What changed in this filing

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Item 9A. Controls and Procedures

2023-03-13 compared with 2022-04-11 · 518 added, 444 removed, 416 unchanged (70% of the section changed)

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of Disclosure Controls and Procedures

Our management,

with the participation of our Chief Executive Officer and Senior Director Finance, evaluated, as of the end of the period covered

by this Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the

Exchange Act).

Based on that evaluation, and as a result of the material weakness described below, our Chief Executive Officer

and Senior Director Finance concluded that, as of December 31, 2021, our disclosure controls

and procedures were not effective at the reasonable assurance level.

Material Weaknesses in Internal Control Over

Financial Reporting

management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period

covered by this Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under

the Exchange Act).

Based on that evaluation, our Chief Executive Officer and

Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective at the reasonable

assurance level.

Identified Material Weaknesses in Internal Control Over Financial Reporting

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

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on a timely basis.

connection with the audits of our financial statements as of and for the years ended December 31, 2021 and December 31, 2020,

we identified a material weakness in our internal control over financial reporting.

The previously identified material weakness pertains

to our oversight of work being performed for the Company by third-party service providers;

as the Company’s management review control

over information produced by third-party service providers was not sufficiently precise to identify errors.

Specifically, as part of

the valuation of an intangible asset in connection with the acquisition of Cutanea, we failed to identify a computational error within

the valuation model for the Xepi ® intangible asset.

In addition, in 2021 an error in the valuation of the same intangible

asset was identified relating to insufficient information being provided to the third-party consultant in connection with an impairment

to the previously identified deficiency relating to management’s review of work performed by specialists, management has implemented

measures designed to improve our internal control over financial reporting including formalized reviews of transactions handled by the

However, in light of the current year control deficiency, the remediation is still considered to be in process.

We will monitor

the effectiveness of our remediation plan and will continue to make changes we determine to be appropriate.

As a result, management has

concluded that the material weakness was not fully remediated as of December 31, 2021.

has corrected this error related to the accounting for the intangible asset impairment in the financial statements prior to the filing

In addition, Management will continue its remediation work by adding steps to the engagement of third-party specialists

for assistance with complex or judgmental accounting areas, including checks and balances over the proper flow of information to the

specialist to allow for an adequate understanding of the transaction.

As previously noted, we are still in process of remediating this material weakness as

of December 31,2021.

If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the

future or otherwise fail to maintain an effective system of internal control, we may not be able to accurately or timely report our

financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, our stock

connection with the audits of our financial statements as of and for the years ended December 31, 2021 and December 31, 2020, we identified

a material weakness in our internal control over financial reporting.

The previously identified material weakness pertains to our oversight

of work being performed for the Company by third-party service providers;

as the Company’s management review control over information

produced by third-party service providers was not sufficiently precise to identify errors.

Specifically, as part of the valuation of

an intangible asset in connection with the acquisition of Cutanea, we failed to identify a computational error within the valuation model

for the Xepi ® intangible asset.

In addition, in 2021 an error in the valuation of the same intangible asset was identified

relating to insufficient information being provided to the third-party consultant in connection with an impairment assessment.

have continued our remediation work by adding steps to the engagement of third-party specialists who provide assistance with complex

or judgmental accounting areas, including checks and balances over the proper flow of information to the specialist to allow for an adequate

understanding of the transaction.

have also continued to assess the competency of any third-party specialists prior to engagement to ensure that the Company is

utilizing appropriate firms and individuals with regard to technical accounting matters.

Annually, this assessment is documented to

support the Company’s assessment of third-party specialists used as part of the financial reporting process.

have implemented controls and procedures to ensure that an appropriate and sufficient review is being performed over both the data being

provided to and from any third-party specialists.

These checks are designed to ensure that the Company is providing all relevant data

to third-party specialists, and that sufficient procedures are being performed to validate and challenge the assumptions in any valuation

reports, validate that the detail in the valuation is accurate, and that any formulas and calculations are validated for clerical accuracy.

As a result of the remediation activities

and controls in place as of December 31, 2022 described above, we have remediated this previously disclosed material weakness.

completion of remediation does not provide assurance that our remediated controls will continue to operate properly or that our financial

statements will be free from error.

Annual Report on Internal Control Over Financial Reporting

Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting, as defined

in Rule 13a-15(f) under the Exchange Act, or an attestation report of our independent registered public accounting firm due to a

transition period established by rules of the SEC for newly public companies, outside of the conclusion noted in the section above

regarding the material weakness identified during fiscal year 2020 and 2021.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules

13a-15(f) and 15d-15(f) of the Exchange Act.

Our management, under the supervision and with the participation of our principal executive

officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting

as of December 31, 2022 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations

of the Treadway Commission (2013 Framework).

Based on the results of its evaluation, management concluded that our internal control over

financial reporting was effective as of December 31, 2022.

of Prior Material Weakness

effective implementation of the Company’s remediation plan, the Company has strengthened its internal control environment and has

addressed the material weaknesses that were identified at December 31, 2021.

Our management assessed the effectiveness of our internal

control over financial reporting as of December 31, 2022.

In making this assessment, management used the criteria set forth by the Committee

of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated Framework (2013).

assessment, the Company concluded that the material weakness has been remediated as of December 31, 2022.

Report of the Registered Public Accounting Firm

a smaller reporting company as defined in the Exchange Act, we are exempt from the auditor attestation requirements of Section 404 of

the Sarbanes-Oxley Act of 2002.

As a result, our independent registered public accounting firm has not audited or issued an attestation

report with respect to the effectiveness of our internal control over financial reporting as of December 31, 2022.

in Internal Control Over Financial Reporting

were no changes in our internal control over financial reporting during the most recent fiscal year ended December 31, 2021 that materially

affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f)

under the Exchange Act), other than the certain internal controls implemented in connection with our remediation efforts described above.

were no changes in our internal control over financial reporting during the most recent fiscal quarter ended December 31, 2022 that materially

affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under

the Exchange Act), other than the certain internal controls implemented in connection with our remediation efforts described above.

Other Information

March 9, 2023, we entered into the Commitment Letter with MidCap, in respect of MidCap’s commitment to provide us with the Revolving

Facility, subject to the borrowing base formula, minimum excess availability and other terms and conditions thereof, in the aggregate

principal amount of up to$6.5 million.

The Revolving Facility shall be secured by a lien on substantially all of the assets of the Company,

subject to customary exceptions.

proceeds of the loans under the Revolving Facility shall be used by the Company to provide working capital.

to the Commitment Letter, the final documentation for the Revolving Facility shall include conditions to borrowings, representations

and warranties, affirmative and negative covenants and other terms and conditions, each to be negotiated and mutually agreed and customary

for financings of this type and size.

Revolving Facility shall bear interest at the 30-Day Adjusted Term SOFR Rate, set monthly on the first day of the month and subject to

a floor of 2.25%, plus 4.00%.

In the event of a called event of default, a default interest rate of 3.00% percent shall be added to the

aforementioned rate.

Under the terms of the Revolving Facility, amounts available for advances would be subject to a borrowing base,

which is a formula based on certain eligible receivables and reserves.

Company also is obligated to pay MidCap certain fees and charges, including (i) at closing, a facility fee equal to 2.00% times the commitments

under the Revolving Facility, (ii) an annual fee equal to 1.00% times the commitments under the Revolving Facility, (iii) audit fees

in connection with any audits or inspections by MidCap or its agents of collateral or the Company’s operations or business (not

to exceed $10,000 per year), (iv) a collateral monitoring charge of $2,000 per month and (v) an unused line fee of 0.375% per annum on

the daily average of the undrawn portion of the commitments under the Revolving Facility.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Officers and Directors

following table provides information regarding our executive officers and members of our board of directors (ages as of the date of this Form 10-K):

following table provides information regarding our executive officers and members of our board of directors (ages as of the date of this

Hermann Lübbert Ph.D.

