What changed in this filing

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Item 1. Financial Statements

2023-05-12 compared with 2022-11-14 · 402 added, 579 removed, 351 unchanged (74% of the section changed)

2 unchanged sentences

thousands, except par value and share amounts )

September 30, 2022

March 31, 2023

December 31, 2022

1 unchanged sentence

Cash and cash equivalents

Investment in equity securities

Accounts receivable, net

4 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Intangible asset, net

4 unchanged sentences

Acquisition contract liabilities, net

Operating lease liabilities

Accrued expenses and other current liabilities

2 unchanged sentences

Acquisition contract liabilities, net

Warrant liability

Warrant liabilities

Operating lease liabilities, non-current

Other liabilities

2 unchanged sentences

Stockholders’ equity:

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

Common Stock, $ 0.001 par value, 300,000,000 shares

23,550,960 and 17,104,749 shares

issued and outstanding as of September 30, 2022 and December 31, 2021

Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2023 and December 31, 2022

Common Stock, $ 0.001 par value, 300,000,000 shares authorized;

26,699,002 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Additional paid-in capital

6 unchanged sentences

Three Months Ended

September 30,

Nine months ended

September 30,

Products revenues, net

6 unchanged sentences

Selling, general and administrative, related party

Restructuring costs

Change in fair value of contingent consideration

2 unchanged sentences

Other income (expense)

Change in fair value of warrants

Change in fair value of warrant liabilities

Change in fair value of investments

Interest expense, net

9 unchanged sentences

thousands, except number of shares)

and Nine Months Ended September 30, 2022

Balance June 30, 2022

Exercise of pre-funded warrants

Exercise of PIPE warrants

Issuance of shares for vested

restricted stock units

Stock based compensation

Balance, September 30,

Months Ended March 31, 2023 and 2022

Additional Paid-

Balance, December 31, 2022

Issuance of common stock and

warrants under private placement, net of issuance costs

Exercise of pre-funded warrants

Exercise of PIPE warrants

Issuance of shares for vested

restricted stock units

Stock based compensation

Balance, September 30, 2022

and Nine Months Ended September 30, 2021

Additional Paid-

Balance June 30, 2021

Balance, September 30, 2021

Balance, March 31, 2023

Balance, December 31, 2021

Balance, September 30, 2021

Stock based compensation

Net income (loss)

Balance, March 31, 2022

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

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

Amortization of right-of-use assets

Amortization of acquired intangible assets

Change in fair value of investment in equity securities

Change in fair value of contingent consideration

1 unchanged sentence

Stock-based compensation

Provision for inventory obsolescence

Provision for doubtful accounts

5 unchanged sentences

Accounts payable and related party payables

Operating lease liabilities

Accrued expenses and other liabilities

1 unchanged sentence

Cash flows from investing activities

Disbursement for loan receivable

Purchases of property and equipment

Cash flows used in investing activities

Cash flows from financing activities:

Payment of deferred offering costs

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

Proceeds from exercise of warrants

Cash flows provided by (used) in financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

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

3 unchanged sentences

Income taxes paid, net

Supplemental non-cash investing and financing activities

Deferred offering costs included in accrued expenses and other liabilities

Non-cash purchase of fixed assets included in accounts payable and related party payable

Conversion of warrant liability to equity

accompanying notes are an integral part of these consolidated financial statements.

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Business Overview

Biofrontera Inc (the “Company”).

U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions

with a focus on photodynamic therapy (“PDT”) and topical antibiotics.

The Company’s licensed products are used for the

treatment of actinic keratoses, which are pre-cancerous skin lesions as well as impetigo, a bacterial skin infection.

Biofrontera Inc.

(the “Company”) includes

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

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

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

principal licensed products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer.

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

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

FDA-approved medical devices, the BF-RhodoLED® lamp series, consisting of the BF-RhodoLED® and the RhodoLED® XL lamps,

for photodynamic therapy (“PDT”) (when used together, “Ameluz ® PDT”) in the U.S.

lesion-directed and field-directed treatment of actinic keratosis of mild-to-moderate severity on the face and scalp.

currently selling Ameluz® for this indication in the U.S.

under an exclusive license and supply agreement (“Ameluz

LSA”), by and among us and Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (collectively, the (“Ameluz

Licensor”) originally dated as of October 1, 2016, and as subsequently amended on October 8, 2021.

Refer to Note 16,

Related Party Transactions , for further details.

second prescription drug product is Xepi® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth.

Currently, no antibiotic resistance against Xepi® is known and it has been specifically approved by the FDA for the treatment of

impetigo due to staphylococcus aureus or streptococcus pyogenes.

The approved indication is impetigo, a common skin infection.

approved for use in adults and children 2 months and older.

We are currently selling Xepi® for this indication in the U.S.

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

(“Ferrer”) that was acquired

by Biofrontera Inc.

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

Refer to Note 16, Related Party Transactions ,

for further details.

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

includes its wholly owned subsidiary

Bio-FRI GmbH, a limited liability company organized under the laws of Germany.

Our subsidiary, Bioi-FRI was formed on February 9, 2022,

as a German presence to facilitate our relationship with the Ameluz Licensor.

principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with the RhodoLED ®

lamp series, for PDT (when used together, “Ameluz ® PDT”).

In the United States, the PDT treatment is

used for the lesion-directed and field-directed treatment of actinic keratoses (“AK”) of mild-to-moderate severity on the

face and scalp.

We are currently selling Ameluz ® for this indication in the U.S.

under an exclusive license and supply

agreement (“Ameluz LSA”) between Biofrontera, Inc.

and the Ameluz Licensors.

Our second prescription drug licensed product in our portfolio is Xepi®

(ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth.

Currently, no antibiotic resistance against

Xepi® is known and it has been specifically approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus

aureus or Streptococcus pyogenes.

It is approved for use in the United States in adults and children 2 months and older.

We are currently

selling Xepi® for this indication in the United States.

under an exclusive license and supply agreement, as amended (“Xepi LSA”)

with Ferrer Internacional S.A.

(“Ferrer”) that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea

Life Sciences, Inc.(“Cutanea”).

and Going Concern

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

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

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

Company’s primary sources of liquidity are its existing cash balances, cash collected from the sales of its products, and cash

flows from equity financing transactions received in 2022.

