What changed in this filing

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Item 1. Financial Statements

2022-08-12 compared with 2022-05-13 · 419 added, 404 removed, 321 unchanged (72% of the section changed)

1 unchanged sentence

thousands, except par value and share amounts )

March 31, 2022

and cash equivalents

receivable, net

receivables, related party

expenses and other current assets

current assets

Cash and cash equivalents

Accounts receivable, net

Other receivables, related party

Prepaid expenses and other current assets

Total current assets

Other receivables long term, related party

Property and equipment, net

Intangible asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

receivables long term, related party

and equipment, net

AND STOCKHOLDERS’ EQUITY

payable, related parties

contract liabilities, net

expenses and other current liabilities

current liabilities

Accounts payable

Accounts payable, related parties

Acquisition contract liabilities, net

Accrued expenses and other current liabilities

Total current liabilities

Long-term liabilities:

Acquisition contract liabilities, net

Warrant liability

Other liabilities

Total liabilities

Commitments and contingencies (see Note 23)

Stockholders’ equity:

contract liabilities, net

and contingencies (see Note 23)

Stockholders’

Preferred Stock,

par value, 20,000,000 shares authorized, zero

shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common Stock, $ 0.001 par

value, 300,000,000 shares authorized;

shares issued and outstanding as of March 31, 2022 and December 31, 2021

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

$ 0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common Stock, $ 0.001

par value, 300,000,000 shares authorized;

19,011,438 and 17,104,749 shares issued and outstanding as of June 30, 2022 and December

paid-in capital

stockholders’ equity

liabilities and stockholders’ equity

accompanying notes are an integral part of these financial statements.

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thousands, except per share amounts and number of shares )

Three Months Ended March 31,

Products revenues, net

Revenues, related party

Total revenues, net

months ended June 30,

revenues, net

related party

revenues, net

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

Restructuring

in fair value of contingent consideration

operating expenses

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Restructuring costs

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

from operations

income (expense)

in fair value of warrants

other income (expense)

Change in fair value of warrant liabilities

Interest expense, net

Other income, net

Total other income (expense)

Income (loss) before income taxes

Income tax expense

Net income (loss)

Income (loss) per common share:

Weighted-average common shares outstanding:

(loss) before income taxes

income (loss)

(loss) per common share:

Weighted-average

common shares outstanding:

accompanying notes are an integral part of these financial statements.

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thousands, except number of shares)

Months Ended March 31, 2022 and 2021

and Six Months Ended June 30, 2022

Additional Paid-

Balance, January 1, 2021

Balance March 31, 2022

Balance, January 1, 2022

Issuance of common stock and warrants under private placement, net of issuance costs

Issuance of shares for vested restricted stock units

Stock based compensation

Net income (loss)

Balance, March 31, 2022

Balance, June 30, 2022

Balance, December 31, 2021

Issuance of common stock and warrants under private placement, net of issuance costs

Issuance of shares for vested restricted stock units

Stock based compensation

Balance, June 30, 2022

and Six Months Ended June 30, 2021

March 31, 2021

June 30, 2021

Balance, December

June 30, 2021

accompanying notes are an integral part of these financial statements.

OF CASH FLOWS

Three Months Ended March 31,

Cash Flows From Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash flows used in operations

Amortization of acquired intangible assets

Change in fair value of contingent consideration

Change in fair value of warrant liabilities

Stock-based compensation

Provision for inventory obsolescence

Provision for (recovery of) doubtful accounts

Non-cash interest expense

Changes in operating assets and liabilities:

Accounts receivable

Other receivables, related party

Prepaid expenses and other assets

Accounts payable and related party payables

Accrued expenses and other liabilities

Cash flows used in operating activities

Cash flows from investing activities

Purchases of property and equipment

Cash flows used in investing activities

Net decrease in cash and cash equivalents

Cash, cash equivalents and restricted cash, at the beginning of the period

Cash, cash equivalents and restricted cash, at the end of the period

Supplemental disclosure of cash flow information

Interest paid

Income tax paid, net

Supplemental non-cash investing and financing activities

Deferred offering costs included in accrued expenses and other liabilities

Months Ended June 30,

flows from operating activities:

income (loss)

to reconcile net income (loss) to cash flows used in operations

of acquired intangible assets

in fair value of contingent consideration

in fair value of warrant liabilities

for inventory obsolescence

for doubtful accounts

interest expense

in operating assets and liabilities:

receivables, related party

expenses and other assets

payable and related party payables

expenses and other liabilities

flows used in operating activities

flows from investing activities

of property and equipment

flows used in investing activities

flows from financing activities:

of deferred offering costs

from issuance of common stock and warrants in private placement, net of issuance costs

flows provided by (used) in financing activities

increase (decrease) in cash and cash equivalents

cash equivalents and restricted cash, at the beginning of the period

cash equivalents and restricted cash, at the end of the period

disclosure of cash flow information

taxes paid, net

accompanying notes are an integral part of these financial statements.

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are a U.S.-based biopharmaceutical company specializing in the commercialization of pharmaceutical products for the treatment of dermatological

conditions, in particular, diseases caused primarily by exposure to sunlight that results in sun damage to the skin.

conditions, in particular, diseases caused primarily by exposure to sunlight that result in sun damage to the skin.

Our principal licensed

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an exclusive license and supply agreement (“Xepi LSA”) with Ferrer Internacional S.A.

(“Ferrer”) that

was acquired by Biofrontera Inc.

(“Ferrer”) that was acquired

by Biofrontera Inc.

on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.

Refer to Note 16, Related

Party Transactions , for further details.

Refer to Note 16, Related Party Transactions ,

for further details.

and Going Concern

Company’s primary sources of liquidity are its existing cash balances and cash flows from equity financing transactions received

As of March 31, 2022, we had cash and cash equivalents of $ 22.4 million, compared to $ 24.5 million as of December 31, 2021.

Company’s primary sources of liquidity are its existing cash balances and cash flows from equity financing transactions.

of 2022, we received aggregate proceeds of $ 9.4 million from the sale of common stock and warrants in a private placement (See Note

18 Stockholders’ Equity) .

As of June 30, 2022, we had cash and cash equivalents of $ 31.9 million, compared to $ 24.5 million

as of December 31, 2021.

we commenced operations in 2015, we have generated significant losses.

For the three months ended March 31, 2022 and 2021, we incurred

losses from operations of $ 3.1 million and $ 3.5 million, respectively.

We incurred net cash outflows from operations of $ 2.1 million

and $ 3.4 million, for the same periods, respectively.

We had an accumulated deficit as of March 31, 2022 of $ 73.3 million.

For the six months ended June 30, 2022 and 2021, we incurred losses

from operations of $ 9.3 million and $ 7.2 million, respectively.

We incurred net cash outflows from operations of $ 2.0 million and $ 4.5

million, for the same periods, respectively.

We had an accumulated deficit as of June 30, 2022 of $ 74.2 million.

Company’s short-term material cash requirements include working capital needs and satisfaction of contractual commitments including

auto leases (see Note 23, Commitments and Contingencies ), Maruho start-up payments of $ 7.3

million (see Note 3.

Acquisition Contract

Liabilities ), and legal settlement expenses after reimbursement from Biofrontera AG, a significant shareholder and our former

parent company, of $ 5.6

million (see Note 13.

Accrued Expenses and Other Current

Liabilities ).

Long-term material cash requirements include potential milestone payments to Ferrer Internacional S.A (see Note

Commitments and Contingencies ) and contingent consideration payments to Maruho (see Note 3.

auto leases (see Note 23, Commitments and Contingencies ), Maruho start-up payments of $ 7.3 million (see Note 3.

Contract Liabilities ), and legal settlement expenses after reimbursement from Biofrontera AG, a significant shareholder and our former

parent company, of $ 5.6 million (see Note 13.

Accrued Expenses and Other Current Liabilities ).

Long-term material cash requirements

include potential milestone payments to Ferrer Internacional S.A (see Note 23.

Commitments and Contingencies ) and contingent consideration

payments to Maruho (see Note 3.

Acquisition Contract Liabilities).

Additionally,

we expect to continue to incur operating losses due to significant discretionary sales and marketing efforts as we seek to expand the

commercialization of Ameluz ® and Xepi ® in the United States.

We also expect to incur additional expenses

to add and improve operational, financial and information systems and personnel, including personnel to support our product commercialization

In addition, we expect to incur significant costs to continue to comply with corporate governance, internal controls and similar

requirements applicable to us as a public company in the U.S.

We expect capital expenditures to increase in 2022 to support the increase

in our business needs including an ERP system.

factors raise doubt about our ability to continue as a going concern, which we have determined are mitigated by the following plans.

Based on current operating plans and financial forecasts, we expect that our current cash and cash equivalents will be sufficient to

fund our operations for at least the next twelve months from the date of issuance of our financial statements.

However, we expect

to have to obtain either equity or debt financing to support our future long-term growth and to mitigate the risk of our operating costs

significantly exceeding the amounts currently estimated.

If our current operating plans or financial forecasts change, or we are unable

to obtain additional financing, we may need to reduce the discretionary spend on promotional expenses, branding, marketing consulting

and defer some hiring.

While we expect to continue being flexible in our spending over the next twelve months, we do not consider there

to be a need to significantly revise our operations currently.

Additionally, we expect to continue to incur operating

losses due to significant discretionary sales and marketing efforts as we seek to expand the commercialization of Ameluz ®

and Xepi ® in the United States.

We also expect to incur additional expenses to add and improve operational,

financial and information systems and personnel, including personnel to support our product commercialization efforts.

In addition, we

expect to incur significant costs to continue to comply with corporate governance, regulatory reporting and other requirements applicable

to us as a public company in the U.S.

We expect capital expenditures to increase in 2022 to support the increase in our business needs

including an ERP system.

Our future growth is

dependent on our ability to obtain additional equity financing.

On July 26, 2022, pursuant to a warrant exercise inducement offer letter

(the “Inducement Letter”), an investor exercised certain of its existing warrants, issued in a private placement on December

1, 2021, to purchase 2,857,143

shares of common stock, at a price of $ 1.62

per share, resulting in gross proceeds of $ 4.6

million ( See Note 25 Subsequent Events) .

Based on current operating plans and financial

forecasts, we expect that our current cash and cash equivalents, along with the proceeds received from the exercise of such warrants

in accordance with the Inducement Letter will be sufficient to fund our operations for at least the next twelve months from the date

of issuance of our financial statements.

However, if our current operating plans or financial forecasts change, or we are unable to

obtain additional financing, we may need to reduce the discretionary spend on promotional expenses, branding, marketing consulting and

defer some hiring.

While we expect to continue being flexible in our spending over the next twelve months, we do not consider there to

be a need to significantly revise our operations currently.

Summary of Significant Accounting Policies

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include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s

financial position as of March 31, 2022, the Company’s operating results for the three months ended March 31, 2022 and 2021, and

the Company’s cash flows for the three months ended March 31, 2022 and 2021.

financial position as of June 30, 2022, the Company’s operating results for the three and six months ended June 30, 2022 and 2021,

and the Company’s cash flows for the six months ended June 30, 2022 and 2021.

The accompanying financial information as of December

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the notes to financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K.

have been no significant changes to these policies during the three months ended March 31, 2022.

have been no significant changes to these policies during the six months ended June 30, 2022.

preparation of the financial statements in accordance with U.S.

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for complying with new or revised accounting standards.

