), which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes (the “Subsidiary Guarantee Termination”).

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 (the “First Amendment”), and a Consent and Release to effect the Subsidiary Guarantee Termination (the “Subsidiary Guarantee Consent”). As consideration for the Secured Parties executing and delivering the First Amendment and the Subsidiary Guarantee Consent, which would reduce 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 Series D Warrant or (ii) an Unsecured Convertible Note. As described in more detail below, there are an aggregate of 4,750,000 shares of Common Stock underlying the Unsecured Convertible Notes and the Series D Warrant issued to the Secured Parties.

Issuance and Description of Unsecured Convertible Notes

As a result of the Secured Parties Consent Transaction and based on the Secured Parties’ elections, we issued Unsecured Convertible Notes to four (4) Secured Parties that have an aggregate principal amount of $525 thousand or will be convertible into an aggregate of 3,750,000 shares of Common Stock, provided approval of Company stockholders is obtained as required by the terms of the Unsecured Convertible Notes (as discussed below).

The Unsecured Convertible Notes will: (i) be unsecured obligations of the Company; (ii) not have any interest that will accrue or be payable by the Company; (iii) be convertible into shares of Common Stock at a conversion price of $0.14 per share (the “Conversion Shares”); (iv) only be convertible into the Conversion Shares beginning on the date that the Company’s stockholders approve the conversion of up to the aggregate principal amount of all of the Unsecured Convertible Notes into Conversion Shares at a meeting of Company stockholders (such as this Proposal Four at the Annual Meeting) and such approval becomes effective; and (vi) have a term of two (2) years payable at maturity, unless the Unsecured Convertible Notes are required to be paid at an earlier date as a result of an acceleration event due to the Company not obtaining the stockholder approval of the conversion of the Unsecured Convertible Notes within six (6) months of the issuance date or due to an event of default that has not been cured. Therefore, if we do not obtain stockholder approval of this Proposal Four to remove this conversion restriction at this Annual Meeting or at a subsequently called meeting of stockholders by September 25, 2024, then the full amount of the Unsecured Convertible Notes, $525 thousand, will become due and payable by us to the Secured Parties.

Issuance and Description of the Series D Warrant

As a result of the Secured Parties Consent Transaction and based on the Secured Parties’ elections, we issued a Series D Warrant to one (1) Secured Party that is exercisable for an aggregate of 1,000,000 shares of Common Stock, provided approval of Company stockholders is obtained as required by the terms of the Series D Warrant (as discussed below).

The Series D Warrant: (i) will be initially exercisable on the later of (A) the six (6) month anniversary of the date of issuance or (B) the date immediately following the date on which Company stockholders approve the exercise of the Series D Warrant into shares of Common Stock at a meeting of Company stockholders (such as this Proposal Four at the Annual Meeting) and such approval becomes effective; (ii) have a term of exercise of five (5) years from the date that the Series D Warrant becomes exercisable; and (iii) have an exercise price equal to $0.14 per share.

Other Post-Closing Obligations and Anti-Dilution Adjustment of Series C Preferred Stock

Resale Registration. In connection with the Secured Parties Consent Transaction and pursuant to the terms of the First Amendment, we agreed to prepare and file on or prior to 60 days after stockholder approval is received for the exercise of the Series D Warrant and the conversion of the Unsecured Convertible Notes, a registration statement with the SEC covering the resale of 100% of the shares of Common Stock underlying the Unsecured Convertible Notes and the Series D Warrant issued to the Secured Parties. We agreed to use our best efforts to cause the registration statement to be declared effective by the SEC and to keep such registration statement effective at all times until the holders of the Unsecured Convertible Notes and the Series D Warrant no longer own such securities or any of the shares of Common Stock issuable upon conversion of the Unsecured Convertible Notes or exercise of the Series D Warrant.

Anti-Dilution Adjustment to Series C Preferred Stock. The Series C Certificate of Designation at the time of the Secured Parties Consent Transaction provided for anti-dilution protections in the event that we granted any right to reprice any Company security or issue a new Company security that would entitle the holder to acquire Common Stock at an effective price per share that is lower than the conversion price of the Series C Preferred Stock, which is referred to as “full-ratchet” anti-dilution protection. As a result of the consummation of the Secured Parties Consent Transaction where the Company issued to the Secured Parties Unsecured Convertible Notes and a Series D Warrant having a conversion price or exercise price of $0.14 per share, the anti-dilution protection in the Series C Certificate of Designation was triggered. Accordingly, the conversion price of each share of Series C Preferred Stock, which was $0.25 per share convertible into 4,000 shares of Common Stock, automatically adjusted downward to $0.14 per share convertible into 7,143 shares of Common Stock. The adjusted conversion price of the Series C Preferred Stock is the same as the conversion price of the Unsecured Convertible Notes and the exercise price of the Series D Warrant. Therefore, based on the Series C Preferred Stock currently outstanding, there were an additional 2,787,841 shares of Common Stock that became issuable upon conversion. Before the Secured Parties Consent Transaction, on January 29, 2024, the anti-dilution protection of the Series B Preferred Stock expired as greater than 75% of the originally issued 15,000 Series B Preferred Stock had been converted. Therefore, the Secured Parties Consent Transaction did not impact the conversion price of the Series B Preferred Stock.

