Biofrontera Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our 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. Previously Identified Material Weaknesses in Internal Control Over Financial Reporting A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In 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. We 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. We 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. We 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. However, 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. Management’s Annual Report on Internal Control Over Financial Reporting 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. Remediation of Prior Material Weakness Through 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). Based on our assessment, the Company concluded that the material weakness has been remediated as of December 31, 2022. Attestation Report of the Registered Public Accounting Firm As 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. Changes in Internal Control Over Financial Reporting There 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. Item 9B. Other Information On 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. The proceeds of the loans under the Revolving Facility shall be used by the Company to provide working capital. Pursuant 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. The 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. The 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. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 60 PART III Item 10. Directors, Executive Officers and Corporate Governance Executive Officers and Directors The 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): Name Age Position(s) Since Executive Officers Prof. Hermann Lübbert Ph.D. 66 Executive Chairman and Director November 2021 Erica Monaco, CPA 38 Chief Executive Officer November 2021 Eugene Frederick Leffler III 39 Chief Financial Officer October 2022 Non-Employee Directors John J. Borer 65 Director November 2021 Loretta M. Wedge, CPA, CCGMA 62 Director November 2021 Beth J. Hoffman, Ph.D. 65 Director November 2021 Kevin D. Weber 64 Director March 2022 Executive Officers Prof. Hermann Lübbert, Ph.D. founded Biofrontera AG in 1997 and has served as Biofrontera Inc.’s Executive Chairman since November 2021 and as chairman of its board of directors since March 2015. Until December 2021, Prof. Dr. Lübbert had served as the chief executive officer of Biofrontera AG, chairman of the management board of Biofrontera AG, and as a managing director of all subsidiaries of Biofrontera AG. Prof. Dr. Lübbert has also served as the chief executive officer of Biofrontera Inc. (March 2015 – January 2020; March 2021-November 2021) and as the chairman of Biofrontera Inc.’s board of directors (March 2015-present). He studied biology in his hometown of Cologne and received his doctorate there in 1984. Following 3.5 years in academic research at the University of Cologne and the California Institute of Technology, he gained experience in managing a global research organization during 10 years at Sandoz, where he served as Head of Genome Research, and Novartis Pharma AG, where he served as a member of the global Neuroscience Research Management Team. He qualified as a university lecturer at the Swiss Federal Institute of Technology (ETH) Zurich and in addition to his engagements at Biofrontera held a professorship for animal physiology at the Ruhr-University Bochum from which he retired on February 28, 2022. 61 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. 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. Fred Leffler has served as Biofrontera Inc’s Chief Financial Officer since October 2022. Mr. 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. Non-Employee Directors John J. 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. He was formerly the Chief Executive Officer and Head of Investment Banking at Rodman & Renshaw and has held senior positions at Security Pacific Business Credit and Barclays American Business Credit. Mr. Borer has also served on the Supervisory Board of Biofrontera AG since May 2016 until December 2021. He holds a Doctor of Law degree (J.D.) from Loyola Law School in Los Angeles, California and a degree in Agricultural Economics from The University of California, Davis. Loretta M. Wedge, CPA, CCGMA became a member of our board of directors in November 2021. She has been the Managing Partner of SemperFi Accounting Services, LLC since July 2019. Prior to that, from February to October 2017 she was the Vice President, Finance & Controller of Velcro Companies and between June 2015 and February 2017, she was the Vice President & Controller of CRISPR Therapeutics. Ms. Wedge is a financial executive with over 25 years of both public and private sector experience including extensive manufacturing, utility, medical device, bio-pharma and experience. She has an M.B.A. from California State University in Sacramento, California. She holds an active CPA license and is also a Certified Chartered Global Management Accountant. Beth J. Hoffman, Ph.D. became a member of our board of directors in November 2021. Dr. Hoffman is the founder, and, since 2015, has been the President and Chief Executive Officer, of Origami Therapeutics, Inc., in San Diego, California. Dr. Hoffman has over 20 years of experience in drug discovery and development. Dr. 