10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                  

Commission file number 001-33678

NOVABAY PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	68-0454536
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2000 Powell Street, Suite 1150, Emeryville, California 94608

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (510) 899-8800

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	NBY	NYSE American

Securities Registered Pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☒	Smaller reporting company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

As of May 10, 2022, there were 52,618,364 shares of the registrant's common stock outstanding.

NOVABAY PHARMACEUTICALS, INC.

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets: March 31, 2022 (unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss: Three months ended March 31, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit): Three months ended March 31, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows: Three months ended March 31, 2022 and 2021 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosure	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
SIGNATURES		51
EXHIBIT INDEX		48

Unless the context requires otherwise, all references in this report to “we,” “our,” “us,” the “Company” and “NovaBay” refer to NovaBay Pharmaceuticals, Inc., a Delaware corporation, and its wholly-owned subsidiary, DERMAdoctor, LLC, a Missouri limited liability company.

The Company owns over 45 live trademark registrations, which include NovaBay®, NovaBay Pharma®, Avenova®, NeutroPhase®, CelleRx®, Aganocide®, AgaDerm®, Neutrox®, Going Beyond Antibiotics®, Kakadu C®, AIN’T Misbehavin’® and KP Duty®. The Company owned trademarks are designated as “®” when referenced in this document; all other trademarks and trade names are the property of their respective owners.

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NOVABAY PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

	March 31,			December 31,
	2022			2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,641		$	7,504
Accounts receivable, net of allowance for doubtful accounts ($0 at March 31, 2022 and December 31, 2021)		2,300			1,668
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($522 and $641 at March 31, 2022 and December 31, 2021, respectively)		3,785			3,220
Prepaid expenses and other current assets		752			778
Total current assets		12,478			13,170
Operating lease right-of-use assets		2,331			411
Property and equipment, net		187			193
Goodwill		4,528			4,528
Other intangible assets, net		5,109			5,200
Other assets		161			476
TOTAL ASSETS	$	24,794		$	23,978
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	1,556		$	1,045
Accrued liabilities		2,763			2,092
Line of credit		—			105
Operating lease liabilities		465			200
Total current liabilities		4,784			3,442
Operating lease liabilities-non-current		1,922			246
Warrant liability		—			9,558
Contingent earnout liability		342			561
Total liabilities		7,048			13,807
Commitments & contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; 13 and 14 issued and outstanding at March 31, 2022 and December 31, 2021, respectively		609			680
Common stock, $0.01 par value; 150,000 and 100,000 shares authorized, 51,419 and 47,766 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		514			478
Additional paid-in capital		158,621			150,900
Accumulated deficit		(141,998	)		(141,887	)
Total stockholders' equity		17,746			10,171
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	24,794		$	23,978

The accompanying notes are an integral part of these condensed consolidated financial statements. 

-3-

NOVABAY PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended March 31,
	2022			2021
Sales:
Product revenue, net	$	2,623		$	1,801
Other revenue, net		6			6
Total sales, net		2,629			1,807
Product cost of goods sold		1,113			455
Gross profit		1,516			1,352
Operating expenses:
Research and development		28			5
Sales and marketing		1,687			1,680
General and administrative		2,183			1,187
Total operating expenses		3,898			2,872
Operating loss		(2,382	)		(1,520	)
Unrealized gain on changes in fair value of warrant liability		2,056			—
Unrealized gain on changes in fair value of contingent liability		219			—
Other (expense) income, net		(4	)		2
Loss before provision for income taxes		(111	)		(1,518	)
Provision for income taxes		—			—
Net loss and comprehensive loss	$	(111	)	$	(1,518	)
Net loss per share attributable to common stockholders (basic and diluted)	$	0.00		$	(0.04	)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted)		50,088			41,782

The accompanying notes are an integral part of these condensed consolidated financial statements.

-4-

NOVABAY PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands)

	Preferred Stock						Common Stock				Additional Paid-		Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		In Capital		Deficit			(Deficit)
Balance at December 31, 2021		14		$	680			47,766	$	478	$	150,900	$	(141,887	)	$	10,171
Net Loss		-			-			-		-		-		(111	)		(111	)
Reclassification of Private Placement Warrants		-			-			-		-		7,502		-			7,502
Conversion of Series B Non-Voting Preferred Stock to common stock		(1	)		(71	)		3,653		36		35		-			-
Stock-based compensation expense related to employee and director stock options		-			-			-		-		184		-			184
Balance at March 31, 2022		13		$	609			51,419	$	514	$	158,621	$	(141,998	)	$	(17,746	)

	Preferred Stock				Common Stock				Additional Paid-		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		In Capital		Deficit			(Deficit)
Balance at December 31, 2020		-		-		41,782	$	418	$	147,963	$	(136,063	)	$	12,318
Net Loss		-		-		-		-		-		(1,518	)		(1,518	)
Stock-based compensation expense related to employee and director stock options		-		-		-		-		130		-			130
Stock-based compensation expense related to non-employee stock options		-		-		-		-		53		-			53
Balance at March 31, 2021		-	$	-		41,782	$	418	$	148,146	$	(137,581	)	$	10,983

The accompanying notes are an integral part of these condensed consolidated financial statements.

-5-

NOVABAY PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

(In thousands)

	Three Months Ended March 31,
	2022			2021
Operating activities:
Net loss	$	(111	)	$	(1,518	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		30			9
Amortization of intangible assets		91			—
Stock-based compensation expense for options and stock issued to employees and directors		184			130
Stock-based compensation expense for options and stock issued to non-employees		—			53
Unrealized gain on changes in fair value of warrant liability		(2,056	)		—
Unrealized gain on changes in fair value of contingent liability		(219	)		—
Changes in operating assets and liabilities:
Accounts receivable		(632	)		68
Inventory		(565	)		(242	)
Prepaid expenses and other current assets		26			(174	)
Operating lease right-of-use assets		(1,920	)		86
Other assets		(8	)		—
Accounts payable and accrued liabilities		1,182			267
Operating lease liabilities		1,941			(98	)
Net cash used in operating activities		(2,057	)		(1,419	)
Investing activities:
Purchases of property and equipment		(24	)		(25	)
Net cash used in investing activities		(24	)		(25	)
Financing activities:
Payment on the line of credit		(105	)		—
Net cash used in financing activities		(105	)		—
Net decrease in cash, cash equivalents, and restricted cash		(2,186	)		(1,444	)
Cash, cash equivalents and restricted cash, beginning of year		7,979			12,427
Cash, cash equivalents and restricted cash, end of period	$	5,793		$	10,983

	Three Months Ended March 31,
	2022		2021
Supplemental disclosure of cash flow information:
Interest paid	$	4	$	—

	Three Months Ended March 31,
	2022		2021
Supplemental disclosure of non-cash information:
Warrant liability transferred to equity		7,502		-
Addition of operating lease, right-of-use asset		2,039		-
Conversion of Series B Non-Voting Preferred Stock to common stock		71		-

The accompanying notes are an integral part of these condensed consolidated financial statements.

-6-

NOTE 1. ORGANIZATION

NovaBay Pharmaceuticals, Inc. develops and sells scientifically-created and clinically-proven eyecare and skincare products. Our leading product, Avenova® Antimicrobial Lid and Lash Solution (“Avenova Spray”), is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid. Avenova Spray is formulated with our proprietary, stable and pure form of hypochlorous acid and is cleared by the U.S. Food and Drug Administration (“FDA”) for sale in the United States. Avenova Spray is available direct to consumers through online distribution channels and is also often prescribed and dispensed by eyecare professionals for blepharitis and dry-eye disease. Other eyecare products offered under the Avenova eyecare brand include Novawipes by Avenova, Avenova Lubricant Eye Drops, Avenova Moist Heating Eye Compress, and the i-Chek.

On November 5, 2021, (the “Acquisition Closing”), we significantly expanded our business by acquiring DERMAdoctor, LLC (“DERMAdoctor”) as our wholly-owned subsidiary (the “DERMAdoctor Acquisition”). DERMAdoctor offers over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. DERMAdoctor branded products are marketed and sold through the DERMAdoctor website, well-known traditional and digital beauty retailers, and a network of international distributors. See Note 3, “Business Combination” below.

The Company was incorporated under the laws of the State of California on January 19, 2000, as NovaCal Pharmaceuticals, Inc. It had no operations until July 1, 2002, on which date it acquired all of the operating assets of NovaCal Pharmaceuticals, LLC, a California limited liability company. In February 2007, it changed its name from NovaCal Pharmaceuticals, Inc. to NovaBay Pharmaceuticals, Inc. In June 2010, the Company changed the state in which it was incorporated (the “Reincorporation”) and is now incorporated under the laws of the State of Delaware. All references to “the Company” herein refer to the California corporation prior to the date of the Reincorporation and to the Delaware corporation on and after the date of the Reincorporation. The Company is managed as two reportable segments: (1) Optical & Wound Care and (2) Skin Care.

Liquidity

Based primarily on the funds available at March 31, 2022, management believes that the Company’s existing cash and cash equivalents and cash flows generated from product sales will be sufficient to enable the Company to meet its planned operating expenses at least through May 12, 2023. However, changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control. Additionally, our future results, cash expenditures and ability to obtain additional external financing could be adversely affected by the COVID-19 pandemic and general adverse economic conditions.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. These estimates include contract liabilities related to product sales, useful lives for property and equipment and related depreciation calculations, assumptions for valuing options and warrants, the fair value of contingent consideration, intangible assets, goodwill, stock-based compensation, income taxes and other contingencies as of March 31, 2022.

These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were held in a highly-rated, major financial institution in the United States.

- 7-

 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets that sum to the total of the same reported in the condensed consolidated statements of cash flows (in thousands):

	March 31,		December 31,
	2022		2021
Cash and cash equivalents	$	5,641	$	7,504
Restricted cash included in other assets		152		475
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows	$	5,793	$	7,979

The restricted cash amount included in other assets on the condensed consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.

Concentrations of Credit Risk and Major Partners

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with a highly-rated, major financial institution in the United States. 

Deposits in this bank may exceed the amount of federal insurance provided on such deposits. The Company does not believe it is exposed to significant credit risk due to the financial position of the financial institution in which the deposits are held. 

During the three months ended March 31, 2022 and 2021, revenues were derived primarily from sales of Avenova-branded products, directly to consumers through Amazon.com, and Avenova.com. During the three months ended March 31, 2022, revenues also included sales of DERMAdoctor-branded products.

During the three months ended March 31, 2022 and 2021, revenues from significant product categories were as follows (in thousands):

	Three Months Ended March 31,
	2022		2021
Avenova Spray	$	1,426	$	1,575
DERMAdoctor		891		—
NeutroPhase		148		—
Other products		158		226
Total product revenue, net		2,623		1,801
Other revenue, net		6		6
Total sales, net	$	2,629	$	1,807

- 8-

 

During the three months ended March 31, 2022 and 2021, sales of Avenova Spray via Amazon comprised 77% and 65% of total Avenova Spray net revenue, respectively. No other individual distributor comprised greater than 10% of total Avenova Spray net revenue during the three months ended March 31, 2022 or 2021. A major U.S. retailer comprised 25% of DERMAdoctor net revenue for the three months ended March 31, 2022 with no comparable revenue for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, accounts receivable from our major distribution partners and major retailers greater than 10% were as follows:

	March 31,			December 31,
Major distribution partner	2022			2021
Major U.S. Retailer		35	%		33	%
Avenova Spray Pharmacy Distributor B		14	%		11	%
Avenova Spray Pharmacy Distributor A		13	%		13	%

The Company relies on seven contract manufacturers to produce its products. The Company does not own any manufacturing facilities and intends to continue to rely on third parties for the supply of finished goods. Contract manufacturers may or may not be able to meet the Company’s needs with respect to timing, quantity or quality. In particular, it is possible that we may suffer from unexpected supply chain delays in light of the worldwide COVID-19 pandemic.

Fair Value of Financial Assets and Liabilities

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The Company’s cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Allowance for Doubtful Accounts

The Company charges bad debt expense and records an allowance for doubtful accounts when management believes it to be unlikely that specific invoices will be collected. Management identifies amounts due that are in dispute and believes are unlikely to be collected. Management recorded no reserve for accounts receivable at March 31, 2022 and December 31, 2021.

- 9-

 

Inventory

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes and pumps; (2) goods in progress, which are normally filled but unlabeled bottles; and (3) finished goods. We utilize contract manufacturers to produce our products and the price paid to these manufacturers is included in inventory. Inventory is stated at the lower of cost or estimated net realizable value determined by the first-in, first-out method. At both March 31, 2022 and December 31, 2021, management had recorded an allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $522 thousand and $641 thousand, respectively. 

Property and Equipment, net

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets of five to seven years for office and laboratory equipment, three to five years for computer equipment and software, and five to seven years for furniture and fixtures. Leasehold improvements are amortized over the lease term.

The costs of normal maintenance, repairs, and minor replacements are expensed as incurred. 

Business Combinations 

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

The determination of estimated fair value requires us to make significant estimates and assumptions. These fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and asset lives, among other items. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. There were no impairment charges as of March 31, 2022 and December 31, 2021.

Intangible Asset	Fair Value (in thousands)		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

Valuation of Contingent Consideration Resulting from a Business Combination

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value within our Statement of Operations and Comprehensive Loss until such time as the specified milestone achievement period is complete.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. Actual results may differ from estimates.

- 10-

 

Impairment of Long-Lived Assets 

The Company accounts for long-lived assets, other than goodwill and intangible assets, and operating lease right-of-use assets in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use or right-of-use assets are present. The Company reviews long-lived assets and right-of-use assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the statements of operations. There were no impairment charges as of March 31, 2022 and December 31, 2021.

- 11-

 

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.

The Company has elected to combine lease and non-lease components as a single component for all leases in which it is a lessee or a lessor. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

Comprehensive Income (Loss)

ASC 220, Comprehensive Income, requires that an entity's change in equity or net assets during a period from transactions and other events from non-owner sources be reported.

Revenue Recognition

Revenue is recognized from sale of goods in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when or as the Company’s performance obligations are satisfied by transferring control of the promised goods to customers in an amount that reflects the consideration to which the Company expects to receive. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

i. identify the contract(s) with a customer;

ii. identify the performance obligations in the contract;

iii. determine the transaction price;

iv. allocate the transaction price to the performance obligations in the contract; and

v. recognize revenue when (or as) the entity satisfies performance obligations.

Revenue is generated through the Company’s webstores, Avenova.com and DERMAdoctor.com, for Avenova Spray and DERMAdoctor direct to consumer sales which are recognized upon fulfillment, which generally occurs upon delivery of the related products to a third-party carrier. Shipping and handling costs are expensed as incurred and included in cost of goods sold in the consolidated statements of operations and comprehensive loss. We present revenue net of sales taxes and refunds.

Revenue generated through Amazon.com and Walmart.com is recognized upon fulfillment, which generally occurs upon delivery of the products to a third-party carrier. We present revenue net of commissions and any related fulfillment and shipping fees charged by these partners. Fees paid to partners for promoting our products are expensed as incurred and are included in sales and marketing expenses within the operating expenses in the consolidated statements of operations and comprehensive loss.

The Company also generates Avenova Spray revenue through major pharmacy distribution partners. Product supply of Avenova Spray is the only performance obligation contained in these arrangements, and the Company recognizes product revenue upon transfer of control to its major distribution partners at the amount of consideration that the Company expects to be entitled to, generally upon delivery to the distributor on a “sell-in” basis. Upon recognition of product sales, contract liabilities are recorded for invoiced amounts that are subject to significant reversal, including product revenue allowances for cash consideration paid to customers for services, discounts, rebate programs, and product returns. The Company derives its rate of return from historical data and updates its return rate assumption quarterly. Payment for product supply is typically due 30 days after control transfers to the distributor.

Revenue generated through the Company’s partner pharmacies is recognized when control of the product transfers to the end customer.

Revenue for product sales to other retailers, such as Costco and CVS, is generally recognized upon transfer of control to the retailer, which generally occurs upon delivery of the products to a third-party carrier, net of estimated future product returns.

- 12-

 

Cost of Goods Sold

Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, and other costs associated with products sold. Cost of goods sold also includes any necessary allowance for excess and obsolete inventory along with lower of cost and estimated net realizable value.

Research and Development Costs

The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development and regulatory activities, including submissions to the Food and Drug Administration (the “FDA”).

Patent Costs

Patent costs, including legal expenses, are expensed in the period in which they are incurred. Patent expenses are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Advertising Costs

Advertising costs are expensed in the period in which the costs are incurred. Advertising expenses were $0.6 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

Stock-Based Compensation

The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s consolidated statements of stockholders’ equity based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black-Scholes option pricing model. See Note 15, “Equity-Based Compensation” for further information regarding stock-based compensation expense and the assumptions used in estimating that expense. The Company accounts for RSUs issued to employees and non-employees (consultants and advisory board members) based on the fair market value of the Company’s common stock as of the date of issuance.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

- 13-

 

Common Stock Warrant Liabilities

The Company accounts for common stock purchase warrants issued in connection with its equity offerings in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

The Company accounts for common stock purchase warrants issued in connection with share-based compensation arrangements in accordance with the provisions of ASC 718, Stock Compensation, which encompasses the provisions of ASC 480, Distinguishing Liabilities from Equity.

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) do not become exercisable until the occurrence of contingent event. Additionally, for common stock purchase warrants accounted for in accordance with ASC 718, Stock Compensation, the Company classifies as liabilities any contracts where it believes the warrants are deemed to be probable of issuance.

For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants are determined using the Black-Scholes option pricing model, the Binomial Lattice (“Lattice”) valuation model, or the Monte Carlo simulation model where deemed appropriate. These values are subject to a significant degree of management’s judgment.

Net Loss per Share

The Company computes net loss per share by presenting both basic and diluted earnings (loss) per share (“EPS”).

Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods because their effect would be anti-dilutive.

For the year ended December 31, 2021, the Series B Non-Voting Preferred Stock (the “Preferred Stock”) was excluded from the computation of diluted net income per share as their inclusion on an “if converted” basis would have been anti-dilutive as a result of such securities not having a contractual obligation to participate in losses of the Company. 

- 14-

 

The following table sets forth the calculation of basic EPS and diluted EPS (in thousands, except per share amounts):

	Three Months Ended March 31,
Numerator	2022			2021
Net loss	$	(111	)	$	(1,518	)
Denominator
Weighted average shares of common stock outstanding, basic and diluted		50,088			41,782
Net loss per share attributable to common stockholders, basic and diluted	$	0.00		$	(0.04	)

The following outstanding stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2022		2021
Stock options		4,416		3,138
Stock warrants		44,582		7,082
		48,998		10,220

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements that could affect our business, results of operations, financial condition, and liquidity, see Note 2, “Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 29, 2022. The Company continues to evaluate the potential impact of adopting the new accounting guidance on its consolidated financial position, results of operations and cash flows.

- 15-

NOTE 3. BUSINESS COMBINATION

On November 5, 2021, the Company completed the DERMAdoctor Acquisition in which NovaBay acquired 100% of the membership units of DERMAdoctor from the Sellers for a closing purchase price of $12.0 million and potential future earn out payments of up to an aggregate of $3.0 million over a period of two calendar years post-closing.

The Company funded the closing purchase price in part through the 2021 Private Placement (see Note 14, “Stockholders’ Equity”).

The Acquisition is accounted for as a business combination in accordance to ASC 805, Business Combinations, which requires that the assets acquired and liabilities assumed be recognized at their estimated fair values as of the Acquisition Closing. Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

The following table sets forth the final allocation of the purchase price for the DERMAdoctor Acquisition to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from DERMAdoctor (in thousands):

	Fair Value
Tangible net assets and liabilities:
Cash and cash equivalents	$	12
Accounts receivable, net of allowance for doubtful accounts		1,015
Inventory, net of allowance		2,369
Prepaid expenses and other current assets		150
Property and equipment, net		62
Other intangible assets		54
Accounts payable		(200	)
Accrued liabilities		(683	)
Total net assets		2,779
Intangible Assets:
Customer relationships		290
Trade secrets / product formulations		2,890
Trade names		2,080
Total intangible assets		5,260
Net assets acquired		8,039
Purchased consideration		12,561
Goodwill	$	4,528

Goodwill is primarily attributable to assembled workforce, expected synergies and other factors.

The fair values of the identifiable intangible assets acquired at the date of the DERMAdoctor Acquisition are as follows (in thousands):

Intangible Asset	Fair Value		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

- 16-

 

The valuations of intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows.

The Company recognized approximately $1.2 million of transaction costs in the year ended December 31, 2021. These costs are recorded in “General and administrative expense” in the consolidated statements of operations and comprehensive loss.

The Company’s management reviews financial results and manages the business on an aggregate basis in accordance with ASC 280. Therefore, financial results are reported in two operating segments: (1) Optical & Wound Care and (2) Skincare (see Note 20, “Segment Reporting” below).

NOTE 4. FAIR VALUE MEASUREMENTS 

The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value hierarchy include money market securities and certificates of deposit.

As of December 31, 2021, the 2021, Warrants are classified within Level 3 of the fair value hierarchy as liabilities (see Note 13, “Warrant Liability” and Note 14, “Stockholders’ Equity”).