This allows us to delay the adoption of this new standard until it would

otherwise apply to private companies.

The new standard will be effective for us for fiscal years beginning after December 15, 2021, and

interim periods within fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of adopting this

This allows us to delay the adoption of this new standard until it would otherwise

apply to private companies.

The new standard will be effective for us for fiscal years beginning after December 15, 2021, and interim

periods within fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of adopting this guidance.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

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contract liabilities, net consist of the following:

Schedule of Acquisition Contract Liabilities

(in thousands)

December 31, 2021

Short-term acquisition contract liabilities:

Contingent consideration

Start-up cost financing

Contract asset

Acquisition contract liabilities, net

Long-term acquisition contract liabilities:

Contingent consideration

Start-up cost financing

Contract asset

Acquisition contract liabilities, net

Total acquisition contract liabilities:

Contingent consideration

Start-up cost financing

Contract asset

of Acquisition Contract Liabilities

acquisition contract liabilities:

consideration

cost financing

contract liabilities, net

acquisition contract liabilities:

consideration

cost financing

contract liabilities, net

acquisition contract liabilities:

consideration

cost financing

acquisition contract liabilities, net

Fair Value Measurements

following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31,

following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30,

2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair

of Fair Value Hierarchy Valuation Inputs

(in thousands)

Contingent Consideration

Warrant liability- Purchase warrant

Consideration

liability – 2021 Common warrant

liability - 2022 Common warrant

liability- 2022 Common warrant (Pre-funded)

Consideration

consideration, which relates to the estimated profits from the sale of Cutanea products to be shared equally with Maruho, is reflected

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following table provides a roll forward of the fair value of the contingent consideration:

Schedule of Fair Value of Contingent Consideration

(in thousands)

Balance at December 31, 2020

Change in fair value of contingent consideration

Balance at March 31, 2021

Balance at December 31, 2021

Change in fair value of contingent consideration

Balance at March 31, 2022

of Fair Value of Contingent Consideration

at December 31, 2020

in fair value of contingent consideration

Balance at June 30, 2021

at December 31, 2021

in fair value of contingent consideration

at June 30, 2022

issued on May 16, 2022 in conjunction with the private placement to an institutional shareholder were accounted for as liabilities in

accordance with ASC 815-40.

Pre-funded common stock purchase warrants to purchase up to 1,569,000 shares of our common stock at a nominal

exercise price of $ 0.001 per share (the “2022 Pre-funded Warrants”) and common stock purchase warrants to purchase up to

3,419,000 shares of our common stock at an exercise price of $ 2.77 per share (the “2022 Purchase Warrants”) are presented

within warrant liability in the accompanying balance sheets.

The warrant liability is measured at fair value at inception and on a recurring

basis, with changes in fair value presented within the statements of operations .

issued in conjunction with the private placement to an institutional shareholder which closed on December 2, 2021 were accounted for

as liabilities in accordance with ASC 815-40.

Pre-funded common stock purchase warrants to purchase up to 1,507,143

shares of our common

stock at a nominal exercise price (the “Pre-funded Warrants”) were exercised in 2021 and the common stock purchase

warrants to purchase up to 2,857,143

shares of our common

stock at an exercise price of $ 5.25

per share (the Purchase

Warrants”) are presented within warrant liability in the accompanying balance sheets.

The warrant liability is measured

at fair value at inception and on a recurring basis, with changes in fair value presented within the statements of operations.

Company utilizes a Black-Scholes option pricing model to estimate the fair value of the Purchase Warrants which is considered

a Level 3 fair value measurement.

Certain inputs utilized in our Black-Scholes pricing model may fluctuate in future periods based upon

factors which are outside of the Company’s control.

A significant change in one or more of these inputs used in the calculation

of fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash

gain or loss being reported in our statements of operations.

Pre-funded common stock purchase warrants to purchase up to 1,507,143 shares

of our common stock at a nominal exercise price (the “2021 Pre-funded Warrants”) were exercised in 2021 and the common

stock purchase warrants to purchase up to 2,857,143 shares

of our common stock at an exercise price of $ 5.25 per

share (the “2021 Purchase Warrants”) are presented within warrant

liability in the accompanying balance sheets.

The warrant liability is measured at fair value at inception and on a recurring basis,

with changes in fair value presented within the statements of operations.

Company utilizes a Black-Scholes option pricing model to estimate the fair value of the 2022

Purchase Warrants and 2021 Purchase Warrants which is considered a Level 3 fair value measurement.

Certain inputs utilized

in our Black-Scholes pricing model may fluctuate in future periods based upon factors which are outside of the Company’s

A significant change in one or more of these inputs used in the calculation of fair value may cause a significant change to

the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our statements

of operations.

The value of the

2022 Pre-funded Warrants is assumed to be equal to the per share value of the underlying common stock, given that the strike price is

nominal, and is therefore classified as Level 2.

following table presents the changes in the warrant liability measured at fair value (in thousands):

of Changes in Fair Value Warrant Liabilities

(in thousands)

Fair value at December 31, 2021

Change in fair value of warrant liability

Fair value at March 31, 2022

value at December 31, 2021

of new derivative liabilities

in fair value of warrant liability

value at June 30, 2022

generate revenue primarily through the sales of our licensed products Ameluz®, BF-RhodoLED® lamps and Xepi®.

the sales of our BF-RhodoLED® lamp and Xepi® are relatively insignificant compared with the revenues generated through our sales

generated $ 9.6 million of Ameluz® revenue, $ 0.1 million Xepi® revenue, and $ 0.1 million of BF-RhodoLED® lamps revenue during

the three months ended March 31, 2022.

We generated $ 4.5 million of Ameluz® revenue, minimal Xepi® revenue, and $ 0.2 million

of BF-RhodoLED® lamps revenue during the three months ended March 31, 2021.

the sales of our BF-RhodoLED® lamp and Xepi® are relatively insignificant compared with the revenues generated through

our sales of Ameluz®.

party revenue relates to an agreement with Biofrontera Bioscience GmbH (“Bioscience”) for BF-RhodoLED® leasing and installation

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analysis of the changes in product revenue allowances and reserves is summarized as follows:

Schedule of Revenue Allowance and Accrual Activities

(in thousands):

Co-pay assistance program

Prompt pay discounts

Government and payor rebates

Balance at December 31, 2020

Provision related to current period sales

Credit or payments made during the period

Balance at March 31, 2021

Balance at December 31, 2021

Provision related to current period sales

Credit or payments made during the period

Balance at March 31, 2022

of Revenue Allowance and Accrual Activities

assistance program

pay discounts

and payor rebates

at December 31, 2020

related to current period sales

or payments made during the period

Balance at June 30, 2021

at December 31, 2021

related to current period sales

or payments made during the period

at June 30, 2022

Accounts Receivable, net

receivable are mainly attributable to the sale of Ameluz ® , the BF-RhodoLED ® and Xepi®.

receivables are mainly attributable to the sale of Ameluz ® , the BF-RhodoLED ® and Xepi®.

It is expected

that all trade receivables will be settled within twelve months of the balance sheet date.

allowance for doubtful accounts was $ 60,000 and $ 18,000 as of March 31, 2022 and December 31, 2021, respectively.

allowance for doubtful accounts was $ 126,000 and $ 18,000 as of June 30, 2022 and December 31, 2021, respectively.

Other Receivables, Related Party

Company has recorded a receivable of $ 11.3 million due from Biofrontera AG for its 50% share of a legal settlement for which both parties

are jointly and severally liable for the total settlement amount of $ 22.5 million.

The Company has a contractual right to repayment of

its share of the settlement payment from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021 and

amended on March 31, 2022, which provided that the settlement payments would first be made by the Company and then reimbursed by Biofrontera

AG for its share.

Of the total receivable $ 8.4 million is short-term and $ 2.8 million is long-term.

of May 11, Biofrontera AG has not paid the first reimbursement amount to the Company.

We determined that the potential of Biofrontera

AG to default on its obligation was less than probable.

This is supported by the March 31, 2022 Amended Settlement Allocation Agreement

between the Company and Biofrontera AG.

The Amended Allocation Agreement provides certain remedies to the Company, if Biofrontera AG

fails to make timely reimbursements, which the Company may implement in its sole discretion, including the ability to charge interest

at a rate of 6.0 % per annum for each day that any reimbursement is past due and the ability to offset any overdue reimbursement amounts

against payments owed to Biofrontera AG by the Company (including amounts owed under the Company’s license and supply agreement

for Ameluz ® ).

A s such , no reserve

for the receivable has been recorded as of March 31, 2022 or December 31, 2021.

of June 30, 2022, the Company has a receivable of $ 5.6 million

term and $ 2.8 long-term)

due from Biofrontera AG for its 50 %

share of the balance of a legal settlement for which both parties are jointly and severally liable.

The Company has a contractual

right to repayment of its share of the settlement payment from Biofrontera AG under the Settlement Allocation Agreement entered into

on December 9, 2021 and as amended on March 31, 2022, which provided that the settlement payments would first be made by the Company

and then reimbursed by Biofrontera AG for its share The March 31, 2022 Amended Settlement

Allocation Agreement provides certain remedies to the Company, if Biofrontera AG fails to make timely reimbursements, which the

Company may implement in its sole discretion, including the ability to charge interest at a rate of 6.0 %

per annum for each day that any reimbursement is past due and the ability to offset any overdue reimbursement amounts against

payments owed to Biofrontera AG by the Company (including amounts owed under the Company’s license and supply agreement for

such , no reserve for the receivable has been recorded as of June 30, 2022 or December

remaining $ 0.3 million of other receivables, related party pertains to service agreements and chargebacks.

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assessing the consumption of inventories, the sequence of consumption is assumed to be based on the first-in-first-out (FIFO) method.

There was no provision for obsolescence recorded for the three months ended March 31, 2022.

We recorded a provision of $ 0.1

for Xepi® inventory obsolescence, for the

three months ended March 31, 2021.

million related to BF-RhodoLED ®

devices for the three and six months ended June 30, 2022.

We recorded a provision of $ 34 k

for Xepi® inventory obsolescence, for the six months ended June 30, 2021.

Prepaid Expenses and Other Current Assets

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Schedule of Prepaid Expenses and Other Current Assets

(in thousands)

Receivable for common stock warrants proceeds

Prepaid expenses

Security deposits

for common stock warrants proceeds

Property and Equipment, Net

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Schedule of Property and Equipment

(in thousands)

Computer equipment

Computer software

Furniture & fixtures

Leasehold improvement

Machinery & equipment

Property and equipment, gross

and equipment, gross

Accumulated depreciation

Property and equipment, net

expense was $ 26,000 and $ 33,000 , for the three months ended March 31, 2022, and 2021, respectively, which was included in selling, general

and administrative expense on the statements of operations.

and equipment, net

expense was $ 26,000

and $ 33,000 , for the

three months ended June 30, 2022, and 2021, respectively, and $ 54,000

and $ 66,000 for

the six months ended June 30, 2022 and 2021, respectively, which was included in selling, general and administrative expense in the

statements of operations.

Intangible Asset, Net

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Schedule of Intangible Asset Net

(in thousands)

Xepi® license

Accumulated amortization

Intangible asset, net

Xepi® license intangible asset was recorded at acquisition-date fair value of $ 4.6

million and is amortized on a straight-line basis

over the useful life of 11

Amortization expense for the three months ended March

31, 2022 and 2021 was $ 0.1

Xepi® license intangible asset was recorded at acquisition-date fair value of $ 4.6 million and is amortized on a straight-line basis

over the useful life of 11 years.