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. Kevin D. Weber became a member of our board of directors in March 2022. Mr. 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 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. Mr. 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. Family Relationships There are no family relationships between any director or executive officer. Involvement in Certain Legal Proceedings None of our directors, executive officers or control persons have been involved in any of the following events during the past ten years: 1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); 3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or 4. 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. 62 Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file. Based 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, 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. Dr. Lübbert on January 19, 2022 to report employee stock grants, (b) late Form 4s filed for Prof. Dr. Lübbert, Ms. Monaco, Ms. Hoffman, Ms. Wedge, Mr. Weber and Mr. Borer on May 26, 2022 to report equity compensation and (c) a late Form 4 filed for Prof. Dr. Lübbert and Ms. Monaco on September 19, 20222 to report the vesting of restricted stock units. Code of Ethics and Code of Conduct We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is posted on our website at https://investors.biofrontera-us.com/wp-content/uploads/2021/10/Code-of-Conduct.pdf . In addition, we post on our website all disclosures that are required by law or the Nasdaq listing standards concerning any amendments to, or waivers from, any provision of the code. The information on or accessed through our website is deemed not to be incorporated in this Form 10-K or to be part of this Form 10-K. Procedures for Shareholders to Recommend Director Nominees There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors. Audit Committee We have an audit committee of the board of directors, which consists of Mr. Weber, Dr. Hoffman and Ms. Wedge. Before the expiration of the phase-in period applicable to initial public offerings under SEC and Nasdaq rules, all members of our audit committee will be independent for audit committee purposes. The board of directors has determined that Ms. Wedge qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to: ● reviewing 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 Form 10-K ● discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; ● discussing with management major risk assessment and risk management policies; ● monitoring the independence of the independent auditor; ● verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; 63 ● reviewing and approving all related-party transactions; ● inquiring and discussing with management our compliance with applicable laws and regulations; ● pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; ● appointing or replacing the independent auditor; ● determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; and ● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies. Item 11. Executive Compensation Summary Compensation Table Executive Compensation during the years ended December 31, 2022 and 2021 was as follows: Name and principal position Year Salary ($) Bonus ($) Stock awards ($) Option awards ($) All other compensation ($) Total ($) Erica Monaco, CPA, Chief Executive Officer 2022 433,823 120,798 398,474 243,100 346 1,196,541 2021 294,231 107,658 270,407 140,441 235 812,972 Eugene Frederick Leffler III 2022 ** 54,615 25,000 - - 55 79,670 2021 - - - - - - Prof. Hermann Lübbert Ph.D., Executive Chairman 2022 474,739 - 498,092 303,785 1,616 1,278,232 2021 18,019 * - 540,818 280,885 - 839,722 * for services during December 14, 2021 – December 31, 2021 **for services during October 24, 2022 – December 31, 2022 Refer to Note: 20. 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. 64 Narrative Disclosure to Summary Compensation Table Executive Compensation Arrangements The following summarizes the material terms of the employment offer letters and employment agreements with each of our named executive officers. Monaco Employment Agreement On October 21, 2019, we entered into an employment agreement with Erica Monaco pursuant to which she agreed to continue to serve as our Vice President of Finance and Operations. This agreement was amended on January 6, 2020, pursuant to which she agreed to serve as our Chief Financial Officer in consideration for an annual base salary of $270,000 and eligibility to receive a cash bonus of up to 30% of her base salary and to participate in any benefit programs we make available to our employees. Ms. Monaco’s employment agreement is for no particular terms and provides “at will” employment, provided that, if we terminate Ms. Monaco without “cause” (as such term is defined in Ms. Monaco’s employment agreement), we must provide her with ninety (90) days’ notice. On August 11, 2021, we entered into a new employment agreement with Ms. Monaco. The agreement provides that Ms. Monaco will serve as our Chief Executive Officer with a base salary of $300,000 as well as provides a signing bonus of $75,000 paid in two installments. The terms 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. Monaco. 