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Executive Officer

Frederick Leffler III

Financial Officer

Wedge, CPA, CCGMA

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at Biofrontera held a professorship for animal physiology at the Ruhr-University Bochum from which he retired on February 28, 2022.

Erica Monaco has served as Biofrontera Inc.’s

Chief Executive Officer since November 2021.

She has held senior leadership positions since joining Biofrontera in 2016, including as

Chief Financial Officer and Chief Operating Officer and acted as a member of Biofrontera Inc.’s Board of Directors from

January 2020 until November 2021.

Erica previously held financial leadership roles with SUN Pharma from 2013 to 2016 where she directed

financial operations for two GMP facilities specializing in PDT, sterile injectable diagnostics and contract manufacturing.

to 2013, Erica worked for WGBH Educational Foundation managing financial planning and analysis for public media production and broadcasting

and for Deloitte providing audit, assurance and tax consulting services for public companies.

Erica received her Bachelor of Business

Administration with an Accounting concentration and her Master of Science in Accounting (M.S.A) from The Isenberg School

of Management at the University of Massachusetts.

Monaco has served as Biofrontera Inc.’s Chief Executive Officer since November 2021.

She has held senior leadership positions

since joining Biofrontera in 2016, including as Chief Financial Officer and Chief Operating Officer and acted as a member of Biofrontera

Inc.’s Board of Directors from January 2020 until November 2021.

Erica previously held financial leadership roles with SUN Pharma

from 2013 to 2016 where she directed financial operations for two GMP facilities specializing in PDT, sterile injectable diagnostics

and contract manufacturing.

Prior to 2013, Erica worked for WGBH Educational Foundation managing financial planning and analysis for

public media production and broadcasting and for Deloitte providing audit, assurance and tax consulting services for public companies.

Erica received her Bachelor of Business Administration with an Accounting concentration and her Master of Science in Accounting (M.S.A)

from The Isenberg School of Management at the University of Massachusetts.

She holds an active CPA license.

Leffler has served as Biofrontera Inc’s Chief Financial Officer since October 2022.

Leffler is an experienced financial

executive with 15 years of leadership, financial management, consultancy and operations experience across a range of private and public

organizations, including growth-stage, private equity and Fortune 100 companies.

Prior to joining the Company, Mr.

Leffler served as

a Senior Manager at McKinsey & Company since January 2022 as well as in different capacities, including Associate and Senior Manager

from September 2015 to November 2019.

Prior to rejoining McKinsey & Company, Mr.

Leffler served as the Senior Director, Corporate

Finance & Restructuring of FTI Consulting from August 2020 to January 2022.

Prior to joining FTI Consulting, he served as Vice President,

Data & Analytics of Rockcreek from November 2019 to August 2020.

Earlier in his career, Mr.

Leffler held various financial positions

at General Electric and Sun Edison.

Fred received his Bachelor of Science, Business Administration (BSBA) degree from the Ohio State

University Fisher School of Business, and his Master of Business Administration (MBA) from Duke University’s Fuqua School of Business.

Borer III, J.D.

became a member of our board of directors in November 2021.

Since 2012, he has been the Senior Managing Director and

Co-Head of Investment Banking at The Benchmark Company, LLC.

Since 2012, he has been the Senior Managing Director

and Co-Head of Investment Banking at The Benchmark Company, LLC.

He was formerly the Chief Executive Officer and Head of Investment Banking

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from California State University in Sacramento, California.

active CPA license and is also a Certified Chartered Global Management Accountant.

She holds an active

CPA license and is also a Certified Chartered Global Management Accountant.

Hoffman, Ph.D.

became a member of our board of directors in November 2021.

Hoffman is the founder, and, since 2015, has been the

President and Chief Executive Officer, of Origami Therapeutics, Inc., in San Diego, California.

Hoffman has over 20 years of experience

in drug discovery and development.

Hoffman has made major contributions to the launch of two first-in-class drugs and two best-in-class

drugs for Cystic Fibrosis.

Hoffman is the founder, and, since 2015, has been

the President and Chief Executive Officer, of Origami Therapeutics, Inc., in San Diego, California.

Hoffman has over 20 years of

experience in drug discovery and development.

Hoffman has made major contributions to the launch of two first-in-class drugs and

two best-in-class drugs for Cystic Fibrosis.

Beth holds her Ph.D.

in Biology from The Johns Hopkins University in Baltimore, Maryland.

Weber became a member of our board of

directors in March 2022.

Weber is an experienced pharmaceutical executive who brings to Biofrontera more than 30 years of executive

and commercialization experience with a particular expertise in product marketing.

He has worked in a range of therapeutic areas including

clinical and aesthetic dermatology, pain management, inborn errors of metabolism and respiratory medicine.

He is currently a Principal

at Skysis, a biotech-focused brand management consulting practice, and previously served as CEO of Paraffin International.

Prior to Paraffin,

Weber served in senior executive and marketing roles at Depomed, Hyperion Therapeutics and Medicis Pharmaceuticals.

Weber served as a member of the supervisory board of Biofrontera AG.

Weber previously served on the Boards of Directors

of the American Academy of Pain Medicine Foundation, the American Chronic Pain Association and the Arizona Bioindustry Association.

in Business Administration from Western Michigan University.

Weber became a member of our board of directors in March 2022.

Weber is an experienced pharmaceutical executive who brings

to Biofrontera more than 30 years of executive and commercialization experience with a particular expertise in product marketing.

has worked in a range of therapeutic areas including clinical and aesthetic dermatology, pain management, inborn errors of metabolism

and respiratory medicine.

He recently retired from his position as a Principal at Skysis, a biotech-focused brand management consulting

practice, and previously served as CEO of Paraffin International.

Prior to Paraffin, Mr.

Weber served in senior executive and marketing

roles at Depomed, Hyperion Therapeutics and Medicis Pharmaceuticals.

From 2016 to 2021 Mr.

Weber served as a member of the supervisory

board of Biofrontera AG.

Weber previously served on the Boards of Directors of the American Academy of Pain Medicine Foundation,

the American Chronic Pain Association and the Arizona Bioindustry Association.

He holds a B.S.

in Business Administration from Western

Michigan University.

Relationships

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banking activities;

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have

violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated

a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Section 16(a) Reports

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solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe

that during fiscal year ended December 31, 2021 all filing requirements applicable to our officers, directors and greater than 10% percent

beneficial owners were complied with, except for one late Form 4 for Prof.

Lübbert reporting the grant of restricted stock

units and stock options on December 9, 2021 due to an administrative error.

that during fiscal year ended December 31, 2022 our officers, directors and greater than 10% percent beneficial owners were in compliance

with all applicable filing requirements except for (a) a late Form 4 filed for Prof.

Lübbert on January 19, 2022

to report employee stock grants, (b) late Form 4s filed for Prof.

Borer on May 26, 2022 to report equity compensation and (c) a late Form 4 filed for Prof.

Lübbert and Ms.

Monaco on September

19, 20222 to report the vesting of restricted stock units.

of Ethics and Code of Conduct

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this Form 10-K or to be part of this Form 10-K.

Procedures for Shareholders to Recommend

Director Nominees

have been no material changes to the procedures by which security holders may recommend nominees to our board of

for Shareholders to Recommend Director Nominees

have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

have an audit committee of the board of directors, which consists of Mr.

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and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board

whether the audited financial statements should be included in our Annual Report on Form 10-K

whether the audited financial statements should be included in our Form 10-K

with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation

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Compensation Table

Executive Compensation during the years

ended December 31, 2021 and 2020 was as

Compensation during the years ended December 31, 2022 and 2021 was as follows:

Name and principal position

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Option awards ($)

Nonequity incentive plan compensation ($)

Nonqualified deferred compensation earnings ($)

All other compensation ($)

Hermann Lübbert Ph.D., Executive Chairman

Erica Monaco, CPA, Chief Executive Officer

* for services during December 14, 2021

– December 31, 2021

Refer to Note:

Equity Incentive Plans and

Share-Based Payments for all assumptions used in the valuation of the stock awards and option awards.

Eugene Frederick Leffler III

Hermann Lübbert Ph.D., Executive Chairman

for services during December 14, 2021 – December 31, 2021

services during October 24, 2022 – December 31, 2022

Equity Incentive Plans and Share-Based Payments of the Notes to the Financial Statements for all assumptions

used in the valuation of the stock awards and option awards.

Disclosure to Summary Compensation Table

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of this agreement are otherwise substantially the same with those of her current employment agreement.

On April 1, 2022, we entered into an amendment to the employment agreement with Ms.

The agreement was amended

to provide for an annual base salary of $450,000 and eligibility to receive a cash bonus up to 60% of base salary upon the attainment

of performance goals set in advance by the Board of Directors.

The actual amount of the bonus shall depend upon the level of achievement

of set targets, however, no bonus shall be paid if the level of target achievement is below 70%.

Upon termination of employment by the Company other than termination for “Cause”, Ms.

Monaco shall be entitled to a severance payment equal to one twelfth of her then-current annual base salary for each full year of employment;

provided, however, that such payment shall not exceed two full years of Ms.

Monaco’s then-current base salary.

Employment Agreement

Prior to our initial public offering, Prof.

had not received compensation from us (or that has been or will be reimbursed by us) for his service as Chairman of our Board of Directors

or as Chief Executive Officer during that period.

Instead, his services were rendered as a part of his duties as the Chief Executive

Officer of our former parent, Biofrontera AG.

In the fiscal year ended December 31, 2019, he received total compensation from

Biofrontera AG of €718,881 ($849,789) (based on the noon buying rate of the Federal Reserve Bank of New York for the euro on September

10, 2021, which was €1.00 to $1.1821), which included a base salary of €350,000 ($413,735), a bonus of €167,476 ($197,973),

€36,962($43,693) in option awards and €148,847 ($175,952) in income from the exercise of existing stock options.

In the fiscal

year ended December 31, 2020, Prof.

Lübbert received total compensation from Biofrontera AG of €707,000 ($835,745), which

included a base salary of €322,000 ($380,633), €290,000 ($342,809) in stock appreciation rights and €86,000 ($101,661)

in income from the exercise of existing stock options.

His initial base salary from Biofrontera AG for the fiscal year ended December

31, 2021 is €390,000 ($461,019), and he will be eligible for a bonus of up to €195,000 ($230,510) if certain targets

are met, which can double with over-achievement of those targets.

Under his contract with Biofrontera AG, he is also entitled

to receive €292,500 ($345,764) in stock appreciation rights.

On October 1, 2021,

we entered into an amended employment agreement with Prof.

Lübbert that became effective on December 14, 2021, the day after

his last day of employment with Biofrontera AG.

October 1, 2021, we entered into an amended employment agreement with Prof.

Lübbert that became effective on December 14, 2021,

the day after his last day of employment with Biofrontera AG.

The agreement provides that Prof.

Lübbert will continue to serve as our

Executive Chairman and devote 100% of his time to his role as Executive Chairman.

Lübbert will continue to serve

as our Executive Chairman and devote 100% of his time to his role as Executive Chairman.

Subsequently, Prof Dr.

Lübbert’s agreement

was further amended on March 2, 2022 (effective retroactively to December 15, 2021) to establish his base salary of $468,500, with eligibility

to receive a cash bonus of up to 65% of his base salary upon the attainment of performance goals set in advance by the Board.

amount of any bonus shall depend upon the level of achievement of set targets.

No bonus will be paid if our board of directors determines

that the target achievement of the respective year was below 70%.

agreement was further amended on March 2, 2022 (effective retroactively to December 15, 2021) to establish his base salary of $468,500,

with eligibility to receive a cash bonus of up to 65% of his base salary upon the attainment of performance goals set in advance by the

The actual amount of any bonus shall depend upon the level of achievement of set targets.

No bonus will be paid if our board of

directors determines that the target achievement of the respective year was below 70%.

We also agree to allow Prof.

Lübbert to participate in

any benefit programs we make available to our employees.

to participate in any benefit programs we make available to our employees.

Upon termination of employment by the Company other

than termination for “Cause”, Mr.

Lübbert shall be entitled to a severance payment equal to one twelfth of his then-current

annual base salary for each full year of employment (including Biofrontera AG, as a past affiliate of the Company);

provided, however,

that such payment shall not exceed two full years of Mr.

Lübbert’s then-current base salary.

Employment Agreement

October 3, 2022, we entered into an employment agreement with Mr.

Leffler to serve as our Chief Financial Officer.

The agreement provides

for an annual base salary of $355,000, with a one-time signing bonus of $25,000, receipt of 100,000 stock options and eligibility to

participate in any benefit programs we make available to our employees.

Leffler may receive a bonus of up to 40% of his base salary

upon attainment of performance goals set in advance by the Chief Executive Officer.

the event that Mr.

Leffler experiences a termination of his employment without “cause” or he resigns for “good

reason” outside of a period during which provisions related to a “change in control” (as such terms are defined in

the employment agreement) are in effect, provided that he executes and makes effective a release of claims against the Company and

its affiliates, Mr.

Leffler will become entitled to a lump sum payment in an amount equal to one-twelfth of his annual base salary

for each full year of employment;

further provided that such payment will not be less than six months of his then-current base

salary, and shall not exceed two full years of, his then-current base salary.

Leffler experiences a termination of his

employment without “cause” or he resigns for “good reason” within a certain period of a “change in

control,” he will be entitled to certain benefits and an enhanced severance payment.

Equity Awards

of our named executive officers holds outstanding options and restricted stock unit awards that were all awarded in the fiscal year 2021

following our initial public offering.

These awards are described in more detail in the “Outstanding Equity Awards at Fiscal Year

End” table below and in Note 19, Equity Incentive Plans and Share-Based Payments of the Notes to the Financial Statements for additional

Chief Executive Officer and Executive Chairman hold outstanding options and restricted stock unit awards that were awarded in the fiscal

years ending December 31, 2022, and 2021, following our initial public offering.

These awards are described in more detail in the “Outstanding

Equity Awards at Fiscal Year End” table below and in Note 20, Equity Incentive Plans and Share-Based Payments of the Notes to the

Financial Statements for additional information.

maintain the 2021 Omnibus Incentive Plan, which provided for the issuance of stock option awards to our eligible employees (including

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December 9, 2021, Ms.

Monaco also received a grant of 56,689 restricted stock units under the terms of the 2021 Omnibus Incentive

Plan, as described below, and subject to the applicable award agreement between Ms.

Monaco also received a grant of 56,689 restricted stock units under the terms of the 2021 Omnibus Incentive Plan,

as described below, and subject to the applicable award agreement between Ms.

Monaco and the Company.

Each restricted stock

unit represents a contingent right to receive one share of our common stock.

The restricted stock units vest on June 9, 2022,

subject to Ms.

Monaco’s continued employment through the vesting date.

Each vested restricted stock unit will be settled, at

the Company’s discretion, in shares, cash or a combination of shares and cash, within 60 days of the vesting date.

is entitled to dividend equivalents with respect to the restricted stock units.

Each restricted stock unit represents

a contingent right to receive one share of our common stock.

The restricted stock units vest on June 9, 2022, subject to Ms.

continued employment through the vesting date.

Each vested restricted stock unit will be settled, at the Company’s discretion,

in shares, cash or a combination of shares and cash, within 60 days of the vesting date.

Monaco is entitled to dividend equivalents

with respect to the restricted stock units.

In the event of Ms.

Monaco’s death,

disability, or termination for good reason while the restricted stock units remain unvested, 100 percent of the restricted stock

units will become immediately vested as of the date of such occurrence.

In the event of termination or cause, the unvested and

vested portion of the restricted stock units will be cancelled immediately and any rights to the underlying shares of stock will be

Monaco’s death, disability, or termination for good reason while

the restricted stock units remain unvested, 100 percent of the restricted stock units will become immediately vested as of the date of

such occurrence.