Amortization expense for the three months ended June 30, 2022 and 2021 was $ 0.1 million and $ 0.2 million

for the six months ended June 30, 2022 and 2021.

review the Xepi ® license intangible asset for impairment whenever events or changes in circumstances indicate that the

carrying amount of the assets may not be fully recoverable.

The Company did not recognize any impairment charges during the three months

ended March 31, 2022 or March 31, 2021.

The Company did not recognize any impairment charges during the three or

six months ended June 30, 2022 or 2021.

Statement of Cash Flows Reconciliation

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Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

(in thousands)

Cash and cash equivalents

Short-term restricted cash

Long-term restricted cash

Total cash, cash equivalent, and restricted cash shown on the statements of cash flows

and cash equivalents

restricted cash

cash, cash equivalent, and restricted cash shown on the statements of cash flows

Accrued Expenses and Other Current Liabilities

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Schedule of Accrued Expenses and Other Current Liabilities

(in thousands)

Legal settlement (See note 23)

Employee compensation and benefits

Professional fees

Product revenue allowances and reserves

settlement (See note 23)

compensation and benefits

revenue allowances and reserves

Other Long-Term Liabilities

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Schedule of Other Long Term Liabilities

(in thousands)

Legal settlement – noncurrent (See note 23)

settlement – noncurrent (See note 23)

a result of the net losses, we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes

for the three-month periods ended March 31, 2022 and 2021.

Income tax expense incurred for the three months ended March 31, 2022

for the three- or six-month periods ended June 30, 2022 and 2021.

Income tax expense incurred for the three and six months ended June

30, 2022 and 2021 relates to state income taxes.

At March 31, 2022 and December 31, 2021, the Company had no unrecognized tax benefits.

The Company continues to be in a cumulative loss

position and as such, is maintaining a full valuation allowance.

At June 30, 2022 and December 31, 2021, the Company had no unrecognized tax benefits.

Company continues to be in a cumulative loss position and as such, is maintaining a full valuation allowance.

and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statements

of operations.

As of March 31, 2022, and December 31, 2021, the Company has no accrued interest related to uncertain tax positions.

As of June 30, 2022, and December 31, 2021, the Company has no accrued interest related to uncertain tax positions.

the Company is in a loss carryforward position, it is generally subject to examination by the U.S.

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be based upon our sales history, although the minimum number of units to purchase per year remains unchanged.

of this amendment, the purchase price we pay Biofrontera Pharma for Ameluz ® will range from 30 % to 50 % of the anticipated

net price per unit based on our level of annual revenue.

As a result of this amendment,

the purchase price we pay Biofrontera Pharma for Ameluz ® will range from 30 % to 50 % of the anticipated net price per unit

based on our level of annual revenue.

Refer to Item I.

Business - Commercial Partners and Agreements in our

Annual Report on Form 10-K for the year ended December 31, 2021 for further details.

Under the agreement, the Company obtained an exclusive,

non-transferable license to use the Pharma’s technology to market and sell the licensed products, Ameluz ® and BF-RhodoLED ®

Business - Commercial Partners and Agreements in our Annual Report on Form

10-K for the year ended December 31, 2021 for further details.

Under the agreement, the Company obtained an exclusive, non-transferable

license to use the Pharma’s technology to market and sell the licensed products, Ameluz ® and BF-RhodoLED ®

and must purchase the licensed products exclusively from Pharma.

There was no consideration paid for the transfer of the license.

of the licensed products during the three months ended March 31, 2022 and 2021 were $ 5.2 million and $ 3.0 million, respectively, and

recorded in inventories in the balance sheets, and, when sold, in cost of revenues, related party in the statements of operations.

due and payable to Pharma as of March 31, 2022 and December 31, 2021 were $ 0.3 million and $ 0.3 million, respectively, which were recorded

in accounts payable, related parties in the balance sheets.

of the licensed products during the three and six months ended June 30, 2022 were $ 6.2 million and $ 11.5 million, respectively, and $ 1.2

million and $ 3.9 million for the three and six months ended June 30, 2021.

These purchases are recorded in inventories in

the balance sheets, and, when sold, in cost of revenues, related party in the statements of operations.

Amounts due and payable to Pharma

as of June 30, 2022 and December 31, 2021 were $ 1.1 million and $ 0.3 million, respectively, which were recorded in accounts payable,

related parties in the balance sheets.

December 2021, we entered into an Amended and Restated Master Contract Services Agreement, or Services Agreement, which provides for

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We currently have statements of work in place regarding IT, regulatory affairs, medical affairs,

pharmacovigilance, and investor relations services, and are continuously assessing the other services historically provided to

us by Biofrontera AG to determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers.

Expenses related to the service agreement were $ 0.1

million and $ 0.2

for the three months ended March 31, 2022 and 2021, respectively which were recorded in selling, general and administrative, related

There were no

amounts due to Biofrontera AG related to the

service agreement as of March 31, 2022.

Amounts due to Biofrontera AG related to the service agreement were $ 0.2

million as of December 31, 2021 which were recorded

in accounts payable, related parties in the balance sheets.

pharmacovigilance, and investor relations services, and are continuously assessing the other services historically provided to us by

Biofrontera AG to determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers.

Expenses related to the service agreement were $ 0.3 million and $ 0.4 million for the three and six months ended June 30, 2022, respectively

and $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021.

These expenses were recorded in selling, general

and administrative, related party.

Amounts due to Biofrontera AG related to the service agreement were $ 0.2 million as of June 30, 2022

and December 31, 2021 which were recorded in accounts payable, related parties in the balance sheets.

Lamp Lease Agreement

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lamps and associated services.

revenue related to the clinical lamp lease agreement was approximately $ 15,000 and $ 13,000 for the three months ended March 31, 2022

and 2021, respectively and recorded as revenues, related party.

