SCHEDULE: NovaBay CEO Lazar Sells Stake, Resigns

David E. Lazar, NovaBay Pharmaceuticals' CEO and director, has sold a significant portion of his preferred stock and rights to new investors, resigning from his roles.

Summary

• David E. Lazar, former Chief Executive Officer and director of NovaBay Pharmaceuticals, Inc., sold 441,325 shares of Series D Preferred Stock and rights to purchase 268,750 shares of Series E Preferred Stock.
• The purchasers are R01 Fund LP and Framework Ventures IV L.P., with a total purchase price of $12,000,000.
• The transaction includes $9,850,000 for Series D Preferred Stock and $2,150,000 for Series E Preferred Stock rights, with the latter payable directly to the Issuer.
• Lazar resigned as Chief Executive Officer and director, effective upon the release of escrow funds to him.
• Following the transaction, Lazar retains 39,925 shares of Series D Preferred Stock, convertible into 6,388,000 shares of Common Stock, subject to a 19.99% beneficial ownership limitation.
• The transaction was contingent on stockholder approval of proposals 5 and 9 from the September 23, 2025 proxy statement, which was obtained on October 16, 2025.
• Both Series D and Series E Preferred Stock are convertible into 160 shares of Common Stock per preferred share.
• Lazar's beneficial ownership percentage, assuming Purchasers convert their Series D Preferred Stock, will be approximately 5%.

Sentiment

Score: 4

Explanation: The sentiment is mixed to slightly negative. While the company receives a capital infusion and new investors, the departure of the CEO and a significant insider selling a large stake, coupled with ongoing NYSE compliance issues, creates uncertainty and potential negative market perception.

Positives

• NovaBay Pharmaceuticals, Inc. will receive $2,150,000 from the Purchasers for the Series E Preferred Stock, providing a capital infusion.
• The transaction introduces new significant investors, R01 Fund LP and Framework Ventures IV L.P., into the company's ownership structure.
• The NYSE approved the funding plan set forth in the Preferred Stock SPA on August 15, 2025, as a way for the Issuer to regain compliance with listing standards.
• Stockholder approval for the transaction was obtained, indicating shareholder support for the strategic move.

Negatives

• David E. Lazar, the Chief Executive Officer and a director, resigned from his positions, which can create leadership uncertainty.
• A significant insider (Lazar) sold a large portion of his holdings in the company.
• NovaBay was notified by NYSE on April 18, 2024, and May 28, 2024, of non-compliance with listing standards (Sections 1003(a)(i), 1003(a)(ii), and 1003(a)(iii)) due to reported losses.
• The company faces a deadline of October 18, 2025, to regain NYSE compliance, or delisting proceedings may be initiated.

Risks

• Failure to regain compliance with NYSE listing standards by October 18, 2025, could lead to delisting proceedings.
• The conversion of Series D and Series E Preferred Stock is subject to a 19.99% beneficial ownership limitation, which could restrict immediate full conversion.
• The company's continued financial performance and ability to address historical losses remain a risk factor for maintaining NYSE listing.
• Potential for disputes regarding the Escrow Funds as per the Escrow Agreement.

Future Outlook

The transaction will result in a significant change in the company's ownership structure and management. The capital infusion from the Series E Preferred Stock purchase is intended to help the Issuer regain compliance with NYSE listing standards by the October 18, 2025 deadline. The new investors will hold a substantial stake, potentially influencing future strategic decisions.

Management Comments

• David E. Lazar resigned as Chief Executive Officer and director of the Issuer, effective upon the release of Escrow Funds.

Industry Context

This transaction reflects a common strategy for companies facing financial distress or seeking to recapitalize, often involving a change in leadership and the introduction of new institutional investors. The sale of preferred stock with conversion limitations is a mechanism to raise capital while managing potential immediate dilution and maintaining regulatory compliance (e.g., NYSE listing rules). The focus on regaining NYSE compliance highlights the challenges smaller public companies face in maintaining exchange listings amidst financial difficulties.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Seller represents that, to his knowledge, there are no actions, suits, proceedings, judgments, claims, or investigations pending or threatened in writing against the Issuer.
• Seller covenants to notify Purchasers within two business days of any notification or letters threatening legal actions against the Issuer.

Related Party Transactions

• David E. Lazar, as the former CEO and director, is the Seller in the Securities Purchase Agreement with R01 Fund LP and Framework Ventures IV L.P.
• The transaction involves the sale of his preferred stock and rights, and his resignation from management.

Stakeholder Impact

• Shareholders: Significant change in beneficial ownership, potential future dilution from preferred stock conversion, change in leadership, and a capital infusion for the company.
• Employees: The continued employment of a 'Key Employee' is a condition for closing, indicating stability for at least one critical role.
• Company (NovaBay): Receives $2,150,000 in capital, addresses NYSE compliance plan, and undergoes a leadership transition.
• Purchasers (R01 Fund LP, Framework Ventures IV L.P.): Become significant stakeholders with substantial preferred stock holdings.

Next Steps

• Closing of the Securities Purchase Agreement, including the release of escrow funds and transfer of Series D Preferred Stock and Series E Rights.
• The Issuer must continue efforts to regain compliance with NYSE listing standards by October 18, 2025.
• Potential conversion of Series D and Series E Preferred Stock by the Purchasers, subject to beneficial ownership limitations.

Key Dates

Recommendation

The filing presents a mixed bag. While the capital infusion and new institutional investors are positive steps towards addressing NYSE compliance and strengthening the balance sheet, the departure of the CEO and a significant insider selling a large portion of their stake introduces uncertainty. Investors should hold to observe how the new management team performs, how the company progresses with NYSE compliance, and the strategic direction under the new ownership structure before making further investment decisions. The beneficial ownership limitation on preferred stock conversion also adds a layer of complexity.

Keywords

NovaBay Pharmaceuticals, David E. Lazar, R01 Fund LP, Framework Ventures IV L.P., Schedule 13D, Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, CEO Resignation, Stock Sale, NYSE Compliance, Corporate Governance, Capital Raise