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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-29 · 292 added, 20 removed, 131 unchanged (70% of the section changed)

9 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 for non-DERMAdoctor operations. Our management utilized the criteria set forth in "Internal Control-Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission to conduct an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021 for non-DERMAdoctor operations.

Our management has concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on these criteria for non-DERMAdoctor operations.

The Company has one year to evaluate the Internal Control over Financial Reporting for the DERMAdoctor organization.

issued by the Committee of Sponsoring Organizations of the Treadway Commission to conduct an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022.

Our management has concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on these criteria.

Changes in Internal Control Over Financial Reporting

1 unchanged sentence

OTHER INFORMATION

On March 23, 2022, the Company’s Board authorized amendments to, and restatement of, the Company’s Bylaws (the “Amended and Restated Bylaws”). 

In addition to certain administrative updates, the Company’s Amended and Restated Bylaws include the following amendments:

Updates to Article XI (Indemnification) to indemnify directors to the fullest extent permitted by Delaware law.

Adding a new Section 48 (Exclusive Forums for Adjudication of Disputes) to provide that the Delaware Court of Chancery shall be the exclusive forum for derivative actions, actions for breach of fiduciary duty, actions pursuant to the Delaware General Corporation, the Company’s Certificate of Incorporation or the Amended and Restated Bylaws or actions under the internal affairs doctrine.

This provision does not relate to suits under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction.

The directors believe that the above amendments will better assist the Company in attracting qualified directors and officers as well as prevent forum shopping.

The above summary does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.7 to this Annual Report on Form 10-K and is incorporated herein by reference.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

3 unchanged sentences

EXECUTIVE COMPENSATION

The information required by this item will be included in the 2022 Proxy Statement and is incorporated herein by reference.

Unless otherwise indicated, all per share numbers have been retroactively adjusted to account for the 1-for-35 Reverse Stock Split, effective November 15, 2022.

Also, effective February 16, 2023, the Board appointed Tommy Law as the Company’s Interim Chief Financial Officer and Treasurer.

Law was not a named executive officer during 2022 and, as such, is not reflected in the below information.

Summary Executive Compensation Table

The following table shows information regarding the compensation earned during the fiscal years ended December 31, 2022 and December 31, 2021 by (1) our Chief Executive Officer, General Counsel and Chief Compliance Officer, (2) our Chief Product Officer, and (3) our former Chief Financial Officer (who served for the entire fiscal year ended December 31, 2022 and then until February 15, 2023) (collectively, the “NEOs”).

Name and principal position(s)

Option awards (1)

All other compensation (2)

CEO, GC and Chief

Compliance Officer

Audrey Kunin, M.D.

Chief Product Officer

Andrew Jones (4)

Former Chief Financial Officer

(1)          These amounts represent the aggregate grant date fair value of the equity awards granted to the Company’s NEOs during the fiscal year. The aggregate grant date fair value is computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. See Note 15, “Equity-Based Compensation”

to the Company’s consolidated financial statements in our Annual Report, regarding assumptions underlying the valuation of the Company’s equity awards. These amounts do not correspond to the actual value that may be recognized by the Company’s NEOs.

(2)          In 2021 the amounts included individual life insurance premiums paid for by the Company.

In 2022 the amounts included individual life insurance premiums paid for by the Company for Mr.

Jones of $1,909 each, and 401(k) plan matching contributions paid for by the Company for Mr.

Audrey Kunin and Mr.

Jones of $13,045, $4,395 and $12,265, respectively.

(3)          Dr.

Audrey Kunin was appointed our Chief Product Officer effective November 5, 2021, and therefore 2021 compensation only reflects a partial year.

(4)          Mr.

Jones served as the Company’s Chief Financial Officer for the entire fiscal years ended December 31, 2021 and 2022.

Subsequently, Mr.

Jones resigned as the Company’s Chief Financial Officer, effective as of February 15, 2023.