As of March 31, 2023, we had cash and cash equivalents of $ 13.5 million, compared

to $ 17.2 million as of December 31, 2022.

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

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

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

We incurred net cash outflows from operations of $ 7.9 million

and $ 5.7 million for the same periods, respectively.

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

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

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

Contract Liabilities ), and legal settlement expenses after reimbursement from Biofrontera AG (“Biofrontera AG”), a significant shareholder and

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

Accrued Expenses and Other Current Liabilities ).

Long-term material cash

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

Commitments and Contingencies ) and

contingent consideration payments to Maruho (see Note 3.

Acquisition Contract Liabilities).

For the three months ended March 31, 2023 and 2022, we incurred

loss from operations of $ 5.5 million and $ 3.1 million, respectively .

We incurred net cash outflows

from operations of $ 3.7 million and $ 2.1 million, for the same periods, respectively.

We had an accumulated deficit as of March 31, 2023

of $ 87.0 million.

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

including facility and auto leases (see Note 21.

Commitments and Contingencies ), Maruho start-up cost financing repayments of

million (see Note 3.

Acquisition Contract Liabilities ), and legal settlement expenses after reimbursement from Biofrontera AG

Long-term material cash requirements include potential milestone payments to Ferrer Internacional S.A, and contingent

consideration payments to Maruho connected with Xepi sales (see Note 21.

Commitments and Contingencies) .

Additionally,

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

we expect to continue to incur operating losses due to significant discretionary sales and marketing , medical affairs, and dermatology

community outreach efforts as we seek to expand the

commercialization of our licensed products in the United States.

We also expect to incur additional expenses to add and improve

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

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

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

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

AG as a strategic measure.

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

Based on current operating plans and financial forecasts,

we expect that our current cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months from

the date of issuance of our financial statements.

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

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

and defer some hiring.

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

to be a need to significantly revise our operations currently.

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

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

In addition, we

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

a public company in the U.S.

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

Based on current operating plans and financial forecasts, we expect that our revolving line of credit and expected proceeds from the

sale of our investment in equity securities in addition to our current cash and cash equivalents will be sufficient to fund our

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

However, we expect to have to

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

costs significantly exceeding the amounts currently estimated.

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

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

marketing consulting and defer some hiring.

While we expect to continue being flexible in our spending over the next twelve months,

we do not consider there to be a need to significantly revise our operations currently.

Summary of Significant Accounting Policies

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financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly

the Company’s financial position as of September 30, 2022, the Company’s operating results for the three and nine months

ended September 30, 2022 and 2021, and the Company’s cash flows for the nine months ended September 30, 2022 and 2021.

The accompanying

financial information as of December 31, 2021 is derived from audited financial statements.

Interim results are not necessarily indicative

of results for a full year.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s

Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 11, 2022.

All amounts shown in

these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages and per share and

share amounts.

the Company’s financial position as of March 31, 2023, the Company’s operating results for the three months ended March 31,

2023 and 2022, and the Company’s cash flows for the three months ended March 31, 2023 and 2022.

The accompanying financial information

as of December 31, 2022 is derived from audited financial statements.

Interim results are not necessarily indicative of results for a

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual

Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 13, 2023.

amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages

and per share and share amounts.

Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies within

the notes to financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K.

have been no significant changes to these policies during the nine months ended September 30, 2022 other than the following.

Consolidation

accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the

United States of America (“GAAP”).

These consolidated financial statements include the accounts of our wholly owned subsidiary.

All intercompany balances and transactions have been eliminated in consolidation.

have been no significant changes to these policies during the three months ended March 31, 2023.

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

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estimates and the exercising of judgment are appropriate relate to, valuation allowances for receivables and inventory, valuation of

contingent consideration and warrant liabilities, realization of intangible and other long-lived assets, product sales allowances and reserves,

share-based payments and income taxes including deferred tax assets and liabilities.

Estimates are based on historical experience and

other assumptions that are considered appropriate in the circumstances.

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

Issued Accounting Pronouncements

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires organizations that lease assets to recognize

on the balance sheet the assets and liabilities for the rights and obligations created by those leases.

The new guidance requires

that a lessee recognize assets and liabilities for leases with lease terms of more than twelve months and recognition, presentation

and measurement in the financial statements will depend on the lease classification as a finance or operating lease.

the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing

and uncertainty of cash flows arising from leases.

The JOBS ACT provides that an emerging growth company can take advantage of an

extended transition period for complying with new or revised accounting standards.

This allows us to delay the adoption of this new

standard until it would otherwise apply to private companies.

The new standard will be effective for us for fiscal years beginning

after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company is currently

evaluating the impact of adopting this guidance.

Upon adoption of Topic 842, the Company expects to recognize a right-of-use asset and lease liability for all financing

and operating leases with terms greater than twelve months.

contingent consideration and warrant liabilities, realization of intangible and other long-lived assets, product sales allowances and

reserves, share-based payments and income taxes including deferred tax assets and liabilities.

Estimates are based on historical experience

and other assumptions that are considered appropriate in the circumstances.

They are continuously reviewed but may vary from the actual

Adopted Accounting Pronouncements

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

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as an allowance that reflects the entity’s current estimate of credit losses expected to be incurred.

The new standard will be

effective for us on January 1, 2023.

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

The new standard was effective

for us on January 1, 2023, and did not have a material effect on our consolidated financial statements.

Acquisition Contract Liabilities

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to the benefit associated with the non-interest-bearing start-up cost financing and $ 6.5 million of contingent consideration related

to the estimated profits from the sale of Cutanea products to be shared equally with Maruho.

to the estimated profits from the sale of Cutanea products to be shared equally with Maruho (see Note 21.

Commitment and contingencies – Cutanea payments) .

contract asset related to the start-up cost financing is amortized on a straight-line basis using a 6.0 % interest rate over the 57 -month

9 unchanged sentences

contract liabilities, net consist of the following:

of Acquisition Contract Liabilities

Schedule of Acquisition Contract Liabilities

(in thousands)

September 30, 2022

December 31, 2022

6 unchanged sentences

Contingent consideration

Start-up cost financing

Contract asset

Acquisition contract liabilities, net

Total acquisition contract liabilities:

4 unchanged sentences

Fair Value Measurements

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

30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such

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

2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair

of Fair Value Hierarchy Valuation Inputs

(in thousands)

September 30, 2022

December 31, 2022

Investment in equity securities

Contingent Consideration

Warrant liability – 2022 Purchase Warrants

Warrant liability - 2022 Purchase Warrants

Warrant liability - 2022 Inducement Warrants

Warrant liability

in equity securities

of March 31, 2023, the Company had an investment in shares of Biofrontera AG .