In the event of termination or cause, the unvested and vested portion of the restricted stock units will be cancelled

immediately and any rights to the underlying shares of stock will be forfeited.

Lübbert’s Stock Option Award

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portions of the restricted stock units will be cancelled immediately and any rights to the underlying shares of stock will be forfeited.

General Information About the 2021 Omnibus

Information About the 2021 Omnibus Incentive Plan

July 23, 2021, our board of directors adopted and our sole shareholder at the time approved the 2021 Omnibus Incentive Plan.

of the 2021 Omnibus Incentive Plan is to enable the Company to attract, retain and motivate its employees by providing for or increasing

their proprietary interests in the Company.

2021 Omnibus Incentive Plan is a stock incentive plan under which we may offer securities of the Company to our employees.

The 2021 Omnibus

Incentive Plan is not subject to any provisions of the U.S.

Employee Retirement Income Security Act of 1974 and is not qualified under

Section 401(a) of the Code.

The 2021 Omnibus Incentive Plan permits Biofrontera to satisfy any awards under the 2021 Omnibus Incentive

Plan by distributing to participants (1) authorized and unissued shares of Biofrontera common stock, (2) shares of common stock held

in the Biofrontera treasury, (3) shares of Biofrontera common stock purchased on the open market or (4) shares of Biofrontera common

stock acquired through private purchase.

directors, officers and consultants or advisors of the Company and its affiliates are eligible for awards under the 2021 Omnibus Incentive

The Committee (as discussed below) has the sole and complete authority to determine who will be granted awards under the 2021 Omnibus

Incentive Plan.

On July 23, 2021, our board of directors

adopted and our sole shareholder at the time approved the 2021 Omnibus Incentive Plan.

The purpose of the 2021 Omnibus Incentive

Plan is to enable the Company to attract, retain and motivate its employees by providing for or increasing their proprietary

interests in the Company.

The 2021 Omnibus Incentive Plan is a stock incentive

plan under which we may offer securities of the Company to our employees.

The 2021 Omnibus Incentive Plan is not subject to any provisions

Employee Retirement Income Security Act of 1974 and is not qualified under Section 401(a) of the Code.

The 2021 Omnibus Incentive

Plan permits Biofrontera to satisfy any awards under the 2021 Omnibus Incentive Plan by distributing to participants (1) authorized and

unissued shares of Biofrontera common stock, (2) shares of common stock held in the Biofrontera treasury, (3) shares of Biofrontera common

stock purchased on the open market or (4) shares of Biofrontera common stock acquired through private purchase.

Employees, directors, officers and consultants

or advisors of the Company and its affiliates are eligible for awards under the 2021 Omnibus Incentive Plan.

The Committee (as discussed

below) has the sole and complete authority to determine who will be granted awards under the 2021 Omnibus Incentive Plan.

Administration

The 2021 Omnibus Incentive Plan is administered

by the Committee, which consists of the members of our compensation committee, or if our board of directors is acting as our compensation

committee, the individuals constituting “eligible” directors of our board of directors.

The Committee administers the 2021

Omnibus Incentive Plan, except in the case of awards to non-employee directors.

Awards to non-employee directors are administered by

our board of directors.

The Committee in its discretion may delegate any and all of its duties to officers of the Company.

The Committee

or, in the case of awards to non-employee directors, our board of directors, has the authority to determine the terms and conditions

of any agreements relating to awards granted under the 2021 Omnibus Incentive Plan (agreements may differ among participants), and to

adopt, alter and repeal rules, guidelines and practices relating to the 2021 Omnibus Incentive Plan.

The Committee or, in the case of

awards to non-employee directors, our board of directors, has full discretion to administer and interpret the 2021 Omnibus Incentive

Plan, and to adopt whatever rules, regulations and procedures it deems necessary or advisable.

2021 Omnibus Incentive Plan is administered by the Committee, which consists of the members of our compensation committee, or if our

board of directors is acting as our compensation committee, the individuals constituting “eligible” directors of our board

of directors.

The Committee administers the 2021 Omnibus Incentive Plan, except in the case of awards to non-employee directors.

to non-employee directors are administered by our board of directors.

The Committee in its discretion may delegate any and all of its

duties to officers of the Company.

The Committee or, in the case of awards to non-employee directors, our board of directors, has the

authority to determine the terms and conditions of any agreements relating to awards granted under the 2021 Omnibus Incentive Plan (agreements

may differ among participants), and to adopt, alter and repeal rules, guidelines and practices relating to the 2021 Omnibus Incentive

The Committee or, in the case of awards to non-employee directors, our board of directors, has full discretion to administer and

interpret the 2021 Omnibus Incentive Plan, and to adopt whatever rules, regulations and procedures it deems necessary or advisable.

Plan Amendments

The 2021 Omnibus Incentive Plan expires by its

terms on the tenth anniversary of the Plan Effective Date.

However, our board of directors may terminate the 2021 Omnibus Incentive Plan

before that date.

No awards can be granted under the 2021 Omnibus Incentive Plan after the 2021 Omnibus Incentive Plan has terminated.

However, awards granted prior to the date on which the 2021 Omnibus Incentive Plan terminates will not be affected by the termination

and the terms and conditions of the 2021 Omnibus Incentive Plan will continue to apply to those awards.

Shares Available for Awards

Shares Available for Issuance

The maximum number of shares of common stock that

may be issued pursuant to awards granted under the 2021 Omnibus Incentive Plan is 2,750,000, subject to certain adjustments for corporate

transactions, as described in the section entitled “— Adjustments ” below.

No participant may be granted awards

of options and/or stock appreciation rights or performance compensation awards with respect to more than 900,000 shares of common stock

in any one year.

On termination, forfeiture, or expiration of an unexercised stock option grant or other award, in whole or in part,

the number of shares of common stock subject to such unexercised stock option grant or other award will become available again for grant

under the 2021 Omnibus Incentive Plan.

Also, shares subject to a stock option grant or other award that are not delivered to a participant

because they are used to satisfy a tax withholding obligation or that are withheld to pay all or a portion of an option’s exercise

price will again become available for grant under the 2021 Omnibus Incentive Plan.

In addition, shares of Biofrontera common stock will

not be considered used if the award to which they relate is settled in cash.

Further, shares subject to awards granted in assumption

or substitution of outstanding awards of an acquired entity shall not be counted against the shares of our common stock available for

issuance under the 2021 Omnibus Incentive Plan.

Stock Options

Nonqualified or incentive stock options may be

granted under the 2021 Omnibus Incentive Plan.

The Committee sets the terms of the stock option grant at the time the grant is made.

2021 Omnibus Incentive Plan expires by its terms on the tenth anniversary of the Plan Effective Date.

However, our board of directors

may terminate the 2021 Omnibus Incentive Plan before that date.

No awards can be granted under the 2021 Omnibus Incentive Plan after

the 2021 Omnibus Incentive Plan has terminated.

However, awards granted prior to the date on which the 2021 Omnibus Incentive Plan terminates

will not be affected by the termination and the terms and conditions of the 2021 Omnibus Incentive Plan will continue to apply to those

Available for Awards

Available for Issuance

maximum number of shares of common stock that may be issued pursuant to awards granted under the 2021 Omnibus Incentive Plan is

2,750,000, subject to certain adjustments for corporate transactions, as described in the section entitled

“— Adjustments ” below.

On December 12, 2022, the stockholders of the Company approved an amendment to

increase the number of shares authorized for issuance by 2,589,800 from 2,750,000 to 5,339,800 shares.

No participant may be granted

awards of options and/or stock appreciation rights or performance compensation awards with respect to more than 900,000 shares of

common stock in any one year.

On termination, forfeiture, or expiration of an unexercised stock option grant or other award, in

whole or in part, the number of shares of common stock subject to such unexercised stock option grant or other award will become

available again for grant under the 2021 Omnibus Incentive Plan.