Amounts due from Bioscience for clinical lamp and other reimbursements

were approximately $ 99,000 and $ 92,000 as of March 31, 2022 and December 31, 2021, respectively, which were recorded as other receivables,

related party in the balance sheets.

revenue related to the clinical lamp lease agreement was approximately $ 16,000 and $ 31,000 for the three and six months ended June 30,

2022, respectively and $ 15,000 and $ 28,000 for the three and six months ended June 30, 2021, and were recorded as revenues, related party.

Amounts due from Bioscience for clinical lamp and other reimbursements were approximately $ 0.2 million and $ 92,000 as of June 30, 2022

and December 31, 2021, respectively, which were recorded as other receivables, related party in the balance sheets.

Reimbursements

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to the Cutanea acquisition share purchase agreement, we received start-up cost financing and reimbursements for certain costs.

These restructuring costs Maruho agreed to pay are referred to as “SPA costs” under the arrangement and are to be accounted

for as other income.

restructuring costs Maruho agreed to pay are referred to as “SPA costs” under the arrangement and are to be accounted for

as other income.

Refer to Note 3, Acquisition Contract Liabilities .

amounts reimbursed relating to SPA costs for the three months ended March 31, 2022.

For the three months ended March 31, 2021, the

amounts reimbursed relating to SPA costs were $ 0.1

million and were recorded as other income in the statements of operations as the related expenses were incurred.

As of March 31,

2022 and December 31, 2021 amounts due from Maruho, primarily relating to SPA cost reimbursements, were $ 56,000

for each of the periods and were recorded in other receivables, related parties in the balance sheets.

Company receives expense reimbursement from Biofrontera AG and Biofrontera Bioscience on a quarterly basis for costs incurred on behalf

of these entities.

Total expense reimbursements were $ 0.1 million for the three months ended March 31, 2022 and 2021, which were netted

against expenses incurred within selling, general and administrative expenses.

Company has recorded a receivable of $ 11.3 million due from Biofrontera AG for its 50 % share of a legal settlement for which both parties

are jointly and severally liable for the total settlement amount of $ 22.5 million.

The Company has a contractual right to repayment of

its share of the settlement payment from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021 and

amended on March 31, 2022, which provided that the settlement payments would first be made by the Company and then reimbursed by Biofrontera

AG for its share.

The amended agreement provides certain remedies to the Company, if Biofrontera AG fails to make timely reimbursements,

which the Company may implement in its sole discretion, including the ability to charge interest at a rate of 6.0 % per annum for each

day that any reimbursement is past due and the ability to offset any overdue reimbursement amounts against payments owed to Biofrontera

AG by the Company (including amounts owed under the Company’s license and supply agreement for Ameluz®).

The Company has accrued

$ 56,000 of interest income as of March 31, 2022.

Of the total receivable of $ 11.3 million, $ 8.5 million is short-term and $ 2.8 million

is a long-term receivable.

were no amounts reimbursed relating to SPA costs for the three and six months ended June 30, 2022.

For the three and six months ended

June 30, 2021, the amounts reimbursed relating to SPA costs were nil and $ 0.5 million and were recorded as other income in the statements

of operations as the related expenses were incurred.

As of June 30, 2022 and December 31, 2021 amounts due from Maruho, primarily relating

to SPA cost reimbursements, were $ 67,000 and $ 56,000 for each of the periods and were recorded in other receivables, related parties

in the balance sheets.

Company has recorded a receivable of $ 5.6 million

due from Biofrontera AG for its 50 %

share of the balance of a legal settlement for which both parties are jointly and severally liable.

Refer to Note 7, Other

Receivables, Related Party .

The Company has recognized $ 0.1 million

of interest income for the six months ended June 30, 2022 in connection with this receivable.

Restructuring costs

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primarily relate to the winding down of Cutanea’s operations.

There were no restructuring costs for the three months ended March

For the three months ended March 31, 2021, restructuring costs were incurred in the amount of $ 0.3 million.

There were no restructuring costs for the three and six months ended

June 30, 2022.

For the three and six months ended June 30, 2021, restructuring costs were incurred in the amount of $ 0.5 million.

Stockholders’ Equity

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The outstanding shares of common stock are fully paid and non-assessable.

Placement - On May 16, 2022, the Company entered into a Securities Purchase Agreement (“May 2022 PIPE”).

2022 PIPE, the Company issued for the gross cash receipts of $ 9.4

million (i) 1,850,000

shares of the common stock, (ii) a warrant to purchase up to 3,419,000

shares of the common stock (“ 2022 Purchase Warrant”) and (iii) a warrant

to purchase up to 1,569,000

shares of the common stock (“ 2022 Pre-Funded Warrant”).

purchase price for one share of common stock (or common stock equivalent) and a warrant to purchase one share of common stock was

The 2022 Purchase Warrant will be exercisable six months after the issue date, expires five and one-half years after the issue date

and has an exercise price of:

The Pre-Funded Warrant is exercisable immediately and has a term of exercise equal to five (5) years with a nominal

exercise price of $ 0.001

Because the warrants are accounted

for as liabilities, the May 2022 PIPE proceeds were allocated between the fair value of the warrants with the remaining proceeds allocated

to common stock and additional paid in capital.

Equity Incentive Plans and Share-Based Payments

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2021, our Board of Directors adopted, and our shareholders approved the 2021 Omnibus Incentive Plan (“2021 Plan).

the 2021 Plan, 2,750,000

shares are reserved and authorized for awards

and the maximum contractual term is 10

years for stock options issued under the 2021

2021 Plan, 2,750,000

shares are authorized for awards and the maximum contractual term is 10

years for stock options granted.

A total of 2,693,311 shares remain eligible for issuance as of June 30,

2022 under the 2021 Plan.

Non-qualified

stock options

the quarter ended June 30, 2022, the Company granted non-qualified stock options to certain employees and non-employee directors.

were granted on May 18, 2022 with an exercise price of $ 2.61 , a contractual term of ten years and a grant-date fair value of $ 1.7 million.

Of the total 1,053,434 options granted, 88,000 options were awarded to non-employee directors.

The non-employee director options vest

in equal monthly installments following the date of grant and will be fully vested on the one-year anniversary of the date of grant.

The employee options vest annually over a three-year period, subject to the recipient’s continued service with the Company through

the applicable vesting dates.

the quarter ended March 31, 2022, the Company granted non-qualified stock options to certain employees to purchase 28,378 shares of common

stock under the 2021 Omnibus Incentive Plan.

The options were granted to employees on March 2, 2022 with an exercise price

of $ 2.96 and a contractual term of ten years .

These stock options had a grant-date fair value of $ 44,000 and vest annually over a three-year

period, subject to the recipient’s continued service with the Company through the applicable vesting dates.

The options were granted to employees on March 2, 2022 with an exercise price of $ 2.96 and

a contractual term of ten years .

These stock options had a grant-date fair value of $ 44,000 and vest annually over a three-year period,

subject to the recipient’s continued service with the Company through the applicable vesting dates.

Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the

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The Company elects to account for forfeitures as they occur.

fair value of each option grant was estimated on the grant date of March 2, 2022, using the Black-Scholes option pricing model with the

following assumptions:

fair value of the underlying unit of $ 2.96 , expected volatility of 55.0 % , risk free rate of 1.79 % , term of 6 years

and a dividend yield of 0 .

compensation expense of approximately $ 0.1 million was recorded in selling, general and administrative expenses on the accompanying statement

of operations for the three months ended March 31, 2022.

There was no stock based compensation for the three months ended March 31, 2021.

outstanding and exercisable under the employee share option plan as of March 31, 2022 and a summary of option activity during the three

compensation expense of approximately $ 0.2 million and $ 0.3 million was recorded in selling, general and administrative expenses on the

accompanying statement of operations for the three and six months ended June 30, 2022.

There was no stock based compensation for the

three and six months ended June 30, 2021.

outstanding and exercisable under the employee share option plan as of June 30, 2022 and a summary of option activity during the six

months then ended is presented below.

Schedule of Stock Unit Activity

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Intrinsic Value (1)

Outstanding at December 31, 2021

Canceled or forfeited

Outstanding at March 31, 2022

Exercisable at March 31, 2022

at December 31, 2021

Outstanding at June

Exercisable at June

aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value

of the common stock for the options that were in the money at March 31, 2022.

of March 31, 2022, there was $ 1.3 million of unrecognized compensation cost related to unvested stock options, which is expected to be

of the common stock for the options that were in the money at June 30, 2022.

of June 30, 2022, there was $ 2.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be

recognized over a weighted-average period of approximately 2.6 years.

Compensation (RSUs)

were no RSU’s granted during the three months ended March 31, 2022.

During the year ended December 31, 2021, the Company granted

to certain members of management 170,068 restricted stock units, or RSUs.

The fair value of each RSU is estimated based on the closing

market price of the Company’s common stock on the grant date.

RSUs had a grant-date fair value of $ 0.8 million and will be fully vested on June 9, 2022, six months after the grant date, subject to

the recipient’s continued service with the Company through the applicable vesting dates.

Share-based compensation expense of $ 0.4

million for the RSUs was recorded in selling, general and administrative expenses in the accompanying statement of operations for the

three months ended March 31, 2022.

There was no share-based compensation for the three months ended March 31, 2021.

of March 31, 2022, there was $ 0.3 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

the quarter ended June 30, 2022, the Company awarded 343,512 Restricted Stock Units (RSUs) to certain members of management.

no RSU’s granted during the three months ended March 31, 2022.

The fair value of each RSU is estimated based on the closing market

price of the Company’s common stock on the grant date.

RSUs had a grant-date fair value of $ 0.9 million and will vest annually over two years, subject to the recipient’s continued service

with the Company through the applicable vesting dates.

Share-based compensation expense of $ 0.4 million and $ 0.8 million for the RSUs

was recorded in selling, general and administrative expenses in the accompanying statement of operations for the three and six months

ended June 30, 2022.

There was no share-based compensation for the three and six months ended June 30, 2021.

of June 30, 2022, there was $ 0.8 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

over a weighted-average period of approximately 1.9 years.

Schedule of Restricted Stock Units

Average Remaining Contractual Term

Average Grant Date Fair Value

at December 31, 2021

Outstanding at June

Expected to vest at June 30, 2022

Interest Expense, net

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Schedule of Interest Expense

(in thousands)

Three Months Ended March 31,

(in thousands)

Interest expense

Contract asset interest expense

Interest income

Interest expense, net

three months ended

six months ended

asset interest expense

income – related party

Interest income – other

asset interest expense relates to the $ 1.7 million contract asset in connection with the $ 7.3 million start-up cost financing received

5 unchanged sentences

Schedule of Other Income, Net

(in thousands)

Three Months Ended March 31,

(in thousands)

Reimbursed SPA costs

Other income, net

three months ended

six months ended

net, primarily includes gain (loss) on foreign currency transactions and gain on termination of operating leases.

Net Loss per Share

Net Earnings per Share

net earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during

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The diluted shares include the dilutive effect of stock-based awards based on the treasury stock

and diluted net income (loss) per share attributable to common stockholders is calculated as follows:

following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders.