The fair value of

th is investment was determined with Level 1 inputs through references to quoted market prices.

Consideration

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

reflected at fair value within acquisition contract liabilities, net on the consolidated balance sheets.

The fair value is based on

significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy.

valuation of the contingent consideration utilizes a scenario-based method under which a set of payoffs are calculated using the

term of the earnout, projections, and an appropriate metric risk premium.

These payoffs are then discounted back from the payment

date to the valuation date using a payment discount rate.

Finally, the discounted payments are summed together to arrive at the

value of the contingent consideration.

The scenario-based method incorporates the following key assumptions:

(i) the forecasted

product profit amounts, (ii) the remaining contractual term, (iii) a metric risk premium, and (iv) a payment discount rate.

Company re-measures contingent consideration and re-assesses the underlying assumptions and estimates at each reporting

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

at fair value within acquisition contract liabilities, net on the consolidated balance sheets.

The fair value is based on significant

inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy.

The valuation of the contingent

consideration utilizes a scenario-based method under which a set of payoffs are calculated using the term of the earnout, projections,

and an appropriate metric risk premium.

These payoffs are then discounted back from the payment date to the valuation date using a payment

discount rate.

Finally, the discounted payments are summed together to arrive at the value of the contingent consideration.

The scenario-based

method incorporates the following key assumptions:

(i) the forecasted product profit amounts, (ii) the remaining contractual term, (iii)

a metric risk premium, and (iv) a payment discount rate.

The Company re-measures contingent consideration and re-assesses the underlying

assumptions and estimates at each reporting period.

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

of Fair Value of Contingent Consideration

Schedule of Fair Value of Contingent Consideration

(in thousands)

1 unchanged sentence

Change in fair value of contingent consideration

Balance at September 30, 2021

Balance at March 31, 2022

Balance at December 31, 2022

Change in fair value of contingent consideration

Balance at September 30, 2022

of 2021 Purchase Warrant and Issuance of July 2022 Inducement Warrant .

On July 26, 2022, the Company entered into an Inducement Letter

with the holder of the Company’s 2021 Purchase Warrants (the “Investor”).

The 2021 Purchase Warrants were originally

issued on December 1, 2021 to purchase up to 2,857,143

shares of common stock, par value $ 0.001

The Investor agreed to exercise for

cash, the 2021 Purchase Warrants, in exchange for the Company’s agreement to (i) lower

the exercise price of the 2021 Purchase Warrants from $ 5.25

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

Warrant”) to purchase up to 4,285,715

shares of common stock.

The Company received

proceeds of $ 4.6

million from the exercise of the 2021 Purchase

Warrants and expensed $ 0.3 million of related financial advisory fees.

price modification triggered the requirement for modification accounting of these warrants.

Based on the applicable guidance

for liability classified warrants, the warrants issued during the three months ended September 2022 in connection with the modification

and exercise of the 2021 Purchase Warrants were considered inducement warrants and their fair value of $ 3.9

million at issuance was considered part of the

modification transaction and included in the change in fair value and recognized in the consolidated statement of operations.

value was determined using a Black-Scholes option pricing model with the following assumptions:

fair value of the underlying common stock

of $1.64, expected volatility of 70%, risk free rate of 2.84%, remaining contractual term of 4.34 years and a dividend yield of 0%.

expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Inducement Warrant is exercisable on or after January 27, 2023 at a price per share of $ 1.66 and expires on December 1, 2026 .

2022 Pre-Funded and Purchase Stock Warrants.

Warrants issued on May 16, 2022 in conjunction with the private placement to an

institutional shareholder were accounted for as liabilities in accordance with ASC 815-40.

Pre-funded common stock purchase warrants

to purchase up to 1,569,000

shares of our common stock at a nominal exercise price of $ 0.001

per share (the “2022 Pre-funded Warrants”) and common stock purchase warrants to purchase up to 3,419,000

shares of our common stock at an exercise price of $ 2.77

per share (the “2022 Purchase Warrants”) are presented within warrant liability in the accompanying consolidated balance

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

within the consolidated statements of operations.

On July 14, 2022, the 2022 Pre-funded Warrants were exercised resulting in net

proceeds of $ 2 ,000.

The estimated fair value of the May 2022 Purchase Warrant at September 30, 2022 was determined using the Black-Scholes Option

Pricing Model with the following assumptions:

fair value of the underlying common stock of $ 1.05 , expected volatility of 75 %, risk

free rate of 4.01 %, remaining contractual term of 5.13 years and a dividend yield of 0 %.

The expected life of the warrants is

assumed to be equivalent to their remaining contractual term.

Company utilize d a Black-Scholes option pricing model to estimate the fair value of the Inducement Warrant at September 30, 2022 with the following

fair value of the underlying common stock of $ 1.05 , expected volatility of 80 %, risk free rate of 4.10 %, remaining contractual

term of 4.17 years and a dividend yield of 0 %.

The expected life of the warrants is assumed to be equivalent to their remaining contractual

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

periods based upon factors which are outside of the Company’s control.

A significant change in one or more of these inputs used

in the calculation of fair value may cause a significant change to the fair value of our warrant liability which could also result in

material non-cash gain or loss being reported in our consolidated statements of operations.

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

Balance at March 31, 2023

liabilities, comprised of warrants to purchase one share of common stock issued in a private placement on May 16, 2022, expiring

five and one-half years after the issue date and with an exercise price of $ 2.77 per share (the “ Purchase Warrants”) and

warrants to purchase one share of

common stock issued on July 26, 2022, expiring on December 1, 2026 with an exercise price of $ 1.66 per share (the “ Inducement Warrants”), were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in

the accompanying consolidated balance sheets.

The warrant liabilities are measured at fair value at inception and on a recurring

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

Company utilizes a Black-Scholes option pricing model to estimate the fair value of the Purchase Warrants and Inducement Warrants

which is considered a Level 3 fair value measurement.

Certain inputs utilized in our Black-Scholes pricing model may fluctuate in

future periods based upon factors which are outside of the Company’s control.