The following table presents the Company's assets measured at fair value on a recurring basis as of March 31, 2022 (in thousands):

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	March 31,		Active Markets		Other		Unobservable
	2022		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Deposit held as a certificate of deposit		152		152		—		—
Total assets	$	152	$	152	$	—	$	—
Liabilities
Warrant liability	$	—		—		—	$	—
Contingent earnout liability		342		—		—		342
Total liabilities	$	342	$	—	$	—	$	342

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of March 31, 2022 (in thousands):

Fair value of warrant liability at December 31, 2021	$	9,558
Decrease in fair value of 2021 Warrants		(2,056	)
Reclassification of warrant liability to equity		(7,502	)
Fair value of warrant liability at March 31, 2022	$	—
Fair value of contingent liability at December 31, 2021	$	561
Decrease in fair value of contingent liability		(219	)
Fair value of contingent liability at March 31, 2022	$	342

- 17-

 

The following table presents the Company's assets measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
	2021		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—
Liabilities
Warrant liability	$	9,558		—		—	$	9,558
Contingent earnout liability		561		—		—		561
Total liabilities	$	10,119	$	—	$	—	$	10,119

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2021 (in thousands):

Fair value of warrant liability at December 31, 2020	$	—
Fair value of 2021 Warrants issued		14,172
Decrease in fair value of 2021 Warrants		(4,614	)
Fair value of warrant liability at December 31, 2021	$	9,558

NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following (in thousands):

	March 31,		December 31,
	2022		2021
Prepaid inventory	$	335	$	367
Prepaid dues and subscription		93		18
Prepaid insurance		77		138
Prepaid consultant		8		68
Prepaid patents		8		9
Prepaid sales rebates		3		19
Prepaid rent		—		14
Other		228		145
Total prepaid expenses and other current assets	$	752	$	778

- 18-

 

NOTE 6. INVENTORY

Inventory consisted of the following (in thousands):

	March 31,			December 31,
	2022			2021
Raw materials and supplies	$	1,446		$	1,179
Finished goods		2,861			2,682
Less: Reserve for excess and obsolete inventory		(522	)		(641	)
Total inventory, net	$	3,785		$	3,220

NOTE 7. PROPERTY AND EQUIPMENT 

Property and equipment consisted of the following (in thousands):

	March 31,			December 31,
	2022			2021
Office and laboratory equipment	$	20		$	20
Furniture and fixtures		157			157
Computer equipment and software		464			464
Production equipment		138			114
Leasehold improvements		79			79
Total property and equipment, at cost		858			834
Less: accumulated depreciation and amortization		(671	)		(641	)
Total property and equipment, net	$	187		$	193

Depreciation and amortization expense was $30 thousand and $9 thousand for the three months ended March 31, 2022 and 2021, respectively.

NOTE 8. GOODWILL

Goodwill is accounted for in accordance to ASC 350, Intangibles-Goodwill and Other. We do not amortize goodwill, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired. There were no indications of impairment during the three months ended March 31, 2022. For the DERMAdoctor acquisition, there were no material measurement period adjustments recorded to the fair values of assets acquired and liabilities assumed during the period.  No goodwill impairment was recognized as of March 31, 2022. Goodwill was $4.5 million as of both March 31, 2022 and December 31, 2021.

- 19-

 

NOTE 9. OTHER INTANGIBLE ASSETS

Other intangible assets consisted of the following (in thousands):

	Balance at December 31, 2021
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(7	)	$	283
Trade secrets / product formulations		2,890		(53	)		2,837
Total other intangible assets	$	5,260	$	(60	)	$	5,200

	Balance at March 31, 2022
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(17	)	$	273
Trade secrets / product formulations		2,890		(134	)		2,756
Total other intangible assets	$	5,260	$	(151	)	$	5,109

Amortization expense was $91 thousand and $0 for the three months ended March 31, 2022 and 2021, respectively. Based on the amortizable intangible assets as of March 31, 2022, future amortization expenses were as follows (in thousands):

2022	$	272
2023		363
2024		363
2025		363
2026		363
Thereafter		1,305
Total	$	3,029

- 20-

 

NOTE 10. ACCRUED LIABILITIES 

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2022		2021
Contract liabilities (see Note 16)	$	1,914	$	1,289
Employee payroll and benefits		397		443
Audit services		95		—
Other		357		360
Total accrued liabilities	$	2,763	$	2,092

NOTE 11. LINE OF CREDIT

At the time of the DERMAdoctor Acquisition, DERMAdoctor had a line of credit agreement with Bank Midwest for $500 thousand. There was no balance outstanding on the line of credit at the time of Acquisition Closing. The line of credit was terminated and repaid in full on January 6, 2022. The line of credit had an interest rate equal to the Wall Street Journal Prime Rate plus 1.50% with a floor of 5.00%. All borrowings were collateralized by substantially all assets of DERMAdoctor. As of March 31, 2022, there was no outstanding balance on the line of credit.

NOTE 12. COMMITMENTS AND CONTINGENCIES 

Indemnification Agreements

As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and may enable it to recover a portion of any future payments. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, it has not recorded any liabilities for these agreements as of March 31, 2022. 

In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, typically its clinical research organizations, investigators, clinical sites, suppliers, and others. Pursuant to these agreements, it generally indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with the use or testing of its products or product candidates or with any U.S. patent or any copyright or other intellectual property infringement claims by any third party with respect to its products. The term of these indemnification agreements is generally perpetual. The potential future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, costs related to these indemnification provisions have been immaterial. The Company also maintains various liability insurance policies that limit its exposure. As a result, it believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of March 31, 2022. 

Legal Matters

As of March 31, 2022, there were no legal matters that, in the opinion of management, would ultimately result in liability that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Leases

The Company leases office space for its corporate headquarters located in Emeryville, California. The initial lease term was scheduled to expire on February 28, 2022, but on January 19, 2022, the Company exercised its option to extend the term and amended the lease to extend the term through July 31, 2027.

We are also party to a lease for 19,136 square feet of space located in Riverside, Missouri, which we utilize for light manufacturing, storage, distribution of products and administrative functions. The lease commenced on October 1, 2019 and expires on December 31, 2024.

- 21-

 

In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate. The Company has elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use assets and lease liability for leases being greater than if the policy election was not applied. The leases include variable components (e.g. common area maintenance) that are paid separately from the monthly base payment based on actual costs incurred and therefore were not included in the right-of-use assets and lease liability, but are reflected as an expense in the period incurred.

The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Lease Costs	Three Months Ended March 31,
	2022		2021
Operating lease cost	$	134	$	99
Net lease cost	$	134	$	99
Other information
Operational cash flow used for operating leases	$	111	$	113

The Company has measured its operating lease liabilities at its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate are summarized as follows:

	Three Months Ended March 31,
	2022			2021
Weighted-average remaining lease term (in years)		5.0			1.0
Weighted-average discount rate		5	%		12	%

Future lease payments under non-cancelable leases as of March 31, 2022 were as follows (in thousands):

2022	$	430
2023		535
2024		549
Thereafter		1,166
Total future minimum lease payments		2,680
Less imputed interest		(293	)
Total	$	2,387
Reported as:
Operating lease liability	$	465
Operating lease liability- non-current		1,922
Total	$	2,387

- 22-

 

Contracts

On May 13, 2020, the Company entered into an agreement with TLF Bio Innovation Lab LLC (“TLF Bio Innovation”) to manage the relaunch of the Company’s CelleRx product (the “TLF Agreement”) which was further amended on September 4, 2020 and subsequently terminated on February 4, 2021. Under the TLF Agreement, the Company paid TLF Bio Innovation a monthly cash fee and issued 15,000 warrants to TLF Bio Innovation on January 22, 2021(see Note 14, “Stockholders’ Equity”).

- 23-

 

NOTE 13. WARRANT LIABILITY

2019 Domestic, Foreign & Ladenburg Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the 2019 Domestic Warrants, the 2019 Foreign Warrants and the 2019 Ladenburg Warrants in the third quarter of 2019. The terms of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants all required potential cash-settlement in the event of a specified fundamental transaction. Under ASC 480, Distinguishing Liabilities from Equity, the warrants were classified as liabilities because the Company’s potential obligation to cash-settle the warrants was deemed to be beyond the Company’s control. The fair value of outstanding warrants was determined at each reporting date using a Black-Scholes option pricing model with the changes in fair value recorded in the consolidated statements of operations and comprehensive loss.

Upon issuance in the third quarter of 2019, the fair value of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants was determined to be $3.1 million, $2.0 million and $0.1 million, respectively.

- 24-

 

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the 2019 Domestic Warrants and 2019 Foreign Warrants were exercised at reduced exercise prices. The warrant liabilities associated with these warrants was adjusted to their fair values as of the date of exercise, with the change in fair values recorded in the consolidated statements of operations and comprehensive loss. The fair values were then transferred to equity. As of the date of exercise, the fair value of the 2019 Domestic Warrants and 2019 Foreign Warrants was determined to be $4.9 million and $4.2 million, respectively, in accordance with the following key assumptions:

Assumptions	2019 Domestic Warrants			2019 Foreign Warrants
Expected price volatility		178	%		178	%
Expected term (in years)		4.57			4.57
Risk-free interest rate		0.25	%		0.27	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of warrant	$	1.18		$	1.54

There were no 2019 Domestic Warrants or 2019 Foreign Warrants outstanding as of March 31, 2022.

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the Company amended the 2019 Ladenburg Warrants. The Company’s potential obligation to cash-settle the warrants if a specified fundamental transaction occurred was amended to apply only in situations within the Company’s control. Pursuant to this change, the 2019 Ladenburg Warrants were no longer classified as liabilities. The warrant liability associated with the 2019 Ladenburg Warrants was adjusted to fair value as of the date of the amendment, with the change in fair value recorded in the consolidated statements of operations and comprehensive loss. The fair value was then transferred to equity. The fair value of the 2019 Ladenburg Warrants was determined to be $0.2 million on the date of amendment in accordance with the following key assumptions:

Expected price volatility		186	%
Expected term (in years)		4.05
Risk-free interest rate		0.22	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	1.17

The 2019 Ladenburg Warrants will no longer be adjusted to fair value in reporting periods after the amendment. All 2019 Ladenburg Warrants remained outstanding as of March 31, 2022.

November 2021 Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the 2021 Warrants in the fourth quarter of 2021. The terms of the 2021 Warrants required that the Company obtain stockholder approval for an increase in authorized shares before they became exercisable. Under ASC 480, Distinguishing Liabilities from Equity, the 2021 Warrants were classified as liabilities as of December 31, 2021 and until the 2021 Warrants became exercisable. The 2021 Warrants became exercisable subsequent to December 31, 2021, on January 31, 2022. On January 31, 2022, our stockholders met and approved the necessary increase in authorized share capital available to meet the assumed exercise or conversion of its issued warrants and convertible preferred stock.  On January 31, 2022, as a result of the stockholder approval of the increase in authorized share capital, the warrants issued in November 2021 became exercisable and were reclassified from a liability to equity because the warrants require physical settlement or net share settlement. Accordingly, there is no fair value of warrant liabilities recorded in the Company’s balance sheet as of March 31, 2022.

Upon issuance, the fair value of the 2021 Warrants was determined to be $14.2 million in accordance with the following key assumptions as of November 2, 2021:

Expected price volatility		84.9	%
Expected term (in years)		6.2
Risk-free interest rate		1.29	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.38

As of December 31, 2021, the fair value of the 2021 Warrants was determined to be $9.6 million in accordance with the following key assumptions:

Expected price volatility		87	%
Expected term (in years)		6.0
Risk-free interest rate		1.31	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.25

- 25-

NOTE 14. STOCKHOLDERS' EQUITY

Preferred Stock and 2021 Warrants

The Company is authorized to issue up to 5,000,000 shares of preferred stock with rights and preferences as may be approved by its Board of Directors under its Amended and Restated Certificate of Incorporation.

On October 29, 2021, the Company entered into a securities purchase agreement with various institutional investors to sell in a private placement offering (the “2021 Private Placement”) (i) an aggregate of 15,000 shares of our newly-created Series B Non-Voting Preferred Stock (the “Preferred Stock”) convertible into an aggregate of 37,500,000 shares of Common Stock, and (ii) warrants (the “2021 Warrants”) exercisable for 37,500,000 shares of Common Stock for net proceeds of $14.9 million. The 2021 Private Placement closed on November 2, 2021.

The 2021 Warrants are exercisable into 37,500,000 Warrant Shares at an exercise price of $0.53 per share, subject to adjustment. The Warrants were not immediately exercisable upon issuance. In order for the Warrants to become exercisable, the Company was required to hold a stockholder meeting to (i) obtain stockholder approval, in accordance with the NYSE American LLC Company Guide (the “Company Guide”) Section 713(a) and (b), for the issuance of the 37,500,000 shares of Common Stock upon the exercise of all of the Warrants, as well as the issuance of the 37,500,000 Conversion Shares upon conversion of the Preferred Stock (the “Share Issuance Proposal”) and (ii) obtain stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 100,000,000 shares to 150,000,000 shares (the “Authorized Share Increase Proposal”). The Company held a special meeting of stockholders on December 17, 2021 (the “Special Meeting”) at which the Share Issuance Approval was approved by stockholders and, at a subsequent adjournment of the Special Meeting on January 31, 2022, the stockholders approved the Authorized Share Increase Proposal. As a result of these stockholder approvals, the Warrants became exercisable subsequent to December 31, 2021 and will continue to be exercisable for a period of six (6) years thereafter.

Each share of the Preferred Stock that we issued in the Private Placement had a purchase price of $1,000 per share and is initially convertible at a conversion price of $0.40 into 2,500 shares of Common Stock, or an aggregate of 37,500,000 shares of Common Stock. The conversion by the holders of the Preferred Stock was initially subject to approval of the Share Issuance Proposal. Until the Share Issuance Proposal was approved by stockholders at the Special Meeting, the holders of the Preferred Stock were limited in converting their shares to an aggregate of 19.99% of the outstanding shares of Common Stock immediately prior to the closing of the 2021 Private Placement, or 8,984,178 shares of Common Stock. As a result of the Company’s stockholders approving the Share Issuance Proposal at the Special Meeting, this limitation upon conversion of Preferred Stock was no longer applicable to the holders as of December 31, 2021. The Preferred Stock does not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of NovaBay. The Preferred Stock does, however, have anti-dilution protection in the event that we sell or grant any Common Stock or any other securities of our Company, subject to certain limited exceptions, that would entitle the holder thereof to acquire Common Stock at an effective price per share that is lower than the then applicable conversion price of the Preferred Stock.

The Company allocated the net proceeds between the Preferred Stock and the 2021 Warrants by applying the residual fair value methodology. The Company first allocated $14.2 million to the 2021 Warrants, with the residual amount allocated to the Preferred Stock. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2021 Warrants.

In connection with the issuance of the Preferred Stock, the Company recorded a beneficial conversion feature of $0.7 million as a discount to Preferred Stock and an increase to additional paid in capital. The Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statements of operations and comprehensive loss upon approval of the Share Issuance Proposal in the fourth quarter of 2021.

The Company incurred total issuance costs of $1.7 million in conjunction with the 2021 Private placement. The Company allocated $1.6 million of the issuance costs to the warrant liability which was expensed in the Company’s consolidated statements of operations and comprehensive loss during the year ended December 31, 2021. The remaining $0.1 million was recorded as a reduction of Preferred Stock in the Company’s consolidated balance sheets.

During the first quarter of 2022, 1,461 shares of the Preferred Stock were converted into 3,652,500 shares of common stock. Each share of the Preferred Stock is currently convertible into 2,500 shares of common stock. There were 13 thousand shares of the Preferred Stock outstanding as of March 31, 2022.

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Common Stock

May 2021 At the Market Offering

In the second quarter of 2021, the Company established the 2021 ATM Program with Ladenburg. For additional information regarding the offering and equity program, see the Company’s Current Report on Form 8-K filed with the SEC on May 14, 2021. During the second quarter of 2021, 2,672,000 shares of common stock were issued under the 2021 ATM Program for total net proceeds of $1.8 million, net of offering costs of $0.1 million.

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Common Stock Warrants

2019 Domestic Warrants, 2019 Foreign Warrants, 2019 Ladenburg Warrants and July 2020 Warrants

In the third quarter of 2019, the Company entered into a purchase agreement (the “2019 Purchase Agreement”) for the sale of (i) 4,198,566 shares of common stock and (ii) 4,198,566 common stock purchase warrants exercisable for 4,198,566 shares of common stock (the “2019 Domestic Warrants”) for gross proceeds of $4.2 million. The 2019 Domestic Warrants were issued with an exercise price of $1.15 per share and an expiration date of February 13, 2025.

The Company allocated the proceeds between the common stock and 2019 Domestic Warrants by applying the relative fair value allocation methodology. The Company first allocated $3.1 million to the 2019 Domestic Warrants, with the residual amount allocated to the common stock. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2019 Domestic Warrants.

Ladenburg served as the placement agent for the transaction in exchange for a commission representing six percent (6%) of the gross proceeds, totaling $0.3 million, and 167,942 common stock purchase warrants exercisable for 167,942 shares of common stock with an exercise price of $1.25 per share and an expiration date of August 8, 2024 (the “2019 Ladenburg Warrants”). In addition, the Company reimbursed the Placement Agent $60 thousand for certain expenses. The Company also incurred and paid other offering costs of $0.3 million.

The Company incurred total issuance costs of $0.5 million in conjunction with the 2019 Purchase Agreement. The Company allocated $0.2 million of the issuance costs to the warrant liability which was expensed in the Company’s consolidated statements of operations and comprehensive loss during the period. The remaining $0.3 million was recorded as a reduction of additional paid-in capital in the Company’s consolidated balance sheets. As the 2019 Ladenburg Warrants were accounted for as a stock issuance cost, $59 thousand was allocated to the warrant liability and expensed during the period and $65 thousand was recorded as a reduction to additional paid-in capital in the Company’s consolidated balance sheets. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2019 Ladenburg Warrants.

During the third quarter of 2020, the Company and the holders of the 2019 Domestic Warrants and the 2019 Foreign Warrants entered into exercise agreements which resulted in the cash exercise of the warrants at a reduced exercise price of $0.99. The Company received aggregate gross proceeds of approximately $6.8 million from the exercises. The Company incurred and paid other offering costs of $0.2 million. The Company also incurred and paid a $0.2 million fee to China Kington for brokering the transaction, which equaled six percent (6%) of the gross proceeds from the 2019 Foreign Warrants.

During the third quarter of 2020, the Company and all holders of the 2019 Domestic Warrants and 2019 Foreign Warrants entered into warrant repricing letter agreements. Pursuant to the letter agreements, in consideration for the exercise in full of the 2019 Domestic Warrants and 2019 Foreign Warrants, the Company agreed to: (1) reduce the exercise price of the 2019 Domestic Warrants and the 2019 Foreign Warrants to $0.99 per share prior to exercise, and (2) in a private placement, issue new common stock purchase warrants (the “July 2020 Warrants”) to purchase up to a number of shares of common stock, equal to 100% of the number of 2019 Domestic Warrants and 2019 Foreign Warrants currently held by such holders upon the holders exercising their warrants.

The July 2020 Warrants became exercisable nine months after their issuance, for an aggregate of 6,898,566 shares of common stock. The July 2020 Warrants have an exercise price of $1.65 per share and will expire five and a half years after their issuance. The Company determined that the common stock issued from the exercise of the 2019 Domestic and 2019 Foreign Warrants, and the July 2020 Warrants to be one unit of account, and therefore did not allocate the proceeds between the common stock and the July 2020 Warrants as, the proceeds, even if allocated, would be both recognized in additional paid-in capital. All July 2020 Warrants remained outstanding as of March 31, 2022.

During the third quarter of 2020, the Company also entered into a reprice agreement with Ladenburg which reduced the exercise price to $0.99 per share and amended certain terms of the 2019 Ladenburg Warrants. The Company’s potential obligation to cash-settle the warrants if a specified fundamental transaction occurred was amended to apply only in situations within the Company’s control. As further described in Note 13 “Warrant Liability”, the 2019 Ladenburg Warrants were no longer classified as a liability as a result of this amendment.

TLF Bio Innovation Warrants

On January 15, 2021, TLF Bio Innovation was granted warrants exercisable for 15,000 shares of the Company’s common stock with an exercise price of $0.6718 per share (the “TLF Warrants”). The TLF Warrants will expire five years after their issuance. The TLF Warrants are classified as equity.

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The details of all outstanding warrants as of March 31, 2022 were as follows:

	Warrants (in thousands)		Weighted- Average Exercise Price
Outstanding at December 31, 2021		7,082	$	1.63
Warrants granted		37,500	$	0.53
Outstanding at March 31, 2022		44,582	$	0.71

NOTE 15. EQUITY-BASED COMPENSATION

Equity Compensation Plans 

In October 2007, the Company adopted the 2007 Omnibus Incentive Plan (the “2007 Plan”) to provide for the granting of equity awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and stock appreciation rights to employees, directors and outside consultants, as determined by the Board.  The 2007 Plan expired on March 15, 2017. Upon expiration, new awards cannot be issued pursuant to the 2007 Plan, but outstanding awards continue to be governed by its terms. Stock options granted under the 2007 Plan expire no later than ten years from the date of grant. All stock options outstanding under the 2007 Plan were fully vested as of March 31, 2022.

In March 2017, the Company adopted the 2017 Omnibus Incentive Plan (the “2017 Plan”), which was approved by stockholders on June 2, 2017, to provide for the granting of equity awards, such as nonqualified stock options (“NQSOs”), incentive stock options (“ISOs”), restricted stock, performance shares, stock appreciation rights (“SARs”), RSUs and other share-based awards to employees, directors, and consultants, as determined by the Board.  The 2017 Plan does not affect awards previously granted under the 2007 Plan. Upon adoption, the 2017 Plan allowed for awards of up to 2,318,486 shares of the Company’s common stock, plus an automatic annual increase in the number of shares authorized for awards on the first day of each of the Company’s fiscal years beginning January 1, 2018 through January 1, 2027 equal to (i) 4% of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of common stock than provided for in Section 4(a)(i) of the 2017 Plan as determined by the Board. On January 15, 2021, the number of shares available for future awards under the 2017 Plan was increased by 1,671,303 shares. As of  March 31, 2022, there were 1,525,680 shares available for future awards under the 2017 Plan.

Under the terms of the 2017 Plan, the exercise price of NQSOs, ISOs and SARs may not be less than 100% of the fair market value of the common stock on the date of grant and, if ISOs are granted to an owner of more than 10% of the Company’s stock, then not less than 110% of the fair market value of the common stock on the date of grant. The term of awards will not be longer than ten years, or in the case of ISOs, not longer than five years with respect to holders of more than 10% of the Company’s stock. Stock options granted to employees generally vest over four years, while options granted to directors and consultants typically vest over a shorter period, subject to continued service. The Company issues new shares to satisfy option exercises for awards issued under the 2007 Plan and the 2017 Plan.

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Stock Option Summary 

The following table summarizes information about the Company’s stock options outstanding at March 31, 2022 and activity during the period ended March 31, 2022:

(in thousands, except years and per share data)	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		4,449		$	1.39		7.6	$	460
Options granted		332		$	0.30
Options forfeited/cancelled		(21	)	$	10.94
Outstanding at March 31, 2022		4,760		$	1.27		7.6	$	356
Vested and expected to vest at March 31, 2022		4,416		$	1.33		7.5	$	313
Vested at March 31, 2022		2,218		$	2.30		5.8	$	—
Exercisable at March 31, 2022		2,218		$	2.30		5.8	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of the Company’s common stock as quoted on the NYSE American as of March 31, 2022 for options that have a quoted market price in excess of the exercise price. There were no stock option awards exercised during the three months ended March 31, 2022. The Company received no cash payments for the exercise of stock options during the three months ended March 31, 2022.