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. 65 Lübbert Employment Agreement On October 1, 2021, we entered into an amended employment agreement with Prof. Dr. Lübbert that became effective on December 14, 2021, the day after his last day of employment with Biofrontera AG. The agreement provides that Prof. Dr. 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. 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. Dr. Lübbert 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. Leffler Employment Agreement On 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. Mr. 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. In 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. If Mr. 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. 2022 Equity Awards Our 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. We maintain the 2021 Omnibus Incentive Plan, which provided for the issuance of stock option awards to our eligible employees (including our named executive officers). See additional details in the “ General Information About the 2021 Omnibus Incentive Plan” below. Ms. Monaco’s Stock Option Award On December 9, 2021, Ms. Monaco was granted an option to purchase 56,689 shares of our common stock under the terms of the 2021 Omnibus Incentive Plan, as described below, at an exercise price of $4.77 per share. Subject to Ms. Monaco’s continued employment through the applicable vesting date, the option will vest and become exercisable in three equal annual installments, beginning on December 9, 2022. In the event of Ms. Monaco’s death, disability, or termination for good reason while any portion of the option remains unvested, the option will become immediately vested and exercisable with respect to 100 percent of the option shares as of the date of such occurrence. In the event of termination for cause, Ms. Monaco will forfeit the vested and unvested portions of the option. In the event of termination for any other reason, the unvested portion of the option will be forfeited as of the termination date, and the vested portion will expire on the earlier of the last day of the applicable option period or the 90 th day following the termination date. Ms. Monaco’s Award of Restricted Stock Units On 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 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. Ms. 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 forfeited. 66 Prof. Dr. Lübbert’s Stock Option Award On December 9, 2021, 2021, Prof. Dr. Lübbert was granted an option to purchase 113,379 shares of our common stock under the terms of the 2021 Omnibus Incentive Plan, as described below, at an exercise price of $4.77 per share. Subject to Prof. Dr. Lübbert’s continued employment through the applicable vesting date, the options will vest in three equal annual installments beginning on December 9, 2022. In the event of the Prof. Dr. Lübbert’s death, disability, or termination for good reason while any portion of the option remains unvested, the option will become immediately vested and exercisable with respect to 100 percent of the option shares as of the date of such occurrence. In the event of termination for cause, Prof. Dr. Lübbert will forfeit immediately the vested and unvested portions of the option. In the event of termination for any other reason, the unvested portion of the option will be forfeited as of the termination date, and the vested portion will expire on the earlier of the last day of the applicable option period or the 90 th day following the termination date. Prof. Dr. Lübbert’s Award of Restricted Stock Units On December 9, 2021, Prof. Dr. Lübbert also received a grant of 113,379 restricted stock units under the terms of the 2021 Omnibus Incentive Plan, as described below, and subject to the applicable award agreement between Prof. Dr. Lübbert 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 Prof. Dr. Lübbert’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. Prof. Dr. Lübbert is entitled to dividend equivalents with respect to the restricted stock units. In the event of Prof. Dr. Lübbert’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 for cause, the unvested and vested 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 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 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. Eligibility 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. 67 Duration; 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. 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. 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. Awards 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. These terms are described in a stock option agreement. Restricted Stock Awards Restricted 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. 