SCHEDULE: R01 Fund LP Boosts NovaBay Stake to 16.2% with $6M Preferred Stock Deal

R01 Fund LP and Framework Ventures IV L.P. acquired $12 million in NovaBay Pharmaceuticals preferred stock from CEO David Lazar, with R01 Fund LP's beneficial ownership reaching 16.2%.

Summary

• R01 Fund LP and Framework Ventures IV L.P. (Purchasers) entered into a Securities Purchase Agreement with David Lazar (Seller), NovaBay Pharmaceuticals' CEO and director, on October 9, 2025.
• Under this agreement, Purchasers agreed to acquire 441,325 shares of Series D Preferred Stock for $9,850,000 and the rights to purchase 268,750 shares of Series E Non-Voting Convertible Preferred Stock for an additional $2,150,000, totaling $12,000,000.
• R01 Fund LP's portion of this acquisition involved a purchase price of $6,000,000, leading to its beneficial ownership of 220,663 shares of Series D Non-Voting Convertible Preferred Stock.
• These 220,663 Series D shares held by R01 Fund LP are convertible into a maximum of 1,164,117 shares of NovaBay's Common Stock, representing approximately 16.2% of the outstanding Common Stock (based on 6,010,749 shares as of October 1, 2025).
• The filing also states that, upon stockholder approval, each share of Preferred Stock (Series D and E) will be convertible into 160 shares of Common Stock, potentially totaling 113.6 million shares of Common Stock from the entire transaction, subject to a 19.99% conversion limitation until such approval.
• The transaction is contingent on NovaBay stockholder approval of proposals 5 and 9 at the October 16, 2025 Annual Meeting and other customary closing conditions, with an outside date of October 18, 2025.
• David Lazar's resignation as CEO and director is effective upon the release of escrow funds related to the transaction.

Sentiment

Score: 6

Explanation: The filing indicates a significant investment by activist investors aiming to drive value and address the company's NYSE compliance issues. While the company faces challenges (NYSE non-compliance, CEO resignation), the new investment and strategic intent from R01 Fund LP and Framework Ventures IV L.P. provide a potential positive catalyst for future improvement. The transaction is contingent on stockholder approval, which introduces some uncertainty.

Positives

• A significant $12 million investment by R01 Fund LP and Framework Ventures IV L.P. into NovaBay Pharmaceuticals, with R01 Fund LP contributing $6 million.
• The investment is intended to help NovaBay regain compliance with NYSE listing standards, as the funding plan was approved by NYSE on August 15, 2025.
• The Purchasers intend to work with the Issuer to pursue strategic opportunities to drive value for stockholders.
• The transaction includes a waiver of Section 203 of the Delaware General Corporation Law, potentially simplifying future actions for the Purchasers.

Negatives

• NovaBay Pharmaceuticals is currently not in compliance with NYSE listing standards regarding stockholders' equity, having reported losses in multiple recent fiscal years.
• The closing of the transaction is subject to stockholder approval of proposals 5 and 9, introducing a contingency.
• The conversion of preferred stock into common stock is limited to 19.99% of outstanding common stock until stockholder approval, potentially delaying full realization of voting power and full dilution.

Risks

• Failure to obtain stockholder approval for proposals 5 and 9 at the October 16, 2025 Annual Meeting could prevent the closing of the transaction and full conversion of preferred stock.
• NovaBay Pharmaceuticals faces potential delisting from NYSE if it does not regain compliance with listing standards by October 18, 2025, or if it fails to make progress consistent with its plan.
• The investment is described as a 'speculative investment that involves a high degree of risk and the potential loss of its entire investment' by the Purchasers.
• The Issuer's financial condition, strategic direction, business, and prospects could negatively impact the value of the investment.

Future Outlook

The Reporting Persons intend to continuously review their investment in NovaBay Pharmaceuticals and may engage in discussions with management, the Board, other stockholders, industry analysts, or strategic partners regarding the Issuer's business, operations, governance, strategy, capitalization, ownership, and future plans. They may also consider purchasing additional securities, selling existing holdings, or engaging in hedging transactions based on various factors including market conditions and the Issuer's performance.

Industry Context

This Schedule 13D filing indicates a significant activist investment in NovaBay Pharmaceuticals, a company facing NYSE delisting concerns due to insufficient stockholders' equity. The acquisition of a substantial preferred stock stake by R01 Fund LP and Framework Ventures IV L.P., coupled with the resignation of the current CEO, suggests a potential shift in corporate strategy and governance. Such investments often precede efforts to restructure, improve financial performance, or explore strategic alternatives to enhance shareholder value, particularly in companies under regulatory pressure.

Management Changes

Corporate Governance

Related Party Transactions

• The Securities Purchase Agreement is between R01 Fund LP and Framework Ventures IV L.P. (Purchasers) and David Lazar (Seller), who is the current Chief Executive Officer and a director of NovaBay Pharmaceuticals, Inc.

Stakeholder Impact

• Shareholders: Potential for increased shareholder value if the new investors successfully implement strategic opportunities and address NYSE compliance. The required stockholder vote on proposals 5 and 9 directly impacts their rights and the transaction's completion.
• Management: David Lazar's resignation as CEO and director indicates a significant change in leadership.
• Creditors: The capital infusion from the Series E Preferred Stock purchase could improve the company's financial position, potentially benefiting creditors.
• NYSE: The transaction is part of NovaBay's plan to regain compliance with NYSE listing standards, which is crucial for its continued listing.

Next Steps

• NovaBay stockholders to vote on proposals 5 and 9 at the Annual Meeting on October 16, 2025.
• Closing of the Securities Purchase Agreement, contingent on stockholder approval and other conditions, by October 18, 2025.
• Release of escrow funds to the Seller and payment of Series E purchase price to the Issuer upon closing.
• David Lazar's resignation as CEO and director to become effective upon release of escrow funds.
• NovaBay Pharmaceuticals must regain compliance with NYSE listing standards by October 18, 2025.
• Reporting Persons to review their investment and potentially engage in discussions with management, the Board, and other stakeholders regarding strategic opportunities.

Key Dates

Recommendation

The significant investment by R01 Fund LP and Framework Ventures IV L.P. and their stated intent to drive value are positive signals. However, NovaBay Pharmaceuticals faces critical challenges, including non-compliance with NYSE listing standards and the need for stockholder approval for the transaction to fully close and preferred shares to convert. The resignation of the CEO also introduces uncertainty. While the investment provides a lifeline and potential for strategic improvement, the immediate future remains contingent and risky, warranting a 'hold' until the outcomes of the stockholder meeting and NYSE compliance efforts are clear.

Keywords

NovaBay Pharmaceuticals, R01 Fund LP, Framework Ventures, Schedule 13D, Preferred Stock, Convertible Securities, Shareholder Activism, Corporate Governance, NYSE Listing Compliance, David Lazar, Investment, Equity Stake