What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-12 · 250 added, 255 removed, 250 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Forward-Looking

Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.

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capital requirements, our need for additional financing, statements regarding the efficacy and intended use of our technologies under

development, the timelines and strategy for bringing licensed products to market, the timeline for regulatory review and approval

of our licensed products, and other statements that are not historical facts, including statements which may be preceded by the words

“intends,” “may,” “will,” “plans,” “expects,” “anticipates,”

“projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,”

“potential” or similar words.

Forward-looking statements are not guaranties of future performance, are based on certain assumptions

and are subject to various known and unknown risks and uncertainties, many of which are beyond our control.

Actual results may differ

materially from the expectations contained in the forward-looking statements.

development, the timelines and strategy for bringing licensed products to market, the timeline for regulatory review and approval of

our licensed products, and other statements that are not historical facts, including statements which may be preceded by the words “intends,”

“may,” “will,” “plans,” “expects,” “anticipates,” “projects,”

“predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential”

or similar words.

Forward-looking statements are not guaranties of future performance, are based on certain assumptions and are subject

to various known and unknown risks and uncertainties, many of which are beyond our control.

Actual results may differ materially from

the expectations contained in the forward-looking statements.

that may cause such differences include, but are not limited to:

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future events or otherwise, except as required by law.

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 result in sun damage to the skin.

Our principal licensed

product focuses on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer.

We also market

a topical antibiotic for treatment of impetigo, a bacterial skin infection.

Biofrontera Inc.

(the “Company”) includes

its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI” or “subsidiary”).

subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with our Ameluz Licensor.

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 result in sun damage to the skin.

Our principal licensed product focuses on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin

We also market a topical antibiotic for treatment of impetigo, a bacterial skin infection.

principal licensed product is Ameluz®, which is a prescription drug approved for use in combination with our licensor’s FDA-approved

35 unchanged sentences

the following:

our sales in the United States of Ameluz ® in combination with the RhodoLED ® lamp for the treatment

our sales in the United States of Ameluz ® in combination with the BF-RhodoLED® lamp series for the treatment

of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be a leading photodynamic

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devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz ® , the RhodoLED ®

lamp series and Xepi ® .

We have financed our operating and capital expenditures through cash proceeds generated from

our product sales and proceeds received in equity financings.

We have financed our operating and capital expenditures through cash proceeds generated from our product sales and

proceeds received in equity financings.

believe that important measures of our results of operations include product revenue, operating income (loss) and adjusted EBITDA (a

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As Teligent, Inc, is no longer a viable manufacturing option,

Ferrer has selected a new contract manufacturer for Xepi ® , but the process will require significant time, including the time it will take the new contract manufacturer

to reach a level of production to meet our commercial needs.

Although we have inventory of Xepi ® on hand, we do not expect

it will be enough to complete the commercialization of Xepi ® in accordance with the originally planned timeline.

the uncertainty of supply chain, we expect a delay in shipments of Xepi ® for the next 18 months.

Despite these delays, our total revenues will not be significantly impacted since the majority of our revenues

are from sales of Ameluz ® .

After adjusting our forecast due to supply chain issues, we expect our net Xepi ®

revenues impact to be $0.5 million over the next twelve months.

We continue to monitor the impacts of the supply chain on our business

and are focused on ensuring the stability of the supply chains for Ameluz ® and RhodoLED ® .

Ferrer has selected a new contract manufacturer for Xepi ® , but the process will require significant time, including the

time it will take the new contract manufacturer to reach a level of production to meet our commercial needs.

Although we have inventory

of Xepi ® on hand, we do not expect it will be enough to complete the commercialization of Xepi ® in accordance

with the originally planned timeline.

Due to the uncertainty of supply chain, we expect a delay in shipments of Xepi ® for

the next 15 months from the new contract manufacturer.

Despite these delays, our total revenues will not be significantly impacted since

the majority of our revenues are from sales of Ameluz ® .

We continue to monitor the impacts of the supply chain on our

business and are focused on ensuring the stability of the supply chains for Ameluz ® and RhodoLED ® .

of Our Results of Operations

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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.

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.