As of March 31, 2022, total unrecognized compensation cost related to unvested stock options and restricted stock units was approximately $1.1 million. This amount is expected to be recognized as stock-based compensation expense in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.25 years.

Stock Option Awards to Employees and Directors 

The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards as of the date of grant by applying the Black-Scholes option pricing model using the single-option valuation approach. The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note 2, “Summary of Significant Accounting Policies,” for a description of the accounting policies that the Company applied to value its stock-based awards. 

During the three months ended March 31, 2022 and 2021, the Company granted options to employees and directors to purchase an aggregate of 332,000 and 55,000 shares of common stock, respectively.

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The weighted-average assumptions used in determining the value of options are as follows: 

	Three Months Ended March 31,
Assumption	2022			2021
Expected price volatility		160.47	%		164.44	%
Expected term (in years)		6.45			6.19
Risk-free interest rate		1.63	%		1.09	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of options granted during the period	$	0.29		$	1.04

Expected Price Volatility—This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. The computation of expected volatility was based on the historical volatility of our own stock.

Expected Term—This is the period of time over which the options granted are expected to remain outstanding. The expected life assumption is based on the Company’s historical data.

Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected life of the option.

Dividend Yield—We have not made any dividend payments nor do we have plans to pay dividends in the foreseeable future.

Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

During the three months ended March 31, 2022 and 2021, the Company did not grant restricted stock to employees.

For the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $184 thousand and $130 thousand, respectively, for stock-based awards to employees and directors.  

Stock-Based Awards to Non-Employees

During the three months ended March 31, 2022 and 2021, the Company did not grant options exercisable for shares of common stock to non-employees in exchange for advisory and consulting services.

When the Company grants stock options, the stock options are recorded at their fair value on the grant date and recognized over the respective service or vesting period. The fair value of the stock options that are granted is calculated using the Black-Scholes-Merton option pricing model.

In addition, during the three months ended March 31, 2022 and 2021, the Company did not grant restricted stock to non-employees.

For the three months ended March 31, 2022, the Company recognized a nominal stock-based compensation expense as compared to stock-based compensation expense of $53 thousand for the three months ended March 21, 2021, related to non-employee stock option grants. 

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Summary of Stock-Based Compensation Expense 

A summary of the stock-based compensation expense included in results of operations for the options and restricted stock awards discussed above is as follows (in thousands): 

	Three Months Ended March 31,
	2022		2021
Research and development	$	4	$	4
Sales and marketing		12		31
General and administrative		168		148
Total stock-based compensation expense	$	184	$	183

NOTE 16. LICENSE, COLLABORATION AND DISTRIBUTION AGREEMENTS

Transactions under the Company’s major distribution agreements are recognized upon transfer of control of product sold to its major distribution partners at the amount of consideration that the Company expects to be entitled to. The Company records contract liabilities for the amounts that are estimated to be subject to significant reversal, including allowances for services, discounts, rebate programs, and product returns.

The following table presents changes in the Company's contract assets and liabilities for the three months ended March 31, 2022 (in thousands): 

	Balance at December 31, 2021		Additions		Deductions			Balance at the end of the Period
Contract liabilities: deferred revenue	$	2	$	69	$	(2	)	$	69
Contract liabilities: accrued liabilities (includes contract assets)		1,270		842		(201	)		1,911
Total	$	1,272	$	911	$	(203	)	$	1,980

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For the three months ended March 31, 2022 and 2021, the Company recognized the following revenue (in thousands):

	Three Months Ended March 31,
	2022		2021
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied	$	201	$	575
New activities in the period:
Performance obligations satisfied		2,428		1,232
	$	2,629	$	1,807

Avenova Spray Pharmacy Distribution Agreements and Specialty Pharmacies

Avenova Spray is made available in local pharmacies and major pharmacy retail chains under nationwide distribution agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen. We have also entered into direct agreements with preferred pharmacy networks as part of our Partner Pharmacy Program. The Company incurred net sales loss of $199 thousand during the three months ended March 31, 2022, and net sales revenue of $122 thousand during the three months ended March 31, 2021 for its Avenova Spray product from these distribution and partner pharmacy agreements. The net loss during the three months ended March 31, 2022, was the result of an increase in returns for expired product from a major pharmacy retail chain.

Under the prescription Avenova Spray product distribution arrangements, the Company had a contract liability balance of $1.3 million and $0.9 million as of  March 31, 2022 and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets. The Company also recorded a prepayment of $3 thousand and $19 thousand for rebates related to these distribution agreements as of March 31, 2022 and December 31, 2021, respectively, that is recorded in the prepaid expenses and other current assets in the condensed consolidated balance sheets (see Note 5, “Prepaid Expenses and Other Current Assets”).

Over-the-Counter Sales of Avenova Spray

Avenova Spray was launched online on June 1, 2019 direct to U.S. customers. Avenova Spray is offered primarily for sale on Amazon.com, the Company’s website (Avenova.com) and Walmart.com. Avenova Spray was launched at select CVS stores and online on CVS.com in February 2021. These channels provide the Company with more stable pricing and provide customers with easy access to our product. During the three months ended March 31, 2022 and 2021, the revenue generated from over-the-counter Avenova Spray was $1.4 million and $1.2 million, respectively. 

DERMAdoctor

DERMAdoctor products are available through wholesale distribution relationships with third parties such as Costco, Amazon and others. The Company had a contract liability balance of $0.6 million and $0.4 million as of  March 31, 2022, and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets.

NOTE 17. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) plan covering all eligible employees. The Company was not required to contribute to the plan and made no contributions during the period ended December 31, 2021. The Company made an election to change the terms of the 401(k) plan such that, beginning on January 1, 2022, the Company made matching contributions equal to 100% of the first 3% of compensation deferred, plus 50% of the next 2% of compensation deferred.

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NOTE 18. RELATED PARTY TRANSACTIONS      

Related Party Revenue 

The following table summarizes information about the Company’s related party revenue and cost of goods sold during the three months ended March 31, 2022 and 2021, respectively (in thousands): 

	Three Months Ended March 31,
	2022			2021
Related party revenue:
NeutroPhase	$	148		$	—
Total related party revenue	$	148		$	—
Cost of goods sold:
NeutroPhase	$	(134	)	$	—
Total related party expenses	$	(134	)	$	—

Related party accounts receivable was $0.1 million as of both March 31, 2022 and December 31, 2021.

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NOTE 19. PAYCHECK PROTECTION PROGRAM

On May 6, 2020, the Company received loan proceeds in the amount of $0.9 million from Wells Fargo Bank, N.A. (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020, or the PPP Flexibility Act, which was enacted on September 5, 2020. The PPP loan provided for an interest rate of 1.00% per year and maturity two years after the date of initial disbursement, with initial principal and interest payments coming due late in fiscal 2021. The PPP Loan could be prepaid by the Company at any time prior to the maturity with no prepayment penalties. Funds from the PPP Loan could only be used for payroll costs, costs used to continue group health care benefits, rent and utilities incurred during the 24-week period after receiving the PPP Loan (collectively, “Qualifying Expenses”) in order for the PPP Loan to be forgiven in whole or in part. The Company used the entire PPP Loan amount for Qualifying Expenses.

Since the Company determined that there was reasonable assurance that it would meet the conditions for forgiveness of the full loan amount, the Company accounted for the forgivable PPP Loan as a government income grant that we earned through the Company’s compliance with the loan forgiveness criteria. A deferred income liability was recognized upon receipt of the forgivable loan proceeds. The deferred income liability was recognized as other income as Qualifying Expenses were incurred. For the year ended December 31, 2020, $0.9 million was recognized as other income and recorded in the consolidated statements of operations and comprehensive loss. No amount was recognized for the period ended March 31, 2022.

The Company received notice, dated May 24, 2021, from Wells Fargo Bank, N.A. confirming the full loan amount of $0.9 million was forgiven.

NOTE 20. SEGMENT REPORTING

The Company’s chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance.

Prior to the DERMAdoctor Acquisition in November 2021 (see Note 3, “Business Combination”), the Company was managed as a single segment focused on commercializing Avenova Spray in the United States. After the DERMAdoctor Acquisition, the Company began managing and aggregating its operational and financial information in accordance with two reportable segments: (1) Optical &Wound Care and (2) Skin Care. The Optical & Wound Care segment consists of products historically sold by NovaBay prior to the DERMAdoctor Acquisition. The Skin Care segment consists of products acquired in the DERMAdoctor Acquisition and skincare products subsequently sold under the DERMAdoctor brand.

Select financial information for each segment is as follows (in thousands):

	Three Months Ended March 31,
	2022			2021
Net sales
Optical & Wound Care	$	1,738		$	1,807
Skincare		891			—
Consolidated	$	2,629		$	1,807
Operating loss
Optical & Wound Care	$	(2,039	)	$	(1,520	)
Skincare		(343	)		—
Consolidated	$	(2,382	)	$	(1,520	)

The Company’s reportable segments are strategic business units that offer different products. Each segment is managed independently because they require different operations and markets to distinct classes of customers. Operating costs included in one segment may benefit other segments, and therefore these segments are not designed to measure operating income or loss directly related to the products included in each segment. Management will continually evaluate the alignment of product development organizations, sales organizations, and inter-segment commissions for segment reporting purposes, which may result in changes to segment allocations in future periods.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in Part I, Item 1 of this report. This discussion contains forward-looking statements that involve risks and uncertainties, and with our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022. Words such as "expects," "anticipated," "will," "may," "goals," "plans," "believes," "estimates," "concludes," determines," variations of these words, and similar expressions are intended to identify these forward-looking statements. As a result of many factors, including those set forth in our SEC filings, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believed to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements.

Overview 

We are a company focused on the development and sale of scientifically-created and clinically-proven eyecare and skincare products. Our portfolio of products includes a number of eyecare products under our Avenova brand, led by Avenova Spray which contains our proprietary, stable and pure form of hypochlorous acid, and over 30 dermatologist-developed skincare products under our DERMAdoctor brand.

On November 5, 2021, we purchased DERMAdoctor, LLC (“DERMAdoctor”) for approximately $12.0 million as well as $3.0 million of contingent consideration payable in cash or our common stock over the next two years upon the achievement of certain contribution margin targets. For additional information regarding the DERMAdoctor Acquisition, see Note 3 “Business Combination” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

The DERMAdoctor Acquisition was funded, in part, through the sale of an aggregate of 15,000 shares of Preferred Stock (convertible into an aggregate of 37,500,000 shares of Common Stock) and the 2021 Warrants (exercisable for 37,500,000 shares of Common Stock) for an aggregate purchase price of $15.0 million. For additional information regarding the Preferred Stock and the 2021 Warrants, see Note 13, “Warrant Liability” and Note 14, “Stockholders’ Equity” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

In 2021, we also continued to expand our Avenova product offerings, including adding the following products under the Avenova eyecare brand: (1) Avenova Moist Heating Eye Compress and (2) the i-Chek. We expanded our distribution efforts through our partnership with ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical businesses to promote Avenova Spray.

Financial Overview and Outlook

We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses in the future as we continue to commercialize our eyecare and skincare products and integrate the DERMAdoctor business. Our net loss was $111 thousand for the three months ended March 31, 2022 and a net loss of $1.5 million for the three months ended March 31, 2021. As of March 31, 2022, we had an accumulated deficit of $142 million and current assets totaling $12.5 million.

We expect to grow commercial sales of Avenova and DERMAdoctor branded products through an expansion of domestic and international market penetration, with a particular focus on online channels, and the development of new product offerings under both brand names.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these condensed consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates and judgments related to revenue recognition, research and development costs, patent costs, stock-based compensation, income taxes, earnout contingency, and warrant liability. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. 

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report, we believe that the following accounting policies are most critical to fully understanding and evaluating our reported financial results.

Allowance for Doubtful Accounts

The Company charges bad debt expense and records an allowance for doubtful accounts when management believes it to be unlikely that specific invoices will be collected. Management identifies amounts due that are in dispute, and it believes are unlikely to be collected. Management recorded no reserve for accounts receivable at March 31, 2022 and December 31, 2021.

Inventory

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes, and pumps; (2) goods in progress; and (3) finished goods. We utilize contract manufacturers to produce our products and the price paid to these manufacturers is included in inventory. Inventory is stated at the lower of cost or estimated net realizable value determined by the first-in, first-out method. At both March 31, 2022 and December 31, 2021, management had recorded an allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $522 thousand and $641 thousand, respectively. 

Business Combinations 

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

The determination of estimated fair value requires us to make significant estimates and assumptions. These fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and asset lives, among other items.  As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date. We do not amortize goodwill and intangible assets with indefinite useful lives. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

Intangible Asset	Fair Value (in thousands)		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

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Valuation of Contingent Consideration Resulting from a Business Combination

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value within our condensed consolidated statements of operations and comprehensive loss until such time as the specified milestone achievement period is complete.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. Actual results may differ from estimates.

Impairment of Long-Lived Assets 

The Company accounts for long-lived assets, other than goodwill and intangible assets, and operating lease right-of-use assets in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use or right-of-use assets are present. The Company reviews long-lived assets and right-of-use assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the condensed consolidated statements of operations and comprehensive loss. There were no impairment charges during the periods ended March 31, 2022 and December 31, 2021, respectively.

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Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.

The Company has elected to combine lease and non-lease components as a single component for all leases in which it is a lessee or a lessor. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

Revenue Recognition

Revenue generated through the Company’s webstores, primarily Avenova.com and DERMAdoctor.com, is recognized upon fulfillment, which generally occurs upon delivery of the related products to multiple third-party carriers. Shipping and handling costs are expensed as incurred and included in cost of goods sold in the condensed consolidated statements of operations and comprehensive loss. We present revenue net of sales taxes and refunds.

Revenue generated through third-party online retailers is also recognized upon fulfillment, which generally occurs upon delivery of the related products to a third-party carrier. We present revenue net of commissions and any related fulfillment and shipping fees charged by these partners. Fees paid to partners for promoting our product are expensed as incurred and are included in sales and marketing expenses within the operating expenses in the condensed consolidated statements of operations and comprehensive loss.

The Company also generates Avenova Spray revenue through major pharmacy distribution partners. Product supply of Avenova Spray is the only performance obligation contained in these arrangements, and the Company recognizes product revenue upon transfer of control to its major distribution partners at the amount of consideration that the Company expects to be entitled to, generally upon delivery to the distributor on a “sell-in” basis. Upon recognition of product sales, contract liabilities are recorded for invoiced amounts that are subject to significant reversal, including product revenue allowances for cash consideration paid to customers for services, discounts, rebate programs, and product returns. The Company derives its rate of return from historical data and updates its return rate assumption quarterly. Payment for product supply is typically due 30 days after control transfers to the distributor.

Revenue generated through the Company’s partner pharmacies is recognized when control of the product transfers to the end customer.

Revenue for product sales to other retailers is generally recognized upon transfer of control to the retailer, which generally occurs upon delivery of the related products to a third-party carrier, net of estimated future product returns.

The following table summarizes the activity in the accounts related to product revenue allowances (in thousands) during the three months ended March 31, 2022:

	Wholesaler/ Pharmacy fees			Cash discounts			Rebate			Returns			Total
Balance at December 31, 2021	$	(84	)	$	(13	)	$	(375	)	$	(798	)	$	(1,270	)
Current provision related to sales made during current period		(40	)		(18	)		(328	)		(456	)		(842	)
Payments		16			6			123			56			201
Balance at March 31, 2022	$	(108	)	$	(25	)	$	(580	)	$	(1,198	)	$	(1,911	)

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Cost of Goods Sold

Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, and other costs associated with products sold. Cost of goods sold also includes any necessary allowance for excess and obsolete inventory along with lower of cost and estimated net realizable value.

Research and Development Costs

The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development, and regulatory activities, including submissions to the Food and Drug Administration (“FDA”).

Advertising Costs

Advertising costs are expensed in the period in which the costs are incurred. Advertising expenses were $0.6 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

Stock-Based Compensation

The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s consolidated statements of stockholders’ equity based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black-Scholes option pricing model. See Note 15, “Equity-Based Compensation” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further information regarding stock-based compensation expense and the assumptions used in estimating that expense. The Company accounts for RSUs issued to employees and non-employees (consultants and advisory board members) based on the fair market value of the Company’s common stock as of the date of issuance.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

Common Stock Warrant Liabilities

The Company accounts for common stock warrants issued in connection with its equity offerings in accordance with the provisions of Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

The Company accounts for common stock warrants issued in connection with share-based compensation arrangements in accordance with the provisions of ASC 718, Stock Compensation, which encompasses the provisions of ASC 480, Distinguishing Liabilities from Equity.

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash gain or loss in the condensed consolidated statements of operations and comprehensive loss. The fair values of these warrants are determined using the Black-Scholes option pricing model, the Binomial Lattice (“Lattice”) valuation model, or the Monte Carlo simulation model where deemed appropriate. These values are subject to a significant degree of management’s judgment.

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Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a business line basis in making operating decisions, allocating resources, and evaluating financial performance. The Company has determined that it operates as two operating segments.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements that could affect our business, results of operations, financial condition, and liquidity, see Note 2, “Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 29, 2022. The Company continues to evaluate the potential impact of adopting the new accounting guidance on its consolidated financial position, results of operations and cash flows.

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

	Three Months Ended March 31,						Dollar			Percent
	2022			2021			Change			Change
Statement of Operations
Sales:
Product revenue, net	$	2,623		$	1,801		$	822			46	%
Other revenue, net		6			6			—			0	%
Total sales, net		2,629			1,807			822			46	%
Product cost of goods sold		1,113			455			658			145	%
Gross profit		1,516			1,352			164			12	%
Research and development		28			5			23			460	%
Sales and marketing		1,687			1,680			7			0	%
General and administrative		2,183			1,187			996			84	%
Total operating expenses		3,898			2,872			1.026			36	%
Operating loss		(2,382	)		(1,520	)		(862	)		57	%
Non-cash gain on changes in fair value of warrant liability		2,056			—			2,056			100	%
Non-cash gain on changes in fair value of contingent liability		219			—			219			100	%
Other (expense) income, net		(4	)		2			(6	)		(300	%)
Loss before provision for income taxes		(111	)		(1,518	)		1,407			(93	%)
Provision for income taxes		—			—			—			—
Net loss and comprehensive loss	$	(111	)	$	(1,518	)	$	1,407			(93	%)

Impact of DERMAdoctor Acquisition

The Acquisition Closing for DERMAdoctor took place on November 5, 2021 (see Note 3, “Business Combination” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report) Accordingly, the above results for the three months ended March 31, 2022 include the financial results of DERMAdoctor, which includes product revenue, net, of $0.9 million, goods sold of $0.5 million, $0.4 million in sales and marketing costs and $0.2 million in general and administrative costs, with no comparable operating results for the three months ended March 31, 2021.

Total Net Sales, Cost of Goods Sold and Gross Profit

Product revenue, net, increased by $0.8 million, or 46%, to $2.6 million for the three months ended March 31, 2022, from $1.8 million for the three months ended March 31, 2021.

Revenue from Avenova Spray decreased by $0.2 million in 2022 from $1.6 million for the three months ended March 31, 2021 to $1.4 million for the three months ended March 31, 2022. The decrease reflects an unanticipated increase in expired Avenova Spray units returned from retail pharmacies for product purchased prior to the launch of our over-the-counter Avenova Spray product in 2019 and the beginning of the COVID-19 pandemic in 2020. The decrease was partially offset by an overall increase in the number of Avenova Spray units sold during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increase in units sold reflects continued higher number of over-the-counter and physician dispensed units sold, partially offset by a continued decrease in the number of units sold through pharmacy channels. The overall increase in revenue due to unit sales was also partially offset by the lower average net selling price associated with over-the-counter and physician dispensed units as compared to units sold through our pharmacy channels.

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We also recognized product revenue, net, of $0.9 million from the sale of DERMAdoctor products during the three months ended March 31, 2022 with no comparable revenue during the three months ended March 31, 2021.

Cost of goods sold increased by 145%, to $1.1 million for the three months ended March 31, 2022, from $0.5 million for the three months ended March 31, 2021. This increase was primarily due to $0.5 million in cost of goods sold recognized from the sales of DERMAdoctor products for the three months ended March 31, 2022 with no comparable cost of goods sold for the three months ended March 31, 2021.

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Gross profit increased by 12%, to $1.5 million for the three months ended March 31, 2022, from $1.4 million for the three months ended March 31, 2021.

Sales and marketing

Sales and marketing expenses increased by $7 thousand, for the three months ended March 31, 2022. The increase was due to $0.4 million in sales and marketing costs incurred for DERMAdoctor products for the three months ended March 31, 2022, with no comparable expenditures in the 2021 period. The increase was offset by fewer sales representative headcount employed during the three months ended March 31, 2022 period as compared to the 2021 period. Additionally, results for the 2021 period include costs incurred in conjunction with the relaunch of the Company’s CelleRx Clinical Reset product with no comparable expenditures during the three months ended March 31, 2022. Going forward, the Company anticipates focusing sales and marketing resources on the DERMAdoctor brand instead of driving growth of CelleRx Clinical Reset.

General and administrative 

General and administrative expenses increased by $1.0 million, or 84%, to $2.2 million for the three months ended March 31, 2022, from $1.2 million for the three months ended March 31, 2021.

Results for the three months ended March 31, 2022 include $0.2 million in DERMAdoctor general and administrative costs and $0.1 million from the amortization of intangibles related to the DERMAdoctor Acquisition with no comparable expenses in the 2021 period. The Company also incurred one-time costs related to a special meeting of stockholders held in January 2022 with no comparable expenditures in the 2021 period. Employee-related costs, including non-cash stock-based compensation costs, were also higher for the three months ended March 31, 2022 as compared to the 2021 period.

Additionally, during the three months ended March 31, 2021, the Company received an insurance reimbursement for costs incurred in conjunction with a dispute with the Company’s former Interim President and Chief Executive Officer and Chief Financial Officer which reduced general and administrative costs in the 2021 period.