Dilutive Effect of Issuances of Common Stock

If stockholder approval of this Proposal Four is received and it becomes effective, then all of the Unsecured Convertible Notes and the Series D Warrant will be convertible or exercisable, as the case may be, for an aggregate of 4,750,000 shares of Common Stock. Accordingly, an aggregate of 4,750,000 shares of Common Stock, which represented 15.8% of the total number of shares of Common Stock outstanding as of March 25, 2024, and represents 13.2% of outstanding shares of Common Stock as of the Record Date, will be issuable pursuant to the conversion of the Unsecured Convertible Notes and the exercise of the Series D Warrant. If the Unsecured Convertible Notes become convertible and the Series D Warrant becomes exercisable, then existing stockholders of the Company will experience dilution in their ownership interests and voting rights to the extent that such Unsecured Convertible Notes are converted and/or the Series D Warrant is exercised.

Obligations Upon Failure of Stockholder Approval

If Proposal Four is not approved, the Unsecured Convertible Notes will not be convertible pursuant to the terms of the Unsecured Convertible Notes and the Company will owe $525 thousand to the applicable Secured Parties on September 25, 2024. Further, the Series D Warrant will not be exercisable pursuant to the terms of the Series D Warrant.

Rights of Unsecured Convertible Note Holders and Series D Warrant Holder

If stockholder approval of this Proposal Four is received and it becomes effective, then the shares of Common Stock issuable upon the conversion of the Unsecured Convertible Note and the exercise of the Series D Warrant will have the same privileges and rights as all other shares of Common Stock that are currently issued and outstanding, including the right to vote on all matters presented to the holders of Common Stock.

Additional disclosure concerning the DERMAdoctor Divestiture and the Secured Parties Consent Transaction can be found disclosed in, with related transaction documents as exhibits to, our Current Reports on Form 8-K filed with the SEC on March 25, 2024 and March 26, 2024. See “Where You Can Find More Information” below.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the Annual Meeting is required for approval of this Proposal Four.

The Board has unanimously approved resolutions to (i) effect a reverse split of all of our outstanding (or held in treasury) shares of Common Stock by a ratio of not less than 1-for-10 and not more than 1-for-35 (each 10 to 35 shares of Common Stock, as the case may be, shall be combined to become 1 share of Common Stock) that will be effected by amending our Certificate of Incorporation and (ii) directing that a proposal be submitted to our stockholders at the Annual Meeting for the prior approval of the Reverse Stock Split. The primary purpose of the Reverse Stock Split is to increase the value per share to remain in compliance with the NYSE American’s continued listing requirements under the Company Guide and for the other reasons detailed below under “— Reasons for the Reverse Stock Split”.

If this Proposal Five is approved by our stockholders, the Board will have sole discretion pursuant to Section 242(c) of the Delaware General Corporation Law to elect, as it determines to be in the Company’s best interests and without further action by our stockholders, whether or not and when to effect the Reverse Stock Split, or to abandon it. The Company reserves the right to abandon the Reverse Stock Split without further action by our stockholders at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the Certificate of Amendment, even if the authority to effect the Reverse Stock Split has been approved by our stockholders. By voting in favor of Proposal Five, you are expressly also authorizing the Board to delay, not to proceed with, and/or abandon, the Reverse Stock Split if it should so decide, in its sole discretion. No further action on the part of stockholders will be required to either implement or abandon the Reverse Stock Split.

If this Proposal Five is approved by stockholders and if the Reverse Stock Split is made effective, the number of authorized shares of Company capital stock, consisting of 150,000,000 authorized shares of Common Stock and 5,000,000 authorized shares of preferred stock, will remain unchanged, which will result in the number of authorized shares of Common Stock that will be available for future issuance to increase significantly. If Proposal Five is approved by our stockholders and the Reverse Stock Split is effective, then these additional authorized shares of Common Stock will be available for issuance for any proper corporate purpose as determined by the Board, without further approval by the stockholders, except as required by law.

