Item 1.01. Entry into a Material Definitive Agreement.
As previously disclosed in the Current Report on Form 8-K filed by NovaBay Pharmaceuticals, Inc. (the “Company”) with the Securities and Exchange Commission on August 9, 2019, the Company, on August 8, 2019, entered into: (1) a Securities Purchase Agreement with certain domestic investors for the sale of an aggregate of 4,198,466 shares of the Company’s common stock in a registered direct offering and warrants exercisable for 4,198,566 shares of common stock (the “Domestic Warrants”) and (2) a Securities Purchase Agreement with certain foreign investors for the sale of 2,700,000 shares of the Company’s Series A Non-Voting Convertible Preferred Stock which automatically converted into 2,700,000 shares of common stock, at a ratio of 1:1, upon the approval of the Company’s stockholders at the Company’s special stockholder meeting on October 9, 2019 and warrants exercisable for 2,700,000 shares of common stock (the “Foreign Warrants” and together with the Domestic Warrants, the “Warrants”). In connection with the offer to certain domestic investors, the Company issued Ladenburg Thalmann & Co. warrants exercisable for 167,942 shares of the Company’s common stock (the “Ladenburg Warrants”) as partial consideration for its services as placement agent. Both the Domestic Warrants and the Foreign Warrants were issued with an exercise price of $1.15 while the Ladenburg Warrants were issued with an exercise price of $1.25.
Beginning on July 20, 2020, the Company and the holders of the Domestic Warrants, all holders of the Foreign Warrants and Ladenburg (collectively, the “Holders”) entered into separate warrant repricing letter agreements (the “Exercise Agreements”). Pursuant to the Exercise Agreements in consideration for the exercise in full of the Reprice Warrants (as defined below), the Company agreed to: (1) reduce the exercise price of an aggregate total of 4,198,566 Domestic Warrants and 2,700,000 Foreign Warrants (the “Reprice Warrants”) to $0.99 per share (the “Reduced Exercise Price”), (2) amend the Ladenburg Warrants to reduce the exercise price of an aggregate total of 167,942 Ladenburg Warrants to $0.99 per share and (3) in a private placement, issue new common stock purchase warrants (the “New Warrants”) to purchase up to a number of shares of common stock, equal to 100% of the number of Domestic Warrants and Foreign Warrants currently held by such Holder. The Company expects to receive aggregate gross proceeds of approximately $6,829,580 from the exercise of the Domestic Warrants and Foreign Warrants.
The New Warrants will be exercisable six months after their issuance, for an aggregate of 6,898,566 shares of common stock. The New Warrants will have an exercise price of $1.65 per share and will expire five and a half years after their issuance. Subject to limited exceptions, a Holder of a New Warrant will not have the right to exercise any portion of its New Warrants if the Holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of a Holder prior to the date of issuance, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon prior notice to the Company, the Holder may increase or decrease the Beneficial Ownership Limitation, provided further that in no event shall the Beneficial Ownership Limitation exceed 9.99% and any increase in the beneficial ownership limitation will not be effective until 61 days following notice to us. Pursuant to the terms of the Exercise Agreements, the Holders will be entitled to certain registration rights that provide for the Company to file a registration statement on behalf of the Holders for the New Warrants within 90 calendar days of the date of the Exercise Agreements and requires the Company to use its commercially reasonable efforts to cause the registration statement to become effective within six months of the date of the Exercise Agreements, that will provide for the resale of the shares of common stock underlying the New Warrants.
The description of terms and conditions of the Exercise Agreements, Reprice Agreement and the New Warrants set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text of the form of New Warrants, the form of Exercise Agreement with Holders of Domestic Warrants, the form of Exercise Agreement with Holders of Foreign Warrants and the form of Reprice Agreement with Ladenburg attached hereto as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively.