10-Q: NovaBay Pivots to Blockchain, Regains NYSE Compliance

NovaBay Pharmaceuticals, Inc. reported a net income of $4.455 million for the nine months ended September 30, 2025, driven by divestitures, and announced a strategic pivot towards blockchain-based assets while regaining NYSE American compliance.

Summary

• NovaBay Pharmaceuticals, Inc. reported a net income of $4.455 million for the nine months ended September 30, 2025, a significant improvement from a net loss of $6.011 million in the prior year period.
• This net income was primarily driven by substantial gains from discontinued operations, including the Avenova Asset Divestiture ($10.7 million gain) and PhaseOne Divestiture ($0.5 million gain).
• Net loss from continuing operations for the nine months ended September 30, 2025, was $6.627 million, compared to $6.852 million in the prior year.
• Product revenue from continuing operations (wound care business to China) was $0.521 million for both the three and nine months ended September 30, 2025, with no comparable revenue in 2024.
• The company's board decided not to pursue a previously approved plan of dissolution and is now evaluating opportunities in emerging financial infrastructure and network-based markets, including blockchain-based assets.
• NovaBay completed several financing activities, including the issuance of Series D Preferred Stock for $3.85 million (net $3.79 million) and subsequent issuance of Series E Preferred Stock for $2.15 million (gross proceeds) and October 2025 Pre-Funded Warrants for $6.0 million (gross proceeds) post-quarter end.
• The company regained compliance with NYSE American minimum stockholders' equity requirements on October 20, 2025.
• Cash and cash equivalents increased to $2.309 million as of September 30, 2025, from $0.430 million at December 31, 2024.

Sentiment

Score: 6

Explanation: While continuing operations show losses and the new strategic direction is highly speculative and risky, the company successfully divested non-core assets, generated significant cash from these sales, raised substantial new capital, and resolved its NYSE compliance issue. The pivot to blockchain, while risky, also presents a potential for high reward if successfully executed, and the company has secured funding to explore this path.

Positives

• Net income of $4.455 million for the nine months ended September 30, 2025, compared to a net loss of $6.011 million in the prior year, primarily due to divestiture gains.
• Significant cash increase from $430 thousand at December 31, 2024, to $2.309 million at September 30, 2025.
• Regained compliance with NYSE American minimum stockholders' equity requirements on October 20, 2025.
• Successful divestiture of Avenova assets for $11.5 million and PhaseOne trademarks for $0.5 million.
• Secured new capital through Series D Preferred Stock ($3.85 million gross), Series E Preferred Stock ($2.15 million gross), and October 2025 Pre-Funded Warrants ($6.0 million gross).
• Management believes existing cash and cash equivalents, combined with recent capital raises, will be sufficient to meet planned operating expenses through at least November 7, 2026.

Negatives

• Continuing operations reported a net loss of $1.333 million for the three months and $6.627 million for the nine months ended September 30, 2025.
• Operating loss from continuing operations was $1.256 million for the three months and $6.437 million for the nine months ended September 30, 2025.
• Impairment of long-lived assets totaling $87 thousand for the three months and $676 thousand for the nine months ended September 30, 2025.
• General and administrative expenses for continuing operations increased by $0.2 million (3%) to $5.8 million for the nine months ended September 30, 2025.
• A special cash dividend of $0.80 per share, totaling $4.8 million, was paid on September 29, 2025, reducing cash.

Risks

• Uncertainty in successfully implementing the new business strategy focusing on emerging decentralized financial infrastructure and network-based markets, including blockchain-based assets.
• The new strategic shift requires specialized employee skillsets, operational, technical, and compliance infrastructure, and different security protocols and treasury management practices, which may be difficult to build within anticipated timeframes.
• Exposure to significant operational risks due to the rapidly evolving decentralized financial infrastructure and network-based markets ecosystem, including frequent upgrades and protocol changes requiring significant adjustments and unanticipated costs.
• Reliance on third-party service providers in operations introduces risks outside of the company's control, including significant cybersecurity risks.
• Adverse changes in the legal and regulatory framework governing blockchain-based assets, which is rapidly evolving and highly uncertain, could materially impair the value and liquidity of future holdings.
• Potential for significant fines, penalties, registration requirements, trading restrictions, or forced divestiture if blockchain-based assets or related activities are deemed to violate securities, commodities, anti-money-laundering, sanctions, consumer-protection, or other applicable laws.
• Blockchain-based asset trading platforms are relatively new, largely unregulated, and may not comply with existing regulations, leading to unpredictability and susceptibility to attacks.
• Significant trading on systems and platforms with minimum predictability, potential for transaction/withdrawal limits or suspensions, and credit risk when transferring assets to third-party accounts.
• Lack of tools to detect and deter fraudulent or manipulative trading activities on some trading platforms.
• Extreme volatility in the trading prices of many blockchain-based assets, which could lead to a material adverse effect on the value of common stock and potential loss of all or substantially all its value.
• Negative perception and lack of stability and standardized regulation in the blockchain-based economy may reduce confidence and increase price volatility.
• Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change, potentially limiting the company's ability to use its $153.7 million federal and $128.6 million state NOL carryforwards.