Restructuring

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on the acquisition date of March 25, 2019 and is re-measured at each reporting date, with changes in fair value presented within the

statements of operations, until the contingency is resolved.

consolidated statements of operations, until the contingency is resolved.

in Fair Value of Warrant Liabilities

stock warrants issued in conjunction with private placement financing transactions which closed on December 2, 2021 and May 17, 2022

stock warrants issued in conjunction with private placement financing transactions

are accounted for as liabilities in accordance with ASC 815-40.

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.

warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the

consolidated statements of operations.

expense, net, primarily consists of amortization of the contract asset related to the start-up cost financing from Maruho Co.

(“Maruho”) agreement (“Share Purchase Agreement”) to acquire 100% of the Shares of Cutanea Life

Sciences, Inc.

(“Cutanea”), offset by interest income of 6% per annum for each day that any reimbursement is past due

related to the Amended Settlement Allocation Agreement with Biofrontera AG and immaterial amounts of interest income earned on our

financing of customer purchases of RhodoLED ® lamps.

(“Maruho”) agreement (“Share Purchase Agreement”) to acquire 100% of the Shares of Cutanea Life Sciences, Inc.

(“Cutanea”), offset by interest income of 6% per annum for each day that any reimbursement is past due related to the Amended

Settlement Allocation Agreement with Biofrontera AG and immaterial amounts of interest income earned on our financing of customer purchases

of RhodoLED ® lamps.

income, net primarily includes (i) reimbursed Share Purchase Agreement costs, and (ii) gain (loss) on foreign currency transactions.

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of Operations

of the Three Months ended June 30, 2022 and 2021

following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

of the Three Months ended September 30, 2022 and 2021

following table summarizes our results of operations for the three months ended September 30, 2022 and 2021:

( in thousands)

Product revenues, net

Related party revenues

Revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

Restructuring

in fair value of contingent consideration

from operations

in fair value of warrant liabilities

before income taxes

product revenue was $4.5 million and $5.9 million for the three months ended June 30, 2022 and 2021, respectively, a decrease of $1.4

million, or 23.9%.

The decrease was primarily driven by the lower volume of Ameluz ® orders, which resulted in a decrease

in Ameluz ® revenue of $1.5 million, which was partially offset with the impact of the price increase

related to Ameluz ® of $0.1 million.

of Revenues, Related Party

of revenues, related party was $2.4 million and $3.0 million for the three months ended June 30, 2022 and 2021, respectively, a decrease

of $0.6 million, or 19.2%.

which was driven by the decrease in Ameluz ® product revenue.

Operating expenses:

Cost of revenues, related party

is directly correlated to the selling price under the Ameluz LSA.

of Revenues, Other

of revenues, other was $0.2 million and $0.1 million for the three months ended June 30, 2022 and 2021, respectively.

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

Change in fair value of warrant liabilities

Interest expense, net

Other income, net

Loss before income taxes

Income tax expenses

General and Administrative Expenses

general and administrative expenses were $9.7 million and $5.6 million for the three months ended June 30, 2022 and 2021, respectively,

an increase of $4.1 million, or 74.2%.

increase was primarily driven by legal expenses of $0.8 million, issuance costs related to a private placement financing of $0.7

million and business insurance of $0.5 million.

Headcount costs also increased $0.7 million as a result of resumed hiring in 2022.

The increase was further driven by stock compensation expense of $0.6 million, general consulting expenses $0.5M as well as resumed

travel of $0.2 million

General and Administrative Expenses, Related Party

general and administrative expenses, related party were $0.3 million and $0.2 million for the three months ended June 30, 2022 and 2021,

respectively, an increase of $0.1 million or 76.5%.

Related party expense is based on statements of work issued under the Services Agreement

with the Biofrontera Group.

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

and investor relations services.

Prior period related party expense was based on costs incurred by Biofrontera AG plus 6% for services

provided to us related to accounting consolidation, IT support and pharmacovigilance.

Increase of $0.2 million is mainly related to IT

development and quality assurance services.

general and administrative expenses were $7.8 million and $17.1 million for the three months ended September 30, 2022 and 2021, respectively,

a decrease of $9.3 million, or 54.6%.

decrease was primarily driven by legal settlement expense incurred in 2021 of $11.3 million.

This decrease was partially offset by an

increase in headcount costs of $0.8 million as a result of resumed hiring in 2022 plus additional business

insurance of $0.5 million, general consulting expense of $0.4 million and stock compensation expense of $0.4 million.

Restructuring

were no restructuring costs for the three months ended June 30,2022.

Restructuring costs were $0.2 million for three months ended June

30, 2021, which was related to facility exit costs.

were no restructuring costs for the three months ended September 30, 2022.

Restructuring costs were $0.2 million for three months ended

September 30, 2021, which were related to facility exit costs.

in Fair Value of Contingent Consideration

change in fair value of contingent consideration was a decrease of $2.2 million and an increase of $0.7 million for the three months

ended June 30, 2022 and 2021, respectively.

The change in fair value of contingent consideration is driven by the estimated profit share

the Company is required to pay under the Share Purchase Agreement.

ended September 30, 2022 and 2021, respectively.

The change in fair value of contingent consideration is driven by the estimated profit

share the Company is required to pay under the Share Purchase Agreement.

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was a decrease of $5.4 million for three months ended June 30, 2022.

The change in fair

value of warrant liabilities was driven by changes in the underlying value of the common stock.

There were no warrant liabilities as

of June 30, 2021.

of the Six Months ended June 30, 2022 and 2021

following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

change in fair value of warrant liabilities was a decrease of $1.2 million for three months ended September 30, 2022.

The change in

fair value of warrant liabilities was driven by changes in the underlying value of the common stock, as well as the modification of

the 2021 Purchase Warrant.

There were no warrant liabilities as of September 30, 2021.

of the Nine Months ended September 30, 2022 and 2021

following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

( in thousands)

Product revenues, net

Related party revenues

Revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

Restructuring

in fair value of contingent consideration

Operating expenses:

from operations

in fair value of warrant liabilities

before income taxes

product revenue was $14.2 million and $10.6 million for the six months ended June 30, 2022 and 2021, respectively, an increase of $3.6

million, or 34.1%.

The increase was primarily driven by (i) higher volume of Ameluz ® orders, which resulted in an increase

in Ameluz ® revenue of $3.5 million, and (ii) an Ameluz ® price increase which further increased Ameluz ®

revenue by $0.1 million.

of Revenues, Related Party

of revenues, related party was $7.4 million and $5.4 million for the six months ended June 30, 2022 and 2021, respectively, an increase

of $2.0 million, or 37.1% which was driven by the increase in Ameluz ® product revenue.

Cost of revenues, related party

is directly correlated to the selling price under the Ameluz LSA.

of Revenues, Other

of revenues, other was consistent at $0.3 million for the six months ended June 30, 2022 and 2021.

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

Change in fair value of warrant liabilities

Interest expense, net

Other income, net

Income (loss) before income taxes

Income tax expenses

Net income (loss)

product revenue was $18.5 million and $14.9 million for the nine months ended September 30, 2022 and 2021, respectively, an increase

of $3.6 million, or 24.0%.

The increase was primarily driven by (i) higher volume of Ameluz ® orders, which resulted in

an increase in Ameluz ® revenue of $3.2 million, and (ii) an Ameluz ® price increase which further increased

Ameluz ® revenue by $0.2 million.

of Revenues, Related Party

of revenues, related party was $9.5 million and $7.6 million for the nine months ended September 30, 2022 and 2021, respectively, an

increase of $1.9 million, or 24.6% which was driven by the increase in Ameluz ® product revenue.

Cost of revenues, related

party is directly correlated to the selling price under the Ameluz LSA.

General and Administrative Expenses

general and administrative expenses were $17.3 million and $10.3 million for the six months ended June 30, 2022 and 2021, respectively,

an increase of $7.0 million, or 67.7%.

increase was primarily driven by legal expenses of $1.3 million and business insurance of $1.0 million.

Headcount costs also increased

$1.2 million as a result of resumed hiring in 2022.

The increase was further driven by stock compensation expense of $1.1 million, issuance

costs related to a private placement financing of $0.7 million, consulting expenses of $0.7 million and resumed travel of $0.5 million.

General and Administrative Expenses, Related Party

Selling, general and administrative expenses, related

party were $0.4 million for the six months ended June 30, 2022 and 2021.

Related party expense is based on statements of work issued under

the Services Agreement with the Biofrontera Group.

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

affairs, pharmacovigilance, and investor relations services.

Prior period related party expense was based on costs incurred by Biofrontera

AG plus 6% for services provided to us related to accounting consolidation, IT support and pharmacovigilance.

general and administrative expenses were $25.1 million and $27.4 million for the nine months ended September 30, 2022 and 2021, respectively,

a decrease of $2.4 million, or 8.6%.

decrease was primarily driven by legal settlement expense incurred in 2021 of $11.3 million.

This decrease was partially offset by legal

expenses of $1.4 million, issuance costs related to a private placement financing of $1.0 million and business insurance of $1.5 million.

Headcount costs also increased $2.0 million as a result of resumed hiring in 2022.

The increase was further driven by stock compensation

expense of $1.5 million, consulting expenses of $1.1 million and resumed travel of $0.5 million.

Restructuring

were no restructuring costs for the six months ended June 30, 2022.

Restructuring costs were $0.5 million for the six months ended June

30, 2021, which was related to facility exit costs.

were no restructuring costs for the nine months ended September 30, 2022.

Restructuring costs were $0.7 million for the nine months ended

September 30, 2021, which was related to facility exit costs.

in Fair Value of Contingent Consideration

The change in fair value

of contingent consideration was a decrease of $1.9 million and an increase of $1.0 million for the six months ended June 30, 2022 and

2021, respectively.

The change in fair value of contingent consideration is driven by the estimated profit share the Company is required

to pay under the Share Purchase Agreement.

change in fair value of contingent consideration was a decrease of $4.1 million and an increase of $1.7 million for the nine months ended

September 30, 2022 and 2021, respectively.

The change in fair value of contingent consideration is driven by the estimated profit share

the Company is required to pay under the Share Purchase Agreement.

in Fair Value of Warrant Liabilities

The change in fair value

of warrant liabilities was a decrease of $14.1 million for the six months ended June 30, 2022.

The change in fair value of warrant liabilities

was driven by changes in the underlying value of the common stock.

There were no warrant liabilities as of June 30, 2021.

Income (Loss) to Adjusted EBITDA Reconciliation for the Six Months Ended June 30, 2022 and 2021

define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and other

non-operating items from our statements of operations as well as certain other items considered outside the normal course of our operations

specifically described below.

change in fair value of warrant liabilities was a decrease of $15.3 million for the nine months ended September 30, 2022.

in fair value of warrant liabilities was driven by changes in the underlying value of the common stock, as well as the modification of the 2021 Purchase Warrant.

There were no warrant

liabilities as of September 30, 2021.

Income (Loss) to Adjusted EBITDA Reconciliation for the Nine Months Ended September 30, 2022 and 2021

define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and

other non-operating items from our consolidated statements of operations as well as certain other items considered outside the

normal course of our operations specifically described below.

Adjusted EBITDA is not a presentation made in accordance with GAAP.

Our definition of adjusted EBITDA may

vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation

and differences due to items subject to interpretation.

Adjusted EBITDA should not be considered as an alternative to net income or loss,

operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures

of operating performance or liquidity.

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation

or as a substitute for analysis of our results as reported under GAAP.

Our definition of adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential

inconsistencies in the method of calculation and differences due to items subject to interpretation.

Adjusted EBITDA should not be

considered as an alternative to net income or loss, operating income/(loss), cash flows from operating activities or any other

performance measures derived in accordance with GAAP as measures of operating performance or liquidity.

Adjusted EBITDA has

limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as

reported under GAAP.

in fair value of contingent consideration:

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contingent consideration as this is non-cash.

Change in fair value of warrant liabilities:

The warrants issued in conjunction with private placement equity financings were accounted for as liabilities

in accordance with ASC 815-40.

The warrant liabilities were measured at fair value at inception and are remeasured at each reporting date,

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

We exclude the impact of the change in fair value of warrant

liabilities as this is non-cash.

in fair value of warrant liabilities:

The warrants issued in conjunction with private placement equity financings were accounted

for as liabilities in accordance with ASC 815-40.

The warrant liabilities were measured at fair value at inception and are

remeasured at each reporting date, with changes in fair value presented within the consolidated statement of operations.

the impact of the change in fair value of warrant liabilities as this is non-cash.

based compensation:

To measure operating performance, we exclude the impact of costs relating to share-based compensation.

the subjective assumptions and a variety of award types, we believe that the exclusion of share-based compensation expense, which is

typically non-cash, allows for more meaningful comparisons of our operating results to peer companies.

Share-based compensation expense

can vary significantly based on the timing, size and nature of awards granted.

issuance costs:

To measure operating performance, we exclude the portion of issuance costs related to our warrant liabilities.

We do not expect to incur this type of expense on a recurring basis and believe the exclusion of these costs allows management and the

users of the financial statements to better understand our financial results.

EBITDA margin is adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.

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information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating

below table presents a reconciliation from net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2022 and

income (loss)

and amortization

in fair value of contingent consideration

in fair value of warrant liabilities

EBITDA margin

EBITDA decreased from ($2.9) million during the three months ended June 30, 2021 to ($8.0) million for the three months ended June 30,

below table presents a reconciliation from net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2022

Three months ended

September 30,

Nine months ended

September 30,

Net income (loss)

Interest expense, net

Income tax expense

Depreciation and amortization

Change in fair value of contingent consideration

Change in fair value of warrant liabilities

Legal settlement expenses

Stock-based compensation

Expensed issuance costs

Adjusted EBITDA

Adjusted EBITDA margin

EBITDA decreased from ($3.8) million during the three months ended September 30, 2021 to ($5.00) million for the three months ended September

Our adjusted EBITDA margin decreased from (88.5%) to (115.9%) during the same periods.

EBITDA decreased from ($5.7) million during the six months ended June 30, 2021 to ($11.3) million for the six months ended June 30, 2022.

EBITDA decreased from ($9.5) million during the nine months ended September 30, 2021 to ($14.11) million for the nine months ended September

Our adjusted EBITDA margin decreased from (63.9%) to (76.2%) during the same periods.

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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 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.

of 2022, we received proceeds of $4.6 million from the exercise of common stock warrants (See Note 18 Stockholders’ Equity) .

As of September 30, 2022, we had cash and cash equivalents of $27.5 million, compared to $24.5 million as of December 31, 2021.

Since we commenced

operations in 2015, we have generated significant losses.

For the nine months ended September 30, 2022 and 2021, we incurred losses from

operations of $13.0 million and $23.3 million, respectively.

We incurred net cash out-flow from operation of $7.9 million and $5.7 million

for the nine months ended September 30, 222 and September 30, 2021.

We had an accumulated deficit as of September 30, 2022 of $76.7 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.

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.

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 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

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) .

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.

The adequacy of our available funds to meet our future operating and capital

requirements will depend on many factors, including the amounts of future revenues generated by our products.

Due to numerous factors

described in more detail under the caption Part I, Item 1A, “Risk Factors” of this Form 10-K and our contractual obligations

and commitments, we may require significant additional funds earlier than we currently expect in order to continue to commercialize Ameluz®,

BF-RhodoLED® lamp series, and Xepi® and to support the operating, investing, and financing activities of the Company beyond the

next twelve months.

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 our licensed products 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 also intend to be opportunistic in our business plans which may include acquiring additional shares of Biofrontera

AG as a strategic measure.

future growth is dependent on our ability to obtain additional equity.

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, 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.

adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the amounts

of future revenues generated by our licensed products.

Due to numerous factors described in more detail under the caption Part I, Item

1A, “Risk Factors” of the Form 10-K and our contractual obligations and commitments, we may require significant additional

funds earlier than we currently expect in order to continue to commercialize Ameluz®, BF-RhodoLED® lamp series, and to support the operating, investing, and financing activities of the Company beyond the next twelve months.

future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

costs of our commercialization activities for Ameluz ® and Xepi ® ;

costs of our commercialization activities for Ameluz ® ;

extent to which we acquire or invest in licensed products, businesses and technologies;

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following table summarizes our cash provided by and (used in) operating, investing and financing activities:

Months Ended June 30,

cash used in operating activities

cash used in investing activities

cash provided by (used) in financing activities

increase (decrease) in cash and restricted cash

the six months ended June 30, 2022, operating activities used $2.0 million of cash, primarily resulting from our net income of $4.7 million,

adjusted for non-cash expense of stock-based compensation of $1.1 million, $0.3M depreciation and amortization, $0.2 million interest

expense as well as $7.6 million of working capital changes which was offset by the change in fair value of warrant liabilities $14.1M

and the change in fair value of contingent consideration $1.9 million.

the six months ended June 30, 2021, operating activities used $4.5 million of cash, primarily resulting from our net loss of $7.2 million,

adjusted for non-cash expense of $1.5 million as an offset and net cash provided by changes in our operating assets and liabilities of

$1.2 million.

the six months ended June 30, 2022 and 2021, net cash used in investing activities in the amount of $36,000 and $3,000, respectively,

consisted of the purchase of computer equipment.

the six months ended June 30, 2022, net cash from financing activities was $9.4 million driven entirely by proceeds from the sale of

common stock and warrants in a private placement (See note 18 Stockholders’ Equity) .

the six months ended June 30, 2021, cash used in financing activities was $0.5 million related to payments of deferred offering costs.

Nine Months Ended September 30,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used) in financing activities

Net increase (decrease) in cash and restricted cash

During the nine months ended September 30, 2022, operating activities used

$7.9 million of cash, primarily resulting from our net income of $1.1 million, decreased by the non-cash change in fair value of warrant

liabilities of $15.3 million and the change in fair value of contingent consideration of $3.4 million and offset by the non-cash expense

of stock-based compensation of $1.5 million, $0.4 million depreciation and amortization, $0.3 million interest expense as well as $7.3

million of working capital changes.

the nine months ended September 30, 2021, operating activities used $5.7 million of cash, primarily resulting from our net loss of $23.2

million, adjusted for non-cash expense of $1.5 million as an offset and net cash provided by changes in our operating assets and liabilities

of $1.2 million.

the nine months ended September 30, 2022 investing activities used $3.1 million, primarily resulting from the distribution of a

short-term loan of $3.1 million, which is repayable at the option of the holder, Quirin PrivatbankAG, in cash or in shares of Biofrontera AG acquired with the funds from the loan.

the nine months ended September 30, 2021, investing activities used $2,000, resulting from the purchase of computer equipment.

During the nine months ended September 30, 2022,

net cash from financing activities was $14 million driven entirely by proceeds from the sale of common stock and warrants in a private

placement (See Note 18 Stockholders’ Equity) as well as the exercise of warrants .

During the nine months ended September 30, 2021, cash used in financing

activities was $0.65 million related to payments of deferred offering costs.

Policies and Significant Judgments and Estimates

management’s discussion and analysis of our financial condition and results of operations are based on our financial statements,

which have been prepared in accordance with U.S.

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

GAAP requires

the use of estimates and assumptions by management that affect the value of assets and liabilities, as well as contingent assets and

liabilities, as reported on the balance sheet date, and revenues and expenses arising during the reporting period.

The main areas in

which assumptions, estimates and the exercising of a degree of judgment are appropriate relate to fair value measurements of contingent

consideration and warrant liabilities and stock compensation.

Estimates are based on historical experience and other assumptions that

are considered appropriate in the circumstances.

They are continuously reviewed but may vary from the actual values.

management’s discussion and analysis of our financial condition and results of operations are based on our consolidated

financial statements, which have been prepared in accordance with U.S.

The preparation of the financial statements in

accordance with U.S.

GAAP requires the use of estimates and assumptions by management that affect the value of assets and

liabilities, as well as contingent assets and liabilities, as reported on the balance sheet date, and revenues and expenses arising

during the reporting period.

The main areas in which assumptions, estimates and the exercising of a degree of judgment are

appropriate relate to fair value measurements of contingent consideration and warrant liabilities and stock compensation.

are based on historical experience and other assumptions that are considered appropriate in the circumstances.

They are continuously

reviewed but may vary from the actual values.

significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies , to

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summary of our critical accounting estimates is included in the Company’s Annual Report on Form 10-K for the year ended December

There were no material changes to our critical accounting estimates for the six months ended June 30, 2022.

There were no material changes to our critical accounting estimates for the nine months ended September 30, 2022.

Sheet Arrangements

the contractual obligations and commitments as discussed in the section titled Liquidity and Capital Resources , we did not

have during the periods presented, and we do not currently have, any other off-balance sheet arrangements, as defined in the rules

and regulations of the SEC.

the contractual obligations and commitments as discussed in the section titled Liquidity and Capital Resources , we did not have

during the periods presented, and we do not currently have, any other off-balance sheet arrangements, as defined in the rules and regulations

Growth Company Status

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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 2. Management’s Discussion and Analysis