2022 and 2021 Base Salaries and Target Bonus Amounts

The Compensation Committee did not recommend any increases to executive salaries or target bonus amounts for 2022;

they remained the same as 2021.

Hall, this was a 2022 base salary of $350,000 and a target bonus percentage of base salary of 50%.

Jones, this was a 2022 base salary of $300,000 and a target bonus percentage of base salary of 35%.

Previously in 2021, the Compensation Committee approved increases to Messrs.

Hall’s and Jones’

annual base salary and target bonus amounts to be effective as of May 1, 2021.

As compared to 2020, the base salary of Mr.

Hall increased from $286,000 to $350,000 and his target bonus percentage of base salary increased from 40% to 50%.

As compared to 2020, the base salary of Mr.

Jones increased from $275,000 to $300,000 and his target bonus percentage of base salary increased from 30% to 35%.

2022 and 2021 Cash Bonuses

The Board, upon the recommendation of the Compensation Committee, determined not to award any bonuses to its NEOs for fiscal year 2022 performance.

Previously, the Board, upon the recommendation of the Compensation Committee, awarded Mr.

Jones a bonus of $70,000 and $73,500, respectively, for fiscal year 2021 performance.

Audrey Kunin was not awarded a bonus for fiscal year 2021 due to her beginning date of service on November 5, 2021.

2022 Equity Awards

The Board, upon the recommendation of the Compensation Committee, determined it would not grant any equity awards for the 2022 fiscal year to any of its NEOs.

2021 Equity Awards

On May 4, 2021, the Compensation Committee granted performance restricted stock units (“Performance RSUs”) to Messrs.

Hall and Jones in the amount of 14,286 Performance RSUs and 7,143 Performance RSUs, respectively.

Subsequently, on November 5, 2021, Dr.

Audrey Kunin was granted 8,572 Performance RSUs in relation to her employment agreement (as described in more detail below).

The Performance RSUs are designed to align each executive’s total direct compensation with the long-term interests of the Company and its stockholders by further linking compensation to performance.

The Performance RSUs represent the right to receive a number of shares of the Company’s common stock on a one-to-one basis with the number of Performance RSUs granted, subject to the Company's achievement of certain performance goals set forth in the award agreement.

Under the Performance RSUs, the awards will vest based on the achievement of three performance goals as determined by the Compensation Committee at the end of the performance period ending December 31, 2023.

The Performance RSUs are tied to three categories of performance goals to be achieved during the performance period, which will be equally weighted at the end of the performance period:

(1) 1/3 of the Performance RSUs will be earned if the Company’s revenue meets a threshold amount for a trailing 12 month period;

(2) 1/3 of the Performance RSUs will be earned if the Company achieves a threshold amount of cash flow for at least two consecutive quarters;

and (3) 1/3 of the Performance RSUs will be earned if the Company achieves a threshold market capitalization for twenty consecutive trading days.

The Performance RSUs will only vest upon the achievement of the performance goals as determined by the Compensation Committee at the end of the performance period, subject, in general, to the executive's continuous employment with the Company through the end of the performance period;

provided, however, an executive will be entitled to a pro-rated portion of the award in the event that his employment ceases upon his death or permanent disability.

Further, if a change in control of the Company occurs, the Performance RSUs will immediately vest, even if the performance goals have not been met, and be settled in the form of consideration consistent with the terms of the change in control.

Jones’

Performance RSUs were subsequently forfeited upon his resignation, effective February 15, 2023.

On November 5, 2021, Dr.

Audrey Kunin was also granted 4,286 stock options in relation to her employment agreement (as described in more detail below).

Such stock options vest over a two (2) year period (with 50% of the options having vested on the one-year anniversary of Dr.

Audrey Kunin’s first day of employment and the remaining 50% of the stock options to vest on the two (2) year anniversary of Dr.

Audrey Kunin’s employment immediately prior to the expiration of the term of her employment agreement).

Federal Income Tax Law

Federal income tax law prohibits publicly held companies, such as the Company, from deducting compensation paid to a NEO that exceeds $1 million during the tax year.

Prior to the adoption of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), to the extent that compensation was based upon the attainment of performance goals set by the Compensation Committee pursuant to plans approved by the stockholders, the compensation was exempted from the $1 million deduction limit.

The Tax Act repealed this exemption, and now compensation paid to NEOs in excess of $1 million is no longer deductible, even if performance-based.

The Compensation Committee intends to continue to use performance metrics in compensation when it is in the best interests of the Company and its stockholders even if such compensation is not deductible for tax purposes.

Outstanding Equity Awards at Fiscal Year End

The following table presents the outstanding equity awards held by each of our NEOs as of December 31, 2022.

Stock options were granted pursuant to our 2007 Plan thereafter until its expiration in March 2017, and all awards since then have been pursuant to our 2017 Plan.

The options granted under our 2007 Plan and 2017 Plan are not exercisable until they have vested.

Option Awards

Number of securities underlying unexercised options

exercisable (1)

Number of securities underlying unexercised options

unexercisable (1)

exercise price

Option expiration

number of unearned

market or payout

value of unearned

Audrey Kunin, M.D.

Andrew Jones (6)

_________________

(1)          Unless otherwise noted, each option vests as to 25% of the shares underlying the option on the first anniversary of the grant date, with the remainder vesting every three months in 12 equal installments thereafter.

Options expire ten (10) years from the date of grant.

(2)          Under the Performance RSUs, the awards will vest based on the achievement of three performance goals as determined by the Compensation Committee at the end of the performance period ending December 31, 2023, as described in further detail above.

(3)          Mr.

Hall was granted 4,086 stock options to vest on January 31, 2018, in direct proportion to the percentage achievement of the stated 2017 corporate goals, as approved and determined by the Board.

Such determination resulted in a 15% payout, or 613 shares vesting.

(4)          Mr.

Hall was granted 3,715 stock options to vest on January 31, 2017, in direct proportion to the percentage achievement of the stated 2016 corporate goals, as approved and determined by the Board, which was 100%.

(5)          Dr.

Audrey Kunin was granted 4,286 stock options, half of which vested on November 5, 2022, and the other half which will vest on November 5, 2023.

(6)          Mr.

Jones’

Performance RSUs and unvested options were subsequently forfeited upon his resignation, effective February 15, 2023.

Employment-Related Agreements and Potential Payments upon Termination or Change in Control

On January 31, 2020 and November 5, 2021, the Company entered into an employment agreement with each of Mr.

Audrey Kunin, respectively, in connection with their respective appointments to serve as an executive officer.

Hall’s employment agreement was subsequently amended on January 26, 2022.

Jones was party to an employment agreement, dated May 4, 2020, prior to his resignation from the Company on February 15, 2023.

The principal terms of our NEOs’

employment agreements (including Mr.

Jones, whose employment agreement was effective throughout the 2022 fiscal year) are summarized below.

Hall’s employment agreement, as amended, provides for at-will employment and a term commencing on January 31, 2020 and ending on December 31, 2023 unless earlier terminated.

Hall’s employment agreement originally provided for an annual base salary of two hundred eighty-six thousand dollars ($286,000), subject to annual review and increases determined by the Compensation Committee and/or Board (such amount, the “Hall Base Salary”).

In addition, Mr.

Hall shall be eligible for any bonus plan that is deemed appropriate by the Board.

The bonus amount shall be determined by the Board, in its sole discretion, based upon factors, including:

(i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to the executive as set by the executive and the Company’s Board, before the end of the first calendar quarter;

(ii) the evaluation of the executive by the Company’s Board;

(iii) the Company’s financial, product and expected progress;

and (iv) other pertinent matters relating to the Company’s business and valuation.

Any bonus will be payable within two and a half (2 1 / 2 ) months following the end of the year for which the bonus was earned.