A significant change in one or more of these

inputs used in the calculation of fair value may cause a significant change to the fair value of our warrant liabilities which could

also result in material non-cash gain or loss being reported in our consolidated statements

of operations.

fair value at March 31, 2023 was estimated using a Black-Scholes pricing model based on the following assumptions:

Schedule of Fair value Warrant by Using Black-Scholes Pricing Model Assumptions

Expiration term (in years)

Risk-free Rate

Dividend yield

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

of Changes in Fair Value Warrant Liabilities

(in thousands)

Fair value at December 31, 2021

Issuance of new warrants

Exercise of warrants

Three Months Ended March 31,

Fair value at beginning of period

Change in fair value of warrant liability

Fair value at September 30, 2022

Fair value at end of period

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

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Credit or payments made during the period

Balance at September 30, 2021

Balance at March 31, 2022

Balance at December 31, 2022

Beginning Balance

Provision related to current period sales

Credit or payments made during the period

Balance at September 30, 2022

Balance at March 31, 2023

Ending Balance

Accounts Receivable, net

2 unchanged sentences

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

allowance for doubtful accounts was $ 0.1 million

and negligible as of September 30, 2022 and December 31, 2021, respectively.

Trade accounts receivable are stated at their net realizable value.

The allowance for credit losses reflects our

best estimate of expected credit losses of the receivables determined on the basis of historical experience and current information.

developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending primarily

on delinquency status, and fixed reserve percentages are established for each pool of trade accounts receivables.

allowance for credit losses was $ 0.1 million as of March 31, 2023 and December 31, 2022.

Other Receivables, Related Party

of September 30, 2022, the Company has a receivable of $ 6.3 million

term and $ 2.8 long-term)

due from Biofrontera AG of which $ 6.1

million is due from Biofrontera AG for its 50 % share

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

The Company has a contractual right to

repayment of its share of the settlement payment, plus other miscellaneous settlement costs, from Biofrontera AG under the

Settlement Allocation Agreement entered into on December 9, 2021 and as amended on March 31, 2022, which provided that the

settlement payments would first be made by the Company and then reimbursed by Biofrontera AG for its share.

The March 31, 2022

Amended Settlement Allocation Agreement provides certain remedies to the Company, if

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

charge interest at a rate of 6.0 %

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

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

A s such , no

reserve for the receivable has been recorded as of September 30, 2022 or December 31, 2021.

remaining $ 0.2 million of other receivables, related party pertains to service agreements and chargebacks.

See Note 16- Related Party

Transactions .

of March 31, 2023 the Company has a receivable of $ 3.8

million due from the Biofrontera Group of which

million is due from Biofrontera AG for its 50 %

share of the balance of a legal settlement (see Note 21.

Commitments and Contingencies – Legal proceedings ) for which both

parties are jointly and severally liable.

The Company has a contractual right to repayment of its share of the settlement payments, plus

interest and other miscellaneous settlement costs, from Biofrontera AG under the Settlement Allocation Agreement (“Allocation Agreement”)

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

the Company and then reimbursed by Biofrontera AG for its share.

The Allocation Agreement, as amended, provides certain remedies

to the Company, if Biofrontera AG fails to make timely reimbursements, which the Company may implement in its sole discretion, including

the ability to charge interest at a rate of 6.0 %

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

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

A s such , no reserve for the receivable has

been recorded as of March 31, 2023 or December 31, 2022.

are comprised of Ameluz ® , Xepi® and the BF-RhodoLED ® finished products.

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

We recorded a provision of $ 0.1 million

related to BF-RhodoLED ® devices for the nine months ended September 30, 2022.

The provision for Xepi® inventory

obsolescence was negligible, for the three months ended September 30, 2022 and for the three and nine months ended September 30,

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

There was no provision for obsolescence recorded for the three months ended March 31, 2023 and 2022.

Prepaid Expenses and Other Current Assets

2 unchanged sentences

(in thousands)

September 30, 2022

December 31, 2022

Loan receivable, short term

Receivable for common stock warrants proceeds

Prepaid expenses

Prepaid insurance

Prepaid licenses

Security deposits

On September 23, 2022.

the Company entered into a loan agreement with Quirin

PrivatBank AG in the amount of 3.1 million Euros.

loan receivable bears interest at 1.0 % from date of disbursement, is due on December 6, 2022 and is repayable at the option of the holder,

in cash or in shares of Biofrontera AG acquired with the funds disbursed from the loan.

Property and Equipment, Net

2 unchanged sentences

(in thousands)

September 30, 2022

December 31, 2022

7 unchanged sentences

Property and equipment, net

expense was $ 0.1 ,

for the nine months ended September 30, 2022 and 2021.

which was included in selling, general and administrative

expense in the consolidated statements of operations.

Depreciation expense for the three months ended September 30, 2022 and 2021 was negligible.

expense for the three months ended March 31, 2023 and 2022 was negligible and was included in selling, general and administrative expense

in the consolidated statements of operations.

Intangible Asset, Net

2 unchanged sentences

(in thousands)

September 30, 2022

December 31, 2022

2 unchanged sentences

Intangible asset, net

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

million and is amortized on a straight-line basis over the useful life of 11

Amortization expense was $ 0.1

million and $ 0.3 million,

for the three and nine months ended September 30, 2022, respectively, and $ 0.1

million and $ 0.3 million

for the three and nine months ended September 30, 2021, respectively.

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

over the useful life of 11 years.

Amortization expense for the three months ended March 31, 2023 and 2022 was $ 0.1 million.

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

carrying amount of the assets may not be fully recoverable.

In October 2022, upon receiving notification of further

third-party manufacturing delays that impacted the timing of sales expansion and improved market positioning of the Xepi ® product,

we deemed it necessary to assess the recoverability of our Xepi ® asset group.

Future cash flows were estimated over

the expected remaining useful life of the asset group, and we determined that, on an undiscounted basis, expected cash flows exceeded

the carrying amount of the asset group.

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

nine months ended September 30, 2022 or 2021.

Company did not recognize any impairment charges during the three months ended March 31, 2023 or 2022.