Non-cash gain (loss) on changes in fair value of warrant liability 

Adjustments to the fair value of warrant liability resulted in a gain of $2.1 million for the three months ended March 31, 2022. The warrant liability was reclassified to equity during the three months ended March 31, 2022 and will no longer require fair value adjustments which will impact our results of operations. For additional information regarding the warrant liability and their valuation, please see Note 13, “Warrant Liability”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report.

Other (expense) income, net

Other (expense) income, net, was $215 thousand for the three months ended March 31, 2022 as compared to $2 thousand for the three months ended March 31, 2021. During the three months ended March 31, 2022, the Company recorded $219 thousand in income for an adjustment to the fair value of a contingent earnout liability. For additional information regarding the contingent earnout liability, please see Note 4, “Fair Value Measurements”, in the Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report.

Liquidity and Capital Resources 

As of March 31, 2022, our cash and cash equivalents were $5.6 million, compared to $7.5 million as of December 31, 2021. Based primarily on the funds available at March 31, 2022, management believes that the Company’s existing cash and cash equivalents and cash flows generated from product sales will be sufficient to enable the Company to meet its planned operating expenses at least through May 12, 2023. However, changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control that impact the broader economy such as the COVID-19 pandemic and the conflict between Russia and Ukraine.

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Cash Used in Operating Activities

Net cash used in operating activities was $2.1 million for the three months ended March 31, 2022, which consisted primarily of a net loss of $111 thousand, adjusted primarily by non-cash gain of $2.1 million on the change in fair value of warrant liability, non-cash gain of $219 thousand on the change in fair value of contingent liability, stock-based compensation expenses of $184 thousand, and a net increase of $24 thousand in our net operating assets and liabilities.

Net cash used in operating activities was $1.4 million for the three months ended March 31, 2021, which consisted primarily of a net loss of $1.5 million, adjusted by stock-based compensation expenses of $0.2 million, and a net change of $0.1 million in our net operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities for the purchase of property and equipment was $24 and $25 thousand, for the three months ended March 31, 2022 and 2021, respectively.

Net Cash Used in Financing Activities

Net cash used in financing activities for the repayment of the DERMAdoctor line of credit, which was subsequently terminated in the first quarter of 2022, was $0.1 million for the three months ended March 31, 2022.

There was no cash used in, or provided by, financing activities during the three months ended March 31, 2021.

Net Operating Losses and Tax Credit Carryforwards

As of December 31, 2021, we had net operating loss carryforwards for federal and state income tax purposes of $125.9 million and $106.8 million, respectively. The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2024 and $31.0 million that will carryforward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028. As of December 31, 2021, we also had tax credit carryforwards for federal income tax purposes of $1.3 million and $0.3 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2026. The state tax credits have an indefinite carryover period.

Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. Accordingly, our ability to utilize net operating loss carryforwards may be limited as a result of such ownership changes. Such a limitation could result in the expiration of carryforwards before they are utilized.

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Inflation

Our costs are subject to fluctuations, particularly due to change in the price of raw and packing materials and the cost of labor, transportation and operating supplies.  Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, costs savings projects and sourcing decisions, while maintaining and improving margins and market share.  Failure to manage these fluctuations could adversely impact our results of operations or cash flows.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements at March 31, 2022.

Seasonality

Avenova Branded Products

Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experience seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experience less seasonality with demands consistent throughout the year.

Dermatology/Skincare Products

Our DERMAdoctor products are sold through third parties such as Costco, Amazon and others; therefore, we may receive periodic large orders that result in large chunks of revenue that are received in irregular intervals during the year. Historically sales of DERMAdoctor products that contain sunscreen and antiperspirants are higher in the summer seasons and sales of DERMAdoctor products that contain moisturizers are higher in the fall and winter months. In addition, DERMAdoctor products will typically experience an uptick in sales during the fourth quarter around the holidays of each country in which its products are sold, particularly in the United States and China.

Contractual Obligations

Our contractual cash commitments as of March 31, 2022 were as follows (in thousands):

Contractual Obligations	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Facility leases	$	525	$	1,490	$	656	$	—	$	2,671
Equipment leases		9		—		—		—		9
Total	$	534	$	1,490	$	656	$	—	$	2,680

Our commitments as of March 31, 2022 consisted primarily of facility operating leases and an operating lease for two copiers.

The total commitment for the facility leases as of March 31, 2022 was $2.7 million due over the leases’ terms, compared to $0.5 as of December 31, 2021.

We had an operating lease for two copiers as of March 31, 2022. The total commitment for the lease as of March 31, 2022 was $9 thousand due over the lease terms, compared to $13 thousand as of December 31, 2021.

See Note 12, “Commitments and Contingencies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further information regarding these leases.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk consists principally of interest rate risk on our cash and cash equivalents. Our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in interest rates, particularly because our current liquid assets at March 31, 2022 were held in cash and cash equivalents.

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Our investment policy restricts our investments to high-quality investments and limits the amounts invested with any one issuer, industry, or geographic area. The goals of our investment policy are as follows: preservation of capital, assurance of liquidity needs, best available return on invested capital, and minimization of capital taxation. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with an interest rate fixed at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk, in accordance with our investment policy, we maintain our cash and cash equivalents in short-term marketable securities, including money market mutual funds, Treasury bills, Treasury notes, certificates of deposit, commercial paper, and corporate and municipal bonds. The risk associated with fluctuating interest rates is limited to our investment portfolio. Due to the short-term nature of our investment portfolio, we believe we have minimal interest rate risk arising from our investments. As of March 31, 2022 and December 31, 2021, a 10% change in interest rates would have had an immaterial effect on the value of our investment portfolio. We do not use derivative financial instruments in our investment portfolio. We do not hold any instruments for trading purposes.

With most of our focus on the domestic U.S. market, we have not had any material exposure to foreign currency rate fluctuations.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Assessing the costs and benefits of such controls and procedures necessarily involves the exercise of judgment by management. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The “Legal Matters” section of Note 12. “Commitments and Contingencies” to the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect our business, results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 29, 2022. We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide updated quarterly information under this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable. 

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following exhibits are filed with or incorporated by reference into this report.

EXHIBIT INDEX

	Incorporation by Reference					Filed Herewith
Exhibit Number	Exhibit Description	Form	File Number	Exhibit/ Form 8-K Item Reference	Filing Date
2.1	Membership Unit Purchase Agreement dated September 27, 2021, by and among the Company, DERMAdoctor, the Founders and the Sellers (as defined therein)	8-K	001-3678	2.1	9/28/2021
3.1	Amended and Restated Certificate of Incorporation of NovaBay Pharmaceuticals, Inc.	10-K	001-33678	3.1	3/21/2018
3.2	Amendment to the Amended and Restated Certificate of Incorporation	8-K	001-33678	3.1	6/04/2018
3.3	Amendment to the Amended and Restated Certificate of Incorporation, as amended	8-K	001-33678	3.1	5/28/2020
3.4	Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 24, 2021	8-K	001-33678	3.1	5/24/2021
3.5	Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated January 31, 2022	8-K	001-33678	3.1	2/1/2022
3.6	Certificate of Designation for the Series B Preferred Stock	8-K	001-33678	3.1	11/1/2021
3.7	Amended and Restated Bylaws	10-K	001-33678	3.7	3/29/2022
4.1	Description of Securities	10-K	001-33678	4.1	3/29/2022
4.2	Form of Warrant pursuant to the Services Agreement with TLF Bio Innovation Lab, LLC, dated May 13, 2020	8-K	001-33678	4.1	5/18/2020
4.3	Form of July 2020 Warrant	8-K	001-33678	4.1	7/21/2020
4.4	Form of November 2021 Warrant	8-K	001-33678	4.1	11/01/2021
10.1	Office Lease by and between the Company and KBSIII Towers at Emeryville, LLC, dated August 24, 2016 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 26, 2016)	8-K	001-33678	10.1	8/26/2016
10.2	First Amendment to Office Lease by and between the Company and KBSIII Towers at Emeryville, LLC, dated January 24, 2022	8-K	001-33678	10.2	1/28/2022
10.3+	Executive Employment Agreement with Justin M. Hall, dated January 31, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2020)	8-K	001-33678	10.1	2/6/2020
10.4+	First Amendment to Executive Employment Agreement with Justin M. Hall, dated January 26, 2022	8-K	001-33678	10.6	1/28/2022

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31.1	Certification of the Principal Executive Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a)	X
31.2	Certification of the Principal Financial Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a)	X
32.1	Certification by the Chief Executive Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)	X
32.2	Certification by the Chief Financial Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)	X
101.INS	Inline XBRL Instance Document	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments)	X

+ Indicates a management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 12, 2022
	By:	/s/   Justin Hall
		Justin Hall  Chief Executive Officer, General Counsel and Director (principal executive officer)

Date: May 12, 2022
	By:	/s/   Andrew Jones
		Andrew Jones Chief Financial Officer (principal financial officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT

RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Justin Hall, certify that:

1. I have reviewed this Form 10-Q of NovaBay Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2022

/s/ Justin Hall

Justin Hall

Chief Executive Officer, General Counsel and Director (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT

RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew Jones, certify that:

1. I have reviewed this Form 10-Q of NovaBay Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2022

/s/ Andrew Jones 

Andrew Jones

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of NovaBay Pharmaceuticals, Inc. (the Company) on Form 10-Q for the quarter ended March 31, 2022 (the Report), I, Justin Hall, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 12, 2022

/s/ Justin Hall 

Justin Hall

Chief Executive Officer, General Counsel and Director

This Certification is made solely for the purpose of 18 USC Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of NovaBay Pharmaceuticals, Inc. (the Company) on Form 10-Q for the quarter ended March 31, 2022 (the Report), I, Andrew Jones, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 12, 2022

/s/ Andrew Jones 

Andrew Jones

Chief Financial Officer

This Certification is made solely for the purpose of 18 USC Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2022	May 10, 2022
Document Information [Line Items]
Entity Central Index Key	0001389545
Entity Registrant Name	NOVABAY PHARMACEUTICALS, INC.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	001-33678
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	68-0454536
Entity Address, Address Line One	2000 Powell Street, Suite 1150
Entity Address, City or Town	Emeryville
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94608
City Area Code	510
Local Phone Number	899-8800
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	NBY
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		52,618,364

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
ASSETS
Cash and cash equivalents	$ 5,641	$ 7,504
Accounts receivable, net of allowance for doubtful accounts ($0 at March 31, 2022 and December 31, 2021)	2,300	1,668
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($522 and $641 at March 31, 2022 and December 31, 2021, respectively)	3,785	3,220
Prepaid expenses and other current assets	752	778
Total current assets	12,478	13,170
Operating lease right-of-use assets	2,331	411
Property and equipment, net	187	193
Goodwill, Ending Balance	4,528	4,528
Other intangible assets, net	5,109	5,200
Other assets	161	476
TOTAL ASSETS	24,794	23,978
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	1,556	1,045
Accrued liabilities	2,763	2,092
Line of credit	0	105
Operating lease liability	465	200
Total current liabilities	4,784	3,442
Operating lease liabilities-non-current	1,922	246
Warrant liability	0	9,558
Contingent earnout liability	342	561
Total liabilities	7,048	13,807
Commitments & contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; 13 and 14 issued and outstanding at March 31, 2022 and December 31, 2021, respectively	609	680
Common stock, $0.01 par value; 150,000 and 100,000 shares authorized, 51,419 and 47,766 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	514	478
Additional paid-in capital	158,621	150,900
Accumulated deficit	(141,998)	(141,887)
Total stockholders' equity	17,746	10,171
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 24,794	$ 23,978

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Accounts receivable, allowance for doubtful accounts	$ 0	$ 0
Inventory, allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments	$ 522	$ 641
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares outstanding (in shares)	13,000	14,000
Preferred stock, shares issued (in shares)	13,000	14,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	150,000,000	100,000,000
Common stock, shares issued (in shares)	51,419,000	47,766,000
Common stock, shares outstanding (in shares)	51,419,000	47,766,000

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Sales:
Total sales, net	$ 2,629	$ 1,807
Product cost of goods sold	1,113	455
Gross profit	1,516	1,352
Operating expenses:
Research and development	28	5
Sales and marketing	1,687	1,680
General and administrative	2,183	1,187
Total operating expenses	3,898	2,872
Operating loss	(2,382)	(1,520)
Unrealized gain on changes in fair value of warrant liability	2,056	0
Unrealized gain on changes in fair value of contingent liability	219	0
Other (expense) income, net	4	(2)
Loss before provision for income taxes	(111)	(1,518)
Provision for income taxes	0	0
Net loss and comprehensive loss	$ (111)	$ (1,518)
Net loss per share attributable to common stockholders (basic and diluted) (in dollars per share)	$ 0.00	$ (0.04)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted) (in shares)	50,088	41,782
Product [Member]
Sales:
Total sales, net	$ 2,623	$ 1,801
Product and Service, Other [Member]
Sales:
Total sales, net	$ 6	$ 6

XML

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2020	0	41,782
Balance at Dec. 31, 2020	$ 0	$ 418	$ 147,963	$ (136,063)	$ 12,318
Balance at Dec. 31, 2020	0	(418)	(147,963)	136,063	(12,318)
Net Loss	$ 0	$ 0	0	(1,518)	(1,518)
Conversion of Series B Non-Voting Preferred Stock to common stock					0
Stock-based compensation expense related to employee and director stock options			130		130
Balance (in shares) at Mar. 31, 2021	0	41,782
Balance at Mar. 31, 2021	$ 0	$ 418	148,146	(137,581)	10,983
Balance at Mar. 31, 2021	$ 0	$ (418)	(148,146)	137,581	(10,983)
Stock-based compensation expense related to non-employee stock options			53		53
Balance (in shares) at Dec. 31, 2021	14	47,766
Balance at Dec. 31, 2021	$ 680	$ 478	150,900	141,887	10,171
Balance at Dec. 31, 2021	(680)	(478)	(150,900)	(141,887)	(10,171)
Net Loss	0	0	0	(111)	(111)
Reclassification of Private Placement Warrants	$ 0	$ 0	7,502	0	7,502
Conversion of Series B Non-Voting Preferred Stock to common stock (in shares)	(1)	(3,653)
Conversion of Series B Non-Voting Preferred Stock to common stock	$ (71)				(71)
Conversion of Series B Non-Voting Preferred Stock to common stock (in shares)	1	3,653
Conversion of Series B Non-Voting Preferred Stock to common stock		$ 36	35
Stock-based compensation expense related to employee and director stock options			184		184
Balance (in shares) at Mar. 31, 2022	13	51,419
Balance at Mar. 31, 2022	$ 609	$ 514	158,621	141,998	17,746
Balance at Mar. 31, 2022	$ (609)	$ (514)	$ (158,621)	$ (141,998)	$ (17,746)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating activities:
Net Loss	$ (111)	$ (1,518)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	30	9
Amortization of intangible assets	91	0
Unrealized gain on changes in fair value of warrant liability	(2,056)	(0)
Decrease in fair value of contingent liability	(219)	0
Changes in operating assets and liabilities:
Accounts receivable	(632)	68
Inventory	(565)	(242)
Prepaid expenses and other current assets	26	(174)
Operating lease right-of-use assets	(1,920)	86
Other assets	(8)	0
Accounts payable and accrued liabilities	1,182	267
Operating lease liabilities	1,941	(98)
Net cash used in operating activities	(2,057)	(1,419)
Investing activities:
Purchases of property and equipment	(24)	(25)
Net cash used in investing activities	(24)	(25)
Financing activities:
Payment on the line of credit	(105)	0
Net cash used in financing activities	(105)	0
Net decrease in cash, cash equivalents, and restricted cash	(2,186)	(1,444)
Cash, cash equivalents and restricted cash, beginning of year	7,979	12,427
Cash, cash equivalents and restricted cash, end of period	5,793	10,983
Supplemental disclosure of cash flow information:
Interest paid	4	0
Addition of operating lease, right-of-use asset	2,039	0
Conversion of Series B Non-Voting Preferred Stock to common stock	71	0
Employees and Directors [Member] | Share-Based Payment Arrangement, Option [Member]
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense for options and stock issued	184	130
Nonemployees [Member] | Share-Based Payment Arrangement, Option [Member]
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense for options and stock issued	0	53
The 2019 Preferred Warrant and 2019 Common Warrant Liability [Member]
Supplemental disclosure of cash flow information:
Warrant liability transferred to equity	$ 7,502	$ 0

XML

Note 1 - Organization

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1. ORGANIZATION

NovaBay Pharmaceuticals, Inc. develops and sells scientifically-created and clinically-proven eyecare and skincare products. Our leading product, Avenova® Antimicrobial Lid and Lash Solution (“Avenova Spray”), is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid. Avenova Spray is formulated with our proprietary, stable and pure form of hypochlorous acid and is cleared by the U.S. Food and Drug Administration (“FDA”) for sale in the United States. Avenova Spray is available direct to consumers through online distribution channels and is also often prescribed and dispensed by eyecare professionals for blepharitis and dry-eye disease. Other eyecare products offered under the Avenova eyecare brand include Novawipes by Avenova, Avenova Lubricant Eye Drops, Avenova Moist Heating Eye Compress, and the i-Chek.

On November 5, 2021, (the “Acquisition Closing”), we significantly expanded our business by acquiring DERMAdoctor, LLC (“DERMAdoctor”) as our wholly-owned subsidiary (the “DERMAdoctor Acquisition”). DERMAdoctor offers over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. DERMAdoctor branded products are marketed and sold through the DERMAdoctor website, well-known traditional and digital beauty retailers, and a network of international distributors. See Note 3, “Business Combination” below.

The Company was incorporated under the laws of the State of California on January 19, 2000, as NovaCal Pharmaceuticals, Inc. It had no operations until July 1, 2002, on which date it acquired all of the operating assets of NovaCal Pharmaceuticals, LLC, a California limited liability company. In February 2007, it changed its name from NovaCal Pharmaceuticals, Inc. to NovaBay Pharmaceuticals, Inc. In June 2010, the Company changed the state in which it was incorporated (the “Reincorporation”) and is now incorporated under the laws of the State of Delaware. All references to “the Company” herein refer to the California corporation prior to the date of the Reincorporation and to the Delaware corporation on and after the date of the Reincorporation. The Company is managed as two reportable segments: (1) Optical & Wound Care and (2) Skin Care.

Liquidity

Based primarily on the funds available at March 31, 2022, management believes that the Company’s existing cash and cash equivalents and cash flows generated from product sales will be sufficient to enable the Company to meet its planned operating expenses at least through May 12, 2023. However, changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control. Additionally, our future results, cash expenditures and ability to obtain additional external financing could be adversely affected by the COVID-19 pandemic and general adverse economic conditions.

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Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. These estimates include contract liabilities related to product sales, useful lives for property and equipment and related depreciation calculations, assumptions for valuing options and warrants, the fair value of contingent consideration, intangible assets, goodwill, stock-based compensation, income taxes and other contingencies as of March 31, 2022.

These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were held in a highly-rated, major financial institution in the United States.

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets that sum to the total of the same reported in the condensed consolidated statements of cash flows (in thousands):

	March 31,		December 31,
	2022		2021
Cash and cash equivalents	$	5,641	$	7,504
Restricted cash included in other assets		152		475
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows	$	5,793	$	7,979

The restricted cash amount included in other assets on the condensed consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.

Concentrations of Credit Risk and Major Partners

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with a highly-rated, major financial institution in the United States. 

Deposits in this bank may exceed the amount of federal insurance provided on such deposits. The Company does not believe it is exposed to significant credit risk due to the financial position of the financial institution in which the deposits are held. 

During the three months ended March 31, 2022 and 2021, revenues were derived primarily from sales of Avenova-branded products, directly to consumers through Amazon.com, and Avenova.com. During the three months ended March 31, 2022, revenues also included sales of DERMAdoctor-branded products.

During the three months ended March 31, 2022 and 2021, revenues from significant product categories were as follows (in thousands):

	Three Months Ended March 31,
	2022		2021
Avenova Spray	$	1,426	$	1,575
DERMAdoctor		891		—
NeutroPhase		148		—
Other products		158		226
Total product revenue, net		2,623		1,801
Other revenue, net		6		6
Total sales, net	$	2,629	$	1,807

During the three months ended March 31, 2022 and 2021, sales of Avenova Spray via Amazon comprised 77% and 65% of total Avenova Spray net revenue, respectively. No other individual distributor comprised greater than 10% of total Avenova Spray net revenue during the three months ended March 31, 2022 or 2021. A major U.S. retailer comprised 25% of DERMAdoctor net revenue for the three months ended March 31, 2022 with no comparable revenue for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, accounts receivable from our major distribution partners and major retailers greater than 10% were as follows:

	March 31,			December 31,
Major distribution partner	2022			2021
Major U.S. Retailer		35	%		33	%
Avenova Spray Pharmacy Distributor B		14	%		11	%
Avenova Spray Pharmacy Distributor A		13	%		13	%

The Company relies on seven contract manufacturers to produce its products. The Company does not own any manufacturing facilities and intends to continue to rely on third parties for the supply of finished goods. Contract manufacturers may or may not be able to meet the Company’s needs with respect to timing, quantity or quality. In particular, it is possible that we may suffer from unexpected supply chain delays in light of the worldwide COVID-19 pandemic.

Fair Value of Financial Assets and Liabilities

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The Company’s cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Allowance for Doubtful Accounts

The Company charges bad debt expense and records an allowance for doubtful accounts when management believes it to be unlikely that specific invoices will be collected. Management identifies amounts due that are in dispute and believes are unlikely to be collected. Management recorded no reserve for accounts receivable at March 31, 2022 and December 31, 2021.

Inventory

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes and pumps; (2) goods in progress, which are normally filled but unlabeled bottles; and (3) finished goods. We utilize contract manufacturers to produce our products and the price paid to these manufacturers is included in inventory. Inventory is stated at the lower of cost or estimated net realizable value determined by the first-in, first-out method. At both March 31, 2022 and December 31, 2021, management had recorded an allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $522 thousand and $641 thousand, respectively. 

Property and Equipment, net

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets of five to seven years for office and laboratory equipment, three to five years for computer equipment and software, and five to seven years for furniture and fixtures. Leasehold improvements are amortized over the lease term.

The costs of normal maintenance, repairs, and minor replacements are expensed as incurred. 

Business Combinations 

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

The determination of estimated fair value requires us to make significant estimates and assumptions. These fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and asset lives, among other items. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. There were no impairment charges as of March 31, 2022 and December 31, 2021.