The Compensation Committee of the Board of Directors shall have the sole discretion to pay any or all of the annual bonus in the form of equity compensation.

Any such equity compensation shall be issued from the Company’s equity incentive plan, and shall be fully vested upon issuance.

In the event the Company terminates Mr.

Hall for cause (as defined in the employment agreement), he shall be entitled to any earned but unpaid wages or other compensation (including reimbursements of his outstanding expenses and unused vacation) earned through the termination date.

In the event the Company terminates Mr.

Hall without cause (including death, disability or for constructive termination) (each as defined in the employment agreement) which is not in connection with a change of control, provided such termination constitutes a “separation from service”

as such term is defined in Section 409A of the Code and, subject to his execution of a release of claims in favor of the Company, he shall be entitled to an amount equal to the Hall Base Salary in effect on the date of separation from service plus the full target annual bonus percentage for the current fiscal year (the “Hall Severance Amount”).

The Hall Severance Amount will be paid in twelve (12) equal consecutive monthly installments at the monthly rate of the Hall Base Salary rate in effect at the time of his termination, with such installments commencing within sixty (60) days following the executive’s separation from service.

The Hall Severance Amount shall be in addition to Mr.

Hall’s earned wages and other compensation (including reimbursements of his outstanding expenses and unused vacation) through the date his employment is terminated from the Company.

In the event the Company terminates Mr.

Hall without cause in connection with a change of control (as defined in the employment agreement), he shall be entitled to a Change of Control Severance (the “Hall CoC Severance Amount”) in place of the Hall Severance Amount described above.

The Hall CoC Severance Amount shall be:

(i) an amount equal to twice the Hall Base Salary and (ii) an amount equal to the cash portion of his target Annual Bonus for the fiscal year in which the termination occurs (with it deemed that all performance goals have been met at one hundred percent (100%) of budget or plan) multiplied by one hundred fifty percent (150%).

For a period of eighteen (18) months, Mr.

Hall may elect coverage for, and the Company shall reimburse him for, the amount of his premium payments for group health coverage, if any, elected by the executive pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”);

provided, however, that Mr.

Hall shall be solely responsible for all matters relating to his continuation of coverage pursuant to COBRA, including (without limitation) his election of such coverage and his timely payment of premiums.

Moreover, all outstanding equity awards held by Mr.

Hall will be subject to full accelerated vesting on the date of termination without cause, in both the standard Hall Severance Amount and the Hall CoC Severance Amount, and the exercise period shall be extended to three (3) years from the date of termination.

In order to terminate Mr.

Hall for cause (or for Mr.

Hall to resign for constructive termination), the acting party shall give notice to the other party specifying the reason for termination and providing a period of thirty (30) days to cure the reason specified.

If there is no cure within thirty (30) days or the notified party earlier refuses to effect the cure, the termination shall then be deemed effective.

Audrey Kunin’s employment agreement provides for at-will employment and a two-year term commencing on November 5, 2021.

Her employment agreement provides for an annual base salary of $200,000 (“Kunin Base Salary”).

Additionally, Dr.

Audrey Kunin’s employment agreement included an equity grant of 8,572 Performance RSUs and a stock option award of 150,000 shares, as further described above.

Audrey Kunin’s employment agreement also provides her with the opportunity to earn an annual performance bonus (“Kunin Annual Bonus”) in an amount up to one hundred percent (100%) of the Kunin Base Salary.

For the Kunin Annual Bonus, sixty percent (60%) of the total amount of the Kunin Annual Bonus shall be determined by the Board in its sole discretion, based upon the following factors:

(i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to Dr.

Audrey Kunin as set by Dr.

Audrey Kunin and the Company and/or its authorized representative;

(ii) the evaluation of Dr.

Audrey Kunin by the Company and/or its authorized representative;

(iii) DERMAdoctor’s financial, product and expected progress;

and (iv) other pertinent matters relating to DERMAdoctor’s business and valuation.