Statement of Cash Flows Reconciliation

following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the

consolidated statements of cash flows:

following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the consolidated

statements of cash flows:

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

(in thousands)

September 30, 2022

December 31, 2022

Cash and cash equivalents

Short-term restricted cash

Long-term restricted cash

Total cash, cash equivalent, and restricted cash shown on the consolidated

statements of cash flows

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

Accrued Expenses and Other Current Liabilities

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(in thousands)

September 30, 2022

December 31, 2022

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Product revenue allowances and reserves

Other Long-Term Liabilities

long-term liabilities consist of the following:

Schedule of Other Long Term Liabilities

(in thousands)

September 30, 2022

December 31, 2021

Legal settlement – noncurrent (See note 23)

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

for the three- or nine-month periods ended September 30, 2022 and 2021.

Income tax expense incurred for the three and nine months ended

September 30, 2022 and 2021 relates to state income taxes.

At September 30, 2022 and December 31, 2021, the Company had no unrecognized

tax benefits.

for the three-month periods ended March 31, 2023 and 2022.

Income tax expense incurred for the three months ended March 31, 2023 and

2022 relates to state income taxes.

At March 31, 2023 and December 31, 2022, the Company had no unrecognized tax benefits.

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

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

consolidated statements of operations.

As of September 30, 2022, and December 31, 2021, the Company has no accrued interest related

to uncertain tax positions.

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

statements of operations.

As of March 31, 2023, and December 31, 2022, the Company has no accrued interest related to uncertain tax positions.

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

federal, state, and local income tax authorities for all tax years in which a loss carryforward is available.

federal, state, and local income

tax authorities for all tax years in which a loss carryforward is available.

Related Party Transactions

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based on our level of annual revenue.

Refer to Item I.

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

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

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

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

and must purchase the licensed products exclusively from Pharma.

Under the agreement, the Company obtained an exclusive, non-transferable license to use Pharma’s

technology to market and sell the licensed products, Ameluz ® and BF-RhodoLED ® and must purchase the licensed

products exclusively from Pharma.

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

of the licensed products during the three and nine months ended September 30, 2022 were $ 5.2

million and $ 16.6

million, respectively, and $ 1.0

million and $ 5.7

million for the three and nine months ended September 30, 2021.

These purchases are 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 Pharma as of September 30, 2022 and December 31, 2021 were $ 4.2

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 IT resources of Biofrontera AG and its wholly owned subsidiaries (the

“Biofrontera Group”) 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 $ 0.2

million and $ 0.6

million for the three and nine months ended September 30, 2022, respectively and $ 0.2

million and $ 0.5

million for the three and nine months ended September 30, 2021.

These expenses were recorded in selling, general and administrative,

related party.

Amounts due to Biofrontera AG related to the service agreement as of September 30, 2022 and December 31, 2021 were

million and $ 0.2

million, respectively, which were offset against other receivables, related party in the consolidated balance sheet.

of the licensed products during the three months ended March 31, 2023 and 2022 were $ 4.6 million and $ 5.2 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 Pharma as of March 31, 2023 and December 31, 2022 were $ 0.9 million and $ 1.3 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 IT resources of Biofrontera AG and its wholly owned subsidiaries (the “Biofrontera Group”) 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, and pharmacovigilance,

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.

As of March 31, 2023, we have migrated away from Biofrontera AG to third

party providers for most of our significant IT services .

Expenses related to the service agreement were negligible

for the three months ended March 31, 2023 and $ 0.1 million for the three months ended March 31, 2022, which were recorded in selling,

general and administrative, related party.

Amounts due to Biofrontera AG related to the service agreement as of March 31, 2023 and December

31, 2022 were $ 0.2 million and $ 0.2 million, respectively, which were offset against other receivables, related party in the consolidated

balance sheet.

Lamp Lease Agreement

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lamps and associated services.

revenue related to the clinical lamp lease agreement was minimal for the three and nine months ended September 30, 2022, and

for the three and nine months ended September 30, 2021, and was recorded as revenues, related party.

Amounts due from Bioscience for

clinical lamp and other reimbursements were approximately $ 0.2 million

of September 30, 2022 and December 31, 2021, respectively, which were recorded as other receivables, related party in the

consolidated balance sheets.

Reimbursements from

Maruho Related to Cutanea Acquisition

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 .

amounts reimbursed relating to SPA costs for

the three and nine months ended September 30, 2022.

For the three and nine months ended September 30, 2021, the amounts reimbursed relating

to SPA costs were $ 0.2

million and $ 0.5

million and were recorded as other income in

the consolidated statements of operations as the related expenses were incurred.

As of September 30, 2022 and December 31, 2021 amounts

due from Maruho, primarily relating to SPA cost reimbursements, were $ 0.1

for each of the periods and were recorded in

other receivables, related parties in the consolidated balance sheets.

Company has recorded a receivable of $ 6.1

million and $11.3 million as of September 30, 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 7, Other

Receivables, Related Party .

The Company has recognized $ 0.1

million of interest income for the nine months ended September 30, 2022 in connection with this receivable.

Restructuring costs

restructured the business of Cutanea and incurred restructuring costs which were subsequently reimbursed by Maruho.

Restructuring costs

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

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

September 30, 2022.

For the three and nine months ended September 30, 2021, restructuring costs were incurred in the amount of $ 0.2 and

$ 0.7 million, respectively.

revenue related to the clinical lamp lease agreement was minimal for the three months ended March 31, 2023 and 2022, respectively and

was recorded as revenues, related party.

Amounts due from Bioscience for clinical lamp and other reimbursements were approximately $ 0.2

million and $ 0.1 as of March 31, 2023 and December 31, 2022, respectively, which were recorded as other receivables, related party in

the consolidated balance sheets.

Company has recorded a receivable of $ 3.7 million and $ 6.4 million as of March 31, 2023 and December 31, 2022, respectively, 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 7, Other Receivables, Related Party .

There was no interest income recognized for the three months ended March 31, 2023 and

$ 0.1 million of interest income for the three months ended March 31, 2022, in connection with this receivable.

of March 31, 2023, our investment in equity securities is valued at $ 7.6

million and consists of 6,466,946

common shares of Biofrontera AG, a significant

shareholder of the Company.

Stockholders’ Equity

11 unchanged sentences

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

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

In the May 2022

PIPE, the Company issued for the gross cash receipts of $ 9.4 million (i) 1,850,000 shares of the common stock, (ii) a warrant to purchase

up to 3,419,000 shares of the common stock (“2022 Purchase Warrant”) and (iii) a warrant to purchase up to 1,569,000 shares

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

The purchase price for one share of common stock (or common stock equivalent)

and a warrant to purchase one share of common stock was $ 2.75 .

