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Note 9 - Financing Activities | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Other Liabilities Disclosure [Text Block] | NOTE 9. FINANCING ACTIVITIES See Notes 2, “Summary of Significant Accounting Policies”; 3, “Fair Value Measurements”; 10, “Convertible Notes”; 11, “Common Stock Warrants” and 12, “Stockholders’ Equity” for certain defined terms below and additional discussion of financing activities and related accounting policies and fair value estimates. 2024 Public Offering On July 26, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co., Inc., as the sole underwriter (the “Underwriter”), relating to the issuance and sale in a public offering (the “2024 Public Offering”) of: (i) 1,158,566 shares of common stock and 2,041,814 pre-funded warrants, in lieu of shares of common stock (the “July 2024 Pre-Funded Warrants”), (ii) 3,200,380 Series F-1 warrants to purchase up to 3,200,380 shares of common stock (the “Series F-1 Warrants”), (iii) 3,200,380 Series F-2 warrants to purchase up to 3,200,380 shares of common stock (the “Series F-2 Warrants”) and (iv) 3,200,380 Series F-3 warrants to purchase up to 3,200,380 shares of common stock (the “Series F-3 Warrants”, and together with the Series F-1 Warrants and Series F-2 Warrants, the “July 2024 Warrants”). The Series F-1 Warrants had an exercise price of $1.10 per share at issuance, were exercisable immediately upon issuance, and will expire on the five-year anniversary of the date of issuance. The Series F-2 Warrants had an exercise price of $1.10 per share at issuance, were exercisable immediately upon issuance, and will expire on the six-month anniversary of the date of issuance. The Series F-3 Warrants had an exercise price of $1.10 per share at issuance, were exercisable immediately upon issuance, and will expire on the one-year anniversary of the date of issuance. The July 2024 Pre-Funded Warrants were immediately exercisable at a nominal exercise price of $0.01 per share and could be exercised at any time until the July 2024 Pre-Funded Warrants were exercised in full. As of September 30, 2024, all of the July 2024 Pre-Funded Warrants had been exercised, resulting in the Company issuing 2,041,814 shares of common stock. In connection with such exercises, the Company received net proceeds of approximately $20 thousand. The July 2024 Warrants include a down round feature adjustment where the exercise price was automatically reset to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the July 2024 Warrants as applicable. Such down round feature adjustment was triggered on September 27, 2024, resulting in a reduced exercise price of $0.66. The exercise price and number of shares of common stock issuable upon exercise of the July 2024 Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common stock and the exercise price. Subject to limited exceptions, a holder may not exercise any portion of its July 2024 Warrants to the extent that the holder would beneficially own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the Company’s outstanding common stock after exercise. In addition, the Company granted the Underwriter a 45-day option to purchase up to 477,272 additional shares of common stock and/or 477,272 Series F-1 Warrants to purchase up to 477,272 shares of common stock, 477,272 Series F-2 Warrants to purchase up to 477,272 shares of common stock and 477,272 Series F-3 Warrants to purchase up to 477,272 shares of common stock, or any combination thereof, as determined by the Underwriter, at the public offering price, less underwriting discounts and commissions, in each case solely to cover over-allotments, if any. The Underwriter partially exercised this option on July 26, 2024, for (i) 336,832 shares of common stock, (ii) 336,832 Series F-1 Warrants to purchase up to 336,832 shares of common stock, (iii) 336,832 Series F-2 Warrants to purchase up to 336,832 shares of common stock and (iv) 336,832 Series F-3 Warrants to purchase up to 336,832 shares of common stock. The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $3.9 million, without taking into account any underwriting discounts and commissions. A portion of the proceeds were used towards repaying the Secured Convertible Notes, which were repaid in full during the third quarter of 2024. 2024 Warrant Reprice Transaction In June 2024, the Company entered into a warrant reprice transaction (the “2024 Warrant Reprice Transaction”) with certain existing holders of (i) warrants issued in September 2022 to purchase common stock, (ii) Series A-1 warrants issued in November 2022 to purchase common stock, (iii) Series B-1 Warrants issued in May 2023 to purchase common stock, and (iv) Series B-2 Warrants issued in May 2023 to purchase common stock (collectively (i) through (iv), the “Existing Warrants”). The participants agreed to exercise a portion of their Existing Warrants at a reduced exercise price of $2.50. Existing Warrants were exercised for an aggregate of 90,381 shares of common stock, resulting in gross proceeds of approximately $0.2 million. The Company also issued participants in the 2024 Warrant Reprice Transaction a new June 2024 Warrant to purchase a number of shares of common stock equal to 100% of the shares of common stock exercised. The June 2024 Warrants are substantially similar to the Existing Warrants, except that the June 2024 Warrants will (i) be initially exercisable on the six-month anniversary of the date of issuance; (ii) have an exercise price of $2.57; and (iii) have a term of five (5) years and six (6) months from the date of the closing of the 2024 Warrant Reprice Transaction. The Company incurred total issuance costs of $96 thousand in conjunction with the 2024 Warrant Reprice Transaction. The Company incurred a $69 thousand non-cash loss on the modification of common stock warrants which was recorded in “Other expense, net” during the nine months ended September 30, 2024. 