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. 68 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 Adjustments 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 under the 2021 Omnibus Incentive Plan. Repricing 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 goals); and ● 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; and ● 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. 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. 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 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. 69 Award Termination; Forfeiture; Disgorgement 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. 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. Outstanding Equity Awards at Fiscal Year End The 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: Name Number of Securities Underlying Unexercised Options (#) Exercisable Equity incentive plan awards: number of securities underlying unexercised unearned options (#) Option Exercise Price Option Expiration Date Number of Unearned Shares or Units That Have Not Vested (#) Market or Payout Value of Unearned Shares or Units That Have Not Vested ($) Erica Monaco Stock options (1) 18,707 37,982 4.77 12/9/2031 - - Stock options (3) - 152,672 2.61 05/18/2032 - - Restricted stock units (2) - - - - 152,672 398,474 Hermann Lübbert Stock options (1) 37,415 75,964 4.77 12/9/2031 - - Stock options (3) - 190,840 2.61 05/18/2032 - - Restricted stock units (2) - - - - 190,840 498,092 Eugene Frederick Leffler III - - - - - - (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 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. (3) The option vests in three equal annual installments beginning on May 18, 2023. Additional Narrative Disclosure General Information About the Employee Stock Purchase Plan (the “ESPP”) We will use the ESPP to provide eligible employees with the opportunity to purchase our common stock, thereby encouraging employees to share in the economic growth and success of the Company through stock ownership. The ESPP was adopted by our board of directors on July 23, 2021 and became effective upon approval of our shareholders on July 23, 2021, although we have not allocated any shares to the program at this time. At a future date, we will seek shareholder approval to authorize the offering of shares of our common stock pursuant to the ESPP. The ESPP is not qualified under Section 401(a) of the Code, which deals with the tax treatment of qualified retirement plans. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Code. The ESPP is not subject to any provisions of the U.S. Employee Retirement Income Security Act of 1974, as amended. The ESPP is administered by our compensation committee, or a duly-authorized delegate. The administrator has full and exclusive authority to interpret the terms of the ESPP and determine eligibility. In general, unless the administrator determines otherwise, all full and part-time employees who are employed by us or a designated subsidiary are eligible to participate in offerings under the ESPP. The administrator may exclude the following employees from offerings under the ESPP: employees who have been employed for less than two years, are highly compensated or subject to Section 16 of the Exchange Act, or who are citizens or residents of certain foreign jurisdictions. In addition, employees who beneficially own 5% or more of the total combined voting power of all classes of our capital stock, who are customarily employed 20 hours or less per week, or are customarily employed for not more than five months during the year are excluded from participating in the ESPP. When shares are available, employees may acquire shares of our common stock through payroll deductions, which may not exceed 15% of their compensation during any pay period. The purchase price of the shares in each qualified offering will be 85% of the fair market value of our closing common stock price on the last day of a designated offering period. General Information About the 401(k) Plan We sponsor a 401(k) defined contribution plan in which our named executive officers may participate, subject to limits imposed by the Code, to the same extent as our other full-time employees. Currently, we match 50% of contributions made by participants in the 401(k) plan up to a maximum of 6% of the employee’s base salary per year. All matching contributions are subject to vesting at the rate of 25% per year of service. Severance Benefits Prof. Dr. Lübbert, Mr. 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.” 70 Director Compensation Director 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: Name Fees earned or paid in cash ($) Stock awards ($) Option Awards ($) Total ($) Hermann Lübbert (1) $ - - - $ - Kevin Weber 46,399 33,132 79,531 John J. Borer 60,416 - 33,132 93,548 Loretta M. Wedge, CPA, CCGMA 63,420 - 33,132 96,552 Beth J. Hoffman, Ph.D. 59,906 - 33,132 93,038 (1) As described above in this Item 11, Prof. Dr. Lübbert was granted a stock option award and restricted stock units in his capacity as an employee of the Company, not for his service as a director. Narrative to Director Compensation Table Our non-employee director compensation policy is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. 