(in thousands, except share and per share

Schedule of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders

Three Months Ended March 31,

dollars are in thousands)

Net income (loss)

Basic weighted average common shares outstanding

income (loss)

weighted average common shares outstanding

Effect of dilutive securities

Stock options and restricted stock units

Diluted weighted average common shares outstanding

Net earnings (loss) per share:

following table sets forth the potential common shares that were not included in the diluted per share calculations for the three months

ended March 31, 2022 because the exercise price was greater than their average market value and they would be anti-dilutive:

options and restricted stock units

weighted average common shares outstanding

earnings (loss) per share:

following table sets forth the potential common shares that were not included in the diluted per share calculations for the six months

ended June 30, 2022 because they would be anti-dilutive:

Schedule of Anti-dilutive Securities Excluded From Computation of Earnings Per Share

Common stock warrants

Months Ended June 30,

stock warrants

Common stock options

Restricted Stock Units

Unit Purchase Options

Total anti-dilutive securities

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The Company incurred rent expense, in the amount of $ 0.1

million and $ 0.2 million for the three months ended March 31, 2022 and 2021, which was included in selling, general, and administrative

million and $ 0.2 million for the three months ended June 30, 2022 and 2021, and $ 0.2 million and $ 0.4 million for the six months ended

June 30, 2022 and 2021, which was included in selling, general, and administrative expenses.

Company also leases autos for its field sales force with a lease payment term of 40 months.

The Company incurred auto lease expense of

$ 0.1 million for the three months ended March 31, 2022 and 2021.

minimum aggregate payments of all future lease commitments as of March 31, 2022, are as follows:

$ 0.1 million for the three months ended June 30, 2022 and 2021 and $ 0.3 million and $ 0.2 million for the six months ended June 30, 2022

minimum aggregate payments of all future lease commitments as of June 30, 2022, are as follows:

Schedule of Future Commitments and Sublease Income

Years ending December 31,

Future lease commitments

Remainder of 2022

earnout payments

ending December 31,

lease commitments

Cutanea payments

are obligated to repay to Maruho $ 3.6 million on December 31, 2022 and $ 3.7 million on December 31, 2023 in start-up cost financing paid

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the Xepi LSA, we are obligated to make payments to Ferrer upon the occurrence of certain milestones.

Specifically, we must pay Ferrer

i) $ 2,000,000 upon the first occasion when annual net sales of Xepi® under the Xepi LSA exceed $ 25,000,000 , and ii) $ 4,000,000 upon

the first occasion annual net sales of Xepi® under the Xepi LSA exceed $ 50,000,000 .

No payments were made for the three months ended

March 31, 2022 or 2021 related to Xepi® milestones.

Specifically, we must pay

Ferrer i) $ 2,000,000

upon the first occasion when annual net sales of Xepi® under the Xepi LSA exceed $ 25,000,000 ,

and ii) $ 4,000,000

upon the first occasion when annual net sales of Xepi® under the Xepi LSA exceed $ 50,000,000 .

No payments were made for the three and six months ended June 30, 2022 or 2021 related to Xepi®

each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably

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agreement, this could nullify the settlement and the Company may lose the benefits of the settlement and be liable for a greater amount.

As of March 31, 2021, we have recorded a legal settlement liability in the amount of $ 11.3

As of June 30, 2022 we have reflected a legal settlement liability in the amount of $ 11.3

million for the remaining

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The Company matches 50% of employee contributions up to a maximum of 6% of employees’ salary .

the three months ended March 31, 2022 and 2021, matching contribution costs paid by the Company were $ 64,000 and $ 61,000 , respectively.

the three months ended June 30, 2022 and 2021, matching contribution costs paid by the Company were $ 47,000 and $ 67,000 , respectively.

For the six months ended June 30, 2022 and 2021, matching contribution costs paid by the Company were $ 0.1 million.

Subsequent Events

have completed an evaluation of subsequent events after the balance sheet date of March 31, 2022 through the date this Quarterly Report

have completed an evaluation of subsequent events after the balance sheet date of June 30, 2022 through the date this Quarterly Report

on Form 10-Q was submitted to the SEC.

We have concluded that no subsequent events have occurred that require recognition in the financial

statements or disclosure in the notes to the financial statements.

July 14, 2022, an investor exercised the 2022 Pre-funded warrants and purchased a total of 1,569,000

shares of common stock at an exercise price of $ .001

per share, resulting in net proceeds of $ 1,569 .

July 26, 2022, the Company entered into the Inducement Letter with the holder (the “Investor”) of the

Company’s 2021 Purchase Warrants.

The 2021 Purchase Warrants were originally issued on December 1, 2021 to purchase up to 2,857,143 shares

of common stock, par value $ 0.001 per

The Investor agreed to exercise for cash, the 2021 Purchase Warrants, in exchange for

the Company’s agreement to (i) lower the exercise price of the 2021 Purchase Warrants from $5.25 to $ 1.62

per share and (ii) issue a new warrant (the “Inducement Warrant”) to

purchase up to 4,285,715 shares

of common stock.

The Company received net proceeds of approximately $ 4.3 million,

after deducting the financial advisory fees, from the exercise of the 2021 Purchase Warrants by the Investor.

The Inducement Warrant is exercisable on or after January 27, 2023 at a

price per share of $ 1.66 and expires on December 1, 2026 .

The Investor has contractually agreed

to restrict its ability to exercise the Inducement Warrant such that the number of shares of the Company’s common stock held by

the Investor and its affiliates after such exercise does not exceed either 4.99% of the then issued and outstanding shares of the Company’s

common stock.

The Investor may increase or decrease these limitations upon notice to the Company, but in no event will any such limitation

exceed 9.99%.

The Company has agreed, as soon as practicable (but in no event later than 30 days after the date of the Inducement

Letter) to file a registration statement on Form S-1 to register the resale of the shares of Common Stock underlying the Inducement Warrant

and to have such registration statement declared effective within 90 days of its initial filing.

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-Q

Item 1. Financial Statements