Intangible Asset	Fair Value (in thousands)		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

Valuation of Contingent Consideration Resulting from a Business Combination

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value within our Statement of Operations and Comprehensive Loss until such time as the specified milestone achievement period is complete.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. Actual results may differ from estimates.

Impairment of Long-Lived Assets 

The Company accounts for long-lived assets, other than goodwill and intangible assets, and operating lease right-of-use assets in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use or right-of-use assets are present. The Company reviews long-lived assets and right-of-use assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the statements of operations. There were no impairment charges as of March 31, 2022 and December 31, 2021.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.

The Company has elected to combine lease and non-lease components as a single component for all leases in which it is a lessee or a lessor. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

Comprehensive Income (Loss)

ASC 220, Comprehensive Income, requires that an entity's change in equity or net assets during a period from transactions and other events from non-owner sources be reported.

Revenue Recognition

Revenue is recognized from sale of goods in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when or as the Company’s performance obligations are satisfied by transferring control of the promised goods to customers in an amount that reflects the consideration to which the Company expects to receive. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

i. identify the contract(s) with a customer;

ii. identify the performance obligations in the contract;

iii. determine the transaction price;

iv. allocate the transaction price to the performance obligations in the contract; and

v. recognize revenue when (or as) the entity satisfies performance obligations.

Revenue is generated through the Company’s webstores, Avenova.com and DERMAdoctor.com, for Avenova Spray and DERMAdoctor direct to consumer sales which are recognized upon fulfillment, which generally occurs upon delivery of the related products to a third-party carrier. Shipping and handling costs are expensed as incurred and included in cost of goods sold in the consolidated statements of operations and comprehensive loss. We present revenue net of sales taxes and refunds.

Revenue generated through Amazon.com and Walmart.com is recognized upon fulfillment, which generally occurs upon delivery of the products to a third-party carrier. We present revenue net of commissions and any related fulfillment and shipping fees charged by these partners. Fees paid to partners for promoting our products are expensed as incurred and are included in sales and marketing expenses within the operating expenses in the consolidated statements of operations and comprehensive loss.

The Company also generates Avenova Spray revenue through major pharmacy distribution partners. Product supply of Avenova Spray is the only performance obligation contained in these arrangements, and the Company recognizes product revenue upon transfer of control to its major distribution partners at the amount of consideration that the Company expects to be entitled to, generally upon delivery to the distributor on a “sell-in” basis. Upon recognition of product sales, contract liabilities are recorded for invoiced amounts that are subject to significant reversal, including product revenue allowances for cash consideration paid to customers for services, discounts, rebate programs, and product returns. The Company derives its rate of return from historical data and updates its return rate assumption quarterly. Payment for product supply is typically due 30 days after control transfers to the distributor.

Revenue generated through the Company’s partner pharmacies is recognized when control of the product transfers to the end customer.

Revenue for product sales to other retailers, such as Costco and CVS, is generally recognized upon transfer of control to the retailer, which generally occurs upon delivery of the products to a third-party carrier, net of estimated future product returns.

Cost of Goods Sold

Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, and other costs associated with products sold. Cost of goods sold also includes any necessary allowance for excess and obsolete inventory along with lower of cost and estimated net realizable value.

Research and Development Costs

The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development and regulatory activities, including submissions to the Food and Drug Administration (the “FDA”).

Patent Costs

Patent costs, including legal expenses, are expensed in the period in which they are incurred. Patent expenses are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Advertising Costs

Advertising costs are expensed in the period in which the costs are incurred. Advertising expenses were $0.6 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

Stock-Based Compensation

The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s consolidated statements of stockholders’ equity based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black-Scholes option pricing model. See Note 15, “Equity-Based Compensation” for further information regarding stock-based compensation expense and the assumptions used in estimating that expense. The Company accounts for RSUs issued to employees and non-employees (consultants and advisory board members) based on the fair market value of the Company’s common stock as of the date of issuance.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

Common Stock Warrant Liabilities

The Company accounts for common stock purchase warrants issued in connection with its equity offerings in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

The Company accounts for common stock purchase warrants issued in connection with share-based compensation arrangements in accordance with the provisions of ASC 718, Stock Compensation, which encompasses the provisions of ASC 480, Distinguishing Liabilities from Equity.

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) do not become exercisable until the occurrence of contingent event. Additionally, for common stock purchase warrants accounted for in accordance with ASC 718, Stock Compensation, the Company classifies as liabilities any contracts where it believes the warrants are deemed to be probable of issuance.

For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants are determined using the Black-Scholes option pricing model, the Binomial Lattice (“Lattice”) valuation model, or the Monte Carlo simulation model where deemed appropriate. These values are subject to a significant degree of management’s judgment.

Net Loss per Share

The Company computes net loss per share by presenting both basic and diluted earnings (loss) per share (“EPS”).

Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods because their effect would be anti-dilutive.

For the year ended December 31, 2021, the Series B Non-Voting Preferred Stock (the “Preferred Stock”) was excluded from the computation of diluted net income per share as their inclusion on an “if converted” basis would have been anti-dilutive as a result of such securities not having a contractual obligation to participate in losses of the Company. 

The following table sets forth the calculation of basic EPS and diluted EPS (in thousands, except per share amounts):

	Three Months Ended March 31,
Numerator	2022			2021
Net loss	$	(111	)	$	(1,518	)
Denominator
Weighted average shares of common stock outstanding, basic and diluted		50,088			41,782
Net loss per share attributable to common stockholders, basic and diluted	$	0.00		$	(0.04	)

The following outstanding stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2022		2021
Stock options		4,416		3,138
Stock warrants		44,582		7,082
		48,998		10,220

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements that could affect our business, results of operations, financial condition, and liquidity, see Note 2, “Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 29, 2022. The Company continues to evaluate the potential impact of adopting the new accounting guidance on its consolidated financial position, results of operations and cash flows.

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Note 3 - Business Combination

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 3. BUSINESS COMBINATION

On November 5, 2021, the Company completed the DERMAdoctor Acquisition in which NovaBay acquired 100% of the membership units of DERMAdoctor from the Sellers for a closing purchase price of $12.0 million and potential future earn out payments of up to an aggregate of $3.0 million over a period of two calendar years post-closing.

The Company funded the closing purchase price in part through the 2021 Private Placement (see Note 14, “Stockholders’ Equity”).

The Acquisition is accounted for as a business combination in accordance to ASC 805, Business Combinations, which requires that the assets acquired and liabilities assumed be recognized at their estimated fair values as of the Acquisition Closing. Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

The following table sets forth the final allocation of the purchase price for the DERMAdoctor Acquisition to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from DERMAdoctor (in thousands):

	Fair Value
Tangible net assets and liabilities:
Cash and cash equivalents	$	12
Accounts receivable, net of allowance for doubtful accounts		1,015
Inventory, net of allowance		2,369
Prepaid expenses and other current assets		150
Property and equipment, net		62
Other intangible assets		54
Accounts payable		(200	)
Accrued liabilities		(683	)
Total net assets		2,779
Intangible Assets:
Customer relationships		290
Trade secrets / product formulations		2,890
Trade names		2,080
Total intangible assets		5,260
Net assets acquired		8,039
Purchased consideration		12,561
Goodwill	$	4,528

Goodwill is primarily attributable to assembled workforce, expected synergies and other factors.

The fair values of the identifiable intangible assets acquired at the date of the DERMAdoctor Acquisition are as follows (in thousands):

Intangible Asset	Fair Value		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

The valuations of intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows.

The Company recognized approximately $1.2 million of transaction costs in the year ended December 31, 2021. These costs are recorded in “General and administrative expense” in the consolidated statements of operations and comprehensive loss.

The Company’s management reviews financial results and manages the business on an aggregate basis in accordance with ASC 280. Therefore, financial results are reported in two operating segments: (1) Optical & Wound Care and (2) Skincare (see Note 20, “Segment Reporting” below).

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Note 4 - Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 4. FAIR VALUE MEASUREMENTS 

The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value hierarchy include money market securities and certificates of deposit.

As of December 31, 2021, the 2021, Warrants are classified within Level 3 of the fair value hierarchy as liabilities (see Note 13, “Warrant Liability” and Note 14, “Stockholders’ Equity”).

The following table presents the Company's assets measured at fair value on a recurring basis as of March 31, 2022 (in thousands):

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	March 31,		Active Markets		Other		Unobservable
	2022		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Deposit held as a certificate of deposit		152		152		—		—
Total assets	$	152	$	152	$	—	$	—
Liabilities
Warrant liability	$	—		—		—	$	—
Contingent earnout liability		342		—		—		342
Total liabilities	$	342	$	—	$	—	$	342

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of March 31, 2022 (in thousands):

Fair value of warrant liability at December 31, 2021	$	9,558
Decrease in fair value of 2021 Warrants		(2,056	)
Reclassification of warrant liability to equity		(7,502	)
Fair value of warrant liability at March 31, 2022	$	—
Fair value of contingent liability at December 31, 2021	$	561
Decrease in fair value of contingent liability		(219	)
Fair value of contingent liability at March 31, 2022	$	342

The following table presents the Company's assets measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
	2021		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—
Liabilities
Warrant liability	$	9,558		—		—	$	9,558
Contingent earnout liability		561		—		—		561
Total liabilities	$	10,119	$	—	$	—	$	10,119

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2021 (in thousands):

Fair value of warrant liability at December 31, 2020	$	—
Fair value of 2021 Warrants issued		14,172
Decrease in fair value of 2021 Warrants		(4,614	)
Fair value of warrant liability at December 31, 2021	$	9,558

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Note 5 - Prepaid Expenses and Other Current Assets

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Prepaid Expenses and Other Current Assets [Text Block]

NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following (in thousands):

	March 31,		December 31,
	2022		2021
Prepaid inventory	$	335	$	367
Prepaid dues and subscription		93		18
Prepaid insurance		77		138
Prepaid consultant		8		68
Prepaid patents		8		9
Prepaid sales rebates		3		19
Prepaid rent		—		14
Other		228		145
Total prepaid expenses and other current assets	$	752	$	778

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Note 6 - Inventory

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE 6. INVENTORY

Inventory consisted of the following (in thousands):

	March 31,			December 31,
	2022			2021
Raw materials and supplies	$	1,446		$	1,179
Finished goods		2,861			2,682
Less: Reserve for excess and obsolete inventory		(522	)		(641	)
Total inventory, net	$	3,785		$	3,220

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Note 7 - Property and Equipment

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE 7. PROPERTY AND EQUIPMENT 

Property and equipment consisted of the following (in thousands):

	March 31,			December 31,
	2022			2021
Office and laboratory equipment	$	20		$	20
Furniture and fixtures		157			157
Computer equipment and software		464			464
Production equipment		138			114
Leasehold improvements		79			79
Total property and equipment, at cost		858			834
Less: accumulated depreciation and amortization		(671	)		(641	)
Total property and equipment, net	$	187		$	193

Depreciation and amortization expense was $30 thousand and $9 thousand for the three months ended March 31, 2022 and 2021, respectively.

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Note 8 - Goodwill

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Goodwill Disclosure [Text Block]

NOTE 8. GOODWILL

Goodwill is accounted for in accordance to ASC 350, Intangibles-Goodwill and Other. We do not amortize goodwill, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired. There were no indications of impairment during the three months ended March 31, 2022. For the DERMAdoctor acquisition, there were no material measurement period adjustments recorded to the fair values of assets acquired and liabilities assumed during the period.  No goodwill impairment was recognized as of March 31, 2022. Goodwill was $4.5 million as of both March 31, 2022 and December 31, 2021.

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Note 9 - Other Intangible Assets

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE 9. OTHER INTANGIBLE ASSETS

Other intangible assets consisted of the following (in thousands):

	Balance at December 31, 2021
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(7	)	$	283
Trade secrets / product formulations		2,890		(53	)		2,837
Total other intangible assets	$	5,260	$	(60	)	$	5,200

	Balance at March 31, 2022
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(17	)	$	273
Trade secrets / product formulations		2,890		(134	)		2,756
Total other intangible assets	$	5,260	$	(151	)	$	5,109

Amortization expense was $91 thousand and $0 for the three months ended March 31, 2022 and 2021, respectively. Based on the amortizable intangible assets as of March 31, 2022, future amortization expenses were as follows (in thousands):

2022	$	272
2023		363
2024		363
2025		363
2026		363
Thereafter		1,305
Total	$	3,029

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Note 10 - Accrued Liabilities

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 10. ACCRUED LIABILITIES 

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2022		2021
Contract liabilities (see Note 16)	$	1,914	$	1,289
Employee payroll and benefits		397		443
Audit services		95		—
Other		357		360
Total accrued liabilities	$	2,763	$	2,092

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Note 11 - Line of Credit

3 Months Ended

Mar. 31, 2022

Line of Credit [Member]

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 11. LINE OF CREDIT

At the time of the DERMAdoctor Acquisition, DERMAdoctor had a line of credit agreement with Bank Midwest for $500 thousand. There was no balance outstanding on the line of credit at the time of Acquisition Closing. The line of credit was terminated and repaid in full on January 6, 2022. The line of credit had an interest rate equal to the Wall Street Journal Prime Rate plus 1.50% with a floor of 5.00%. All borrowings were collateralized by substantially all assets of DERMAdoctor. As of March 31, 2022, there was no outstanding balance on the line of credit.

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Note 12 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 12. COMMITMENTS AND CONTINGENCIES 

Indemnification Agreements

As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and may enable it to recover a portion of any future payments. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, it has not recorded any liabilities for these agreements as of March 31, 2022. 

In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, typically its clinical research organizations, investigators, clinical sites, suppliers, and others. Pursuant to these agreements, it generally indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with the use or testing of its products or product candidates or with any U.S. patent or any copyright or other intellectual property infringement claims by any third party with respect to its products. The term of these indemnification agreements is generally perpetual. The potential future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, costs related to these indemnification provisions have been immaterial. The Company also maintains various liability insurance policies that limit its exposure. As a result, it believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of March 31, 2022. 

Legal Matters

As of March 31, 2022, there were no legal matters that, in the opinion of management, would ultimately result in liability that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Leases

The Company leases office space for its corporate headquarters located in Emeryville, California. The initial lease term was scheduled to expire on February 28, 2022, but on January 19, 2022, the Company exercised its option to extend the term and amended the lease to extend the term through July 31, 2027.

We are also party to a lease for 19,136 square feet of space located in Riverside, Missouri, which we utilize for light manufacturing, storage, distribution of products and administrative functions. The lease commenced on October 1, 2019 and expires on December 31, 2024.

In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate. The Company has elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use assets and lease liability for leases being greater than if the policy election was not applied. The leases include variable components (e.g. common area maintenance) that are paid separately from the monthly base payment based on actual costs incurred and therefore were not included in the right-of-use assets and lease liability, but are reflected as an expense in the period incurred.

The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Lease Costs	Three Months Ended March 31,
	2022		2021
Operating lease cost	$	134	$	99
Net lease cost	$	134	$	99
Other information
Operational cash flow used for operating leases	$	111	$	113

The Company has measured its operating lease liabilities at its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate are summarized as follows:

	Three Months Ended March 31,
	2022			2021
Weighted-average remaining lease term (in years)		5.0			1.0
Weighted-average discount rate		5	%		12	%

Future lease payments under non-cancelable leases as of March 31, 2022 were as follows (in thousands):

2022	$	430
2023		535
2024		549
Thereafter		1,166
Total future minimum lease payments		2,680
Less imputed interest		(293	)
Total	$	2,387
Reported as:
Operating lease liability	$	465
Operating lease liability- non-current		1,922
Total	$	2,387

Contracts

On May 13, 2020, the Company entered into an agreement with TLF Bio Innovation Lab LLC (“TLF Bio Innovation”) to manage the relaunch of the Company’s CelleRx product (the “TLF Agreement”) which was further amended on September 4, 2020 and subsequently terminated on February 4, 2021. Under the TLF Agreement, the Company paid TLF Bio Innovation a monthly cash fee and issued 15,000 warrants to TLF Bio Innovation on January 22, 2021(see Note 14, “Stockholders’ Equity”).

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Note 13 - Warrant Liability

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

NOTE 13. WARRANT LIABILITY

2019 Domestic, Foreign & Ladenburg Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the 2019 Domestic Warrants, the 2019 Foreign Warrants and the 2019 Ladenburg Warrants in the third quarter of 2019. The terms of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants all required potential cash-settlement in the event of a specified fundamental transaction. Under ASC 480, Distinguishing Liabilities from Equity, the warrants were classified as liabilities because the Company’s potential obligation to cash-settle the warrants was deemed to be beyond the Company’s control. The fair value of outstanding warrants was determined at each reporting date using a Black-Scholes option pricing model with the changes in fair value recorded in the consolidated statements of operations and comprehensive loss.

Upon issuance in the third quarter of 2019, the fair value of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants was determined to be $3.1 million, $2.0 million and $0.1 million, respectively.

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the 2019 Domestic Warrants and 2019 Foreign Warrants were exercised at reduced exercise prices. The warrant liabilities associated with these warrants was adjusted to their fair values as of the date of exercise, with the change in fair values recorded in the consolidated statements of operations and comprehensive loss. The fair values were then transferred to equity. As of the date of exercise, the fair value of the 2019 Domestic Warrants and 2019 Foreign Warrants was determined to be $4.9 million and $4.2 million, respectively, in accordance with the following key assumptions:

Assumptions	2019 Domestic Warrants			2019 Foreign Warrants
Expected price volatility		178	%		178	%
Expected term (in years)		4.57			4.57
Risk-free interest rate		0.25	%		0.27	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of warrant	$	1.18		$	1.54

There were no 2019 Domestic Warrants or 2019 Foreign Warrants outstanding as of March 31, 2022.

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the Company amended the 2019 Ladenburg Warrants. The Company’s potential obligation to cash-settle the warrants if a specified fundamental transaction occurred was amended to apply only in situations within the Company’s control. Pursuant to this change, the 2019 Ladenburg Warrants were no longer classified as liabilities. The warrant liability associated with the 2019 Ladenburg Warrants was adjusted to fair value as of the date of the amendment, with the change in fair value recorded in the consolidated statements of operations and comprehensive loss. The fair value was then transferred to equity. The fair value of the 2019 Ladenburg Warrants was determined to be $0.2 million on the date of amendment in accordance with the following key assumptions:

Expected price volatility		186	%
Expected term (in years)		4.05
Risk-free interest rate		0.22	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	1.17

The 2019 Ladenburg Warrants will no longer be adjusted to fair value in reporting periods after the amendment. All 2019 Ladenburg Warrants remained outstanding as of March 31, 2022.

November 2021 Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the 2021 Warrants in the fourth quarter of 2021. The terms of the 2021 Warrants required that the Company obtain stockholder approval for an increase in authorized shares before they became exercisable. Under ASC 480, Distinguishing Liabilities from Equity, the 2021 Warrants were classified as liabilities as of December 31, 2021 and until the 2021 Warrants became exercisable. The 2021 Warrants became exercisable subsequent to December 31, 2021, on January 31, 2022. On January 31, 2022, our stockholders met and approved the necessary increase in authorized share capital available to meet the assumed exercise or conversion of its issued warrants and convertible preferred stock.  On January 31, 2022, as a result of the stockholder approval of the increase in authorized share capital, the warrants issued in November 2021 became exercisable and were reclassified from a liability to equity because the warrants require physical settlement or net share settlement. Accordingly, there is no fair value of warrant liabilities recorded in the Company’s balance sheet as of March 31, 2022.

Upon issuance, the fair value of the 2021 Warrants was determined to be $14.2 million in accordance with the following key assumptions as of November 2, 2021:

Expected price volatility		84.9	%
Expected term (in years)		6.2
Risk-free interest rate		1.29	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.38

As of December 31, 2021, the fair value of the 2021 Warrants was determined to be $9.6 million in accordance with the following key assumptions:

Expected price volatility		87	%
Expected term (in years)		6.0
Risk-free interest rate		1.31	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.25

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Note 14 - Stockholders' Equity

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 14. STOCKHOLDERS' EQUITY

Preferred Stock and 2021 Warrants

The Company is authorized to issue up to 5,000,000 shares of preferred stock with rights and preferences as may be approved by its Board of Directors under its Amended and Restated Certificate of Incorporation.

On October 29, 2021, the Company entered into a securities purchase agreement with various institutional investors to sell in a private placement offering (the “2021 Private Placement”) (i) an aggregate of 15,000 shares of our newly-created Series B Non-Voting Preferred Stock (the “Preferred Stock”) convertible into an aggregate of 37,500,000 shares of Common Stock, and (ii) warrants (the “2021 Warrants”) exercisable for 37,500,000 shares of Common Stock for net proceeds of $14.9 million. The 2021 Private Placement closed on November 2, 2021.

The 2021 Warrants are exercisable into 37,500,000 Warrant Shares at an exercise price of $0.53 per share, subject to adjustment. The Warrants were not immediately exercisable upon issuance. In order for the Warrants to become exercisable, the Company was required to hold a stockholder meeting to (i) obtain stockholder approval, in accordance with the NYSE American LLC Company Guide (the “Company Guide”) Section 713(a) and (b), for the issuance of the 37,500,000 shares of Common Stock upon the exercise of all of the Warrants, as well as the issuance of the 37,500,000 Conversion Shares upon conversion of the Preferred Stock (the “Share Issuance Proposal”) and (ii) obtain stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 100,000,000 shares to 150,000,000 shares (the “Authorized Share Increase Proposal”). The Company held a special meeting of stockholders on December 17, 2021 (the “Special Meeting”) at which the Share Issuance Approval was approved by stockholders and, at a subsequent adjournment of the Special Meeting on January 31, 2022, the stockholders approved the Authorized Share Increase Proposal. As a result of these stockholder approvals, the Warrants became exercisable subsequent to December 31, 2021 and will continue to be exercisable for a period of six (6) years thereafter.