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: All non-employee members $ 35,000 $ 40,250 Additional retainer for non-executive chairperson 30,000 $ 30,000 Audit Committee: Members $ 7,500 $ 8,000 Additional retainer for chair $ 7,500 $ 8,000 Compensation Committee: Members $ 5,000 $ 6.000 Additional retainer for chair $ 5,000 $ 9,000 Nominating and Corporate Governance Committee: Members $ 4,000 $ 5,000 Additional retainer for chair $ 4,000 $ 5,000 These fees are payable in four equal quarterly installments, provided that the amount of such payment will be prorated for any portion of such quarter that the director is not serving on our board of directors or any committee of the board of directors. We also reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending our board of directors and committee meetings. 71 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Equity Compensation Plan Information The 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) 2021 Omnibus Incentive Plan 2,080,856 3.11 3,088,876 Security Ownership of Certain Beneficial Holders and Management The 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. Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Our common stock subject 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. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all common stock shown as beneficially owned by the shareholder. Unless otherwise noted below, the address of each person listed on the table is c/o Biofrontera Inc., 120 Presidential Way, Suite 330, Woburn, Massachusetts 01801. Name of beneficial owner Common Stock beneficially owned % of Common Stock Owned Options exercisable within 60 days(1)(2) 5% or more stockholders: Biofrontera AG Hemmelrather Weg 201 D-51377 Leverkusen, Germany(3) 8,000,000 30.0 - Abshagen Consulting GmbH Burgunderweg 8 Weinheim, Germany, 69469(4) 3,148,042 11.8 - Named executive officers and directors: Erica Monaco 56,689 * 18,707 Eugene Frederick Leffler III - * - Hermann Lübbert 113,379 -* 37,415 John J. Borer - -* 20,166 Loretta M. Wedge, CPA, CCGMA - -* 20,166 Beth J. Hoffman, Ph.D. - -* 20,166 Kevin D. Weber - * 20,166 All current directors and executive officers as a group (7 persons) 170,068 1.15 136,786 * Represents 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. Dr. 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. Dr. 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. If Mr. 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. 72 Item 13. Certain Relationships and Related Transactions, and Director Independence The following are summaries of certain provisions of transactions within the past three years to which we have been a party, in which the amount involved exceeds or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or immediate family member thereof, had or will have a direct or indirect material interest, and are qualified in their entirety by reference to all of the provisions of such agreements. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that we would pay or receive, as applicable, in arm’s-length transactions. Management Prof. Dr. Lübbert used to be Chief Executive Officer and Chairman of the management board of Biofrontera AG, our former parent and currently a significant stockholder. Following his resignation from Biofrontera AG in December 2021, he will begin to receive compensation from us for his services to our company as determined in accordance with the terms of his amended employment agreement. Related Party Agreements License and Supply Agreement On July 15, 2016, we executed an exclusive license and supply agreement with Biofrontera Pharma, which was amended in July 2019 to increase the Ameluz ® transfer price per unit from 35.0% to 50.0% of the anticipated net selling price per unit as defined in the agreement. Under the agreement, we obtained an exclusive, non-transferable license to use Biofrontera Pharma’s technology to market and sell the licensed products in the United States and certain of its territories, Ameluz ® and the RhodoLED ® lamp, and must purchase the licensed products exclusively from Biofrontera Pharma. There was no consideration paid for the transfer of the license. On 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 as entered into on June 16, 2021, we agree to purchase from Biofrontera Pharma a minimum number of units of Ameluz ® per year according to an agreed schedule at fifty percent of our anticipated net price per unit for Ameluz ® . On October 8, 2021, we entered into an amendment to the Ameluz LSA under which the price we pay per unit will be based upon our sales history, although the minimum number of units to purchase per year remains unchanged. See “ Business—Commercial Partners and Agreements—Biofrontera Pharma and Biofrontera Bioscience” for further details. Purchases 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. 