2024 Subsidiary Guarantee Termination On March 24, 2024, in connection with completing certain required conditions to close the DERMAdoctor Divestiture, the Company and the holders of the Secured Convertible Notes entered into a First Amendment (the “First Amendment”) to the Company’s Security Agreement, dated April 27, 2023 (the “Security Agreement”), to remove the Membership Units and any assets of DERMAdoctor as collateral for the Company’s obligations pursuant to the Secured Convertible Notes and for DERMAdoctor to be removed as a party to the Security Agreement, and a Consent and Release (the “Subsidiary Guarantee Consent”), to terminate the Subsidiary Guarantee, dated April 7, 2023 (the “Subsidiary Guarantee”) (collectively, the “2024 Subsidiary Guarantee Termination”). To obtain the secured parties’ consent that resulted in the reduction of the collateral available to secure the obligations under the Secured Convertible Notes and as consideration for the secured parties taking the necessary actions to execute and deliver the First Amendment and the Subsidiary Guarantee Consent, the Company provided each secured party the option, at the Secured Party’s election, to receive only upon the closing of the DERMAdoctor Divestiture either a March 2024 Warrant (see Note 11, “Common Stock Warrants”) or an Unsecured Convertible Note (see Note 10 “Convertible Notes”). The Company issued, based on the secured parties’ elections, (i) a March 2024 Warrant to a secured party that is exercisable for an aggregate of 1,000,000 shares of common stock (28,572 shares post-Reverse Stock Split) and (ii) Unsecured Convertible Notes to four secured parties that have an aggregate principal amount of $525 thousand or will be convertible into an aggregate of 3,750,000 shares of common stock (107,146 shares post-Reverse Stock Split). The Company incurred total issuance costs of $130 thousand in conjunction with the 2024 Subsidiary Guarantee Termination. The Company allocated $19 thousand of the issuance costs to the Unsecured Convertible Notes which was recorded as a discount in the Company’s condensed consolidated balance sheets. The remaining $111 thousand was allocated to the embedded derivative liability and warrant liability and expensed as “Other expense, net” in the Company’s unaudited condensed consolidated statements of operations, during the nine months ended September 30, 2024. 2023 Warrant Reprice Transaction In December 2023, the Company entered into a warrant reprice transaction (the “2023 Warrant Reprice Transaction”) whereby the price terms of certain May 2023 Warrants exercisable for 2,528,848 shares of common stock (72,256 shares post-Reverse Stock Split) were amended and exercised. The price of the amended and exercised May 2023 Warrants was reduced from $1.30 ($45.50 post-Reverse Stock Split) to $0.25 ($8.75 post-Reverse Stock Split). The Company also issued to participants in the 2023 Warrant Reprice Transaction, the December 2023 Warrants exercisable for 2,528,848 shares of common stock (72,256 shares post-Reverse Stock Split). The 2023 Warrant Reprice Transaction resulted in gross proceeds of approximately $0.6 million. The Company allocated the gross proceeds between the common stock and December 2023 Warrants issued to participants by applying the relative fair value allocation methodology. The Company allocated $0.2 million in gross proceeds to the common stock and $0.4 million to the December 2023 Warrants. The December 2023 Warrants were initially classified as liabilities from the date of issuance until Company stockholder approval on May 28, 2024, at which time they were reclassified to equity. The Company incurred total issuance costs of $0.2 million in conjunction with the 2023 Warrant Reprice Transaction. The Company allocated $0.1 million of the issuance costs to the common stock which was recorded as a reduction of additional paid-in capital in the Company’s condensed consolidated balance sheets. The remaining $0.1 million was allocated to the warrant liability and expensed as “Other expense, net” in the Company’s unaudited condensed consolidated statements of operations. 2023 Private Placement In May 2023, the Company closed a private placement (the “2023 Private Placement”) with existing accredited institutional investors of the Company that provided for the issuance and sale of $3.3 million aggregate principal amount of the Secured Convertible Notes and the May 2023 Warrants exercisable for up to 5,076,928 shares of common stock (145,056 shares post-Reverse Stock Split). The Company received gross proceeds of $3.0 million from the 2023 Private Placement. The Company allocated the proceeds from the 2023 Private Placement between the May 2023 Warrants, an embedded derivative liability, and the Secured Convertible Notes by applying the residual fair value methodology. The Company first allocated $1.6 million to the May 2023 Warrants and $0.2 million to the embedded derivative liability with the residual $1.2 million allocated to the Secured Convertible Notes. The embedded derivative liability was subsequently reclassified to equity upon stockholder approval. The Company incurred total issuance costs of $0.7 million in conjunction with the 2023 Private Placement, including a $0.4 million non-cash loss on the warrant modification. The Company allocated $0.3 million of the issuance costs to the Secured Convertible Notes which was recorded as a discount in the Company’s condensed consolidated balance sheets. The remaining $0.4 million was allocated to the embedded derivative liability and warrant liability and expensed as “Other expense, net” in the Company’s unaudited condensed consolidated statements of operations.

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