The 2022 Purchase Warrant will be exercisable nine months after the issue

date, expires five and one-half years after the issue date and has an exercise price of:

$ 2.77 per share.

The Pre-Funded Warrant is exercisable

immediately and has a term of exercise equal to five ( 5 ) years with a nominal exercise price of $ 0.001 per share.

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

the remaining proceeds allocated to common stock and additional paid in capital.

of 2022 Pre-Funded Warrant - On July 14, 2022, an investor exercised the 2022 Pre-Funded Warrant and purchased a total of 1,569,000

shares of common stock at an exercise price of

per share, resulting in negligible net proceeds,

of 2021 Purchase Warrant and Issuance of July 2022 Inducement Warrant - On July 26, 2022, the Company entered into the

Inducement Letter with the holder of the Company’s 2021 Purchase Warrants (the “Investor”).

The 2021 Purchase

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

shares of common stock, par value $ 0.001

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

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

per share and (ii) issue a new warrant (the “Inducement Warrant”) to purchase up to 4,285,715

shares of common stock.

The Company received proceeds of $ 4.6

million, from the exercise of the 2021 Purchase Warrants and expensed the related issuance costs of $ 0.3 million.

Inducement Warrant is exercisable on or after January 27, 2023 at a price per share of $ 1.66 and expires on December 1, 2026 .

Equity Incentive Plans and Share-Based Payments

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

Under the 2021

Plan, 2,750,000 shares are authorized for awards and the maximum contractual term is 10 years for stock options granted .

A total of 2,579,932

shares remain eligible for issuance as of September 30, 2022 under the 2021 Plan.

Under the original

2021 Plan, 2,750,000 shares are reserved and authorized for awards and the maximum contractual term is 10 years for stock options issued

under the 2021 Plan.

On December 12, 2022, the 2021 Plan was amended by our stockholders and the number of shares authorized for awards

under the 2021 Plan was increased by 2,589,800 to 5,339,800 .

As of March 31, 2023, there were 2,946,988 shares available for future awards

under the amended 2021 Plan.

Non-qualified

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of the date of grant.

All stock options are exercisable at a price equal to the market value of the common shares underlying the option

on the grant date.

All stock options are exercisable at a price as set by the Company at the time of the grant but shall not be less

than the market value of the common shares underlying the option on the grant date.

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

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The Company elects to account for forfeitures as they occur.

compensation expense of approximately $ 0.3

million and $ 0.6

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

the three and nine months ended September 30, 2022.

stock based compensation for the three and nine months ended September 30, 2021.

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

nine months then ended is presented below.

Schedule of Stock Unit Activity

fair value of each option was estimated on the date of the grant using the BSM option pricing model with the following assumptions:

Schedule of Stock Options Assumptions

Three Months Ended March 31,

Expected volatility

Expected term (in years)

Risk-free interest rate

3.5 % - 3.7 %

Expected dividend yield

compensation expense of approximately $ 0.3 million and $ 0.1 million was recorded in selling, general and administrative expenses on the

accompanying consolidated statement of operations for the three months ended March 31, 2023 and March 31, 2022, respectively.

outstanding and exercisable under the employee share option plan as of March 31, 2023 and a summary of option activity during the three

months then ended is presented below.

Schedule of Stock Option Activity

Outstanding at December 31, 2022

Canceled or forfeited

Outstanding at September 30, 2022

Exercisable at September 30, 2022

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

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

of September 30, 2022, there was $ 2.6 million of unrecognized compensation cost related to unvested stock options, which is expected

to be recognized over a weighted-average period of approximately 2.5 years.

Outstanding at March 31, 2023

Exercisable at March 31, 2023

The aggregate intrinsic

value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock

for the options that were in the money at March 31, 2023.

of March 31, 2023, there was $ 2.0 million of unrecognized compensation cost related to unvested stock options, which is expected to be

recognized over a weighted-average period of approximately 2.1 years.

Compensation (RSUs)

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compensation expense of $ 0.1

million and $ 0.9

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

operations for the three and nine months ended September 30, 2022.

share-based compensation for the three and nine months ended September 30, 2021.

of September 30, 2022, there was $ 0.7 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

million and $ 0.4 million for the RSUs was recorded in selling, general and administrative expenses in the accompanying consolidated

statements of operations for the three months ended March 31, 2023 and March 31, 2022, respectively.

of March 31, 2023, there was $ 0.5 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

over a weighted-average period of approximately 1.1 years.

5 unchanged sentences

Canceled or forfeited

Outstanding at September 30, 2022

Expected to vest at September 30, 2022

Outstanding at March 31, 2023

Expected to vest at March 31, 2023

Interest Expense, net

1 unchanged sentence

Schedule of Interest Expense

(in thousands)

For three months ended

September 30,

For nine months ended

September 30,

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

Contract asset interest expense

Interest income – related party

Interest income – other

Interest income

Interest expense, net

4 unchanged sentences

Other Income (expense), net

income (expense), net consists of the following:

Schedule of Other Income, Net

(in thousands)

For three months ended

September 30,

For nine months ended

September 30,

(in thousands)

Reimbursed SPA costs

Other income (expense), net

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

Net Earnings per Share

income (expense), net primarily includes (i) gain (loss) on sale of leased assets and (ii) gain (loss) on foreign currency

transactions.

Net Earnings (Loss) per Share

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

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

In periods where a net loss is recorded, no effect is given to potentially dilutive securities, since the effect

would be anti-dilutive.

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

1 unchanged sentence

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

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Net income (loss)

4 unchanged sentences

Net earnings (loss) per share:

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

and nine months ended September 30, 2022 because they would be anti-dilutive:

following table sets forth securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute

EPS in the future:

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

Nine Months Ended September 30,

Three Months Ended

September 30, 2002

Months Ended September 30, 2022

Common stock warrants

1 unchanged sentence

Unit Purchase Options

Total anti-dilutive securities

Anti-dilutive securities excluded from computation of earnings per share

Common stock warrants include Purchase Warrants, Inducement Warrants and warrants issued in the Initial Public Offering.

Commitments and Contingencies

Company leases its corporate headquarters under an operating lease that expires in November 2025.