Audrey Kunin shall also be entitled to the remaining portion of the Kunin Annual Bonus of up to forty percent (40%) of the Kunin Base Salary, as considered and approved by the Board in its sole discretion, upon meeting certain performance metrics related to the Membership Unit Purchase Agreement entered into in connection with the DERMAdoctor Acquisition.

Any bonus to Dr.

Audrey Kunin will be payable within seventy-four (74) days following the end of the year for which such bonus was earned.

Upon the mutual agreement of Dr.

Audrey Kunin and the Board, any or all of the Kunin Annual Bonus may be paid in the form of equity compensation.

Any such equity compensation shall be issued from the Company’s equity incentive plan, and shall be fully vested upon payment.

In the event that Dr.

Audrey Kunin is terminated for cause (as defined in her employment agreement) or such employment is terminated due to her death or disability, she shall be entitled to any earned but unpaid wages or other compensation (including reimbursements of her outstanding expenses and unused vacation) earned through the termination date.

In the event that Dr.

Audrey Kunin is terminated without cause (as defined in her employment agreement), she shall execute a release of claims in favor of the Company, be entitled to an amount equal to the Kunin Base Salary in effect on the date of separation from service plus the full target Annual Bonus percentage of the then current fiscal year (with it deemed that all performance goals have been met at 100% of budget or plan) (the “Kunin Severance Amount”), which will be paid in twelve (12) equal consecutive monthly installments.

The Kunin Severance Amount shall be in addition to Dr.

Audrey Kunin’s earned wages and other compensation (including reimbursements of her outstanding expenses and unused vacation) through the date her employment is terminated.

Further, in the event that Dr.

Audrey Kunin is terminated for cause, she and the other applicable parties will no longer be entitled to the earn out payments provided for in the Membership Unit Purchase Agreement entered into in connection with the DERMAdoctor Acquisition;

however, if Dr.

Audrey Kunin is terminated without cause or terminated as a result of death or disability, she and the other applicable parties will remain entitled to the earn out payments.

Moreover, in the event of either a termination without cause, and subject to her execution of a release, all outstanding equity awards then held by Dr.

Audrey Kunin will be subject to full accelerated vesting on the date of termination, and the exercise period shall be extended to three (3) years from the date of termination.

As a result of Mr.

Jones’

resignation, effective February 15, 2023, his employment agreement terminated on the same day.

Jones’

resignation being voluntary, he was not entitled to either the Jones Severance Amount or the Jones CoC Severance Amount (each as described below).

Jones’

employment agreement provided for at-will employment and a term commencing on May 4, 2020.

The employment agreement included an original annual base salary of two hundred seventy-five thousand dollars ($275,000), subject to annual review and increases determined by the Compensation Committee (such amount, the “Jones Base Salary”), as well as an initial equity grant of 4,572 restricted stock units and an initial stock option award of 8,572 shares, as further described above.

In addition, Mr.

Jones had the opportunity to earn an annual performance bonus in an amount up to thirty percent (30%) of the Jones Base Salary, with such maximum amount subject to increases determined by the Compensation Committee and/or Board (the “Annual Bonus”).

The Annual Bonus amount was to be determined by the Board, in its sole discretion, based upon the following factors:

(i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to Mr.

Jones as set by Mr.

Jones and the Company’s CEO and/or the Board, before the end of the first calendar quarter (or the first three months of his employment, as appropriate);

(ii) the evaluation of Mr.

Jones by the Company’s CEO and/or the Board;

(iii) the Company’s financial, product and expected progress;

and (iv) other pertinent matters relating to the Company’s business and valuation.

Any bonus would have been payable within two and a half (2 ½) months following the end of the year for which the bonus was earned.

The Committee had the sole discretion to pay any or all of the Annual Bonus in the form of equity compensation, except to the extent that the Annual Bonus was paid in connection with a Jones Severance Amount (as defined below) or a Jones CoC Severance Amount (as defined below).