Each share of the Preferred Stock that we issued in the Private Placement had a purchase price of $1,000 per share and is initially convertible at a conversion price of $0.40 into 2,500 shares of Common Stock, or an aggregate of 37,500,000 shares of Common Stock. The conversion by the holders of the Preferred Stock was initially subject to approval of the Share Issuance Proposal. Until the Share Issuance Proposal was approved by stockholders at the Special Meeting, the holders of the Preferred Stock were limited in converting their shares to an aggregate of 19.99% of the outstanding shares of Common Stock immediately prior to the closing of the 2021 Private Placement, or 8,984,178 shares of Common Stock. As a result of the Company’s stockholders approving the Share Issuance Proposal at the Special Meeting, this limitation upon conversion of Preferred Stock was no longer applicable to the holders as of December 31, 2021. The Preferred Stock does not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of NovaBay. The Preferred Stock does, however, have anti-dilution protection in the event that we sell or grant any Common Stock or any other securities of our Company, subject to certain limited exceptions, that would entitle the holder thereof to acquire Common Stock at an effective price per share that is lower than the then applicable conversion price of the Preferred Stock.

The Company allocated the net proceeds between the Preferred Stock and the 2021 Warrants by applying the residual fair value methodology. The Company first allocated $14.2 million to the 2021 Warrants, with the residual amount allocated to the Preferred Stock. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2021 Warrants.

In connection with the issuance of the Preferred Stock, the Company recorded a beneficial conversion feature of $0.7 million as a discount to Preferred Stock and an increase to additional paid in capital. The Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statements of operations and comprehensive loss upon approval of the Share Issuance Proposal in the fourth quarter of 2021.

The Company incurred total issuance costs of $1.7 million in conjunction with the 2021 Private placement. The Company allocated $1.6 million of the issuance costs to the warrant liability which was expensed in the Company’s consolidated statements of operations and comprehensive loss during the year ended December 31, 2021. The remaining $0.1 million was recorded as a reduction of Preferred Stock in the Company’s consolidated balance sheets.

During the first quarter of 2022, 1,461 shares of the Preferred Stock were converted into 3,652,500 shares of common stock. Each share of the Preferred Stock is currently convertible into 2,500 shares of common stock. There were 13 thousand shares of the Preferred Stock outstanding as of March 31, 2022.

Common Stock

May 2021 At the Market Offering

In the second quarter of 2021, the Company established the 2021 ATM Program with Ladenburg. For additional information regarding the offering and equity program, see the Company’s Current Report on Form 8-K filed with the SEC on May 14, 2021. During the second quarter of 2021, 2,672,000 shares of common stock were issued under the 2021 ATM Program for total net proceeds of $1.8 million, net of offering costs of $0.1 million.

Common Stock Warrants

2019 Domestic Warrants, 2019 Foreign Warrants, 2019 Ladenburg Warrants and July 2020 Warrants

In the third quarter of 2019, the Company entered into a purchase agreement (the “2019 Purchase Agreement”) for the sale of (i) 4,198,566 shares of common stock and (ii) 4,198,566 common stock purchase warrants exercisable for 4,198,566 shares of common stock (the “2019 Domestic Warrants”) for gross proceeds of $4.2 million. The 2019 Domestic Warrants were issued with an exercise price of $1.15 per share and an expiration date of February 13, 2025.

The Company allocated the proceeds between the common stock and 2019 Domestic Warrants by applying the relative fair value allocation methodology. The Company first allocated $3.1 million to the 2019 Domestic Warrants, with the residual amount allocated to the common stock. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2019 Domestic Warrants.

Ladenburg served as the placement agent for the transaction in exchange for a commission representing six percent (6%) of the gross proceeds, totaling $0.3 million, and 167,942 common stock purchase warrants exercisable for 167,942 shares of common stock with an exercise price of $1.25 per share and an expiration date of August 8, 2024 (the “2019 Ladenburg Warrants”). In addition, the Company reimbursed the Placement Agent $60 thousand for certain expenses. The Company also incurred and paid other offering costs of $0.3 million.

The Company incurred total issuance costs of $0.5 million in conjunction with the 2019 Purchase Agreement. The Company allocated $0.2 million of the issuance costs to the warrant liability which was expensed in the Company’s consolidated statements of operations and comprehensive loss during the period. The remaining $0.3 million was recorded as a reduction of additional paid-in capital in the Company’s consolidated balance sheets. As the 2019 Ladenburg Warrants were accounted for as a stock issuance cost, $59 thousand was allocated to the warrant liability and expensed during the period and $65 thousand was recorded as a reduction to additional paid-in capital in the Company’s consolidated balance sheets. See Note 13, “Warrant Liability” for further discussion of the key assumptions used to value the 2019 Ladenburg Warrants.

During the third quarter of 2020, the Company and the holders of the 2019 Domestic Warrants and the 2019 Foreign Warrants entered into exercise agreements which resulted in the cash exercise of the warrants at a reduced exercise price of $0.99. The Company received aggregate gross proceeds of approximately $6.8 million from the exercises. The Company incurred and paid other offering costs of $0.2 million. The Company also incurred and paid a $0.2 million fee to China Kington for brokering the transaction, which equaled six percent (6%) of the gross proceeds from the 2019 Foreign Warrants.

During the third quarter of 2020, the Company and all holders of the 2019 Domestic Warrants and 2019 Foreign Warrants entered into warrant repricing letter agreements. Pursuant to the letter agreements, in consideration for the exercise in full of the 2019 Domestic Warrants and 2019 Foreign Warrants, the Company agreed to: (1) reduce the exercise price of the 2019 Domestic Warrants and the 2019 Foreign Warrants to $0.99 per share prior to exercise, and (2) in a private placement, issue new common stock purchase warrants (the “July 2020 Warrants”) to purchase up to a number of shares of common stock, equal to 100% of the number of 2019 Domestic Warrants and 2019 Foreign Warrants currently held by such holders upon the holders exercising their warrants.

The July 2020 Warrants became exercisable nine months after their issuance, for an aggregate of 6,898,566 shares of common stock. The July 2020 Warrants have an exercise price of $1.65 per share and will expire five and a half years after their issuance. The Company determined that the common stock issued from the exercise of the 2019 Domestic and 2019 Foreign Warrants, and the July 2020 Warrants to be one unit of account, and therefore did not allocate the proceeds between the common stock and the July 2020 Warrants as, the proceeds, even if allocated, would be both recognized in additional paid-in capital. All July 2020 Warrants remained outstanding as of March 31, 2022.

During the third quarter of 2020, the Company also entered into a reprice agreement with Ladenburg which reduced the exercise price to $0.99 per share and amended certain terms of the 2019 Ladenburg Warrants. The Company’s potential obligation to cash-settle the warrants if a specified fundamental transaction occurred was amended to apply only in situations within the Company’s control. As further described in Note 13 “Warrant Liability”, the 2019 Ladenburg Warrants were no longer classified as a liability as a result of this amendment.

TLF Bio Innovation Warrants

On January 15, 2021, TLF Bio Innovation was granted warrants exercisable for 15,000 shares of the Company’s common stock with an exercise price of $0.6718 per share (the “TLF Warrants”). The TLF Warrants will expire five years after their issuance. The TLF Warrants are classified as equity.

The details of all outstanding warrants as of March 31, 2022 were as follows:

	Warrants (in thousands)		Weighted- Average Exercise Price
Outstanding at December 31, 2021		7,082	$	1.63
Warrants granted		37,500	$	0.53
Outstanding at March 31, 2022		44,582	$	0.71

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Note 15 - Equity-based Compensation

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 15. EQUITY-BASED COMPENSATION

Equity Compensation Plans 

In October 2007, the Company adopted the 2007 Omnibus Incentive Plan (the “2007 Plan”) to provide for the granting of equity awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and stock appreciation rights to employees, directors and outside consultants, as determined by the Board.  The 2007 Plan expired on March 15, 2017. Upon expiration, new awards cannot be issued pursuant to the 2007 Plan, but outstanding awards continue to be governed by its terms. Stock options granted under the 2007 Plan expire no later than ten years from the date of grant. All stock options outstanding under the 2007 Plan were fully vested as of March 31, 2022.

In March 2017, the Company adopted the 2017 Omnibus Incentive Plan (the “2017 Plan”), which was approved by stockholders on June 2, 2017, to provide for the granting of equity awards, such as nonqualified stock options (“NQSOs”), incentive stock options (“ISOs”), restricted stock, performance shares, stock appreciation rights (“SARs”), RSUs and other share-based awards to employees, directors, and consultants, as determined by the Board.  The 2017 Plan does not affect awards previously granted under the 2007 Plan. Upon adoption, the 2017 Plan allowed for awards of up to 2,318,486 shares of the Company’s common stock, plus an automatic annual increase in the number of shares authorized for awards on the first day of each of the Company’s fiscal years beginning January 1, 2018 through January 1, 2027 equal to (i) 4% of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of common stock than provided for in Section 4(a)(i) of the 2017 Plan as determined by the Board. On January 15, 2021, the number of shares available for future awards under the 2017 Plan was increased by 1,671,303 shares. As of  March 31, 2022, there were 1,525,680 shares available for future awards under the 2017 Plan.

Under the terms of the 2017 Plan, the exercise price of NQSOs, ISOs and SARs may not be less than 100% of the fair market value of the common stock on the date of grant and, if ISOs are granted to an owner of more than 10% of the Company’s stock, then not less than 110% of the fair market value of the common stock on the date of grant. The term of awards will not be longer than ten years, or in the case of ISOs, not longer than five years with respect to holders of more than 10% of the Company’s stock. Stock options granted to employees generally vest over four years, while options granted to directors and consultants typically vest over a shorter period, subject to continued service. The Company issues new shares to satisfy option exercises for awards issued under the 2007 Plan and the 2017 Plan.

Stock Option Summary 

The following table summarizes information about the Company’s stock options outstanding at March 31, 2022 and activity during the period ended March 31, 2022:

(in thousands, except years and per share data)	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		4,449		$	1.39		7.6	$	460
Options granted		332		$	0.30
Options forfeited/cancelled		(21	)	$	10.94
Outstanding at March 31, 2022		4,760		$	1.27		7.6	$	356
Vested and expected to vest at March 31, 2022		4,416		$	1.33		7.5	$	313
Vested at March 31, 2022		2,218		$	2.30		5.8	$	—
Exercisable at March 31, 2022		2,218		$	2.30		5.8	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of the Company’s common stock as quoted on the NYSE American as of March 31, 2022 for options that have a quoted market price in excess of the exercise price. There were no stock option awards exercised during the three months ended March 31, 2022. The Company received no cash payments for the exercise of stock options during the three months ended March 31, 2022.

As of March 31, 2022, total unrecognized compensation cost related to unvested stock options and restricted stock units was approximately $1.1 million. This amount is expected to be recognized as stock-based compensation expense in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.25 years.

Stock Option Awards to Employees and Directors 

The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards as of the date of grant by applying the Black-Scholes option pricing model using the single-option valuation approach. The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note 2, “Summary of Significant Accounting Policies,” for a description of the accounting policies that the Company applied to value its stock-based awards. 

During the three months ended March 31, 2022 and 2021, the Company granted options to employees and directors to purchase an aggregate of 332,000 and 55,000 shares of common stock, respectively.

The weighted-average assumptions used in determining the value of options are as follows: 

	Three Months Ended March 31,
Assumption	2022			2021
Expected price volatility		160.47	%		164.44	%
Expected term (in years)		6.45			6.19
Risk-free interest rate		1.63	%		1.09	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of options granted during the period	$	0.29		$	1.04

Expected Price Volatility—This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. The computation of expected volatility was based on the historical volatility of our own stock.

Expected Term—This is the period of time over which the options granted are expected to remain outstanding. The expected life assumption is based on the Company’s historical data.

Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected life of the option.

Dividend Yield—We have not made any dividend payments nor do we have plans to pay dividends in the foreseeable future.

Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

During the three months ended March 31, 2022 and 2021, the Company did not grant restricted stock to employees.

For the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $184 thousand and $130 thousand, respectively, for stock-based awards to employees and directors.  

Stock-Based Awards to Non-Employees

During the three months ended March 31, 2022 and 2021, the Company did not grant options exercisable for shares of common stock to non-employees in exchange for advisory and consulting services.

When the Company grants stock options, the stock options are recorded at their fair value on the grant date and recognized over the respective service or vesting period. The fair value of the stock options that are granted is calculated using the Black-Scholes-Merton option pricing model.

In addition, during the three months ended March 31, 2022 and 2021, the Company did not grant restricted stock to non-employees.

For the three months ended March 31, 2022, the Company recognized a nominal stock-based compensation expense as compared to stock-based compensation expense of $53 thousand for the three months ended March 21, 2021, related to non-employee stock option grants. 

Summary of Stock-Based Compensation Expense 

A summary of the stock-based compensation expense included in results of operations for the options and restricted stock awards discussed above is as follows (in thousands): 

	Three Months Ended March 31,
	2022		2021
Research and development	$	4	$	4
Sales and marketing		12		31
General and administrative		168		148
Total stock-based compensation expense	$	184	$	183

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Note 16 - License, Collaboration and Distribution Agreements

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

License, Collaboration, and Distribution Agreements [Text Block]

NOTE 16. LICENSE, COLLABORATION AND DISTRIBUTION AGREEMENTS

Transactions under the Company’s major distribution agreements are recognized upon transfer of control of product sold to its major distribution partners at the amount of consideration that the Company expects to be entitled to. The Company records contract liabilities for the amounts that are estimated to be subject to significant reversal, including allowances for services, discounts, rebate programs, and product returns.

The following table presents changes in the Company's contract assets and liabilities for the three months ended March 31, 2022 (in thousands): 

	Balance at December 31, 2021		Additions		Deductions			Balance at the end of the Period
Contract liabilities: deferred revenue	$	2	$	69	$	(2	)	$	69
Contract liabilities: accrued liabilities (includes contract assets)		1,270		842		(201	)		1,911
Total	$	1,272	$	911	$	(203	)	$	1,980

For the three months ended March 31, 2022 and 2021, the Company recognized the following revenue (in thousands):

	Three Months Ended March 31,
	2022		2021
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied	$	201	$	575
New activities in the period:
Performance obligations satisfied		2,428		1,232
	$	2,629	$	1,807

Avenova Spray Pharmacy Distribution Agreements and Specialty Pharmacies

Avenova Spray is made available in local pharmacies and major pharmacy retail chains under nationwide distribution agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen. We have also entered into direct agreements with preferred pharmacy networks as part of our Partner Pharmacy Program. The Company incurred net sales loss of $199 thousand during the three months ended March 31, 2022, and net sales revenue of $122 thousand during the three months ended March 31, 2021 for its Avenova Spray product from these distribution and partner pharmacy agreements. The net loss during the three months ended March 31, 2022, was the result of an increase in returns for expired product from a major pharmacy retail chain.

Under the prescription Avenova Spray product distribution arrangements, the Company had a contract liability balance of $1.3 million and $0.9 million as of  March 31, 2022 and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets. The Company also recorded a prepayment of $3 thousand and $19 thousand for rebates related to these distribution agreements as of March 31, 2022 and December 31, 2021, respectively, that is recorded in the prepaid expenses and other current assets in the condensed consolidated balance sheets (see Note 5, “Prepaid Expenses and Other Current Assets”).

Over-the-Counter Sales of Avenova Spray

Avenova Spray was launched online on June 1, 2019 direct to U.S. customers. Avenova Spray is offered primarily for sale on Amazon.com, the Company’s website (Avenova.com) and Walmart.com. Avenova Spray was launched at select CVS stores and online on CVS.com in February 2021. These channels provide the Company with more stable pricing and provide customers with easy access to our product. During the three months ended March 31, 2022 and 2021, the revenue generated from over-the-counter Avenova Spray was $1.4 million and $1.2 million, respectively. 

DERMAdoctor

DERMAdoctor products are available through wholesale distribution relationships with third parties such as Costco, Amazon and others. The Company had a contract liability balance of $0.6 million and $0.4 million as of  March 31, 2022, and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets.

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Note 17 - Employee Benefit Plan

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Retirement Benefits [Text Block]

NOTE 17. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) plan covering all eligible employees. The Company was not required to contribute to the plan and made no contributions during the period ended December 31, 2021. The Company made an election to change the terms of the 401(k) plan such that, beginning on January 1, 2022, the Company made matching contributions equal to 100% of the first 3% of compensation deferred, plus 50% of the next 2% of compensation deferred.

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Note 18 - Related Party Transactions

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 18. RELATED PARTY TRANSACTIONS      

Related Party Revenue 

The following table summarizes information about the Company’s related party revenue and cost of goods sold during the three months ended March 31, 2022 and 2021, respectively (in thousands): 

	Three Months Ended March 31,
	2022			2021
Related party revenue:
NeutroPhase	$	148		$	—
Total related party revenue	$	148		$	—
Cost of goods sold:
NeutroPhase	$	(134	)	$	—
Total related party expenses	$	(134	)	$	—

Related party accounts receivable was $0.1 million as of both March 31, 2022 and December 31, 2021.

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Note 19 - Paycheck Protection Program

3 Months Ended

Mar. 31, 2022

COVID 19 Member [Member]

Notes to Financial Statements

Unusual or Infrequent Items, or Both, Disclosure [Text Block]

NOTE 19. PAYCHECK PROTECTION PROGRAM

On May 6, 2020, the Company received loan proceeds in the amount of $0.9 million from Wells Fargo Bank, N.A. (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020, or the PPP Flexibility Act, which was enacted on September 5, 2020. The PPP loan provided for an interest rate of 1.00% per year and maturity two years after the date of initial disbursement, with initial principal and interest payments coming due late in fiscal 2021. The PPP Loan could be prepaid by the Company at any time prior to the maturity with no prepayment penalties. Funds from the PPP Loan could only be used for payroll costs, costs used to continue group health care benefits, rent and utilities incurred during the 24-week period after receiving the PPP Loan (collectively, “Qualifying Expenses”) in order for the PPP Loan to be forgiven in whole or in part. The Company used the entire PPP Loan amount for Qualifying Expenses.

Since the Company determined that there was reasonable assurance that it would meet the conditions for forgiveness of the full loan amount, the Company accounted for the forgivable PPP Loan as a government income grant that we earned through the Company’s compliance with the loan forgiveness criteria. A deferred income liability was recognized upon receipt of the forgivable loan proceeds. The deferred income liability was recognized as other income as Qualifying Expenses were incurred. For the year ended December 31, 2020, $0.9 million was recognized as other income and recorded in the consolidated statements of operations and comprehensive loss. No amount was recognized for the period ended March 31, 2022.

The Company received notice, dated May 24, 2021, from Wells Fargo Bank, N.A. confirming the full loan amount of $0.9 million was forgiven.

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Note 20 - Segment Reporting

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 20. SEGMENT REPORTING

The Company’s chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance.

Prior to the DERMAdoctor Acquisition in November 2021 (see Note 3, “Business Combination”), the Company was managed as a single segment focused on commercializing Avenova Spray in the United States. After the DERMAdoctor Acquisition, the Company began managing and aggregating its operational and financial information in accordance with two reportable segments: (1) Optical &Wound Care and (2) Skin Care. The Optical & Wound Care segment consists of products historically sold by NovaBay prior to the DERMAdoctor Acquisition. The Skin Care segment consists of products acquired in the DERMAdoctor Acquisition and skincare products subsequently sold under the DERMAdoctor brand.

Select financial information for each segment is as follows (in thousands):

	Three Months Ended March 31,
	2022			2021
Net sales
Optical & Wound Care	$	1,738		$	1,807
Skincare		891			—
Consolidated	$	2,629		$	1,807
Operating loss
Optical & Wound Care	$	(2,039	)	$	(1,520	)
Skincare		(343	)		—
Consolidated	$	(2,382	)	$	(1,520	)

The Company’s reportable segments are strategic business units that offer different products. Each segment is managed independently because they require different operations and markets to distinct classes of customers. Operating costs included in one segment may benefit other segments, and therefore these segments are not designed to measure operating income or loss directly related to the products included in each segment. Management will continually evaluate the alignment of product development organizations, sales organizations, and inter-segment commissions for segment reporting purposes, which may result in changes to segment allocations in future periods.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. These estimates include contract liabilities related to product sales, useful lives for property and equipment and related depreciation calculations, assumptions for valuing options and warrants, the fair value of contingent consideration, intangible assets, goodwill, stock-based compensation, income taxes and other contingencies as of March 31, 2022.

These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were held in a highly-rated, major financial institution in the United States.

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets that sum to the total of the same reported in the condensed consolidated statements of cash flows (in thousands):

	March 31,		December 31,
	2022		2021
Cash and cash equivalents	$	5,641	$	7,504
Restricted cash included in other assets		152		475
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows	$	5,793	$	7,979

The restricted cash amount included in other assets on the condensed consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk and Major Partners

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with a highly-rated, major financial institution in the United States. 

Deposits in this bank may exceed the amount of federal insurance provided on such deposits. The Company does not believe it is exposed to significant credit risk due to the financial position of the financial institution in which the deposits are held. 

During the three months ended March 31, 2022 and 2021, revenues were derived primarily from sales of Avenova-branded products, directly to consumers through Amazon.com, and Avenova.com. During the three months ended March 31, 2022, revenues also included sales of DERMAdoctor-branded products.

During the three months ended March 31, 2022 and 2021, revenues from significant product categories were as follows (in thousands):

	Three Months Ended March 31,
	2022		2021
Avenova Spray	$	1,426	$	1,575
DERMAdoctor		891		—
NeutroPhase		148		—
Other products		158		226
Total product revenue, net		2,623		1,801
Other revenue, net		6		6
Total sales, net	$	2,629	$	1,807

During the three months ended March 31, 2022 and 2021, sales of Avenova Spray via Amazon comprised 77% and 65% of total Avenova Spray net revenue, respectively. No other individual distributor comprised greater than 10% of total Avenova Spray net revenue during the three months ended March 31, 2022 or 2021. A major U.S. retailer comprised 25% of DERMAdoctor net revenue for the three months ended March 31, 2022 with no comparable revenue for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, accounts receivable from our major distribution partners and major retailers greater than 10% were as follows:

	March 31,			December 31,
Major distribution partner	2022			2021
Major U.S. Retailer		35	%		33	%
Avenova Spray Pharmacy Distributor B		14	%		11	%
Avenova Spray Pharmacy Distributor A		13	%		13	%

The Company relies on seven contract manufacturers to produce its products. The Company does not own any manufacturing facilities and intends to continue to rely on third parties for the supply of finished goods. Contract manufacturers may or may not be able to meet the Company’s needs with respect to timing, quantity or quality. In particular, it is possible that we may suffer from unexpected supply chain delays in light of the worldwide COVID-19 pandemic.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Assets and Liabilities

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The Company’s cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Allowance for Doubtful Accounts

The Company charges bad debt expense and records an allowance for doubtful accounts when management believes it to be unlikely that specific invoices will be collected. Management identifies amounts due that are in dispute and believes are unlikely to be collected. Management recorded no reserve for accounts receivable at March 31, 2022 and December 31, 2021.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is comprised of (1) raw materials and supplies, such as bottles, packaging materials, labels, boxes and pumps; (2) goods in progress, which are normally filled but unlabeled bottles; and (3) finished goods. We utilize contract manufacturers to produce our products and the price paid to these manufacturers is included in inventory. Inventory is stated at the lower of cost or estimated net realizable value determined by the first-in, first-out method. At both March 31, 2022 and December 31, 2021, management had recorded an allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments of $522 thousand and $641 thousand, respectively. 