The Company provided the landlord

with a security deposit in the amount of $ 0.1

million, which was recorded as other assets in the consolidated balance sheets.

expense is recorded on a straight-line basis through the end of the lease term.

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

million and $ 0.4 million for the three and nine months ended September 30, 2022 which was included in selling, general, and administrative

The rent expense, net of sublease income for the three and nine months ended September 30, 2021 was $ 0.2 million and $ 0.6 million.

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

The Company incurred auto lease expense of

$ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2022 and $ 0.1 million and $ 0.4 million for

the three and nine months ended September 30, 2021.

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

Company leases its corporate headquarters under an operating lease that expires in August 2025.

The Company has the option to extend

the term of the lease for one five (5) year period upon written notice to the landlord.

The extension period has not been included in

the determination of the ROU asset or the lease liability as the Company concluded that it is not reasonably certain that it would exercise

The Company provided the landlord with a security deposit in the amount of $ 0.1 million, which was recorded as other assets

in the consolidated balance sheets.

Company has also entered into a master lease agreement for its vehicles.

After an initial non-cancelable twelve-month period, each vehicle

is leased on a month to month basis.

Based on historical retention experience of approximately three years, the vehicles have expiration

dates ranging from February 2023 through September 2025.

components of lease expense for the three months ended March 31, 2023 were as follows (in thousands except lease term and discount rate):

of Components of Lease Expense and Other Information

Lease expense

Operating Leases

Amortization of ROU assets (operating lease cost)

Interest on lease liabilities

Total lease expense

Other Information

Operational cash flow used for operating leases

ROU assets obtained in exchange for lease liabilities

Weighted -average remaining lease term (in years)

Weighted -average discount rate

lease payments under non-cancelable leases as of March 31, 2023 were as follows (in thousands):

Schedule of Future Commitments and Sublease Income

ending December 31,

lease commitments

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

to us in connection with the Cutanea acquisition.

Years ending December 31,

Future lease commitments

Total future minimum lease payments

Less imputed interest

Total lease liability

of Operating Lease Liability

Operating lease liability, current

Operating lease liability, non-current

have a contract in which we agreed to repay to Maruho $ 3.6 million on December 31, 2022 and $ 3.7 million on December 31, 2023 in start-up

cost financing paid to us in connection with the Cutanea acquisition.

have filed for arbitration against Maruho with the International Chamber of Commerce (“ICC”) regarding issues with Maruho’s

contract manufacturer that were not disclosed at the time of the Agreement and therefore are withholding the repayment of the start-up

cost financing until a decision is reached through the arbitration process.

The arbitration notes that Maruho breached the agreement with Cutanea

due to the undisclosed manufacturing issues and seeks damages as well as a declaration that we are not obligated to repay Maruho.

are also obligated to share product profits with Maruho equally from January 1, 2020 through October 30, 2030.

3 unchanged sentences

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

Specifically, we must pay Ferrer

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

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

No payments were made for the three and

nine months ended September 30, 2022 or 2021 related to Xepi® milestones.

Specifically, we must pay

Ferrer i) $ 2,000,000

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

and ii) $ 4,000,000

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

No payments have been made related to Xepi ® milestones.

liability related to shares of Biofrontera AG acquired from Maruho through subscription rights

on the outcome of the arbitration process between Biofrontera AG and Maruho, the Company may be liable for an additional payout of $ 0.9 million

in relation to the shares of Biofrontera AG acquired from Maruho through a subscription rights agreement.

In accordance with ASC 450-20-50-3,

Contingencies, we have not accrued any liability associated with the subscription rights purchase, as the liability is not considered

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

estimable under the provisions of FASB ASC Topic 450, Contingencies .

The Company expenses as incurred the costs related to such

legal proceedings.

We are not presently a party to any pending legal proceedings.

The Company expenses as incurred the legal costs related

to such legal proceedings.

November 29, 2021, the Company entered into a settlement and release agreement with respect to a lawsuit filed March 23, 2018 in the

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In the settlement, the Company and Biofrontera AG together agreed to make an aggregate payment of $ 22.5 million

to settle the claims in the litigation.

The Company will be responsible for $ 11.3 million of the aggregate settlement amount, plus interest

accrued at a rate equal to the weekly average one-year constant maturity Treasury yield and agreed to pay in three annual installments .

The first installment of $ 11.3 million (of which $ 5.6 million was Biofrontera AG’s portion) was paid in December 2021

by the Company.

Biofrontera AG has agreed to pay a portion of the settlement, both parties remain jointly and severally liable for the full settlement

amount, meaning that in the event Biofrontera AG does not pay all or a portion of the amount it owes under the agreement, the claimant

could compel the Company to pay Biofrontera AG’s share.

If either the Company or Biofrontera AG violates the terms of the settlement

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

As of September 30, 2022 we have reflected a legal settlement liability in the amount of $ 11.3 million for the remaining payments due

and a related receivable from related party of $ 5.6 million, in accordance with 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

and engage a forensic expert to destroy data at issue in the litigation to settle the claims in the litigation.

Biofrontera AG has agreed to pay fifty percent of the settlement costs, we remain jointly and severally liable to DUSA for the full cash

settlement amount, meaning that in the event Biofrontera AG does not pay all or a portion of the amount it owes under the Agreement,

DUSA could compel us to pay Biofrontera AG’s share.

If either we or Biofrontera AG violates the terms of the settlement agreement,

we or Biofrontera AG may be liable for a greater amount.

If we become liable for more than our agreed share of the aggregate settlement

amount, either of these events could have a material adverse effect on our business, prospects, financial condition and/or results of

As of March 31, 2023, we have reflected a legal settlement liability in the amount of $ 6.1 million for the remaining payments

due under the settlement, including the estimated remaining cost of the forensic expert and a related receivable from related party of

$ 3.7 million for the remaining legal settlement costs to be reimbursed in accordance with the Settlement Allocation Agreement, which

provided that the settlement payments, including the cost of the forensic expert, would first be made by the Company and then reimbursed

by Biofrontera AG for its share.

Retirement Plan

4 unchanged sentences

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

the three and nine months ended September 30, 2022, matching contribution costs paid by the Company were $ 0.1 million and $ 0.2 million, respectively.

For the three and nine months ended September 30, 2021, matching contribution costs paid by the Company were $ 0.1 million and $ 0.2 million.

the three months ended March 31, 2023 and 2022, matching contribution costs paid by the Company were $ 0.1 million.