73 Service Agreements 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. We currently have statements of work in place regarding IT, regulatory affairs, medical affairs, pharmacovigilance, and investor relations services, and are continuously assessing the other services historically provided to us by Biofrontera AG to determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers. Expenses related to the service agreement were $0.8 million and $0.7 million for the years ended December 31, 2022 and 2021, which were recorded in selling, general and administrative, related party. Management asserts that these expenses represent a reasonable allocation from Biofrontera AG. 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. Quality Assurance Agreement On 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 Form 10-K. The QAA has remained in effect following our initial public offering. 74 Clinical Lamp Lease Agreement On August 1, 2018, the Company executed a clinical lamp lease agreement with Biofrontera Bioscience to provide lamps and associated services. Total 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 $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 Pursuant to the Cutanea acquisition share purchase agreement, we received start-up cost financing and reimbursements for certain costs. These restructuring costs Maruho agreed to pay are referred to as “SPA costs” under the arrangement and are to be accounted for as other income. Refer to Note 3, Acquisition Contract Liabilities. There 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 sheets. Other Arrangements 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. Refer 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. Director Independence 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, Mr. Weber, Mr. Borer and Ms. Wedge is an “independent director,” as defined under the Exchange Act and the rules of Nasdaq. 75 Item 14. Principal Accountant Fees and Services Audit Fees and Services Grant Thornton LLP was our independent registered public accounting firm for the years ended December 31, 2022 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 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, Fee Category 2022 2021 Audit Fees (1) $ 438,194 $ 990,000 Audit-Related Fees - - Tax Fees - - All Other Fees - - Total Fees $ 438,194 $ 990,000 (1) 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. Pre-approval Policies 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. 76 PART IV Item 15. Exhibit and Financial Statements The following documents are filed as part of this report: (1) Financial Statements, included in Part II, “ Item 8. Financial Statements and Supplementary Data ”: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2022 and 2021 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 Notes to Consolidated Financial Statements (2) Financial Statement Schedules: Financial statement schedules have been omitted because either they are not applicable or the required information is included in the financial statements or the notes thereto. (3) List of Exhibits: The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the SEC. Exhibit No. 2.1# Share and Purchase Agreement dated March 25, 2019 between Biofrontera Newderm LLC, Biofrontera AG, Maruho Co. Ltd. And Cutanea Life Sciences, Inc. (incorporated by reference to Exhibit 4.13 to Biofrontera AG’s Form 20-F filed with the SEC on April 29, 2019). 3.1 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). 3.2 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) 3.3 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). 4.1* Description of Securities 4.2 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) 4.3 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) 4.4 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). 77 4.5 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on December 3, 2021). 4.6 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) 4.7 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) 4.8 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) 4.9 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). 4.10 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) 10.1# Amended and Restated License and Supply Agreement dated June 16, 2021 by and among Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH and Biofrontera Inc. (incorporated by reference to Exhibit 10.1 to Company’s Form S-1 filed with the SEC on July 6, 2021). 10.2# License and Supply Agreement dated March 10, 2014 by and between Ferrer Internacional, S.A. and Medimetriks Pharmaceuticals, Inc., as amended by Amendment No. 1 and Consent and Acknowledgment Agreement with respect thereto (incorporated by reference to Exhibit 4.14 to Biofrontera AG’s Form 20-F filed with the SEC on April 29, 2019). 10.3# Amendment No. 1 to License and Supply Agreement dated March 5, 2018 by and between Medimetriks Pharmaceuticals, Inc. and Ferrer Internacional, S.A. (incorporated by reference to Exhibit 4.15 to Biofrontera AG’s Form 20-F filed with the SEC on April 29, 2019). 