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets of five to seven years for office and laboratory equipment, three to five years for computer equipment and software, and five to seven years for furniture and fixtures. Leasehold improvements are amortized over the lease term.

The costs of normal maintenance, repairs, and minor replacements are expensed as incurred. 

Business Combinations Policy [Policy Text Block]

Business Combinations 

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

The determination of estimated fair value requires us to make significant estimates and assumptions. These fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and asset lives, among other items. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. There were no impairment charges as of March 31, 2022 and December 31, 2021.

Intangible Asset	Fair Value (in thousands)		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

Valuation of Contingent Consideration from Business Combination Policy [Policy Text Block]

Valuation of Contingent Consideration Resulting from a Business Combination

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value within our Statement of Operations and Comprehensive Loss until such time as the specified milestone achievement period is complete.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. Actual results may differ from estimates.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets 

The Company accounts for long-lived assets, other than goodwill and intangible assets, and operating lease right-of-use assets in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use or right-of-use assets are present. The Company reviews long-lived assets and right-of-use assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the statements of operations. There were no impairment charges as of March 31, 2022 and December 31, 2021.

Lessee, Leases [Policy Text Block]

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.

The Company has elected to combine lease and non-lease components as a single component for all leases in which it is a lessee or a lessor. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (Loss)

ASC 220, Comprehensive Income, requires that an entity's change in equity or net assets during a period from transactions and other events from non-owner sources be reported.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

Revenue is recognized from sale of goods in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when or as the Company’s performance obligations are satisfied by transferring control of the promised goods to customers in an amount that reflects the consideration to which the Company expects to receive. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

i. identify the contract(s) with a customer;

ii. identify the performance obligations in the contract;

iii. determine the transaction price;

iv. allocate the transaction price to the performance obligations in the contract; and

v. recognize revenue when (or as) the entity satisfies performance obligations.

Revenue is generated through the Company’s webstores, Avenova.com and DERMAdoctor.com, for Avenova Spray and DERMAdoctor direct to consumer sales which are recognized upon fulfillment, which generally occurs upon delivery of the related products to a third-party carrier. Shipping and handling costs are expensed as incurred and included in cost of goods sold in the consolidated statements of operations and comprehensive loss. We present revenue net of sales taxes and refunds.

Revenue generated through Amazon.com and Walmart.com is recognized upon fulfillment, which generally occurs upon delivery of the products to a third-party carrier. We present revenue net of commissions and any related fulfillment and shipping fees charged by these partners. Fees paid to partners for promoting our products are expensed as incurred and are included in sales and marketing expenses within the operating expenses in the consolidated statements of operations and comprehensive loss.

The Company also generates Avenova Spray revenue through major pharmacy distribution partners. Product supply of Avenova Spray is the only performance obligation contained in these arrangements, and the Company recognizes product revenue upon transfer of control to its major distribution partners at the amount of consideration that the Company expects to be entitled to, generally upon delivery to the distributor on a “sell-in” basis. Upon recognition of product sales, contract liabilities are recorded for invoiced amounts that are subject to significant reversal, including product revenue allowances for cash consideration paid to customers for services, discounts, rebate programs, and product returns. The Company derives its rate of return from historical data and updates its return rate assumption quarterly. Payment for product supply is typically due 30 days after control transfers to the distributor.

Revenue generated through the Company’s partner pharmacies is recognized when control of the product transfers to the end customer.

Revenue for product sales to other retailers, such as Costco and CVS, is generally recognized upon transfer of control to the retailer, which generally occurs upon delivery of the products to a third-party carrier, net of estimated future product returns.

Cost of Goods Sold, Policy [Policy Text Block]

Cost of Goods Sold

Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, and other costs associated with products sold. Cost of goods sold also includes any necessary allowance for excess and obsolete inventory along with lower of cost and estimated net realizable value.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development and regulatory activities, including submissions to the Food and Drug Administration (the “FDA”).

Patent Costs Policy [Policy Text Block]

Patent Costs

Patent costs, including legal expenses, are expensed in the period in which they are incurred. Patent expenses are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Advertising Cost [Policy Text Block]

Advertising Costs

Advertising costs are expensed in the period in which the costs are incurred. Advertising expenses were $0.6 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

Share-Based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s consolidated statements of stockholders’ equity based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black-Scholes option pricing model. See Note 15, “Equity-Based Compensation” for further information regarding stock-based compensation expense and the assumptions used in estimating that expense. The Company accounts for RSUs issued to employees and non-employees (consultants and advisory board members) based on the fair market value of the Company’s common stock as of the date of issuance.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

Warrant Liabilities [Policy Text Block]

Common Stock Warrant Liabilities

The Company accounts for common stock purchase warrants issued in connection with its equity offerings in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

The Company accounts for common stock purchase warrants issued in connection with share-based compensation arrangements in accordance with the provisions of ASC 718, Stock Compensation, which encompasses the provisions of ASC 480, Distinguishing Liabilities from Equity.

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) do not become exercisable until the occurrence of contingent event. Additionally, for common stock purchase warrants accounted for in accordance with ASC 718, Stock Compensation, the Company classifies as liabilities any contracts where it believes the warrants are deemed to be probable of issuance.

For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants are determined using the Black-Scholes option pricing model, the Binomial Lattice (“Lattice”) valuation model, or the Monte Carlo simulation model where deemed appropriate. These values are subject to a significant degree of management’s judgment.

Earnings Per Share, Policy [Policy Text Block]

Net Loss per Share

The Company computes net loss per share by presenting both basic and diluted earnings (loss) per share (“EPS”).

Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods because their effect would be anti-dilutive.

For the year ended December 31, 2021, the Series B Non-Voting Preferred Stock (the “Preferred Stock”) was excluded from the computation of diluted net income per share as their inclusion on an “if converted” basis would have been anti-dilutive as a result of such securities not having a contractual obligation to participate in losses of the Company. 

The following table sets forth the calculation of basic EPS and diluted EPS (in thousands, except per share amounts):

	Three Months Ended March 31,
Numerator	2022			2021
Net loss	$	(111	)	$	(1,518	)
Denominator
Weighted average shares of common stock outstanding, basic and diluted		50,088			41,782
Net loss per share attributable to common stockholders, basic and diluted	$	0.00		$	(0.04	)

The following outstanding stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2022		2021
Stock options		4,416		3,138
Stock warrants		44,582		7,082
		48,998		10,220

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements that could affect our business, results of operations, financial condition, and liquidity, see Note 2, “Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 29, 2022. The Company continues to evaluate the potential impact of adopting the new accounting guidance on its consolidated financial position, results of operations and cash flows.

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Note 2 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Table Text Block]

	March 31,		December 31,
	2022		2021
Cash and cash equivalents	$	5,641	$	7,504
Restricted cash included in other assets		152		475
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows	$	5,793	$	7,979

Schedules of Concentration of Risk, by Product [Table Text Block]

	Three Months Ended March 31,
	2022		2021
Avenova Spray	$	1,426	$	1,575
DERMAdoctor		891		—
NeutroPhase		148		—
Other products		158		226
Total product revenue, net		2,623		1,801
Other revenue, net		6		6
Total sales, net	$	2,629	$	1,807

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	March 31,			December 31,
Major distribution partner	2022			2021
Major U.S. Retailer		35	%		33	%
Avenova Spray Pharmacy Distributor B		14	%		11	%
Avenova Spray Pharmacy Distributor A		13	%		13	%

Schedule of Intangible Assets and Goodwill [Table Text Block]

Intangible Asset	Fair Value (in thousands)		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31,
Numerator	2022			2021
Net loss	$	(111	)	$	(1,518	)
Denominator
Weighted average shares of common stock outstanding, basic and diluted		50,088			41,782
Net loss per share attributable to common stockholders, basic and diluted	$	0.00		$	(0.04	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended March 31,
	2022		2021
Stock options		4,416		3,138
Stock warrants		44,582		7,082
		48,998		10,220

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Note 3 - Business Combination (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	Fair Value
Tangible net assets and liabilities:
Cash and cash equivalents	$	12
Accounts receivable, net of allowance for doubtful accounts		1,015
Inventory, net of allowance		2,369
Prepaid expenses and other current assets		150
Property and equipment, net		62
Other intangible assets		54
Accounts payable		(200	)
Accrued liabilities		(683	)
Total net assets		2,779
Intangible Assets:
Customer relationships		290
Trade secrets / product formulations		2,890
Trade names		2,080
Total intangible assets		5,260
Net assets acquired		8,039
Purchased consideration		12,561
Goodwill	$	4,528

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

Intangible Asset	Fair Value		Useful Life (in years)		Amortization Method
Customer relationships	$	290		7	Straight line
Trade secrets / product formulations		2,890		9	Straight line
Trade names		2,080	Indefinite		N/A
Goodwill		4,528	Indefinite		N/A
	$	9,788

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Note 4 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	March 31,		Active Markets		Other		Unobservable
	2022		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Deposit held as a certificate of deposit		152		152		—		—
Total assets	$	152	$	152	$	—	$	—
Liabilities
Warrant liability	$	—		—		—	$	—
Contingent earnout liability		342		—		—		342
Total liabilities	$	342	$	—	$	—	$	342

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
	2021		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—
Liabilities
Warrant liability	$	9,558		—		—	$	9,558
Contingent earnout liability		561		—		—		561
Total liabilities	$	10,119	$	—	$	—	$	10,119

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Fair value of warrant liability at December 31, 2021	$	9,558
Decrease in fair value of 2021 Warrants		(2,056	)
Reclassification of warrant liability to equity		(7,502	)
Fair value of warrant liability at March 31, 2022	$	—
Fair value of contingent liability at December 31, 2021	$	561
Decrease in fair value of contingent liability		(219	)
Fair value of contingent liability at March 31, 2022	$	342

Fair value of warrant liability at December 31, 2020	$	—
Fair value of 2021 Warrants issued		14,172
Decrease in fair value of 2021 Warrants		(4,614	)
Fair value of warrant liability at December 31, 2021	$	9,558

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Note 5 - Prepaid Expenses and Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

	March 31,		December 31,
	2022		2021
Prepaid inventory	$	335	$	367
Prepaid dues and subscription		93		18
Prepaid insurance		77		138
Prepaid consultant		8		68
Prepaid patents		8		9
Prepaid sales rebates		3		19
Prepaid rent		—		14
Other		228		145
Total prepaid expenses and other current assets	$	752	$	778

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Note 6 - Inventory (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,			December 31,
	2022			2021
Raw materials and supplies	$	1,446		$	1,179
Finished goods		2,861			2,682
Less: Reserve for excess and obsolete inventory		(522	)		(641	)
Total inventory, net	$	3,785		$	3,220

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Note 7 - Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Property, Plant and Equipment [Table Text Block]

	March 31,			December 31,
	2022			2021
Office and laboratory equipment	$	20		$	20
Furniture and fixtures		157			157
Computer equipment and software		464			464
Production equipment		138			114
Leasehold improvements		79			79
Total property and equipment, at cost		858			834
Less: accumulated depreciation and amortization		(671	)		(641	)
Total property and equipment, net	$	187		$	193

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Note 9 - Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Balance at December 31, 2021
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(7	)	$	283
Trade secrets / product formulations		2,890		(53	)		2,837
Total other intangible assets	$	5,260	$	(60	)	$	5,200

	Balance at March 31, 2022
			Accumulated
	Gross		Amortization			Net
Indefinite-lived intangible assets
Trade names	$	2,080	$	—		$	2,080
Amortizable intangible assets
Customer relationships	$	290	$	(17	)	$	273
Trade secrets / product formulations		2,890		(134	)		2,756
Total other intangible assets	$	5,260	$	(151	)	$	5,109

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2022	$	272
2023		363
2024		363
2025		363
2026		363
Thereafter		1,305
Total	$	3,029

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Note 10 - Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	March 31,		December 31,
	2022		2021
Contract liabilities (see Note 16)	$	1,914	$	1,289
Employee payroll and benefits		397		443
Audit services		95		—
Other		357		360
Total accrued liabilities	$	2,763	$	2,092

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Note 12 - Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Lease, Cost [Table Text Block]

Lease Costs	Three Months Ended March 31,
	2022		2021
Operating lease cost	$	134	$	99
Net lease cost	$	134	$	99
Other information
Operational cash flow used for operating leases	$	111	$	113

	Three Months Ended March 31,
	2022			2021
Weighted-average remaining lease term (in years)		5.0			1.0
Weighted-average discount rate		5	%		12	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2022	$	430
2023		535
2024		549
Thereafter		1,166
Total future minimum lease payments		2,680
Less imputed interest		(293	)
Total	$	2,387
Reported as:
Operating lease liability	$	465
Operating lease liability- non-current		1,922
Total	$	2,387

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Note 13 - Warrant Liability (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Derivative Instruments [Table Text Block]

Assumptions	2019 Domestic Warrants			2019 Foreign Warrants
Expected price volatility		178	%		178	%
Expected term (in years)		4.57			4.57
Risk-free interest rate		0.25	%		0.27	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of warrant	$	1.18		$	1.54

Expected price volatility		186	%
Expected term (in years)		4.05
Risk-free interest rate		0.22	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	1.17

Expected price volatility		84.9	%
Expected term (in years)		6.2
Risk-free interest rate		1.29	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.38

Expected price volatility		87	%
Expected term (in years)		6.0
Risk-free interest rate		1.31	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.25

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Note 14 - Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Warrants (in thousands)		Weighted- Average Exercise Price
Outstanding at December 31, 2021		7,082	$	1.63
Warrants granted		37,500	$	0.53
Outstanding at March 31, 2022		44,582	$	0.71

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Note 15 - Equity-based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Share-Based Payment Arrangement, Option, Activity [Table Text Block]

(in thousands, except years and per share data)	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		4,449		$	1.39		7.6	$	460
Options granted		332		$	0.30
Options forfeited/cancelled		(21	)	$	10.94
Outstanding at March 31, 2022		4,760		$	1.27		7.6	$	356
Vested and expected to vest at March 31, 2022		4,416		$	1.33		7.5	$	313
Vested at March 31, 2022		2,218		$	2.30		5.8	$	—
Exercisable at March 31, 2022		2,218		$	2.30		5.8	$	—

Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three Months Ended March 31,
	2022		2021
Research and development	$	4	$	4
Sales and marketing		12		31
General and administrative		168		148
Total stock-based compensation expense	$	184	$	183

Employees and Directors [Member]

Notes Tables

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended March 31,
Assumption	2022			2021
Expected price volatility		160.47	%		164.44	%
Expected term (in years)		6.45			6.19
Risk-free interest rate		1.63	%		1.09	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of options granted during the period	$	0.29		$	1.04

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Note 16 - License, Collaboration and Distribution Agreements (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	Balance at December 31, 2021		Additions		Deductions			Balance at the end of the Period
Contract liabilities: deferred revenue	$	2	$	69	$	(2	)	$	69
Contract liabilities: accrued liabilities (includes contract assets)		1,270		842		(201	)		1,911
Total	$	1,272	$	911	$	(203	)	$	1,980

Disaggregation of Revenue [Table Text Block]

	Three Months Ended March 31,
	2022		2021
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied	$	201	$	575
New activities in the period:
Performance obligations satisfied		2,428		1,232
	$	2,629	$	1,807

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Note 18 - Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

	Three Months Ended March 31,
	2022			2021
Related party revenue:
NeutroPhase	$	148		$	—
Total related party revenue	$	148		$	—
Cost of goods sold:
NeutroPhase	$	(134	)	$	—
Total related party expenses	$	(134	)	$	—

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Note 20 - Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended March 31,
	2022			2021
Net sales
Optical & Wound Care	$	1,738		$	1,807
Skincare		891			—
Consolidated	$	2,629		$	1,807
Operating loss
Optical & Wound Care	$	(2,039	)	$	(1,520	)
Skincare		(343	)		—
Consolidated	$	(2,382	)	$	(1,520	)

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Note 1 - Organization (Details Textual)	3 Months Ended
	Mar. 31, 2022
Number of Reportable Segments	2

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 0		$ 0
Inventory Valuation Reserves	522		641
Goodwill and Intangible Asset Impairment, Total	$ 0		$ 0
Payment for Product Supply Period (Day)	30 days
Advertising Expense	$ 600	$ 700
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)	5 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)	7 years
Computer Equipment and Software [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)	3 years
Computer Equipment and Software [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)	5 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)	7 years
Revenue from Contract with Customer Benchmark [Member] | Distributor Concentration Risk [Member] | Avenova Spray [Member]
Concentration Risk, Percentage	77.00%	65.00%
Revenue from Contract with Customer Benchmark [Member] | Distributor Concentration Risk [Member] | DERMAdoctor [Member]
Concentration Risk, Percentage	25.00%

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Note 2 - Summary of Significant Accounting Policies - Components of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Cash and cash equivalents	$ 5,641	$ 7,504
Restricted cash included in other assets	152	475
Total cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows	$ 5,793	$ 7,979	$ 10,983	$ 12,427

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Note 2 - Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Total sales, net	$ 2,629	$ 1,807
Avenova Spray [Member]
Total sales, net	1,426	1,575
DERMAdoctor [Member]
Total sales, net	891	0
NeutroPhase [Member]
Total sales, net	148	0
Other Products [member]
Total sales, net	158	226
Total Product Revenue [Member]
Total sales, net	2,623	1,801
Product and Service, Other [Member]
Total sales, net	$ 6	$ 6

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Note 2 - Summary of Significant Accounting Policies - Revenues and Accounts Receivable From Major Distribution Partners and Customers (Details) - Customer Concentration Risk [Member] - Accounts Receivable [Member]	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Major US Retailer [Member]
Distribution or collaboration partners	35.00%
Distributor B [Member]
Distribution or collaboration partners		11.00%
Distributor A [Member]
Distribution or collaboration partners	13.00%	13.00%

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Note 2 - Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Nov. 05, 2021
Intangible Assets, Including Goodwill, Fair Value Disclosure	$ 9,788	$ 9,788
Finite-Lived Intangible Assets [Member] | Customer Relationships [Member]
Customer relationships	$ 290
Useful life (Year)	7 years
Finite-Lived Intangible Assets [Member] | Trade Secrets [Member]
Customer relationships	$ 2,890
Useful life (Year)	9 years
Indefinite-Lived Intangible Assets [Member] | Trade Names [Member]
Trade names	$ 2,080
Goodwill [Member]
Goodwill	$ 4,528

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Note 2 - Summary of Significant Accounting Policies - Calculation of Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Net loss	$ (111)	$ (1,518)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted) (in shares)	50,088	41,782
Net loss per share attributable to common stockholders (basic and diluted) (in dollars per share)	$ 0.00	$ (0.04)

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Note 2 - Summary of Significant Accounting Policies - Outstanding Stock Options and Stock Warrants Excluded From the Diluted Net Loss Per Share Computation (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Anti-dilutive securities (in shares)	48,998	10,220
Share-Based Payment Arrangement, Option [Member]
Anti-dilutive securities (in shares)	4,416	3,138
Warrant [Member]
Anti-dilutive securities (in shares)	44,582	7,082

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Note 3 - Business Combination (Details Textual) $ in Millions		3 Months Ended	12 Months Ended
	Nov. 05, 2021 USD ($)	Mar. 31, 2022	Dec. 31, 2021 USD ($)
Number of Operating Segments		2
General and Administrative Expense [Member]
Business Combination, Acquisition Related Costs			$ 1.2
DERMAdoctor [Member]
Payments to Acquire Businesses, Gross	$ 12.0
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 3.0

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Note 3 - Business Combination - Purchase Price Allocation of Estimated Fair Values of Identifiable Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Nov. 05, 2021	Mar. 31, 2022	Dec. 31, 2021
Goodwill		$ 4,528	$ 4,528
DERMAdoctor [Member]
Cash and cash equivalents	$ 12
Accounts receivable, net of allowance for doubtful accounts	1,015
Inventory, net of allowance	2,369
Prepaid expenses and other current assets	150
Property and equipment, net	62
Other intangible assets	54
Accounts payable	(200)
Accrued liabilities	(683)
Total net assets	2,779
Intangible assets	5,260
Net assets acquired	8,039
Purchased consideration	12,561
Goodwill	4,528
DERMAdoctor [Member] | Customer Relationships [Member]
Intangible assets	290
DERMAdoctor [Member] | Trade Secrets [Member]
Intangible assets	2,890
DERMAdoctor [Member] | Trade Names [Member]
Intangible assets	$ 2,080

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Note 3 - Business Combination - Fair Value of Identifiable Intangible Assets Acquired (Details) - USD ($) $ in Thousands		3 Months Ended
	Nov. 05, 2021	Mar. 31, 2022
Intangible Assets, Including Goodwill, Fair Value Disclosure	$ 9,788	$ 9,788
Finite-Lived Intangible Assets [Member] | Customer Relationships [Member]
Customer relationships		$ 290
Useful life (Year)		7 years
Finite-Lived Intangible Assets [Member] | Customer Relationships [Member] | DERMAdoctor [Member]
Customer relationships	$ 290
Useful life (Year)	7 years
Finite-Lived Intangible Assets [Member] | Trade Secrets [Member]
Customer relationships		$ 2,890
Useful life (Year)		9 years
Finite-Lived Intangible Assets [Member] | Trade Secrets [Member] | DERMAdoctor [Member]
Customer relationships	$ 2,890
Useful life (Year)	9 years
Indefinite-Lived Intangible Assets [Member] | Trade Names [Member]
Trade names		$ 2,080
Indefinite-Lived Intangible Assets [Member] | DERMAdoctor [Member] | Trade Names [Member]
Trade names	$ 2,080
Goodwill [Member]
Goodwill		$ 4,528
Goodwill [Member] | DERMAdoctor [Member]
Goodwill	$ 4,528