Future Outlook

Management believes existing cash and cash equivalents, combined with net proceeds from the Series E Preferred Stock and October 2025 Pre-Funded Warrants, will be sufficient to meet planned operating expenses at least through November 7, 2026. The company is evaluating opportunities within emerging financial infrastructure and network-based markets, including select blockchain-based assets, to enhance capital efficiency and long-term stockholder value. This strategic shift may cause adjustments to anticipated spending in the near term. The company may continue to manufacture wound care products domestically in the United States and export finished goods to China.

Management Comments

• "Management believes that the Company's existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through November 7, 2026."
• "The Company has begun evaluating opportunities within emerging financial infrastructure and network-based markets. These opportunities may include select blockchain-based assets that the Company believes could enhance capital efficiency and long-term stockholder value."
• "As a result of any changes in the Company's strategic direction, there may be circumstances that cause the Company to adjust its anticipated spending in the near term."

Industry Context

The company is pivoting from its traditional eyecare, wound care, and skin care product focus to emerging financial infrastructure and network-based markets, specifically mentioning blockchain-based assets, staking, restaking, liquid staking, and other decentralized finance activities. This represents a significant departure from its historical pharmaceutical and consumer health product industry, moving into the rapidly evolving and highly speculative blockchain and DeFi space. This shift aligns with a broader trend of companies exploring new technologies for capital efficiency and value creation, though it carries substantial regulatory and operational risks inherent to the nascent blockchain industry.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• As of September 30, 2025, there were no legal matters that, in management's opinion, would ultimately result in liability that would have a material adverse effect on the company's financial position, results of operations, or cash flows.

Related Party Transactions

• Chongqing Pioneer Pharma Holdings Limited: Net sales of $521 thousand and cost of goods sold of $479 thousand for both the three and nine months ended September 30, 2025. Related party accounts receivable were $0.4 million as of September 30, 2025.
• David E. Lazar, who entered into the 2025 Preferred Stock Purchase Agreement, was the CEO and a director until October 9, 2025, and subsequently assigned his rights to R01 Fund LP and Framework Ventures IV L.P.

Stakeholder Impact

• Shareholders: Experienced a special cash dividend of $0.80 per share. Significant dilution from common stock issuance upon conversion of Series D and E Preferred Stock (77.0 million and 43.0 million shares, respectively) and potential exercise of October 2025 Pre-Funded Warrants (5,405,406 shares). The strategic pivot to blockchain introduces high risk but also potential for significant long-term value. Regained NYSE compliance reduces delisting risk.
• Employees: The strategic shift to blockchain-based assets will require specialized skillsets and operational changes, potentially impacting existing employees and requiring new hires.
• Customers (Wound Care): The company may continue to manufacture wound care products and export to China, indicating continued service for this segment.
• Creditors: Repayment of Secured Convertible Notes and management's belief in sufficient liquidity through November 7, 2026, may positively impact creditor confidence.

Next Steps

• Continue evaluating opportunities within emerging financial infrastructure and network-based markets, including blockchain-based assets.
• Potentially adjust anticipated spending based on changes in strategic direction.
• October 2025 Pre-Funded Warrants become exercisable after January 1, 2026, subject to stockholder approval.
• Series F Preferred Stock holders may redeem their shares for cash after December 31, 2025.
• The company may force redemption of outstanding Series F Preferred Stock at any time after December 31, 2025.

Key Dates

Recommendation

The company has undergone a radical transformation, divesting its traditional businesses and pivoting to the highly speculative blockchain and decentralized finance sector. While the recent capital raises and regaining NYSE compliance are positive, the new strategy is unproven, carries substantial regulatory and operational risks, and lacks a clear track record. The significant dilution from recent and upcoming share issuances also needs to be considered. A "hold" recommendation is appropriate for existing investors to observe the execution of the new strategy, given the high uncertainty and potential for both significant gains and losses. New investors should approach with extreme caution due to the speculative nature of the new business model.

Keywords

Blockchain, Decentralized Finance, DeFi, Cryptocurrency, Staking, NovaBay Pharmaceuticals, NBY, SEC Filing, 10-Q, Financial Results, Divestiture, Wound Care, NYSE American, Capital Raise, Preferred Stock, Warrants