Also, shares subject to a stock option grant or other award that

are not delivered to a participant because they are used to satisfy a tax withholding obligation or that are withheld to pay all or

a portion of an option’s exercise price will again become available for grant under the 2021 Omnibus Incentive Plan.

addition, shares of Biofrontera common stock will not be considered used if the award to which they relate is settled in cash.

Further, shares subject to awards granted in assumption or substitution of outstanding awards of an acquired entity shall not be

counted against the shares of our common stock available for issuance under the 2021 Omnibus Incentive Plan.

or incentive stock options may be granted under the 2021 Omnibus Incentive Plan.

The Committee sets the terms of the stock option grant

at the time the grant is made.

These terms are described in a stock option agreement.

Restricted Stock Awards

Restricted stock awards may be granted under the

stock awards may be granted under the 2021 Omnibus Incentive Plan.

The Committee will set the terms of the restricted stock award at

the time of grant and will describe these terms in a restricted stock award agreement.

the specified performance criteria are not achieved within the established time frame, the shares will be forfeited, unless the terms

of the applicable restricted stock award agreement also provide for service-based vesting, catch-up vesting or otherwise specifically

alter this treatment.

stock unit awards may be granted under the 2021 Omnibus Incentive Plan.

The Committee will set the terms of the restricted stock unit

award at the time of grant and will describe these terms in a restricted stock unit agreement.

may receive under the 2021 Omnibus Incentive Plan a grant of unrestricted shares of Biofrontera common stock or other awards, including

fully-vested deferred stock units, denominated in common stock, as determined by the Committee.

may also receive under the 2021 Omnibus Incentive Plan a cash bonus award.

No cash bonus award to any one Participant (as defined in

the 2021 Omnibus Incentive Plan) in any calendar year can exceed $1,500,000.

2021 Omnibus Incentive Plan provides for appropriate adjustments in the number of shares of common stock subject to awards and available

for future awards, the exercise price of outstanding awards, as well as the maximum award limits under the 2021 Omnibus Incentive Plan,

in the event of changes in our outstanding common stock by reason of a merger, stock split, reorganization, recapitalization or similar

The Committee may also make these types of adjustments if a change in law or circumstances would result in any substantial dilution

or enlargement of the rights of participants under the 2021 Omnibus Incentive Plan.

of options and SARs is generally prohibited under the 2021 Omnibus Incentive Plan without approval of our stockholders.

the applicable award agreement provides otherwise, in the event of a “change in control” of Biofrontera (as defined in the

2021 Omnibus Incentive Plan),

The Committee will set the terms of the restricted stock award at the time of grant and will describe these

terms in a restricted stock award agreement.

If the specified performance criteria are not

achieved within the established time frame, the shares will be forfeited, unless the terms of the applicable restricted stock award agreement

also provide for service-based vesting, catch-up vesting or otherwise specifically alter this treatment.

Restricted Stock Units

Restricted stock unit awards may be granted under

the 2021 Omnibus Incentive Plan.

The Committee will set the terms of the restricted stock unit award at the time of grant and will describe

these terms in a restricted stock unit agreement.

Stock Bonus Awards

Participants may receive under the 2021 Omnibus

Incentive Plan a grant of unrestricted shares of Biofrontera common stock or other awards, including fully-vested deferred stock units,

denominated in common stock, as determined by the Committee.

Cash Bonus Awards

Participants may also receive under the 2021 Omnibus

Incentive Plan a cash bonus award.

No cash bonus award to any one Participant (as defined in the 2021 Omnibus Incentive Plan) in any

calendar year can exceed $1,500,000.

Additional Information

The 2021 Omnibus Incentive Plan provides for appropriate

adjustments in the number of shares of common stock subject to awards and available for future awards, the exercise price of outstanding

awards, as well as the maximum award limits under the 2021 Omnibus Incentive Plan, in the event of changes in our outstanding common

stock by reason of a merger, stock split, reorganization, recapitalization or similar events.

The Committee may also make these types

of adjustments if a change in law or circumstances would result in any substantial dilution or enlargement of the rights of participants

Committee may in its discretion determine that all options and SARs will become vested and immediately exercisable, and/or the restricted

period with respect to any restricted shares or restricted stock units will expire immediately (including a waiver of any applicable

performance goals);

incomplete performance periods in effect on the date the change in control occurs will end on the date of the change in control,

and the Committee will determine the extent to which performance goals with respect to each such award period have been met based

upon such audited or unaudited financial information then available as it deems relevant;

and each participant will be paid partial

or full awards with respect to performance goals for each relevant award period based upon the Committee’s determination of

the degree of attainment of any performance goals;

respect to a Senior Participant (as defined in the 2021 Omnibus Incentive Plan) who is terminated by the Company or its affiliates

without “cause” (as defined in the 2021 Omnibus Incentive Plan):

(i) within twelve months following a change in control

or, (ii) in contemplation of a change in control, all awards will become fully vested and exercisable immediately, irrespective of

vesting schedules and the restricted period shall end at the time of the termination.

the event of a change in control, the Committee may in its discretion also make adjustments to the stock options and other awards granted

under the 2021 Omnibus Incentive Plan.

Repricing of options and SARs is generally prohibited

under the 2021 Omnibus Incentive Plan without approval of our stockholders.

Change in Control

Unless the applicable award agreement provides

otherwise, in the event of a “change in control” of Biofrontera (as defined in the 2021 Omnibus Incentive Plan),

the Committee may in its

discretion determine that all options and SARs will become vested and immediately exercisable, and/or the restricted period with

respect to any restricted shares or restricted stock units will expire immediately (including a waiver of any applicable performance

all incomplete performance

periods in effect on the date the change in control occurs will end on the date of the change in control, and the Committee will

determine the extent to which performance goals with respect to each such award period have been met based upon such audited or unaudited

financial information then available as it deems relevant;

and each participant will be paid partial or full awards with respect

to performance goals for each relevant award period based upon the Committee’s determination of the degree of attainment of

any performance goals;

with respect to a Senior

Participant (as defined in the 2021 Omnibus Incentive Plan) who is terminated by the Company or its affiliates without “cause”

(as defined in the 2021 Omnibus Incentive Plan):

(i) within twelve months following a change in control or, (ii) in contemplation

of a change in control, all awards will become fully vested and exercisable immediately, irrespective of vesting schedules and the

restricted period shall end at the time of the termination.

In the event of a change in control, the Committee

may in its discretion also make adjustments to the stock options and other awards granted under the 2021 Omnibus Incentive Plan.

Committee may substitute shares of the surviving entity or another corporation that is party to the transaction for shares of Biofrontera

common stock.

In connection with such an event, the Committee may also determine that outstanding awards will be cancelled in return

for a cash payment equal to the value of the cancelled awards.

In the event that the Committee decides to cancel outstanding awards,

holders of outstanding awards will receive ten days’ advance notice.

Tax withholding

Participants in the 2021 Omnibus Incentive Plan

must make a cash payment to us, or make other arrangements satisfactory to the Committee, to satisfy the tax withholding obligations

that arise under applicable law with respect to a stock option or other award granted under the Plan, including without limitation any

The Committee may substitute shares of the surviving entity or another corporation that is party

to the transaction for shares of Biofrontera common stock.

In connection with such an event, the Committee may also determine that outstanding

awards will be cancelled in return for a cash payment equal to the value of the cancelled awards.

In the event that the Committee decides

to cancel outstanding awards, holders of outstanding awards will receive ten days’ advance notice.

in the 2021 Omnibus Incentive Plan must make a cash payment to us, or make other arrangements satisfactory to the Committee, to satisfy

the tax withholding obligations that arise under applicable law with respect to a stock option or other award granted under the Plan,

including without limitation any U.S.

federal income and employment taxes and other applicable state and local taxes.

Under certain circumstances, participants may be

permitted to satisfy their tax withholding obligation, in whole or in part, by having us withhold from the shares of common stock otherwise

deliverable to them on the exercise of a stock option, restricted stock unit or SAR, or by surrendering shares having a fair market value

on the date of exercise equal to the exercise price.

Transferability and assignment

In general, participants in the 2021 Omnibus Incentive

Plan can exercise an option or other award received under the 2021 Omnibus Incentive Plan only during their lifetime.

Unless the agreement

under which the stock option or other award was granted provides otherwise, participants cannot transfer stock options or other awards

(except for shares that are not subject to a restricted period), except by will or the laws of descent and distribution or pursuant to

a domestic relations order issued by a court of competent jurisdiction.

Award Termination;

The Committee will have full power and authority

to determine whether, to what extent and under what circumstances any award will be terminated or forfeited.

To the extent provided in

the award agreement, if a participant is terminated for “cause” (as defined in the 2021 Omnibus Incentive Plan) or if they

engage in certain activities after termination as determined by the Committee, then any outstanding stock options or other awards granted

to such participant may be cancelled, and under certain circumstances, they may be required to return the gain received from certain

Awards granted under the 2021 Omnibus Incentive Plan are also subject to any compensation recovery policy or minimum stock holding

period requirement adopted by Biofrontera.

Under certain circumstances,

participants may be permitted to satisfy their tax withholding obligation, in whole or in part, by having us withhold from the shares

of common stock otherwise deliverable to them on the exercise of a stock option, restricted stock unit or SAR, or by surrendering shares

having a fair market value on the date of exercise equal to the exercise price.

Transferability

and assignment

general, participants in the 2021 Omnibus Incentive Plan can exercise an option or other award received under the 2021 Omnibus Incentive

Plan only during their lifetime.

Unless the agreement under which the stock option or other award was granted provides otherwise, participants

cannot transfer stock options or other awards (except for shares that are not subject to a restricted period), except by will or the

laws of descent and distribution or pursuant to a domestic relations order issued by a court of competent jurisdiction.

Committee will have full power and authority to determine whether, to what extent and under what circumstances any award will be terminated

or forfeited.

To the extent provided in the award agreement, if a participant is terminated for “cause” (as defined in the

2021 Omnibus Incentive Plan) or if they engage in certain activities after termination as determined by the Committee, then any outstanding

stock options or other awards granted to such participant may be cancelled, and under certain circumstances, they may be required to

return the gain received from certain awards.

Awards granted under the 2021 Omnibus Incentive Plan are also subject to any compensation

recovery policy or minimum stock holding period requirement adopted by Biofrontera.

Equity Awards at Fiscal Year End

following table sets forth as of the end of fiscal year 2022 all outstanding equity awards held by our named executive officers:

Option Awards

Equity Incentive Plan Awards:

Number of Securities Underlying Unexercised Options (#) Exercisable

Equity incentive plan awards:

number of securities underlying unexercised unearned options

Option Exercise Price

Option Expiration

Number of Unearned Shares or Units That Have Not Vested (#)

Market or Payout Value of Unearned Shares or Units That Have Not Vested ($)

Stock options (1)

Stock options (3)

Restricted stock units (2)

Hermann Lübbert

Stock options (1)

Stock options (3)

Restricted stock units (2)

Eugene Frederick Leffler III

The option vests in three equal annual installments beginning on December 9, 2022.

Each restricted stock unit represents a contingent right to receive one share of BFRI common stock.

The restricted stock units vest in

two equal annual installments beginning on May 18, 2023.

Each vested restricted stock unit will be settled, at the Company’s discretion,

in shares, cash or a combination of shares and cash, within 60 days of the vesting date.

The option vests in three equal annual installments beginning on May 18, 2023.

Narrative Disclosure

Information About the Employee Stock Purchase Plan (the “ESPP”)

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25% per year of service.

Equity Awards at Fiscal Year End

The following table sets forth as of the end

of fiscal year 2021 all outstanding equity awards held by our named executive officers:

Option Awards

Incentive Plan Awards:

of Securities Underlying Unexercised Options (#) Exercisable

of Securities Underlying Unexercised Options (#) Unexercisable

incentive plan awards:

number of securities underlying unexercised unearned options

Exercise Price

ExpirationDate

of Shares or Units of Stock That Have Not Vested (#)

Value of Shares or Units of Stock That Have Not Vested ($)

of Unearned Shares or Units That Have Not Vested (#)

or Payout Value of Unearned Shares or Units That Have Not Vested ($)

Stock options (1)

Restricted stock units (2)

Hermann Luebbert

Stock options (1)

Restricted stock units (2)

(1) The option vests in three equal annual installments beginning

on December 9, 2022.

(2) Each restricted stock unit represents a contingent right

to receive one share of BFRI common stock.

The restricted stock units vest on June 9, 2022.

Each vested restricted stock unit will be

settled, at the Company’s discretion, in shares, cash or a combination of shares and cash, within 60 days of the vesting date.

Leffler, and Ms.

Monaco receive severance benefits pursuant to their employment agreements, which have been

explained in detail starting on page 65 in the section “Narrative Disclosure to Summary Compensation Table.”

compensation for the year ended December 31, 2022, which was pro-rated for board members who served less than the entire service period

during fiscal 2022, are shown on the table below:

Fees earned or

paid in cash ($)

Stock awards ($)

Hermann Lübbert (1)

Erica Monaco (2)

Wedge, CPA, CCGMA

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as an employee of the Company, not for his service as a director.

Monaco was a director of the Company until the completion of our initial public offering.

to Director Compensation Table

non-employee director compensation policy is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee

Under the policy each director who is not an employee is paid cash compensation as set forth below:

Under the policy each director who is not an employee is paid cash compensation as set forth below as well as reimbursed for all reasonable travel and other expensed incurred in connection with attending Board and

Committee meetings:

Annual Retainer

April 1 – May 18, 2022

May 19 – December 31, 2022

Board of Directors:

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

Compensation Plan Information

following table summarizes our equity compensation plan information as of December 31, 2021:

Plan Category

Number of Securities to Be Issued

upon Exercise of Outstanding Options, Warrants and Rights (a)

Weighted-Average Exercise Price

of Outstanding Options, Warrants and Rights (b)

Number of Securities Remaining

Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c)

Securities to Be

Options, Warrants

and Rights (a)

Exercise Price of

Number of Securities

Remaining Available

for Future Issuance

Compensation Plans

(excluding securities

reflected in column

2021 Omnibus Incentive Plan

Ownership of Certain Beneficial Holders and Management

following table sets forth information with respect to the beneficial ownership of our common stock as of March 31, 2021, for

each person or group known to us who beneficially owns more than 5% of our common stock, each of our directors and director nominees,

each of our named executive officers and all of our directors, director nominees and executive officers as a group.

following table sets forth information with respect to the beneficial ownership of our common stock as February 28, 2023, for each person

or group known to us who beneficially owns more than 5% of our common stock, each of our directors and director nominees, each of our

named executive officers and all of our directors, director nominees and executive officers as a group.

ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC.

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Our common stock subject

to options or RSUs that are currently exercisable or exercisable within 60 days of December 31, 2021 are deemed to be outstanding and

to options or RSUs that are currently exercisable or exercisable within 60 days of February 28, 2023 are deemed to be outstanding and

beneficially owned by the person holding the options or RSUs.

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Leverkusen, Germany(3)

Abshagen Consulting GmbH

Burgunderweg 8

Weinheim, Germany, 69469(4)

Named executive officers and directors:

Eugene Frederick Leffler III

Hermann Lübbert

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beneficial ownership of less than 1% of outstanding shares of our common stock.

(1) On December 9, 2021, the Company granted options to purchase shares of common stock at an exercise price of $4.77 per share up to (a) in the case of Prof.

Lübbert, 113,379 shares and (b) in the case of Ms.

Monaco, 56,689 shares.

The options vest in three equal annual installments beginning on December 9, 2022.

The 37,415 shares for Prof.

Lübbert and the 18,707 shares for Ms.

Monaco represent the options under such grants that will have vested within 60 days of the date of this proxy statement.

(2) On May 18, 2022, the Company granted non-qualified stock options to each of the non-employee directors to purchase 22,000 shares of common stock with an exercise price of $2.61.

The non-employee director options vest in equal monthly installments following the date of grant.

The 20,166 shares reported in the table above for each non-employee director represent the options that will have vested within 60 days of the date of this proxy statement.

(3) Information is based upon a Schedule 13G/A filed with the SEC on February 10, 2022 by Biofrontera AG.

According to a Schedule 13D/A (“Zours Schedule 13D”) filed by Deutsche Balaton Aktiengesellschaft (“DB”), VV Beteiligungen Aktiengesellschaft (“VVB”), Delphi Unternehmensberatung Aktiengesellschaft (“DU”), Wilhelm Konrad Thomas Zours, Alexander Link and Rolf Birkert on September 19, 2022, Mr.

Zours owns a majority interest in DU and is the sole member of the boards of management of VVB and DU.

DU owns a majority interest in VVB.

VVB owns a majority interest in DB and DB holds 1,177,676 shares of common stock representing 4.41% of the Company’s outstanding stock.

In the Zours Schedule 13D, Mr.

Zours also includes the shares of Biofrontera Inc.

held by Biofrontera AG, but disclaims beneficial ownership.

Zours was deemed to have voting and dispositive voting power over the shares held by Biofrontera AG, then Mr.

Zours would be the beneficial owner of 34.4% of the Company’s outstanding stock.

(4) Information is based upon a Schedule 13G filed with the SEC on November 4, 2022 by Abshagen Consulting GmbH.

Certain Relationships and Related Transactions, and Director Independence

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Party Agreements

License and Supply Agreement

July 15, 2016, we executed an exclusive license and supply agreement with Biofrontera Pharma, which was amended in July 2019 to increase

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June 16, 2021, we entered into the Ameluz LSA with Biofrontera Pharma and Biofrontera Bioscience.

Under the terms of the Ameluz LSA, we were granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera Bioscience

technology to use, import, export, distribute, market, offer for sale and sell Ameluz ® and the RhodoLED ®

lamp series for its approved indications within the United States and certain of its territories.

Under the terms of the Ameluz LSA,

we were granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera Bioscience technology to use, import,

export, distribute, market, offer for sale and sell Ameluz ® and the RhodoLED ® lamp series for its approved

indications within the United States and certain of its territories.

the terms of the Ameluz LSA as entered into on June 16, 2021, we agree to purchase from Biofrontera Pharma a minimum number of units

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and Agreements—Biofrontera Pharma and Biofrontera Bioscience” for further details.

of the licensed products during the years ended December 31, 2021 and 2020 were $9.4 million and $5.6 million, respectively, and recorded

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

and payable to Biofrontera Pharma as of December 31, 2021 and 2020 were $0.3 million and $1.3 million, respectively, which were recorded

in accounts payable, related parties in the balance sheets.

June 19, 2015, we entered into a 6% interest bearing revolving loan agreement with Biofrontera AG, a significant shareholder of the Company.

Interest was accrued and paid quarterly over the life of the loan.

At December 31, 2021 and 2020, there was no loan principal balance

There was no interest expense related to the loan for the year ended December 31, 2021.

Interest expense related to the

loan was $2.5 million for the year ended December 31, 2020.

December 31, 2020, the Company agreed to convert the outstanding principal balance of the revolving debt of $47.0 million into an aggregate

of 7,999,000 shares of common stock at a purchase price of $5.875 per share, for an aggregate gross capital contribution of $47.0 million.

On March 31, 2021, we

entered into a new 6% interest bearing revolving loan agreement with Biofrontera AG for $20.0 million in committed sources of funds with

a two-year term.

The Company did not drawn upon the Second Intercompany Revolving Loan Agreement and upon the completion

of our initial public offering, the loan was effectively terminated.

In December 2021, we

entered into an Amended and Restated Master Contract Services Agreement, or Services Agreement, which provides for the execution

of statements of work that will replace the applicable provisions of our previous intercompany services agreement dated January 1, 2016,

or 2016 Services Agreement, by and among us, Biofrontera AG, Biofrontera Pharma and Biofrontera Bioscience, enabling us to continue to

use the Biofrontera Group’s IT resources as well as providing access to the Biofrontera Group’s resources with respect to

quality management, regulatory affairs and medical affairs.

If we deem that the Biofrontera Group should continue to provide these

services we will execute a statement of work under the Services Agreement with respect to such services.

of the licensed products during the years ended December 31, 2022 and 2021 were $16.6 million and $9.4 million, respectively, and

recorded in inventories in the consolidated balance sheets, and, when sold, in cost of revenues, related party in the consolidated

statements of operations.

Amounts due and payable to Biofrontera Pharma as of December 31, 2022 and 2021 were $1.3 million and $0.3

million, respectively, which were recorded in accounts payable, related parties in the consolidated balance sheets.

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

the execution of statements of work that will replace the applicable provisions of our previous intercompany services agreement dated

January 1, 2016, or 2016 Services Agreement, by and among us, Biofrontera AG, Biofrontera Pharma and Biofrontera Bioscience, enabling

us to continue to use the Biofrontera Group’s IT resources as well as providing access to the Biofrontera Group’s resources

with respect to quality management, regulatory affairs and medical affairs.

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) following our initial public offering whether they can or should be obtained from other third-party providers.

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.

related to the service agreement were $0.8 million and $0.7 million for the years ended December 31, 2022 and 2021, which were recorded

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Biofrontera AG.

Amounts due to Biofrontera AG related to the service agreement were $0.2 million as of both December 31, 2021

and 2020, which were recorded in accounts payable, related parties in the balance sheets.

Amounts due to Biofrontera AG related to the service agreement were $0.2 million for each of the years ended December 31, 2022 and 2021,

which were recorded in accounts payable, related parties in the consolidated balance sheets.

Assurance Agreement

November 1, 2016, we entered into a quality assurance agreement (“QAA”) with Biofrontera Pharma GmbH in connection

with the Ameluz LSA.

Under the Ameluz LSA, Biofrontera Pharma GmbH agreed to supply products under the LSA of the quality and according

to the specifications agreed upon with the FDA in the respective approvals.

The QAA allocates quality and regulatory responsibilities

including, but not limited to manufacturing, packaging, labeling, complaints, change control and any applicable requirements and is incorporated

by reference herein as Exhibit 10.9 to this Annual Report on Form 10-K.

November 1, 2016, we entered into a quality assurance agreement (“QAA”) with Biofrontera Pharma GmbH in connection with the

Under the Ameluz LSA, Biofrontera Pharma GmbH agreed to supply products under the LSA of the quality and according to the

specifications agreed upon with the FDA in the respective approvals.

The QAA allocates quality and regulatory responsibilities including,

but not limited to manufacturing, packaging, labeling, complaints, change control and any applicable requirements and is incorporated

by reference herein as Exhibit 10.9 to this Form 10-K.

The QAA has remained in effect following our initial public offering.

1 unchanged sentence

August 1, 2018, the Company executed a clinical lamp lease agreement with Biofrontera Bioscience to provide lamps and associated services.

revenue related to the clinical lamp lease agreements was approximately $57,000 and $62,000 for the years ended December 31, 2021 and

2020, respectively and is recorded as revenues, related party.

revenue related to the clinical lamp lease agreements was approximately $0.1 million for each of the years ended December 31, 2022

and 2021 and is recorded as revenues, related party.

Amounts due from Bioscience for clinical lamp and other

reimbursements were approximately $92,000 and $73,000 as of December 31, 2021 and 2020, respectively, which were recorded as accounts

receivable, related party in the balance sheets.

reimbursements were approximately $0.1 million and $0.1 million as of December 31, 2021 and 2020, respectively, which were recorded as

accounts receivable, related party in the consolidated balance sheets.

Reimbursements

from Maruho Related to Cutanea Acquisition

During the year ended December 31, 2020,

we received start-up cost financing from Maruho in the amount of $4.4 million, pursuant to Cutanea acquisition agreement.

was no start-up cost financing received during the year ended December 31, 2021.