10.4 Consent and Acknowledgement Agreement dated March 5, 2018 by and between Medimetriks Pharmaceuticals, Inc. and Ferrer Internacional, S.A. (incorporated by reference to Exhibit 4.16 to Biofrontera AG’s Form 20-F filed with the SEC on April 29, 2019). 10.5# Supply Agreement dated March ___, 2018 by and between Ferrer Internacional, S.A. and Cutanea Life Sciences, Inc. (incorporated by reference to Exhibit 4.17 to Biofrontera AG’s Form 20-F filed with the SEC on April 29, 2019). 10.6† Employment Agreement – Erica Monaco (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Company’s Form S-1 filed with the SEC on August 12, 2021). 10.7 Second Intercompany Revolving Loan Agreement dated March 31, 2021 by and between the Company and Biofrontera AG (incorporated by reference to Exhibit 10.7 to the Company’s Form S-1 filed with the SEC on July 6, 2021). 10.8 Amended and Restated Master Contract Services Agreement, by and among the Company, Biofrontera AG, Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (incorporated by reference to Exhibit 10.8 to the Company’s Form S-1 filed with the SEC on July 6, 2021). 10.9 Quality Agreement dated November 1, 2016, between the Company and Biofrontera Pharma GmbH (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company’s Form S-1 filed with the SEC on July 26, 2021). 10.10 Intercompany Services Agreement dated January 1, 2016, between the Company, Biofrontera AG, Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (incorporated by reference to Exhibit 10.10 to Amendment No. 4 to the Company’s Form S-1 filed with the SEC on September 16, 2021 10.11† Amended Employment Agreement dated October 1, 2021 – Hermann Lübbert (incorporated by reference to Exhibit 10.11 to Amendment No. 5 to the Company’s Form S-1 filed with the SEC on October 1, 2021). 10.12† 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). 10.13† Form of Restricted Stock Unit Executive Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to Amendment No. 6 to the Company’s Form S-1 filed with the SEC on October 12, 2021). 78 10.14† Form of Nonqualified Stock Option Executive Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to Amendment No. 6 to the Company’s Form S-1 filed with the SEC on October 12, 2021). 10.15† Form of Nonqualified Stock Option Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.15 to Amendment No. 6 to the Company’s Form S-1 filed with the SEC on October 12, 2021). 10.16† Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.16 filed with the SEC on October 12, 2021). 10.17# Corrected Amendment to Amended and Restated License and Supply Agreement dated October 8, 2021 by and among Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH and Biofrontera Inc. (incorporated by reference to Exhibit 10.17 to Amendment No. 7 to the Company’s Form S-1 filed with the SEC on October 13, 2021). 10.18 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on December 3, 2021). 10.19 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on December 3, 2021). 10.20† Amendment to Amended Employment Agreement effective as December 15, 2021 and dated March 2, 2022 — Herman Lübbert (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on March 8, 2022). 10.21 Amended Settlement Allocation Agreement dated March 31,2022 between the Company and Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, Biofrontera Development GmbH, Biofrontera Neuroscience GmbH, (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on April 5, 2022). 10.22† 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). 10.23 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) 10.24 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) 10.25 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) 10.26† 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) 10.27 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) 21.1* List of Subsidiaries of the Company 23.1* Consent of Grant Thornton LLP, independent registered public accounting firm 31.1 * Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 31.2 * Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 32.1 * Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 32.2 * Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. † Indicates a management contract or compensatory plan or arrangement. # Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed. Item 16. Form 10-K Summary Not applicable. 79 SIGNATURES Pursuant 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 March 13, 2023. BIOFRONTERA INC. By: /s/ Erica L Monaco Name: Erica L. Monaco Title: Chief Executive Officer Signature Title Date /s/ Erica L Monaco Chief Executive Officer March 13, 2023 Erica Monaco ( Principal Executive Officer) /s/ E. Fred Leffler Chief Financial Officer March 13, 2023 E. Fred Leffler ( Principal Financial Officer) (Principal Accounting Officer) /s/ Hermann Lübbert Chairman of the Board of Directors March 13, 2023 Hermann Lübbert /s/ John J. Borer Director March 13, 2023 John J. Borer /s/ Loretta M. Wedge Director March 13, 2023 Loretta M. Wedge /s/ Kevin D. Weber Director March 13, 2023 Kevin D. Weber /s/ Beth J. Hoffman Director March 13, 2023 Beth J. Hoffman 80