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Note 4 - Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Contingent earnout liability	$ 342	$ 561
Fair Value, Recurring [Member]
Deposit held as a certificate of deposit	152	151
Total assets	152	475
Contingent earnout liability	342	561
Total liabilities	342	10,119
Restricted cash held as a certificate of deposit		324
Warrant liability		9,558
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Deposit held as a certificate of deposit	152	151
Total assets	152	475
Contingent earnout liability	0	0
Total liabilities	0	0
Restricted cash held as a certificate of deposit		324
Warrant liability		0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Deposit held as a certificate of deposit	0	0
Total assets	0	0
Contingent earnout liability	0	0
Total liabilities	0	0
Restricted cash held as a certificate of deposit		0
Warrant liability		0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Deposit held as a certificate of deposit	0	0
Total assets	0	0
Contingent earnout liability	342	561
Total liabilities	$ 342	10,119
Restricted cash held as a certificate of deposit		0
Warrant liability		$ 9,558

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Note 4 - Fair Value Measurements - Fair Value of Warrant Liability (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Fair value of warrant liability at December 31, 2021	$ 9,558	$ 0	$ 0
Reclassification of warrant liability to equity	(7,502)
Fair value of warrant liability at March 31, 2022	0		9,558
Fair value of contingent liability at December 31, 2021	561
Decrease in fair value of contingent liability	(219)	$ 0
Fair value of contingent liability at March 31, 2022	342		561
Warrant Liability [Member]
Decrease in fair value of 2021 Warrants	$ (2,056)		(4,614)
Fair value of 2021 Warrants issued			$ 14,172

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Note 5 - Prepaid Expenses and Other Current Assets - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Prepaid inventory	$ 335	$ 367
Prepaid dues and subscription	93	18
Prepaid insurance	77	138
Prepaid consultant	8	68
Prepaid patents	8	9
Prepaid sales rebates	3	19
Prepaid rent	0	14
Other	228	145
Total prepaid expenses and other current assets	$ 752	$ 778

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Note 6 - Inventory - Summary of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Raw materials and supplies	$ 1,446	$ 1,179
Finished goods	2,861	2,682
Less: Reserve for excess and obsolete inventory	(522)	(641)
Total inventory, net	$ 3,785	$ 3,220

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Note 7 - Property and Equipment (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Depreciation, Total	$ 30
Depreciation, Depletion and Amortization, Total	$ 30	$ 9

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Note 7 - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Property and equipment, at cost	$ 858	$ 834
Less: accumulated depreciation and amortization	(671)	(641)
Total property and equipment, net	187	193
Office and Laboratory Equipment [Member]
Property and equipment, at cost	20	20
Furniture and Fixtures [Member]
Property and equipment, at cost	157	157
Computer Equipment and Software [Member]
Property and equipment, at cost	464	464
Production Equipment [Member]
Property and equipment, at cost	138	114
Leasehold Improvements [Member]
Property and equipment, at cost	$ 79	$ 79

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Note 8 - Goodwill (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Goodwill, Impairment Loss	$ 0
Goodwill, Ending Balance	$ 4,528	$ 4,528

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Note 9 - Other Intangible Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Amortization of Intangible Assets	$ 91	$ 0

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Note 9 - Other Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Amortizable intangible assets, gross	$ 5,260	$ 5,260
Amortizable intangible assets, accumulated amortization	(151)	(60)
Amortizable intangible assets, net	3,029
Total other intangible assets, net	5,109	5,200
Trade Names [Member]
Trade names	2,080	2,080
Customer Relationships [Member]
Amortizable intangible assets, gross	290	290
Amortizable intangible assets, accumulated amortization	(17)	(7)
Amortizable intangible assets, net	273	283
Trade Secrets [Member]
Amortizable intangible assets, gross	2,890	2,890
Amortizable intangible assets, accumulated amortization	(134)	(53)
Amortizable intangible assets, net	$ 2,756	$ 2,837

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Note 9 - Other Intangible Assets - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) $ in Thousands	Mar. 31, 2022 USD ($)
2022	$ 272
2023	363
2024	363
2025	363
2026	363
Thereafter	1,305
Total	$ 3,029

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Note 10 - Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Contract liabilities (see Note 16)	$ 1,914	$ 1,289
Employee payroll and benefits	397	443
Audit services	95	0
Other	357	360
Total accrued liabilities	$ 2,763	$ 2,092

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Note 11 - Line of Credit (Details Textual) - Line of Credit [Member] - Bank Midwest [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Nov. 06, 2021
Line of Credit Facility, Maximum Borrowing Capacity		$ 500
Long-term Line of Credit, Total	$ 0
Debt Instrument, Base Floor	5.00%
Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%

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Note 12 - Commitments and Contingencies (Details Textual)		3 Months Ended
	Jan. 22, 2021 shares	Mar. 31, 2022 ft² shares
Class of Warrant or Right, Issued During Period (in shares)		37,500,000
TLF Bio Innovation, Related Party Warrants [Member]
Class of Warrant or Right, Issued During Period (in shares)	15,000
Riverside, Missouri [Member]
Area of Real Estate Property (Square Foot) | ft²		19,136

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Note 12 - Commitments and Contingencies - Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating lease cost	$ 134	$ 99
Net lease cost	134	99
Operational cash flow used for operating leases	$ 111	$ 113
Weighted-average remaining lease term (in years) (Year)	5 years	1 year
Weighted-average discount rate	5.00%	12.00%

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Note 12 - Commitments and Contingencies - Schedule of Future Lease Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
2022	$ 430
2023	535
2024	549
Thereafter	1,166
Total future minimum lease payments	2,680
Less imputed interest	(293)
Total	2,387
Operating lease liability	465	$ 200
Operating lease liability- non-current	1,922	$ 246
Total	$ 2,387

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Note 13 - Warrant Liability (Details Textual) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Nov. 02, 2021	Dec. 31, 2020	Sep. 30, 2019	Aug. 13, 2019
Class of Warrant or Right, Outstanding (in shares)	44,582	7,082
The 2019 Domestic Warrants [Member]
Warrants and Rights Outstanding				$ 4,900	$ 3,100	$ 3,100
Class of Warrant or Right, Outstanding (in shares)	0
Warrants and Rights Outstanding				4,900	$ 3,100	3,100
The 2019 Foreign Warrants [Member]
Warrants and Rights Outstanding				4,200		2,000
Warrants and Rights Outstanding				4,200		2,000
The 2019 Ladenburg Warrants [Member]
Warrants and Rights Outstanding				200		100
Warrants and Rights Outstanding				$ 200		$ 100
The 2021 Warrants [Member]
Warrants and Rights Outstanding	$ 0	$ 9,600	$ 14,200
Warrants and Rights Outstanding	$ 0	$ 9,600	$ 14,200

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Note 13 - Warrant Liability - The Key Assumptions Used to Value the Warrants (Details)	Dec. 31, 2021	Nov. 02, 2021	Dec. 31, 2019
Warrants assumptions	0.25	0.38
Measurement Input, Price Volatility [Member] | The 2019 Domestic Warrants [Member]
Warrants assumptions			1.78
Measurement Input, Price Volatility [Member] | The 2019 Foreign Warrants [Member]
Warrants assumptions			1.78
Measurement Input, Price Volatility [Member] | The 2019 Ladenburg Warrants [Member]
Warrants assumptions			1.86
Measurement Input, Price Volatility [Member] | The 2021 Warrants [Member]
Warrants assumptions	0.87	0.849
Measurement Input, Expected Term [Member] | The 2019 Domestic Warrants [Member]
Warrants assumptions			4.57
Measurement Input, Expected Term [Member] | The 2019 Foreign Warrants [Member]
Warrants assumptions			4.57
Measurement Input, Expected Term [Member] | The 2019 Ladenburg Warrants [Member]
Warrants assumptions			4.05
Measurement Input, Expected Term [Member] | The 2021 Warrants [Member]
Warrants assumptions	6.0	6.2
Measurement Input, Risk Free Interest Rate [Member] | The 2019 Domestic Warrants [Member]
Warrants assumptions			0.0025
Measurement Input, Risk Free Interest Rate [Member] | The 2019 Foreign Warrants [Member]
Warrants assumptions			0.0027
Measurement Input, Risk Free Interest Rate [Member] | The 2019 Ladenburg Warrants [Member]
Warrants assumptions			0.0022
Measurement Input, Risk Free Interest Rate [Member] | The 2021 Warrants [Member]
Warrants assumptions	0.0131	0.0129
Measurement Input, Expected Dividend Rate [Member] | The 2019 Domestic Warrants [Member]
Warrants assumptions			0.0000
Measurement Input, Expected Dividend Rate [Member] | The 2019 Foreign Warrants [Member]
Warrants assumptions			0.0000
Measurement Input, Expected Dividend Rate [Member] | The 2019 Ladenburg Warrants [Member]
Warrants assumptions			0.0000
Measurement Input, Expected Dividend Rate [Member] | The 2021 Warrants [Member]
Warrants assumptions	0.0000	0.0000
Measurement Input, Share Price [Member] | The 2019 Domestic Warrants [Member]
Warrants assumptions			1.18
Measurement Input, Share Price [Member] | The 2019 Foreign Warrants [Member]
Warrants assumptions			1.54
Measurement Input, Share Price [Member] | The 2019 Ladenburg Warrants [Member]
Warrants assumptions			1.17

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Note 14 - Stockholders' Equity (Details Textual) $ / shares in Units, $ in Thousands		3 Months Ended					12 Months Ended
	Oct. 29, 2021 USD ($) $ / shares shares	Mar. 31, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Jun. 30, 2021 USD ($) shares	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Jan. 31, 2022 shares	Nov. 02, 2021 USD ($)	Jan. 15, 2021 $ / shares shares	Dec. 31, 2020 USD ($)	Aug. 13, 2019 USD ($)
Preferred Stock, Shares Authorized (in shares) | shares		5,000,000	5,000,000				5,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares		$ 0.71	$ 1.63				$ 1.63
Common Stock, Shares Authorized (in shares) | shares		150,000,000	100,000,000				100,000,000	150,000,000
Payments of Stock Issuance Costs					$ 200
Preferred Stock, Shares Outstanding, Ending Balance (in shares) | shares		13,000	14,000				14,000
Class of Warrant or Right, Issued During Period (in shares) | shares		37,500,000
Proceeds from Warrant Exercises					6,800
Ladenburg Thalmann and Co. Inc. [Member]
Payments of Stock Issuance Costs						$ 300
Private Placement, Commission Percentage						6.00%
Payments of Stock Issuance Costs, Reimbursement of Expenses						$ 60
Payments of Stock Issuance Costs, Other						$ 300
China Kington [Member]
Payments of Stock Issuance Costs					$ 200
The 2021 Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares	37,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares	$ 0.53
Warrants and Rights Outstanding		$ 0	$ 9,600				$ 9,600		$ 14,200
The 2019 Domestic Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares						4,198,566
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares						$ 1.15
Warrants and Rights Outstanding						$ 3,100					$ 4,900	$ 3,100
Payments of Stock Issuance Costs Allocated to Warrants						200
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs						$ 300
Class of Warrant or Right, Issued During Period (in shares) | shares						4,198,566
The 2019 Ladenburg Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares						167,942
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares					$ 0.99	$ 1.25
Warrants and Rights Outstanding											200	100
Payments of Stock Issuance Costs Allocated to Warrants						$ 59
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs						$ 65
Class of Warrant or Right, Issued During Period (in shares) | shares						167,942
The 2019 Foreign Warrants [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares					$ 0.99
Warrants and Rights Outstanding											$ 4,200	$ 2,000
Exercise of Warrants, Commission, Percent					6.00%
New Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares					6,898,566
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares					$ 1.65
Warrants and Rights Outstanding, Term (Year)					5 years 6 months
TLF Bio Innovation 2021 Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares										15,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares										$ 0.6718
Warrants and Rights Outstanding, Term (Year)										5 years
Conversion of Series B Preferred Stock to Common Stock [Member]
Adjustments to Additional Paid in Capital, Beneficial Conversion Feature Upon Issuance of Stock			$ 700
The 2021 Private Placement Program [Member]
Payments of Stock Issuance Costs							1,700
Payments of Stock Issuance Costs Allocated to Warrants							1,600
The 2021 Private Placement Program [Member] | Conversion of Series B Preferred Stock to Common Stock [Member]
Preferred Stock, Convertible, Shares Issuable (in shares) | shares	37,500,000
Preferred Stock, Convertible, Conversion Price (in dollars per share) | $ / shares	$ 0.40
Preferred Stock, Convertible, Conversion Ratio	2,500
Maximum Percentage of Common Stock Outstanding	19.99%
Preferred Stock, Convertible, Maximum Common Stock Shares Converted (in shares) | shares	8,984,178
Conversion of Stock, Shares Converted (in shares) | shares		1,461
Conversion of Stock, Shares Issued (in shares) | shares		3,652,500
Convertible Preferred Stock, Shares Issued upon Conversion (in shares) | shares		2,500
ATM Program [Member]
Stock Issued During Period, Shares, New Issues (in shares) | shares				2,672,000
Payments of Stock Issuance Costs				$ 100
Proceeds from Issuance of Common Stock				$ 1,800
August 2019 Common Stock Purchase Agreement [Member]
Stock Issued During Period, Shares, New Issues (in shares) | shares						4,198,566
Payments of Stock Issuance Costs						$ 500
Proceeds from Issuance of Stock and Warrants						$ 4,200
Series B Preferred Stock [Member] | The 2021 Private Placement Program [Member]
Stock Issued During Period, Shares, New Issues (in shares) | shares	15,000
Preferred Stock, Convertible, Shares Issuable (in shares) | shares	37,500,000
Proceeds from Issuance of Preferred Stock and Preference Stock	$ 14,900
Preferred Stock, Purchase Price (in dollars per share) | $ / shares	$ 1,000
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs							$ 100

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Note 14 - Stockholders' Equity - Outstanding Warrants (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2022 $ / shares shares
Outstanding warrants (in shares) | shares	7,082
Outstanding warrants, weighted-average exercise price (in dollars per share) | $ / shares	$ 1.63
Warrants granted (in shares) | shares	37,500
Warrants granted, weighted average exercise price (in dollars per share) | $ / shares	$ 0.53
Outstanding warrants (in shares) | shares	44,582
Outstanding warrants, weighted-average exercise price (in dollars per share) | $ / shares	$ 0.71

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Note 15 - Equity-based Compensation (Details Textual) - USD ($) $ in Thousands		1 Months Ended		3 Months Ended
	Jan. 15, 2021	Mar. 31, 2017	Oct. 31, 2007	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)				0
Proceeds from Stock Options Exercised				$ 0
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total				$ 1,100
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)				2 years 3 months
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in shares)				332,000
Share-Based Payment Arrangement, Expense				$ 184	$ 183
Share-Based Payment Arrangement, Nonemployee [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in shares)				0	0
Share-Based Payment Arrangement, Expense					$ 53
Employees and Directors [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in shares)				332,000	55,000
Share-Based Payment Arrangement, Option [Member]
Share-Based Payment Arrangement, Expense				$ 184	$ 130
Restricted Stock [Member] | Employees and Directors [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)				0	0
The 2007 Omnibus Incentive Plan [Member] | Maximum [Member] | Incentive Stock Options (ISOs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)			10 years
The 2017 Omnibus Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)		2,318,486
Share-based Compensation Arrangement by Share-based Payment Award, Annual Increase in Shares Authorized, Percentage of Outstanding Common Stock		4.00%
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares)	1,671,303
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant (in shares)				1,525,680
The 2017 Omnibus Incentive Plan [Member] | Incentive Stock Options (ISOs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percentage of Stock Owned by Shareholder, Minimum		10.00%
The 2017 Omnibus Incentive Plan [Member] | Share-Based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		4 years
The 2017 Omnibus Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)		10 years
The 2017 Omnibus Incentive Plan [Member] | Maximum [Member] | Incentive Stock Options (ISOs) [Member] | Shareholder of More Than 10% [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)		5 years
The 2017 Omnibus Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent		100.00%
The 2017 Omnibus Incentive Plan [Member] | Minimum [Member] | Incentive Stock Options (ISOs) [Member] | Shareholder of More Than 10% [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent		110.00%

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Note 15 - Equity-based Compensation - Stock Options Outstanding (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Outstanding awards (in shares)	4,449
Outstanding, weighted-average exercise price (in dollars per share)	$ 1.39
Outstanding, weighted-average remaining contractual life (Year)	7 years 7 months 6 days
Outstanding, aggregate intrinsic value	$ 356	$ 460
Options granted (in shares)	332
Options granted, weighted-average exercise price (in dollars per share)	$ 0.30
Options forfeited/cancelled (in shares)	(21)
Options forfeited/cancelled, weighted-average exercise price (in dollars per share)	$ 10.94
Outstanding awards (in shares)	4,760
Outstanding, weighted-average exercise price (in dollars per share)	$ 1.27
Vested and expected to vest (in shares)	4,416
Vested and expected to vest, weighted-average exercise price (in dollars per share)	$ 1.33
Vested and expected to vest, weighted-average remaining contractual life (Year)	7 years 6 months
Vested and expected to vest, aggregate intrinsic value	$ 313
Vested (in shares)	2,218
Vested, weighted-average exercise price (in dollars per share)	$ 2.30
Vested, weighted-average remaining contractual life (Year)	5 years 9 months 18 days
Vested, aggregate intrinsic value	$ 0
Exercisable (in shares)	2,218
Exercisable, weighted-average exercise price (in dollars per share)	$ 2.30
Exercisable, weighted-average remaining contractual life (Year)	5 years 9 months 18 days
Exercisable, aggregate intrinsic value	$ 0

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Note 15 - Equity-based Compensation - Weighted-average Assumptions Used in Determining the Value of Options Granted to Employees and Directors (Details) - Employees and Directors [Member] - $ / shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Expected price volatility	160.47%	164.44%
Expected term (Year)	6 years 5 months 12 days	6 years 2 months 8 days
Risk-free interest rate	1.63%	1.09%
Dividend yield	0.00%	0.00%
Weighted-average fair value of options granted during the period (in dollars per share)	$ 0.29	$ 1.04

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Note 15 - Equity-based Compensation - Summary of Stock-based Compensation Expense Included in Results of Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Stock-based compensation expense	$ 184	$ 183
Research and Development Expense [Member]
Stock-based compensation expense	4	4
Selling and Marketing Expense [Member]
Stock-based compensation expense	12	31
General and Administrative Expense [Member]
Stock-based compensation expense	$ 168	$ 148

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Note 16 - License, Collaboration and Distribution Agreements (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Revenue from Contract with Customer, Including Assessed Tax	$ 2,629	$ 1,807
Avenova Direct [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,400	1,200
DERMAdoctor [Member]
Contract with Customer, Liability, Total	600		$ 400
Revenue from Contract with Customer, Including Assessed Tax	891	0
McKesson Corporation [Member] | Avenova Product [Member]
Contract with Customer, Liability, Revenue Recognized	199	$ 122
McKesson Corporation [Member] | Avenova Product [Member] | Accounts Payable and Accrued Liabilities [Member]
Contract with Customer, Liability, Total	1,300		900
McKesson Corporation [Member] | Avenova Product [Member] | Prepaid Expenses and Other Current Assets [Member]
Contract with Customer, Rebate Liability, Current	$ 3		$ 19

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Note 16 - License, Collaboration and Distribution Agreements - Changes in Assets and Liabilities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Contract Liabilities: Deferred Revenue, Balance at beginning of the period	$ 2
Contract Liabilities: Deferred Revenue, additions	69
Contract Liabilities: Deferred Revenue, deductions	(2)
Contract Liabilities: Deferred Revenue, Balance at the end of the period	69
Contract Liabilities: Accrued Liabilities,Balance at beginning of the period	1,270
Contract Liabilities: Accrued Liabilities, additions	842
Contract Liabilities: Accrued Liabilities, deductions	(201)
Contract Liabilities: Accrued Liabilities, Balance at the end of the period	1,911
Contract Liabilities, Balance at beginning of the period	1,272
Contract Liabilities, additions	911
Contract Liabilities, deductions	(203)
Contract Liabilities, Balance at the end of the period	$ 1,980

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Note 16 - License, Collaboration and Distribution Agreements - Total Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Total sales, net	$ 2,629	$ 1,807
Transferred over Time [Member]
Total sales, net	201	575
Transferred at Point in Time [Member]
Total sales, net	$ 2,428	$ 1,232

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Note 17 - Employee Benefit Plan (Details Textual) - USD ($) $ in Thousands		12 Months Ended
	Jan. 01, 2022	Dec. 31, 2021
The 401(k) Plan [Member]
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 0
The 401K Plan Contribution Level One [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	3.00%
The 401K Plan Contribution Level Two [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	2.00%

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Note 18 - Related Party Transactions (Details Textual) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Accounts Receivable, Related Parties	$ 0.1	$ 0.1

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Note 18 - Related Party Transactions - Related Party Revenue, Cost of Goods Sold, and Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Total related party revenue	$ 148	$ 0
Cost of goods sold	134	(0)
NeutroPhase [Member]
Total related party revenue	148	0
Cost of goods sold	$ 134	$ (0)

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Note 19 - Paycheck Protection Program (Details Textual) - USD ($) $ in Thousands			3 Months Ended	12 Months Ended
	May 24, 2021	May 06, 2020	Mar. 31, 2022	Dec. 31, 2020
Paycheck Protection Program CARES Act [Member]
Other Nonoperating Income			$ 0	$ 900
Paycheck Protection Program CARES Act [Member] | Wells Fargo Bank [Member]
Proceeds from Issuance of Long-term Debt, Total		$ 900
Gain (Loss) on Extinguishment of Debt, Total	$ 900

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Note 20 - Segment Reporting (Details Textual)	3 Months Ended
	Mar. 31, 2022
Number of Reportable Segments	2

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Note 20 - Segment Reporting - Financial Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenue from Contract with Customer, Including Assessed Tax	$ 2,629	$ 1,807
Total sales, net	2,629	1,807
Operating Loss	(2,382)	(1,520)
Optical and Wound Care [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,738	1,807
Total sales, net	1,738	1,807
Operating Loss	(2,039)	(1,520)
Skincare [Member]
Revenue from Contract with Customer, Including Assessed Tax	891	0
Total sales, net	891	$ 0
Operating Loss	$ (343)