Should the Board proceed with the Reverse Stock Split, the exact ratio will be set at a whole number within the above range as determined by the Board in its sole discretion without further action by our stockholders. If the Board elects to effect the Reverse Stock Split with a ratio of 1-for-10 (the low end of the range set forth above), each 10 shares of Common Stock will be combined to become one share of Common Stock. Following a 1-for-10 Reverse Stock Split, the Company would continue to have 150,000,000 authorized shares of Common Stock, but would only have approximately 3,606,083 shares of Common Stock outstanding (as compared to 36,060,825 shares outstanding as of the Record Date). If the Board elects to effect a Reverse Stock Split with a ratio of 1-for-35 (the high end of the range set forth above), each 35 shares of Common Stock will be combined to become one share of Common Stock. Following a 1-for-35 Reverse Stock Split, the Company would similarly continue to have 150,000,000 authorized shares of Common Stock, but would only have approximately 1,030,310 shares of Common Stock outstanding (as compared to 36,060,825 shares outstanding as of the Record Date). The foregoing numbers of shares of Common Stock outstanding will be subject to adjustments that may result from the treatment of fractional shares as described below under the heading “— Fractional Shares”.

The Board believes that the availability of alternative Reverse Stock Split ratios will provide it with the flexibility to implement the Reverse Stock Split in a manner designed to maximize the anticipated benefits for the Company and its stockholders. In determining the specific Reverse Stock Split ratio, the Board may consider, among other things, factors such as:

If the Board determines that effecting the Reverse Stock Split is in our best interest, the Reverse Stock Split will become effective as provided in the Certificate of Amendment, which will set forth the number of shares to be combined into one share of Common Stock within the limits set forth in this proposal. The Reverse Stock Split, if effected, would affect holders of Common Stock and holders of Series B Preferred Stock and Series C Preferred Stock, which are convertible into shares of Common Stock, uniformly, as described below under the heading “— Principal Effects of the Reverse Stock Split”. Except for adjustments that may result from the treatment of fractional shares as described below under the heading “— Fractional Shares”, each stockholder will hold the same percentage of our outstanding Common Stock immediately following the Reverse Stock Split as such stockholder held immediately prior to the Reverse Stock Split. The following description of the proposed Reverse Stock Split and Certificate of Amendment is a summary and is subject to the full text of the proposed Certificate of Amendment, which is attached to this Proxy Statement as Annex A. The text of the form of Certificate of Amendment accompanying this Proxy Statement is, however, subject to revision to reflect the exact ratio for the Reverse Stock Split and any changes that may be required by the office of the Secretary of State of the State of Delaware or that the Board may determine to be necessary or advisable to comply with applicable law and to effect the Reverse Stock Split.

If our stockholders approve this Proposal Five, we expect our Board to determine a reverse stock split ratio within the range approved by stockholders and then file the Certificate of Amendment with the Secretary of State of the State of Delaware, substantially in the form as attached in Annex A hereto. The Certificate of Amendment will become effective after filing with the Secretary of State of the State of Delaware and on the date and time set forth therein.

If this Proposal Five is approved and the Board determines to proceed with the Reverse Stock Split, the exact timing of the filing of the Certificate of Amendment will be determined by the Board. We refer to this time and date as the “Effective Date.” Except as explained below with respect to fractional shares, each issued share of Common Stock immediately prior to the Effective Date will automatically be changed, as of the Effective Date, into a fraction of a share of Common Stock based on the exchange ratio within the approved range determined by the Board.

The Board currently believes that a Reverse Stock Split is necessary, desirable and in the best interest of the Company and its stockholders for the primary reasons listed and described below.

Maintain Compliance with NYSE American Continued Listing Requirements

We are also seeking approval of the Reverse Stock Split so that the Company will comply with the continued listing rules of the NYSE American under the Company Guide. Our Common Stock is listed on the NYSE American under the symbol “NBY.” In order to maintain listing on the NYSE American, among other requirements, our Common Stock must maintain an average minimum closing stock price of $0.20 over any 30-day consecutive trading period, with $0.20 being the current NYSE American internal precedent threshold of what the NYSE American considers to be a “low price per share” and constitute “low selling price issues” of the issuer pursuant to Section 1003(f)(v) of the Company Guide.

As of April 1, 2024, our 30-trading day average closing stock price was $0.14 per share, which is below the $0.20 “low price per share” minimum threshold. Pursuant to the Secured Parties Consent Transaction, the conversion price of the Unsecured Convertible Notes and the exercise price of the Series D Warrant is $0.14 per share. Therefore, the NYSE American may issue to the Company a formal compliance deficiency letter at any time or could delist our Common Stock immediately if our stock price continues to decline. The compliance deficiency letter may initiate a period under which the NYSE American urges the Company to effect a reverse stock split and closely monitors the performance of the Common Stock. At the end of such period, the NYSE American may evaluate the Company’s most recent 30-day average closing price, as well as the Company’s absolute closing price before the end of such period, to determine whether the Company is below the NYSE American compliance standards. While the NYSE American will evaluate the totality of the circumstances, there is a potential that the NYSE American could initiate delisting procedures against the Company. The Board expects that the Reverse Stock Split will increase the market price of Common Stock so that the Company will be able to satisfy the continued listing requirements of the NYSE American for the foreseeable future, although the Company cannot assure that it will be able to do so. Accordingly, approval of this Proposal Five is important in order to maintain the listing of our Common Stock on the NYSE American.