The amounts reimbursed relating to SPA costs

Maruho agreed to pay of $0.5 million in 2021 and $1.2 million in 2020 were recorded as other income in the statements of operations.

Amounts due from Maruho,

primarily relating to SPA cost reimbursements, were $56,000 as of December 31, 2021 and were recorded in accounts receivable,

related parties in the balance sheets.

There were no amounts due from Maruho at December 31, 2020.

receive expense reimbursement from Biofrontera AG and Biofrontera Bioscience on quarterly basis for costs incurred on behalf of these

Total expense reimbursements were $0.3 million for each of the years ended December 31, 2021 and 2020, which were netted against

expenses incurred within selling, general and administrative expenses.

August 27, 2020, the Company received $1.5 million from Biofrontera Pharma to support our marketing efforts.

The amount received was

one-time and non-recurring, and was recorded as reduction of cost of revenues, related party and selling, general and administrative

in the statements of operations for the year ended December 31, 2020 for $1.1 million and $0.4 million, respectively.

The Company has recorded a receivable of $11.3

million due from Biofrontera AG for its 50% share of a legal settlement for which they 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, 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 of $11.3 million, $8.3 million is

short-term and $2.8 million is a long-term receivable

Director Independence

November 2021, our board of directors undertook a review of the independence of our directors and considered whether any director has

a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out

that director’s responsibilities.

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

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.

were no amounts reimbursed relating to SPA costs for the year ended December 31,2022.

For the year ended December 31, 2021 the amounts

reimbursed relating to SPA costs were $0.5 million and were recorded as other income in the consolidated statements of operations as

the related expenses were incurred.

The amounts due from Maruho, primarily relating to SPA cost reimbursements, were $0.1 million for

each of the years ended December 31, 2022 and 2021 and were recorded in other receivables, related parties in the consolidated balance

The Company has recorded a receivable of $6.4 million and $11.3 million

as of December 31, 2022 and December 31, 2021 due from Biofrontera AG for its 50% share of the balance of a legal settlement for

which both parties are jointly and severally liable.

to Note 8, Other Receivables, Related Party.

The Company has recognized $0.1 and $0.0 million of interest income for the years ended December

31, 2022 and 2021 in connection with this receivable.

Our board of directors has undertaken

a review of the independence of our directors and considered whether any director has a material relationship with us that could

compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities.

Our board of directors affirmatively determined that each of Dr.

Hoffman and Ms.

an “independent director,” as defined under the Exchange Act and the rules of Nasdaq.

Certain exemptions are available

to us under the rules of Nasdaq and under Rule 10A-3 of the Exchange Act that allow companies a phase-in period for complying with committee

independence requirements after an initial public offering.

Under these exemptions, companies are permitted to phase in compliance with

these rules and regulations as follows:

(1) one member must satisfy the requirement at the time of listing;

(2) a majority of members

must satisfy the requirement within 90 days of listing;

and (3) all members must satisfy the requirement within one year of listing.

We intend to utilize these exemptions.

Accordingly, you may not have the same protections afforded to shareholders of companies that

are subject to all of the corporate governance requirements of Nasdaq or the Exchange Act.

Borer and Ms.

“independent director,” as defined under the Exchange Act and the rules of Nasdaq.

Principal Accountant Fees and Services

Fees and Services

Grant Thornton LLP

was our independent registered public accounting firm for the years ended December 31, 2020 and December 31, 2021.

The following

table summarizes the fees Grant Thornton billed to us for the last two fiscal years All services and fees related to our 2021

audits were either approved by our audit committee or our Board of Directors for work prior to November 2, 2021.

2021 audit, all audit services and fees were authorized by our former parent company Biofrontera AG’s Board of

Thornton LLP was our independent registered public accounting firm for the years ended December 31, 2022 and December 31, 2021.

following table summarizes the fees Grant Thornton billed to us for the last two fiscal years.

All services and fees related to our

2022 and 2021 audits were either approved by our audit committee or our Board of Directors for work prior to November 2, 2021.

Years Ended December 31,

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All Other Fees

Audit fees consist of fees billed for professional services rendered by Grant Thornton LLP for the audits of our annual financial statements, the reviews of our interim financial statements, and related services that are normally provided in connection with statutory and regulatory filings or engagements, including our registration statements on Form S-1.

The formal written charter for our audit committee

requires that the audit committee pre-approve all audit services to be provided to the Company, whether provided by the Company’s

principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by its independent

registered public accounting firm.

During the approval process, our audit committee considers the impact of the types of services and

the related fees on the independence of the independent registered public accounting firm.

The services and fees must be deemed compatible

with the maintenance of that firm’s independence, including compliance with rules and regulations of the SEC.

fees consist of fees billed for professional services rendered by Grant Thornton LLP for the audits of our annual financial statements,

the reviews of our interim financial statements, and related services that are normally provided in connection with statutory and

regulatory filings or engagements, including our registration statements on Form S-1.

formal written charter for our audit committee requires that the audit committee pre-approve all audit services to be provided to the

Company, whether provided by the Company’s principal auditor or other firms, and all other services (review, attest and non-audit)

to be provided to the Company by its independent registered public accounting firm.

During the approval process, our audit committee

considers the impact of the types of services and the related fees on the independence of the independent registered public accounting

The services and fees must be deemed compatible with the maintenance of that firm’s independence, including compliance with

rules and regulations of the SEC.

Exhibit and Financial Statements

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Statements of Operations for the years ended December 31, 2022 and 2021

of Stockholders’ Equity for the years ended December

31, 2021 and 2020

Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021

Statements of Cash Flows for the years ended December 31, 2022 and 2021

8 unchanged sentences

Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on November 3, 2021).

Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock of Biofrontera Inc.

(incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A filed with the SEC on October 14, 2022)

Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2021).

Description of Securities

Form of IPO Unit Purchase Option (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2021)

Warrant Agent Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2021)

Form of Purchaser Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on December 3, 2021).

1 unchanged sentence

Form of Unit Purchase Option (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K filed with the SEC on December 3, 2021)

Form of 2022 Purchaser Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2022)

Form of 2022 Pre-funded Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2022)

Form of Inducement Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on July 28, 2022).

Stockholder Rights Agreement, dated as of October 13, 2022, between Biofrontera Inc.

and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed with the SEC on October 14, 2022)

Amended and Restated License and Supply Agreement dated June 16, 2021 by and among Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH and Biofrontera Inc.

23 unchanged sentences

5 to the Company’s Form S-1 filed with the SEC on October 1, 2021).

2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to Amendment No.

6 to the Company’s Form S-1 filed with the SEC on October 12, 2021).

2021 Omnibus Incentive Plan (as amended and restated on December 12, 2022) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on December 16, 2022).

Form of Restricted Stock Unit Executive Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to Amendment No.

13 unchanged sentences

Amendment to Employment Agreement effective as April 1, 2022 — Erica Monaco (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on April 5, 2022).

List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 of the Company’s S-1 filed with the SEC on July 6, 2021).

Form of Securities Purchase Agreement for 2022 Private Placement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2022)

Form of Registration Rights Agreement for 2022 Private Placement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2022)

Form of Inducement Letter (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2022)

Employment Agreement —Fred Leffler (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on October 24, 2022)

Form of Exchange Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on October 31, 2022)

List of Subsidiaries of the Company

Consent of Grant Thornton LLP, independent registered public accounting firm

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

14 unchanged sentences

to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed

on its behalf by the undersigned, thereunto duly authorized in the City of Woburn, Commonwealth of Massachusetts, on April 8,

on its behalf by the undersigned, thereunto duly authorized in the City of Woburn, Commonwealth of Massachusetts, on March 13, 2023.

Erica L Monaco

Executive Officer

Erica L Monaco

Executive Officer

March 13, 2023

Executive Officer)

Chief Financial Officer

March 13, 2023

( Principal Financial Officer)

Director Finance

Accounting Officer)

(Principal Accounting Officer)

Hermann Lübbert

of the Board of Directors

March 13, 2023

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

What changed 10-K

Item 9A. Controls and Procedures