NovaBay(NBY) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements The Q1 2025 financial statements show a $7.67 million net income, driven by discontinued operations, significantly improving cash and equity positions Condensed Consolidated Balance Sheets As of March 31, 2025, the balance sheet significantly improved, with cash increasing to $8.47 million and stockholders' equity turning positive to $6.17 million Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $8,467 | $430 | | Total current assets | $9,038 | $1,935 | | Total Assets | $9,872 | $3,423 | | Current Liabilities | | | | Total current liabilities | $3,067 | $2,843 | | Total Liabilities | $3,705 | $3,552 | | Total stockholders' equity (deficit) | $6,167 | $(129) | Condensed Consolidated Statements of Operations Q1 2025 saw a net income of $7.67 million due to $11.0 million from discontinued operations, despite a widening loss from continuing operations to $3.33 million Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total operating expenses | $3,290 | $2,291 | | Operating loss | $(3,290) | $(2,291) | | Net loss from continuing operations | $(3,330) | $(2,925) | | Net income (loss) from discontinued operations, net of taxes | $11,000 | $(289) | | Net income (loss) | $7,670 | $(3,214) | | Basic earnings (loss) per share | $1.44 | $(29.95) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) Stockholders' equity improved from a $129 thousand deficit to a $6.17 million positive equity by March 31, 2025, primarily due to $7.67 million net income - Total stockholders' equity increased from a deficit of $(129) thousand at December 31, 2024, to a positive equity of $6,167 thousand at March 31, 2025[16] - The increase in equity was primarily driven by a net income of $7,670 thousand for the quarter[16] - The company repurchased warrants for $1,990 thousand, which was recorded as a reduction of additional paid-in capital[16] Condensed Consolidated Statements of Cash Flows Q1 2025 saw a net cash increase of $8.04 million, primarily driven by $11.07 million from discontinued operations, offsetting cash used in continuing and financing activities Consolidated Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities, continuing operations | $(1,324) | $(1,979) | | Net cash used in financing activities, continuing operations | $(1,708) | $(597) | | Net increase in cash and cash equivalents, discontinued operations | $11,069 | $1,271 | | Net increase (decrease) in cash, consolidated | $8,037 | $(1,307) | Notes to Condensed Consolidated Financial Statements Notes detail asset divestitures as discontinued operations, ongoing strategic evaluations including potential dissolution, and confirm $8.5 million cash sufficiency for at least 12 months - The company completed the Avenova Asset Divestiture on January 17, 2025, and the Wound Care Divestiture on January 8, 2025. The DERMAdoctor Divestiture was completed on March 12, 2024. All are presented as discontinued operations[19][22] - Stockholders approved a Plan of Dissolution on April 16, 2025, but the Board retains discretion on whether to proceed or pursue other strategic alternatives[23] - Management believes existing cash and cash equivalents of $8.5 million as of March 31, 2025, are sufficient to meet planned operating expenses at least through May 15, 2026[25][183] - In March 2025, the company entered into settlement agreements with certain warrant holders, resulting in the exercise of some warrants and the repurchase of others for $1.8 million[106] Gains on Divestitures (Q1 2025) | Divestiture | Date Closed | Net Gain (in thousands) | | :--- | :--- | :--- | | Avenova Assets | Jan 17, 2025 | $10,700 | | Wound Care Trademarks | Jan 8, 2025 | $500 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transformation post-divestitures, evaluating strategic options including potential dissolution, with cash improved to $8.5 million expected to fund operations through May 2026 - The company has completed the sale of substantially all of its assets and significantly reduced its operations and expected revenue[160] - The Board is evaluating strategic options, including a potential dissolution approved by stockholders on April 16, 2025, but retains discretion to pursue other alternatives[162][164] - As of March 31, 2025, cash and cash equivalents were $8.5 million, a significant increase from $430 thousand at year-end 2024, due to divestiture proceeds[183] Comparison of Continuing Operations (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | General and administrative | $2,701 | $2,291 | | Impairment of long-lived assets | $589 | $— | | Operating loss | $(3,290) | $(2,291) | | Net loss from continuing operations | $(3,330) | $(2,925) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is minimal interest rate sensitivity on cash and equivalents due to short-term, high-quality investments, with no material foreign currency exposure - The principal market risk is interest rate sensitivity on cash and cash equivalents[198] - The investment policy restricts investments to short-term, high-quality securities to preserve capital and ensure liquidity, minimizing interest rate risk[199] - The company has no material exposure to foreign currency rate fluctuations[200] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and Interim CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[203] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[204] PART II OTHER INFORMATION Legal Proceedings As of March 31, 2025, the company was not involved in any legal proceedings with a material adverse effect on its financial position or operations - As of March 31, 2025, there were no legal matters that would result in a material adverse effect on the Company[207] Risk Factors As a smaller reporting company, NovaBay is not required to provide updated quarterly risk factor information, referring stakeholders to the 2024 Annual Report - As a smaller reporting company, NovaBay is not required to provide updated quarterly information under this item[208] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[209] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[210] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[211] Other Information No directors or Section 16 officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or Section 16 officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[212] Exhibits This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-Q report