Additional Authorized Common Stock

If Proposal Five is approved by stockholders and the Board determines to effect the Reverse Stock Split, the number of authorized shares of Company capital stock, consisting of 150,000,000 authorized shares of Common Stock and 5,000,000 authorized shares of preferred stock, will remain unchanged. As a result of there being no change to the number of shares of our authorized capital stock in connection with the Reverse Stock Split, the number of authorized shares of Common Stock that will be available for future issuance will increase significantly. Therefore, the Reverse Stock Split will provide for additional shares of Common Stock that may be issued in any future offerings or potential strategic transactions that we may pursue. We plan to use the additional authorized shares resulting from the Reverse Stock Split to continue to pursue our historical financing strategy of raising additional capital in order to fund our operations and meet our ongoing obligations. We believe that maintaining our current number of authorized shares in our Certificate of Incorporation will better equip us to engage in additional capital raising efforts in the future. While we do not have any current and/or definite plans, agreements or arrangements, whether written or oral, to issue any newly authorized shares in connection with a capital raising transaction, such a transaction could arise at any time following the date of this Proxy Statement, either prior to or after the Annual Meeting.

Improve the Marketability and Liquidity of the Common Stock and Appeal to a Broader Range of Investors and Generate Greater Investor Interest

We also believe that the expected increased market price of our Common Stock resulting from the Reverse Stock Split will improve the marketability and liquidity of our Common Stock and will encourage interest and trading in our Common Stock. A Reverse Stock Split could allow a broader range of institutions to invest in our Common Stock (namely, funds that are prohibited or discouraged by internal policies and practices from buying stocks whose price is below a certain threshold), potentially increasing the liquidity of our Common Stock. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.

There are risks associated with a reverse stock split, and we may fail to realize the expected benefits.

The proposed Reverse Stock Split, if effected, may not increase our stock price, and could lead to a decrease in our overall market capitalization.

On April 1, 2024, the closing sale price of our Common Stock on the NYSE American was $0.10 per share. We expect that the Reverse Stock Split, if effected, will increase the per share trading price of our Common Stock. However, the market price per share of our Common Stock after the Reverse Stock Split may not rise (or remain constant) in proportion to the reduction in the number of shares of Common Stock outstanding before the Reverse Stock Split. We cannot predict the effect of the Reverse Stock Split on the per share trading price of our Common Stock, and the history of reverse stock splits for other companies is varied, particularly since some investors may view a reverse stock split negatively. In many cases, the market price of a company’s shares declines after a reverse stock split, or the market price of a company’s shares immediately after a reverse stock split does not reflect a proportionate or mathematical adjustment to the market price based on the ratio of the reverse stock split (which happened to the Company after its 1-for-35 reverse stock split effective November 15, 2022). Accordingly, our total market capitalization after a Reverse Stock Split may be lower than our total market capitalization before the Reverse Stock Split, and it is possible that a Reverse Stock Split may not result in a per share trading price that would attract investors who do not trade in lower priced stocks.

Even if we implement the Reverse Stock Split, the per share trading price of our Common Stock may decrease due to factors unrelated to the Reverse Stock Split. Other factors, such as our financial results, market conditions and the market perception of our business, may adversely affect the per share trading price of our Common Stock. As a result, we cannot assure you that the Reverse Stock Split, if completed, will result in the benefits that we anticipate, that the per share trading price of our Common Stock will increase following the Reverse Stock Split or that the per share trading price of our Common Stock will not decrease in the future.

The proposed Reverse Stock Split, if effected, may decrease the liquidity of our Common Stock.

The liquidity of our Common Stock may be harmed by the proposed Reverse Stock Split, given the reduced number of shares that would be outstanding after the Reverse Stock Split, particularly if the per share trading price does not increase proportionately as a result of the Reverse Stock Split. While the Board believes that a higher stock price may help generate the interest of new investors, the Reverse Stock Split may not result in a per share price that will attract certain types of investors, such as institutional investors or investment funds, and such share price may not satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our Common Stock may not improve as a result of a Reverse Stock Split and could be adversely affected by a higher per share price. Accordingly, the Reverse Stock Split may not increase marketability of our Common Stock. In addition, investors might consider the increased proportion of unissued authorized shares to issued shares to have an anti-takeover effect under certain circumstances, because the proportion allows for dilutive issuances that could prevent certain stockholders from changing the composition of the Board or render tender offers for a combination with another entity more difficult.

The proposed Reverse Stock Split, if effected, may result in some stockholders owning “odd lots” that may be more difficult to sell or require greater transaction costs per share to sell.

If the proposed Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own less than 100 shares of our Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their shares of Common Stock.

The proposed Reverse Stock Split, if effected, will result in a significant increase in our authorized Common Stock and may result in future dilution to our stockholders.

The Reverse Stock Split will reduce the number of outstanding shares of our Common Stock without a proportionate reduction in the number of shares of authorized but unissued Common Stock in our Certificate of Incorporation, which will give the Company a significantly larger number of authorized shares, as a percentage of total outstanding shares, available for future issuance without further stockholder action, except as may be required by applicable laws or the rules of any stock exchange on which our Common Stock is listed. The issuance of additional shares of Common Stock may have a dilutive effect on the ownership of existing stockholders.

Common Stock and Preferred Stock. If the Reverse Stock Split is approved by the stockholders at the Annual Meeting and the Board determines to proceed with the Reverse Stock Split, we expect the Board to establish the Reverse Stock Split ratio and proceed to effect the Reverse Stock Split, including the filing the Certificate of Amendment with the Secretary of State of the State of Delaware. Except for adjustments that may result from the treatment of fractional shares as described below, each issued share of Common Stock immediately prior to the Effective Date will automatically be changed, as of the Effective Date, into a fraction of a share of Common Stock based on the exchange ratio within the approved range determined by the Board. In addition, proportional adjustments (i.e., in proportion to the Reverse Stock Split ratio determined by the Board) will be made to any convertible or exchangeable securities entitling the holders thereof to purchase, exchange for, or convert into shares of Common Stock (including, but not limited to, warrants, convertible notes and convertible preferred stock). The Reverse Stock Split, if effected, would affect holders of Common Stock and holders of Series B Preferred Stock and Series C Preferred Stock, which are convertible into shares of Common Stock, uniformly.

Voting Rights. Except for adjustments that may result from the treatment of fractional shares as described below, because the Reverse Stock Split would apply to all issued shares of our Common Stock, the proposed Reverse Stock Split would not alter the relative rights and preferences of existing stockholders nor affect any stockholder’s proportionate equity interest in the Company. For example, a holder of 2% of the voting power of the outstanding shares of Common Stock immediately prior to the effectiveness of the Reverse Stock Split will generally continue to hold 2% of the voting power of the outstanding shares of Common Stock immediately after the Reverse Stock Split, and the number of stockholders of record will also remain unaffected by the Reverse Stock Split.

Stock-Based Plans. Proportional adjustments (i.e., in proportion to the Reverse Stock Split ratio) will be made to the maximum number of shares issuable under, outstanding awards under, and other terms of our 2007 Omnibus Incentive Plan and 2017 Omnibus Incentive Plan (collectively, the “Plans”), including adjustments (based upon the Reverse Stock Split ratio) by the Board or a committee thereof, as applicable, to the number of shares available for future grant under the Plans, the number of shares underlying outstanding awards, the exercise price per share of outstanding stock options, and other terms of outstanding awards issued pursuant to the Plans to equitably reflect the effects of the Reverse Stock Split, so as to avoid the effect of increasing the value of awards previously granted.

Listing. Our Common Stock currently trades on the NYSE American. The Reverse Stock Split will not directly affect the listing of our Common Stock on the NYSE American, although we believe that a Reverse Stock Split could potentially increase our stock price, thereby facilitating compliance with the NYSE American’s continued listing standards. Following the Reverse Stock Split, we expect that our Common Stock will continue to be listed on the NYSE American under the symbol “NBY”, although our Common Stock would have a new committee on uniform securities identification procedures (or “CUSIP”) number (which is a number used to identify our Common Stock). Any stock certificates with the older CUSIP number will need to be exchanged for stock certificates with the new CUSIP number by following the procedures described below “— Stock Certificates”.

Authorized but Unissued Shares; Potential Anti-Takeover Effects. Our Certificate of Incorporation currently authorizes 150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, and the Reverse Stock Split would not change those numbers. Therefore, the number of issued and outstanding shares of Common Stock would decrease, and the number of shares remaining available for issuance by us in the future would increase. These additional shares would be available for issuance from time to time for corporate purposes, such as issuances of Common Stock in connection with capital-raising transactions and acquisitions of companies or other assets, as well as for issuance upon conversion or exercise of securities such as convertible preferred stock, convertible debt, warrants or options convertible into or exercisable for Common Stock. We believe that the availability of the additional shares will provide us with the flexibility to meet business needs as they arise, to take advantage of favorable opportunities and to respond effectively in a changing corporate environment. For example, we may elect to issue shares of Common Stock to raise equity capital, to make acquisitions through the use of stock, to establish strategic relationships with other companies, to adopt additional employee benefit plans or reserve additional shares for issuance under such plans, where the Board determines it advisable to do so, without the necessity of soliciting further stockholder approval, subject to applicable stockholder vote requirements under Delaware General Corporation Law and the Company Guide rules. If we issue additional shares for any of these purposes, the aggregate ownership interest of our current stockholders, and the interest of each such existing stockholder, would be diluted, possibly substantially.

We will not issue fractional shares in connection with the Reverse Stock Split. To the extent any holders of pre-Reverse Stock Split Shares are entitled to fractional shares as a result of the Reverse Stock Split, we will instead issue one whole share of Common Stock to all holders that would otherwise receive a fractional share of Common Stock.

Under Delaware law, our stockholders will not be entitled to dissenters’ rights or rights of appraisal in connection with the implementation of the Reverse Stock Split, and we will not independently provide our stockholders with any such rights.

The following is a summary of certain United States federal income tax consequences of the Reverse Stock Split. It does not address any state, local or foreign income or other tax consequences, which, depending upon the jurisdiction and the status of the stockholder/taxpayer, may vary from the United States federal income tax consequences. It applies to you only if you held shares of pre-reverse stock split Common Stock as capital assets for United States federal income tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as (a) a dealer in securities or currencies, (b) a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, (c) a bank, (d) a life insurance company, (e) a tax-exempt organization, (f) a person that owns shares of Common Stock that are a hedge, or that are hedged, against interest rate risks, (g) a person who owns shares of Common Stock as part of a straddle or conversion transaction for tax purposes or (h) a person whose functional currency for tax purposes is not the U.S. dollar. This summary does not address all tax considerations that may be relevant to a particular holder in light of the holder’s circumstances. This summary does not address all aspects of U.S. federal income taxes, such as consequences under the Medicare contribution tax or the alternative minimum tax. Further, this summary does not address the consequences under any U.S. federal tax laws other than the U.S. federal income tax laws, such as U.S. federal estate or gift tax laws. The discussion is based on the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), its legislative history, existing, temporary and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as of the date hereof. These laws, regulations and other guidance are subject to change or differing interpretations, possibly on a retroactive basis, which could result in United States federal income tax consequences that differ from those summarized below. We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of a reverse stock split.

PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.

Tax Consequences to United States Holders of Common Stock. A United States holder, as used herein, is a stockholder who or that is, for United States federal income tax purposes: (a) a citizen or individual resident of the United States, (b) a domestic corporation, (c) an estate whose income is subject to United States federal income tax regardless of its source, or (d) a trust that (i) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. This discussion applies only to United States holders.

The Reverse Stock Split is intended to be treated as a “recapitalization” for U.S. federal income tax purposes and, therefore, a reorganization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code. Assuming that the Reverse Stock Split is so treated, a stockholder should not recognize gain or loss upon the Reverse Stock Split. A stockholder’s aggregate tax basis in the shares of Common Stock received pursuant to the Reverse Stock Split should equal the aggregate tax basis of the shares of Common Stock surrendered. The stockholder’s holding period in the shares of the common stock received should include the holding period in the shares of Common Stock surrendered. Treasury regulations promulgated under the Internal Revenue Code provide detailed rules for allocating the tax basis and holding period of the shares of Common Stock surrendered to the shares of Common Stock received pursuant to the Reverse Stock Split. Stockholders who acquired their shares of Common Stock on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

As noted above, we will not issue fractional shares in connection with the Reverse Stock Split. To the extent any holders of pre-reverse stock split shares would be entitled to fractional shares as a result of the Reverse Stock Split, we will instead issue to each such holder an additional fraction of a share of Common Stock to round up to the next whole share of Common Stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of Common Stock are not clear.

Following the Effective Date of any Reverse Stock Split, if any, the net income or loss and net book value per share of Common Stock will be increased because there will be fewer shares of Common Stock outstanding. We do not anticipate that any other accounting consequences would arise as a result of the Reverse Stock Split.

As of the Effective Date, each certificate representing shares of Common Stock outstanding before the Reverse Stock Split will be deemed, for all corporate purposes, to evidence ownership of the reduced number of shares of Common Stock resulting from the Reverse Stock Split. All options, warrants and other securities exchangeable or exercisable for, or convertible into, Common Stock also automatically will be adjusted on the Effective Date.

Our transfer agent, Computershare Shareholder Services, Inc., will act as the exchange agent for purposes of exchanging stock certificates subsequent to the Reverse Stock Split. Shortly after the Effective Date, stockholders of record will receive written instructions requesting them to complete and return a letter of transmittal and surrender their old stock certificates for new stock certificates reflecting the adjusted number of shares as a result of the Reverse Stock Split. Certificates representing shares of Common Stock issued in connection with the Reverse Stock Split will continue to bear the same restrictive legends, if any, that were borne by the surrendered certificates representing the shares of Common Stock outstanding prior to the Reverse Stock Split. No new certificates will be issued until such stockholder has surrendered any outstanding certificates, together with the properly completed and executed letter of transmittal, to the exchange agent. Until surrendered, each certificate representing shares of Common Stock outstanding before the Reverse Stock Split would continue to be valid and would represent the adjusted number of shares, based on the ratio of the Reverse Stock Split.

Any stockholder whose stock certificates are lost, destroyed or stolen will be entitled to a new certificate or certificates representing post-reverse stock split shares upon compliance with the requirements that we and our transfer agent customarily apply in connection with lost, destroyed or stolen certificates. Instructions as to lost, destroyed or stolen certificates will be included in the letter of instructions from the exchange agent.

Upon the Reverse Stock Split, we intend to treat stockholders holding Common Stock in “street name,” through a broker, bank, or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Brokers, banks, and other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding Common Stock in “street name.” However, such brokers, banks, and other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split. If you hold your shares in “street name” with a bank, broker or other nominee, and if you have any questions in this regard, we encourage you to contact your broker, bank, or nominee.

YOU SHOULD NOT DESTROY YOUR STOCK CERTIFICATES AND YOU SHOULD NOT SEND THEM NOW. YOU SHOULD SEND YOUR STOCK CERTIFICATES ONLY AFTER YOU HAVE RECEIVED INSTRUCTIONS FROM THE EXCHANGE AGENT AND IN ACCORDANCE WITH THOSE INSTRUCTIONS.

If any certificates for shares of Common Stock are to be issued in a name other than that in which the certificates for shares of Common Stock surrendered are registered, the stockholder requesting the reissuance will be required to pay to us any transfer taxes or establish to our satisfaction that such taxes have been paid or are not payable and, in addition, (i) the transfer must comply with all applicable federal and state securities laws, and (ii) the surrendered certificate must be properly endorsed and otherwise be in proper form for transfer.

Registered stockholders are stockholders who hold some or all of their shares electronically in book-entry form with our transfer agent and do not have stock certificates evidencing their ownership of Common Stock. They are, however, provided with a statement reflecting the number of shares of Common Stock registered in their accounts. If you hold registered shares of Common Stock in book-entry form, you do not need to take any action to receive your post-Reverse Stock Split shares of Common Stock in registered book-entry form. If you are entitled to post-Reverse Stock Split shares of Common Stock, a transaction statement will automatically be sent to your address of record by our transfer agent as soon as practicable after the Effective Date indicating the number of shares of Common Stock you hold.

The affirmative vote of a majority of the votes cast for this Proposal Five at the Annual Meeting.

If our stockholders approve this Proposal Five, we expect the Board to determine a Reverse Stock Split ratio within the range approved by stockholders and then file the Certificate of Amendment with the Secretary of State of the State of Delaware to affect the Reverse Stock Split, as soon as practicable following stockholder approval of Proposal Five. The Certificate of Amendment will become effective after filing with the Secretary of State of the State of Delaware and on the date and time set forth therein.

A proposal will be submitted to the stockholders at the Annual Meeting to approve the adjournment of the Annual Meeting to establish a quorum or to solicit additional proxies in the event that there are not sufficient votes at the time of the Annual Meeting to approve the proposals. Any adjournment of the Annual Meeting may be made without notice, other than by an announcement made at the Annual Meeting. Any adjournment of the Annual Meeting for the purpose of establishing a quorum or soliciting additional proxies will allow stockholders who have already sent in their proxies to revoke them at any time prior to the time that the proxies are used.

The affirmative vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at the SpecialAnnual Meeting is required for approval of this Proposal Four.

Six.

Unless otherwise indicated, all per share numbers have been retroactively adjusted to account for the 1-for-35 Reverse Stock Split,reverse stock split, effective November 15, 2022.

The table below sets forth certain information regarding our executive officers. Our executive officers are elected by, and serve at the discretion of, our Board of Directors. The following provides the biographical information regarding our Interim Chief Financial Officer and Treasurer, Chief Product Officer and the President of DERMAdoctor.Treasurer. Information concerning the business experience of the Company’s Chief Executive Officer is provided in “Class II Directors” above.

Effective February 16, 2023, the Board appointed Tommy Law as the Company’s Interim Chief Financial Officer and Treasurer. The Company’s former Chief Financial Officer and Treasurer, Mr. Andrew Jones (“Mr. Jones”) resigned effective February 15, 2023.

Tommy Law (“Mr. Law”) currently serves as the Company’s Interim Chief Financial Officer and Treasurer since JanuaryFebruary 2023. Prior to that, he has served the Company since December 2019 in a variety of positions, most recently as the Corporate Controller since September 2022. As the Corporate Controller, Mr. Law was responsible for quarterly filings with the SEC, as well as managing the periodic financial close process. Prior to serving as the Corporate Controller, Mr. Law served the Company as an Assistant Controller (April 2022 to September 2022), Accounting Manager (June 2020 to April 2022) and Senior Accountant (December 2019 to June 2020). Prior to joining the Company, Mr. Law was a Senior Accountant at KP LLC, a marketing solutions company, from January 2017 to December 2019. Previously, he served as Accounting Manager at Hitachi Solutions America, Ltd., an information technology company, from 2012 to 2015. Mr. Law received his B.S. in Business Administration, Accounting from the San Jose State University.

Dr. Audrey Kunin is the Chief Product Officer of NovaBay. Dr. Audrey Kunin co-founded DERMAdoctor and served as the Chief Creative Officer of DERMAdoctor since March 2018 and as the Chief Executive Officer at its predecessor since 1998. Dr. Audrey Kunin graduated from Ohio State University in December 1980 and received her M.D. at the Medical College of Ohio in June 1985. She received her postgraduate training in Dermatology at the Medical College of Virginia after serving as Chief Resident in July 1989. She is a fellow of the American Academy of Dermatology and formerly served as an Assistant Clinical Instructor of Dermatology at the University of Kansas School of Medicine.

Dr. Jeff Kunin co-founded DERMAdoctor and has served as the President and Chief Executive Officer of DERMAdoctor since March 2018. Dr. Jeff Kunin served as the Chairman of the Department of Radiology at Saint Luke’s Hospital in Kansas City from 2007 to 2017. He graduated college with a B.S. degree in Biochemistry and Cell Biology from the University of California, San Diego. He then graduated medical school and earned his M.D. from the University of Texas Medical Branch in Galveston, Texas. After medical school, he completed a residency in diagnostic radiology at the Medical College of Virginia and Henry Ford Hospital. Subsequently, he completed a fellowship in body imaging at the University of Michigan Hospitals. Dr. Jeff Kunin received his MBA degree from Washington University in St. Louis Olin School of Business.

The following table shows information regarding the compensation earned during the fiscal years ended December 31, 20222023 and December 31, 20212022 by (1) our Chief Executive Officer, General Counsel and Chief Compliance Officer, (2) our Interim Chief ProductFinancial Officer and(who was appointed February 16, 2023), (3) our former Chief Financial Officer (who served for the entire fiscal year ended December 31, 2022in such role until his resignation on February 15, 2023 and thenhas served as a consultant since such date), and (4) our former Chief Product Officer (who served until February 15,her resignation effective on November 5, 2023) (collectively, the “NEOs”). Mr. Law was not a named executive officer during 2022 and, as such, is not reflected in the below information.

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Compensation Peer Survey

The Company’s most recent formal compensation peer survey conducted by a third party was in 2021. The Compensation Committee retained Pay Governance LLC (the “Compensation Consultant”) to conduct a survey (the “Pay Governance Survey”) of the Company’s executive compensation program and Board compensation program and recommend any appropriate changes for 2021. The Pay Governance Survey benchmarked the Company’s compensation practices as compared to the Company’s peer group. The Company’s peer group was approved by the Compensation Committee on May 4, 2021, and is comprised of the following 15 comparably-sized pharmaceutical companies, with adjustments made for entities that have subsequently undergone corporate changes (i.e. removing entities that no longer exist due to mergers, accounting for name changes to entities, etc.):

The Pay Governance Survey in 2021 found that while the Company is positioned slightly above the 25th percentile of the peer group on a revenue basis, the Company’s overall compensation to Messrs. Hall and Jones was below the peer median, particularly (1) the Company’s base salary amount and target bonus amount for Mr. Hall, which was below the market 25th percentile, (2) the Company’s base salary amount and target bonus amount for Mr. Jones, which was below the regressed revenue median, and (3) the Company’s long-term incentive equity grants for both Messrs. Hall and Jones, which were below the market 25th percentile.

As a result of the Pay Governance Survey and based on the Compensation Consultant’s recommendations, the Compensation Committee approved increases to Messrs. Hall’s and Jones’ annual base salary and target bonus amounts effective as of May 1, 2021. The base salary of Mr. Justin Hall, the Company’s Chief Executive Officer and General Counsel, increased from $286,000 to $350,000 and his target bonus percentage of base salary increased from 40% to 50%. The base salary of Mr. Andrew Jones, the Company’s Chief Financial Officer, increased from $275,000 to $300,000 and his target bonus percentage of base salary increased from 30% to 35%.

20222023 and 20212022 Base Salaries and Target Bonus Amounts

The Compensation Committee did not recommend any increases to executive salaries or target bonus amounts for 2023 or 2022; they remained the same as 2021. For Mr. Hall, this was a 20222023 base salary of $350,000 and a target bonus percentage of base salary of 50%. For Mr. Jones,Law, this was a 20222023 base salary of $300,000$170,000 and a target bonus percentage of base salary of 35%25%.