Any such equity compensation would have been issued from the Company’s equity incentive plan, and would have been fully vested upon payment.

In the event the Company terminated Mr.

Jones for cause (as defined in the employment agreement), he would have been entitled to any earned but unpaid wages or other compensation (including reimbursements of his outstanding expenses and unused vacation) earned through the termination date.

In the event the Company terminated Mr.

Jones without cause (including death, disability, or for constructive termination) (each as defined in the employment agreement), which is not in connection with a change of control, he would have been, subject to his execution of a release of claims in favor of the Company, entitled to an amount equal to the Jones Base Salary in effect on the date of separation from service plus the full target Annual Bonus percentage of the then current fiscal year (with it deemed that all performance goals have been met at 100% of budget or plan) (the “Jones Severance Amount”), which would have paid in twelve (12) equal consecutive monthly installments.

The Jones Severance Amount would have been in addition to Mr.

Jones’

earned wages and other compensation (including reimbursements of his outstanding expenses and unused vacation) through the termination date.

In the event the Company terminated Mr.

Jones without cause in connection with a change of control (as defined in the employment agreement), he would have been entitled to a Change of Control Severance (the “Jones CoC Severance Amount”) in place of the Jones Severance Amount described above.

The Jones CoC Severance Amount would have been:

(i) an amount equal to twice the Jones Base Salary in effect on the date of separation from service and (ii) an amount equal to the cash portion of Mr.

Jones’

target Annual Bonus for the fiscal year in which the termination occurred (with it deemed that all performance goals had been met at one hundred percent (100%) of budget or plan) multiplied by one hundred fifty percent (150%).

For a period of eighteen (18) months, Mr.

Jones would have had the option to elect coverage for, and the Company would have reimbursed Mr.

Jones for, the amount of his premium payments for group health coverage, if any, elected by Mr.

Jones pursuant to the COBRA;

provided, however, that Mr.

Jones would be solely responsible for all matters relating to his continuation of coverage pursuant to COBRA, including (without limitation) his election of such coverage and his timely payment of premiums.

Moreover, in the event of either a termination without cause or a termination in connection with a change of control, all outstanding equity awards held by Mr.

Jones would have been subject to full accelerated vesting on the date of termination, and the exercise period extended to three (3) years from the date of termination.

In order for Mr.

Jones to resign for constructive termination, Mr.

Jones would have had to give notice to the Company within thirty (30) days of the initial existence of such grounds for constructive termination and provided a period of thirty (30) days to cure the reason specified.

Director Compensation

The compensation and benefits for service as non-employee members of our Board is determined by the Board.

Directors employed by the Company, such as Mr.

Audrey Kunin, are not compensated for service on the Board or any committee of the Board;

however, we reimburse all directors for any out-of-pocket expenses incurred in connection with attending meetings of the Board and committees of the Board.

The Board, upon the recommendation of the Compensation Committee, approved the Non-Employee Director Compensation Program, effective January 1, 2022 (the “2022 Non-Employee Director Compensation Plan”).

Under the 2022 Non-Employee Director Compensation Plan, each director receives his or her annual retainer compensation in cash and an annual grant of 858 restricted stock units.

All cash compensation is payable quarterly on the first (1 st ) business day of the quarter.

Approved non-employee director compensation for 2022 was as follows:

Board Meetings

Chair of Committees

All Other Committee Members

Chair of the Board :

Annual cash compensation of $52,000 per year.

Member of the Board :

The annual fee consists of:

(i) $40,000 in cash and (ii) 858 restricted stock units granted.

The restricted stock units are granted at the Company’s Annual Meeting of Stockholders, and vest on the one year anniversary of the grant date.

Chair of the Audit Committee :

Annual cash compensation of $17,500 per year.

Chair of the Compensation Committee :

Annual cash compensation of $13,000 per year.

Chair of the N&CG Committee :

Annual cash compensation of $10,000 per year.