Subsequent Events

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

Report on Form 10-Q was submitted to the SEC.

of a stockholder rights plan .

On October 13, 2022 the Board of Directors (“Board”) authorized and declared a

dividend distribution of one Preferred Stock Purchase Right (a “Right”) for each outstanding share of common stock to

stockholders of record as of the close of business on October 24, 2022.

In addition, one Right will automatically attach to each

share of Common Stock issued between the record date of the distribution and the earlier of the distribution date and the expiration

date of the Rights.

Each Right entitles the registered holder to purchase from the Company a unit consisting of one ten-thousandth

of a share (a “Unit”) of Series A Junior Participating Cumulative Preferred Stock, par value $ 0.001

per share, of the Company at a cash exercise price of $ 5.00

per Unit, subject to adjustment, under certain conditions.

The complete terms of the Rights are set forth in the Stockholder Rights

Agreement (“Rights Agreement”), dated October 13, 2022, between the Company and Computershare Trust Company, N.A, as

rights agent.

the stockholder rights plan described above (the “Rights Plan”) is effective immediately, the Rights would become

exercisable only if a person or group, or anyone acting in concert with such a person or group, acquires beneficial ownership, as

defined in the Rights Agreement, of 20 %

or more of the Company’s issued and outstanding common stock in a transaction not approved by the Company’s Board of

The Rights Plan will expire on October 13, 2023.

the Rights Plan, a person or group who beneficially owned 20 % or more of the Company’s outstanding Common Stock prior to the first

public announcement of the Rights Plan on October 14, 2022 will not trigger the Rights so long as they do not

acquire beneficial ownership of any additional shares of Common Stock at a time when they still beneficially own 20 % or more of such

Common Stock.

details about the Rights Agreement are contained in a Form 8-K filed by the Company with the U.S.

Securities and Exchange Commission

on October 14, 2022.

A Junior Participating Cumulative Preferred Stock.

In connection with the adoption of the Rights Plan, the Board approved a Certificate

of Designations of Series A Junior Participating Cumulative Preferred Stock which designates the rights, preferences and privileges of

5,000 shares of Preferred Stock.

The Certificate of Designations was filed with the Secretary of State of Delaware and became effective

on October 13, 2022.

of Biofrontera AG Shares.

On October 25, 2022.

the Company entered into private exchange agreements with certain holders of options to

acquire ordinary shares, nominal value € 1.00

per share (the “AG Options”), of Biofrontera AG, pursuant to which the parties agreed to a negotiated private exchange

shares of the Company’s common stock in exchange for the AG Options.

The AG Options represent the right to acquire 2,623,365

ordinary shares of Biofrontera AG held by the shareholders, representing an exchange ratio of approximately 1 AG share to 1.2 shares

of the Company’s common stock.

There was no additional cost to exercise the AG Options.

As of November 8, 2022, the Company exercised the AG options in full to acquire 2,623,365 shares of Biofrontera AG.

Also, on November 8, 2022, the

Company entered into an amendment to the Loan Agreement with Convertible Repayment Obligation dated September 23,2022.

Amendment, Quirin PrivatBank AG assigned the acquired 1,601,318 shares of AG, including all associated rights, to the Company with

shares to be delivered promptly thereafter.

The parties agreed to terminate the loan in part in exchange for noted shares.

a result of these transactions, the Company now owns a total of 4,224,683

shares, which is 7.45 %

of Biofrontera AG’s outstanding ordinary shares as of November 8, 2022.

These shares were acquired in accordance with the loan

receivable agreement (as amended on November 8, 2022) disclosed in Note 9- Prepaid Expenses and Other Current Assets and the Private

Exchange Agreement entered into October 25, 2022 as detailed above.

have completed an evaluation of subsequent events after the balance sheet date of March 31, 2023 through the date this Quarterly Report

on Form 10-Q was submitted to the SEC.

April 11, 2023, Biofrontera Inc.

and each member of its Board of Directors, in their individual capacities, entered into a settlement

agreement (the “Settlement Agreement”) with Biofrontera AG, a significant stockholder of the Company.

to the terms of the Settlement Agreement, the major provisions are as follows:

Company and a member of its Board of Directors withdrew their challenges to the resolutions

passed at the Biofrontera AG stockholder meeting on January 9, 2023

Company will increase the Board of Directors from five to six members and appoint as a Class

I Director a director nominated by Biofrontera AG to fill the vacancy, subject to certain

restrictions as described in the Settlement Agreement;

Company will begin a search for an additional director candidate, who is fully independent,

to be nominated for election as a Class II Director at the Company’s 2023 annual meeting

of stockholders;

at which point the Company will increase the size of the Board of Directors

to seven members;

Board established a Related Party Transactions Committee to approve all contracts and

transactions between the Company and Biofrontera AG, including any of its affiliates;

Company amended on April 26, 2023 that certain Stockholder Rights Agreement dated October 13, 2022, between

the Company and Computershare Trust Company, N.A., as Rights Agent to increase

the threshold of beneficial ownership before being deemed an Acquiring Person, solely with

respect to Biofrontera AG, from 20% to 29.96%.

Loan and Security Agreement

May 8, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with MidCap Business Credit

LLC, providing us with a revolving line of credit in the aggregate principal amount of up to $ 6.5 million,

subject to a borrowing base.

The Loan Agreement allows the Company to request advances thereunder and to use the proceeds of such

advances for working capital purposes until the maturity date of May 8, 2026.

The Loan Agreement is secured by a lien on

substantially all of the assets of the Company, subject to customary exceptions.

under the Loan Agreement shall bear interest at the 30-Day Adjusted Term SOFR Rate, set monthly on the first day of the month based on

30-Day Term SOFR plus a spread adjustment of 15 basis points and subject to a floor of 2.25 %,

calculated and charged monthly in arrears.

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 Loan Agreement, amounts available for advances would be subject

to a borrowing base, which is a formula based on certain eligible receivables and inventory.

The Loan Agreement also includes an Unused

Line Fee Rate of 0.375 % of the Credit Limit less all outstanding advances, which shall be paid on a monthly basis.

Currently, our borrowing

capacity is limited to our eligible receivables, pending consent from Biofrontera AG to allow Midcap to obtain title to Biofrontera Inc.’s

inventory in the event of bankruptcy.

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

What changed 10-Q

Item 1. Financial Statements