Member of the Audit Committee :

Annual cash compensation of $7,500 per year.

Member of the Compensation Committee :

Annual cash compensation of $6,000 per year for each committee.

Member of the N&CG Committee :

Annual cash compensation of $5,000 per year for each committee.

Non-employee directors also may be granted additional awards under our equity incentive plans at the discretion of our Board.

The compensation received during 2022 by each non-employee director is set forth below:

Freiman, Ph.D.

Julie Garlikov

Mijia (Bob) Wu, M.B.A.

Yenyou (Jeff) Zheng, Ph.D.

 These amounts represent the aggregate grant date fair value of $6.399 per share (as adjusted to account for the Reverse Stock Split) for the 858 restricted stock awards granted to each director as part of his or her annual fee in fiscal year 2022.

The assumptions used to determine the value of restricted stock units are described in Note 15, “Equity-Based Compensation”

to the Company’s consolidated financial statements in our Annual Report.

At December 31, 2022, each of Dr.

Garlikov, Ms.

Sean Zheng and Dr.

Jeff Zheng had an aggregate of 858 unvested restricted stock units.

At December 31, 2022, the aggregate number of vested stock options for each of the non-employee directors who served in 2022 and held stock options was as follows (with no such director holding any unvested stock options at such time):

Freiman, 3,399;

Jeff Zheng, 572.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

21 unchanged sentences

Certificate of Designation for the Series B Preferred Stock

Amendment to Amended and Restated Certificate of Incorporation, as amended, dated November 14, 2022

Certificate of Designation for the Series C Preferred Stock

Amended and Restated Bylaws

2 unchanged sentences

Form of July 2020 Warrant

Form of November 2021 Warrant

Form of Amended July 2020 Warrant

Form of Amended November 2021 Warrant

Form of September 2022 Warrant (2020 participants)

Form of September 2022 Warrant (2021 participants)

Form of Series A-1 Long-Term Warrant

Form of Series A-2 Short-Term Warrant

Director and Officer Indemnity Agreement

26 unchanged sentences

At the Market Offering Agreement between the Company and Ladenburg Thalmann & Co.

Inc., dated April 27, 2020

At the Market Offering Agreement between the Company and Ladenburg Thalmann & Co.

Inc., dated May 14, 2021

5 unchanged sentences

Form of Registration Rights Agreement, dated October 29, 2021

Form of 2020 Warrant Reprice Letter Agreement, dated September 9, 2022

Form of 2021 Warrant Reprice Letter Agreement, dated September 9, 2022

Form of Securities Purchase Agreement, dated September 9, 2022

Form of Registration Rights Agreement

Form of Participant Voting Commitment

Form of Additional Voting Commitment

Form of Leak-Out Agreement

Consulting Agreement between the Company and Andrew Jones, dated February 15, 2023

Subsidiaries of the Company

Consent of WithumSmith+Brown PC

Consent of OUM & Co.

Certification of the Principal Executive Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a)

13 unchanged sentences

Certain confidential portions of this exhibit were omitted by means of marking such portions with brackets because the confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

FORM 10-K SUMMARY

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-K to be signed on its behalf by the undersigned, thereunto duly authorized.

5 unchanged sentences

March 31, 2023

/s/   Andrew Jones 

Chief Financial Officer

/s/   Tommy Law

Interim Chief Financial Officer

(principal financial officer)

POWER OF ATTORNEY

We, the undersigned officers and directors of NovaBay Pharmaceuticals, Inc., do hereby constitute and appoint Justin Hall and Andrew Jones, and each of them, our true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby, ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

We, the undersigned officers and directors of NovaBay Pharmaceuticals, Inc., do hereby constitute and appoint Justin Hall and Tommy Law, and each of them, our true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby, ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:

3 unchanged sentences

( principal executive officer )

/s/ ANDREW JONES

Chief Financial Officer

/s/ TOMMY LAW

Interim Chief Financial Officer

March 31, 2023

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures