What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-15 compared with 2023-03-13 · 523 added, 486 removed, 1288 unchanged (44% of the section changed)

our common stock involves a high degree of risk.

You should carefully consider the risks described below, as well as the other

information in this Form 10-K, including our financial statements and the related notes and the section “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common

The occurrence of any of the events or developments described below could materially and adversely affect our business,

financial condition, results of operations and growth prospects.

In such an event, the market price of our common stock could

decline, and you may lose all or part of your investment.

Additional risks and uncertainties not presently known to us or that we

currently deem immaterial may also impair our business operations.

of Material Risk Factors

1 unchanged sentence

We have listed

below (in order of importance or probability of occurrence) the most significant risk factors applicable to us, but they

do not constitute all of the risks that may be applicable to us.

New risks may emerge from time to time, and it is not possible for us

to predict all potential risks or to assess the likely impact of all risks.

You should read this summary together with the more detailed

description of each risk factor contained below.

below (in order of importance or probability of occurrence) the most significant risk factors applicable to us, but they do not constitute

all of the risks that may be applicable to us.

New risks may emerge from time to time, and it is not possible for us to predict all potential

risks or to assess the likely impact of all risks.

You should read this summary together with the more detailed description of each risk

factor contained below.

Some of these material risks include:

Related to the License and Supply Agreements and our Licensed Products

our sole source of revenue is from sales of products we license from other companies.

If we fail to comply with our obligations in

the agreements under which we license rights from such third parties, or if the license agreements are terminated for other reasons,

we could lose license rights that are important to our business.

important patents for our licensed product Ameluz ® expired in 2019.

Although the process of developing generic topical

dermatological products for the first time presents specific challenges that may deter potential generic competitors, generic versions

of Ameluz ® may enter the market following the recent expiration of these patents.

If this happens, we may need to

reduce the price of Ameluz ® significantly and may lose significant market share.

business depends substantially on the success of our principal licensed product Ameluz ® .

If the Ameluz Licensor is

unable to successfully obtain and maintain regulatory approvals or reimbursement for Ameluz ® for existing and additional

indications, our business may be materially harmed.

Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz ® and has contracted with a second unaffiliated contract manufacturer to begin producing Ameluz ® .

If the Ameluz Licensor fails

to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz

Licensor, our business could be materially harmed.

our Licensors or our Licensors’ manufacturing partners, as applicable, fail to manufacture Ameluz ® , RhodoLED ®

lamps, Xepi ® or other marketed products in sufficient quantities and at acceptable quality and cost levels,

or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face

a bar to, or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and

lose potential revenues.

Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another

licensor may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful.

Currently, our sole source of revenue is from sales of products we license from other companies, including a related party.

If we fail to comply with our obligations in the agreements under which we license rights from such parties, or if the license agreements are terminated for other reasons, we could lose license rights that are important to our business.

Certain important patents for our licensed product Ameluz ® expired in 2019.

Although the process of developing generic topical dermatological products for the first time presents specific challenges that may deter potential generic competitors, generic versions of Ameluz ® may enter the market following the recent expiration of these patents.

If this happens, we may need to reduce the price of Ameluz ® significantly and may lose significant market share.

Our business depends substantially on the success of our principal licensed product Ameluz ® .

If the Ameluz Licensor is unable to successfully obtain and maintain regulatory approvals or reimbursement for Ameluz ® for existing and additional indications, our business may be materially harmed.

The Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz ® and has contracted with a second unaffiliated contract manufacturer to begin producing Ameluz ® .

If the Ameluz Licensor fails to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz Licensor, our business could be materially harmed.

If our Licensors or our Licensors’ manufacturing partners, as applicable, fail to manufacture Ameluz ® , RhodoLED ® lamps, Xepi ® or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and lose potential revenues.

If our Licensors’ efforts to protect the proprietary nature of their intellectual property related to our licensed products are not adequate, we may not be able to compete effectively in our market.

Third party claims of intellectual property infringement may affect our ability to sell our licensed products and may also prevent or delay our Licensors’ product discovery and development efforts

The Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful.

The trade secrets of our Licensors are difficult to protect.

Our subsidiary and certain third-party employees and our licensed patents are subject to foreign laws.

Our international dealings with our Licensors may pose currency risks, which may adversely affect our operating results and net income.

Related to Our Business and Strategy

COVID-19 global pandemic still affects our business and presents new challenges.

coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which

could make it difficult for us to sell our licensed products.

are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ®

lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of

Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third

parties for the supply, development and commercialization of future licensed products or product candidates.

Although we have the

authority under the Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well

as certain other clinical studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory

work and manufacturing from the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing

and manufacture of our licensed products as well as the regulatory approvals and clinical trials related to our licensed products

are currently controlled, and will likely continue to be controlled for the foreseeable future, by our existing and future collaborators.

Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization

of our licensed products.

legislative changes may have a material adverse effect on our business and results of operations.

face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail

to compete effectively.

We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve

the use of a drug but have gained significant market acceptance.

We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates.

Although we have the authority under the Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will likely continue to be controlled for the foreseeable future, by our existing and future collaborators.

Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products.

Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products.

Healthcare legislative changes may have a material adverse effect on our business and results of operations.

To date, we have a relatively short history of sales of our licensed products in the United States.

Competing products and future emerging products may erode sales of our licensed products.

We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively.

We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve the use of a drug but have gained significant market acceptance.

If we are unable to maintain effective marketing and sales capabilities or enter into agreements with third parties to market and sell our licensed products, we may be unable to generate revenue growth.

market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated.

our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may

suffer, and our licensed products could be subject to restrictions or withdrawal from the market.

if our Licensors obtain regulatory approvals for our licensed products and product candidates, or approvals extending their indications,

they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical

device products, could have a significant negative impact on us.

licensed medical device product, the RhodoLED ® lamp, is subject to extensive governmental regulation, and failure

to comply with applicable requirements could cause our business to suffer.

are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we

may be unable to successfully implement our business strategy.

business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

If our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may suffer, and our licensed products could be subject to restrictions or withdrawal from the market.

Even if our Licensors obtain regulatory approvals for our licensed products and product candidates, or approvals extending their indications, they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

With respect to our licensed products, we may be subject to healthcare laws, regulation and enforcement.

Our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.

A recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical device products, could have a significant negative impact on us.

Our licensed medical device product, the RhodoLED ® lamp, is subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

As a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California, the California Consumer Privacy Act (CCPA).

Our actual or perceived failure to comply with such obligations could harm our business.

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We will need to grow the size of our organization and we may experience difficulties in managing this growth.

Our business and operations would suffer in the event of system failures or, cyber-attacks.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our licensed products.

Failure to comply with the U.S.

Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business.

Our licensed products will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory difficulties.

Generic manufacturers may launch products at risk of patent infringement.

The results of our R&D efforts are uncertain and there can be no assurance they will enhance the commercial success of our products.

Related to Our Financial Position and Capital Requirements

There is substantial doubt about our ability to continue as a “going concern.”

Failure to achieve the conditions relating to the additional $7.2 million of proceeds to be provided under the equity financing agreement

entered into on February 19, 2024 could adversely affect our financial condition and liquidity over the next twelve months

have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain

2 unchanged sentences

of Xepi ® and other products we may license.

Our existing and any future indebtedness could adversely affect our ability

to operate our business.

The valuation of our equity investments is subject to volatility.

existing and any future indebtedness could adversely affect our ability to operate our business.

Related to Corporate Governance, Including Being a Public Company

1 unchanged sentence

to management’s review of work performed by specialists.

If we identify

additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be

able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and

If we identify additional material weaknesses in the future or otherwise

fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition

or results of operations, which may adversely affect our business and stock price.

have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management is required

6 unchanged sentences

Related to Our Securities and the Ownership of Our Common Stock

of December 31, 2022, Biofrontera AG beneficially owns 30.0% of our outstanding shares of common stock and will be able to exert

significant control over matters subject to stockholder approval and its interests may conflict with ours or other stockholders in

Provisions of our outstanding warrants could discourage an acquisition

of us by a third party.

Our share price may be volatile, and you may be unable to sell your shares and/or warrants at or above the offering price.

If we fail to regain compliance with applicable listing standards, our common stock and/or our publicly-traded warrants could be

delisted from Nasdaq.

Future sales of our common stock in the public market could cause our share price to fall.

If the Preferred Warrants are not exercised, we will not

receive up to $8 million in aggregate gross proceeds from the exercise of the Warrants which

could have a material adverse effect on our financial condition.

Warrants are exercisable for our common stock, which would increase the number of shares eligible for future resale in the public

market and result in dilution to our stockholders.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price

and trading volume could decline.

Our quarterly operating results may fluctuate significantly.

sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans,

1 unchanged sentence

stock to decline.

we fail to regain compliance with applicable listing standards, our common stock and/or our publicly-traded warrants could be delisted

We have never paid dividends on our common stock and we do not intend to

pay dividends for the foreseeable future.

Consequently, any gains from an investment in our common stock will likely depend on whether

stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction

5 unchanged sentences

a favorable judicial forum for disputes with us or our directors, officers or employees.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims

against us and may reduce the amount of money available to us for our common stock increases.

Many of the warrants to purchase shares of our common stock are accounted for as a warrant liability and recorded at fair value

with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock

Related to the License and Supply Agreements and Our Licensed Products

3 unchanged sentences

lose license rights that are important to our business.

are a party to license agreements with Biofrontera Pharma and Biofrontera Bioscience (for Ameluz ® and the RhodoLED ®

lamp series) and with Ferrer (for Xepi ® ) and expect to enter into additional licenses in the future.

license agreements impose, and we expect that future license agreements will impose, on us various development, regulatory diligence

obligations, payment of milestones or royalties and other obligations.

If we fail to comply with our obligations under our license agreements,

or we are subject to a bankruptcy or insolvency, the licensor may have the right to terminate the license.

In the event that any of our

existing or future important licenses were to be terminated by the licensor, we would likely need to cease further commercialization

of the related licensed product or be required to spend significant time and resources to modify the licensed product to not use the

rights under the terminated license.

In the case of marketed products that depend upon a license agreement, we could be required to cease

our commercialization activities, including sale of the affected product.

are a party to license agreements with Biofrontera Pharma, GmbH and Biofrontera Bioscience, GmbH (for Ameluz ® and the

RhodoLED ® lamp series) and with Ferrer (for Xepi ® ) and expect to enter into additional licenses in the

Our existing license agreements impose, and we expect that future license agreements will impose, on us various development,

regulatory diligence obligations, payment of milestones or royalties and other obligations.

If we fail to comply with our obligations

under our license agreements, the licensor may have the right to terminate the license.

In the event that any of our existing or future

important licenses were to be terminated by the licensor, we would likely need to cease further commercialization of the related licensed

product or be required to spend significant time and resources to modify the licensed product to not use the rights under the terminated

In the case of marketed products that depend upon a license agreement, we could be required to cease our commercialization activities,

including sale of the affected product.

For a summary of the terms of the license agreements, see “ Business—Commercial

47 unchanged sentences

the Ameluz Licensor has received marketing approval in the United States for Ameluz ® for lesion- and field-directed treatment

of actinic keratosis in combination with photodynamic therapy using the BF-RhodoLED ® lamp series, there remains a significant

of actinic keratosis in combination with PDT using the BF-RhodoLED ® lamp series, there remains a significant

risk that we will fail to generate sufficient revenue or otherwise successfully commercialize the product in the United States.

12 unchanged sentences

to earn sufficient revenue and cash flows to continue our operations.

the Ameluz Licensor received approval from the FDA to market in the United States Ameluz ® in combination with photodynamic

therapy using the BF-RhodoLED ® lamp, any new lamp we may license would require new approval from the FDA.

the Ameluz Licensor received approval from the FDA to market in the United States Ameluz ® in combination with PDT using the BF-RhodoLED ® lamp, any new lamp we may license would require new approval from the FDA.

We cannot assure

1 unchanged sentence

on October 21, 2021) or obtain any such new approval.

If the Ameluz Licensor fails to

maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz Licensor,

our business could be materially harmed.

Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz ® and has contracted

with a second unaffiliated contract manufacturer to begin producing Ameluz ® .

If the Ameluz Licensor fails

to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz

Licensor, our business could be materially harmed.

to the Ameluz LSA, the Ameluz Licensor supplies us with Ameluz ® .

The Ameluz Licensor currently depends on a single unaffiliated

contract manufacturer located in Switzerland to manufacture Ameluz ® , Glaropharm AG, and has signed an agreement

with a second unaffiliated contract manufacturer located in Germany, Pharbil Waltrop GmbH, to begin to supply it with Ameluz ®

contract manufacturer located in Switzerland to manufacture Ameluz ® , Glaropharm AG, and has signed an agreement with a

second unaffiliated contract manufacturer located in Germany, Pharbil Waltrop GmbH, to begin to supply it with Ameluz ®

to ensure stability of the supply chain.

57 unchanged sentences

and Results of Operations—Key factors affecting our performance —Supply Chain ” in this Form 10-K.

efforts to commercialize a new lamp (the “RhodoLED ® XL”) that was approved by the FDA on October 21, 2021

have been delayed due to supply chain matters.

We have currently placed an order and issued a PO for 300 units and manufacturing

has commenced on the units.

While we anticipate that we will be able to commercialize the

RhodoLED ® XL in or around the second quarter of 2024, slower than anticipated shipments or other delays are possible.

Licensors’ manufacturing partners must comply with federal, state and foreign regulations, including FDA regulations governing

141 unchanged sentences

be unable to further commercialize our licensed products, which could harm our business significantly.

March 2018, DUSA Pharmaceuticals, Inc., or DUSA, brought a lawsuit against Biofrontera AG and its subsidiaries, including us, before

the District Court of Massachusetts (18-cv-10568-RGS) alleging patent infringement and other claims related to sales practices.

November 29, 2021, before the trial began, we entered into a confidential settlement and release agreement with the respect to the DUSA

Litigation with DUSA.

See “ Commitments and Contingencies—Legal proceedings ” in Note 24 to the audited financial

statements as of and for the years ended December 31, 2022 and 2021 as included in this Form 10-K

Biofrontera AG has agreed to pay a portion of the settlement, we remain jointly and severally liable to DUSA 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, DUSA could

compel us to pay Biofrontera AG’s share.

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

could nullify certain aspects of the settlement and we may lose certain benefits of the settlement and be liable for a greater

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 operations.

As of December 31, 2022, the

Company has a receivable of $6.4 million due from Biofrontera AG for its share of the settlement amount.

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

United States District Court for the District of Massachusetts in which we were alleged to have infringed on certain patents and misappropriated

certain trade secrets.

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

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

either we or Biofrontera AG violates the terms of the settlement agreement, this could nullify certain aspects of the settlement and

we may lose certain benefits of the settlement and 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 operations.

As of December 31, 2023, we have recorded a legal settlement liability in the

amount of $0.4 million for the remaining payments due under the settlement agreement for the cost of the forensic expert and a related receivable from related party of $2.8 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.

The $2.8 million receivable is presented net of accounts payable, related party on the balance sheet.

September 13, 2023, Biofrontera was served with a complaint filed in United Stated District Court for the District of Massachusetts by

DUSA, Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD in which DUSA alleges breach of contract, violation

of the Lanham Act, and unfair trade practices.

All claims stem from allegations that Biofrontera has promoted its Ameluz product in a

manner that is inconsistent with its approved FDA labeling.

Though this complaint was originally filed in the U.S.

District Court for

the District of Massachusetts, this matter has been transferred by agreement of the parties to the U.S.

District Court for the District

of New Jersey.

Company denies the Plaintiffs’ claims and intends to defend these matters vigorously.

Based on the Company’s assessment of

the facts underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate

the possibility of a material loss, nor the potential range of loss that may result from this action.

If the final resolution of the

matter is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or

Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor

54 unchanged sentences

competitive position of our licensed products.

Our subsidiary and certain

third-party employees and our licensed patents are subject to foreign laws.

All employees of our wholly owned subsidiary, Bio-FRI GmbH, and a

majority of the employees of Biofrontera AG, the parent company of the Ameluz Licensor, work in Germany and are subject to German employment

Ideas, developments, discoveries and inventions made by such employees and consultants are subject to the provisions of the German

Act on Employees’ Inventions, which regulates the ownership of, and compensation for, inventions made by employees.

risk that disputes can occur between Biofrontera AG and its employees or former employees pertaining to alleged non-adherence to the

provisions of this act that may impact our license depending on whether Biofrontera AG prevails or fails in any such dispute.

a risk that the compensation Biofrontera AG provided to employees who assign patents to them may be deemed to be insufficient and Biofrontera

AG may be required under German law to increase the compensation due to such employees for the use of the patents.

In those cases where

employees have not assigned their interests to Biofrontera AG, Biofrontera AG may need to pay compensation for the use of those patents.

If Biofrontera AG is required to pay additional compensation or face other disputes under the German Act on Employees’ Inventions,

the impact on our license could adversely affect our results of operations.

subsidiary and certain third-party employees and our licensed patents are subject to foreign laws.

employees of our wholly owned subsidiary, Bio-FRI GmbH, and a majority of the employees of Biofrontera AG, the parent company of the

Ameluz Licensor, work in Germany and are subject to German employment law.

Ideas, developments, discoveries and inventions made by such

employees and consultants are subject to the provisions of the German Act on Employees’ Inventions, which regulates the ownership

of, and compensation for, inventions made by employees.

We face the risk that disputes can occur between Biofrontera AG and its employees

or former employees pertaining to alleged non-adherence to the provisions of this act that may impact our license depending on whether

Biofrontera AG prevails or fails in any such dispute.

There is a risk that the compensation Biofrontera AG provided to employees who

assign patents to them may be deemed to be insufficient and Biofrontera AG may be required under German law to increase the compensation

due to such employees for the use of the patents.

In those cases where employees have not assigned their interests to Biofrontera AG,

Biofrontera AG may need to pay compensation for the use of those patents.

If Biofrontera AG is required to pay additional compensation

or face other disputes under the German Act on Employees’ Inventions, the impact on our license could adversely affect our results

of operations.

international dealings with our Licensors may pose currency risks, which may adversely affect our operating results and net income.

10 unchanged sentences

Related to Our Business and Strategy

COVID-19 global pandemic still affects our business and presents new challenges.

the beginning of 2020, COVID-19 has become a global pandemic.

As a result of the measures implemented by governments around the

world, our business operations have been directly affected.

In particular, we experienced a significant decline in demand for our

licensed products as a result of different priorities for medical treatments emerging, thereby causing a delay of actinic keratosis

treatment for most patients.

Our revenue was directly affected by the global COVID-19 pandemic starting in mid-March of 2020.

that point on, rising infection rates and the resulting American Academy of Dermatology’s official recommendation to care for

patients through remote diagnosis and treatment (telehealth) led to significantly declining patient numbers and widespread, albeit

temporary, physician practice closures.

As COVID-19 vaccines started to roll-out to the general public in March 2021, we experienced

an increase in patients willing to undergo treatment for actinic keratosis.

In the fourth quarter of 2021 continuing through 2022,

we again saw a seasonally strong increase in sales, indicating a revenue recovery from the global COVID-19 pandemic.

optimistic that our business will continue to thrive throughout 2023 as a result of the COVID-19 PHE sunsetting on May 11, 2023.

However, the ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our

business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be

predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public

health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster

vaccination campaigns, among others.

Accordingly, we cannot predict the extent to which our business, financial condition and

results of operations will continue to be affected.

We remain focused on maintaining a strong balance sheet, liquidity and financial

flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial

perspective relating to COVID-19 and variants thereof.

are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps

74 unchanged sentences

legislative changes may have a material adverse effect on our business and results of operations.

the United States and certain other countries, there have been a number of legislative and regulatory changes to the health care

system that could impact our ability to sell our licensed products profitably.

In particular, the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003 revised the payment methodology for many products under Medicare in the United States,

which has resulted in lower rates of reimbursement.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the

Health Care and Education Reconciliation Act of 2010 the (“PPACA” or collectively, the “ACA”), was signed into law, which substantially changed

the way healthcare is financed by both governmental and private insurers in the United States.

its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and we expect there

will be additional challenges and amendments to the ACA in the future.

On January 20, 2017, President Donald Trump signed an

executive order stating that the administration intended to seek prompt repeal of the Affordable Care Act, and, pending repeal,

directed by the U.S.

Department of Health and Human Services and other executive departments and agencies to take all steps

necessary to limit any fiscal or regulatory burdens of the Affordable Care Act.

the United States and certain other countries, there have been a number of legislative and regulatory changes to the health care system

that could impact our ability to sell our licensed products profitably.

In particular, the Medicare Prescription Drug, Improvement, and

Modernization Act of 2003 revised the payment methodology for many products under Medicare in the United States, which has resulted in

lower rates of reimbursement.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education

Reconciliation Act of 2010 the (“PPACA” or collectively, the “ACA”), was signed into law, which substantially

changed the way healthcare is financed by both governmental and private insurers in the United States.

its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and we expect there will

be additional challenges and amendments to the ACA in the future.

On January 20, 2017, President Donald Trump signed an executive order

stating that the administration intended to seek prompt repeal of the Affordable Care Act, and, pending repeal, directed by the U.S.

Department of Health and Human Services and other executive departments and agencies to take all steps necessary to limit any fiscal

or regulatory burdens of the Affordable Care Act.

On January 28, 2021, President Joseph R.

signed the Executive Order on Strengthening Medicaid and stated his administration’s intentions to reverse the actions of his

predecessor and strengthen the Affordable Care Act.

As part of this Executive Order, the Department of Health and Human Services,

United States Treasury, and the Department of Labor are to review all existing regulations, orders, guidance documents, policies,

and agency actions to consider if they are consistent with ensuring both coverage under the Affordable Care Act and if they make

high-quality healthcare affordable and accessible to Americans.

signed the Executive Order on Strengthening

Medicaid and stated his administration’s intentions to reverse the actions of his predecessor and strengthen the Affordable Care

As part of this Executive Order, the Department of Health and Human Services, United States Treasury, and the Department of Labor

are to review all existing regulations, orders, guidance documents, policies, and agency actions to consider if they are consistent with

ensuring both coverage under the Affordable Care Act and if they make high-quality healthcare affordable and accessible to Americans.

On March 11, 2021, President Joseph R.

signed into law the American Rescue Plan Act of 2021 to further

strengthen Medicaid and the ACA and on April 5, 2022, President Joseph R.

signed the Executive Order on Continuing to Strengthen

Americans’ Access to Affordable, Quality Health Coverage in which he celebrated the significant progress across the U.S.

healthcare more affordable and accessible.

signed into law the American Rescue Plan Act of 2021 to further strengthen Medicaid

and the ACA and on April 5, 2022, President Joseph R.

signed the Executive Order on Continuing to Strengthen Americans’

Access to Affordable, Quality Health Coverage in which he celebrated the significant progress across the U.S.

in making healthcare more

affordable and accessible.

In this Executive Order, President Joseph R.

directed agencies “with responsibilities

related to Americans’ access to health coverage” to “review agency actions to identify ways to continue to expand the

availability of affordable health coverage.” The continued expansion of the

government’s role in the U.S.

healthcare industry may further lower rates of reimbursement for pharmaceutical products.

unable to predict the likelihood of changes to the Affordable Care Act or other healthcare laws which may negatively impact our

profitability, we continue to closely monitor all changes.

directed agencies “with responsibilities related

to Americans’ access to health coverage” to “review agency actions to identify ways to continue to expand the availability

of affordable health coverage.” The continued expansion of the government’s role in the U.S.

healthcare industry may further

lower rates of reimbursement for pharmaceutical products.

While we are unable to predict the likelihood of changes to the Affordable

Care Act or other healthcare laws which may negatively impact our profitability, we continue to closely monitor all changes.

Biden intends, as his predecessor did, to take action against drug prices which are considered “high.” The most likely

2 unchanged sentences

Drug pricing continues to be a subject of debate at the executive and legislative levels of U.S.

The American Rescue Plan Act of 2021 signed into law by President

Biden on March 14, 2021 includes a provision that will eliminate the statutory cap on rebates drug manufacturers pay to Medicaid

beginning in January 2024.

With the elimination of the cap, manufacturers may be required to compensate states in an amount greater

than what the state Medicaid programs pay for the drug.

Additionally, the Inflation Reduction Act of 2022 contains substantial drug pricing reforms, including the establishment

of a drug price negotiation program within the U.S.

Department of Health and Human Services that would require manufacturers to charge

a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of

rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace

inflation, and requires manufacturers to provide discounts on Part D drugs.

Substantial penalties can be assessed for noncompliance with

the drug pricing provisions in the Inflation Reduction Act of 2022.

The Inflation Reduction Act of 2022 could have the effect of reducing

the prices we can charge and reimbursement we receive for our products, if approved, thereby reducing our profitability, and could have

a material adverse effect on our financial condition, results of operations and growth prospects.

The effect of Inflation Reduction Act

of 2022 on our business and the pharmaceutical industry in general is not yet known.

American Rescue Plan Act of 2021 signed into law by President Biden on March 14, 2021 includes a provision that will eliminate the

statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024.

With the elimination of the cap,

manufacturers may be required to compensate states in an amount greater than what the state Medicaid programs pay for the drug.

Additionally, the Inflation Reduction Act of 2022 contains substantial drug pricing reforms, including the establishment of a drug

price negotiation program within the U.S.

Department of Health and Human Services that would require manufacturers to charge a

negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of

rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that

outpace inflation, and requires manufacturers to provide discounts on Part D drugs.

Substantial penalties can be assessed for

noncompliance with the drug pricing provisions in the Inflation Reduction Act of 2022.

The Inflation Reduction Act of 2022 could

have the effect of reducing the prices we can charge and reimbursement we receive for our products, if approved, thereby reducing

our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.

The effect of the Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet

the passage of the Inflation Reduction Act of 2022, President Biden signed The Executive Order on Lowering Prescription Drug Costs for

11 unchanged sentences

and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that additional federal, state and foreign healthcare reform

measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare

products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or

additional pricing pressures.

Additionally,

third-party payors, including governmental payors, managed care organizations and private health insurers, are increasingly challenging

the prices charged for medical products and services and examining their cost effectiveness.

The continuing efforts of governments, insurance

companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose

price controls may adversely affect:

expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit

the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage

and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

Additionally, third-party payors,

including governmental payors, managed care organizations and private health insurers, are increasingly challenging the prices charged

for medical products and services and examining their cost effectiveness.

The continuing efforts of governments, insurance companies,

managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls

may adversely affect:

demand for our licensed products,

17 unchanged sentences

licensed products.

We expect this to continue to be even more challenging in the near term as a result of current measures and regulations

implemented by governments worldwide in an attempt to control the COVID-19 pandemic, which may lead to declining demand in some of our

markets in the foreseeable future for our licensed products as different priorities for medical treatments emerge, thereby causing a

delay of actinic keratosis treatment for most patients.

If we are unable to expand our current customer base and obtain market acceptance

of our licensed products, our operations could be disrupted and our business may be materially adversely affected.

Even if we achieve

profitability, we may not be able to sustain or increase profitability.

If we are unable to expand our current customer base and obtain market acceptance of our licensed products, our operations

could be disrupted and our business may be materially adversely affected.

Even if we achieve profitability, we may not be able to sustain

or increase profitability.

products and future emerging products may erode sales of our licensed products.

28 unchanged sentences

Most of our competitors

have substantially greater financial, technical and other resources, such as larger research and development staffs and experienced marketing

have substantially greater financial, technical and other resources, such as larger R&D staffs and experienced marketing

and manufacturing organizations and well-established sales forces.

14 unchanged sentences

licensed products.

In the event we are not successful in expanding our marketing and sales infrastructure, we may not be able to successfully

grow the market our licensed products, which would limit our revenue growth.

In the event we are not successful in maintaining our marketing and sales infrastructure, we may not be able to successfully

grow the market of our licensed products, which would limit our revenue growth.

market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated.

24 unchanged sentences

Ameluz ® in combination

with photodynamic therapy using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses

with PDT using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses

of mild-to-moderate severity on the face and scalp.

78 unchanged sentences

sell or produce our licensed products in a cost-effective and timely manner.

In February 2024, our Ameluz Licensor initiated a voluntary

recall of a limited number of lots of Ameluz® due to a manufacturing defect in the impacted product’s packaging, which is provided

by an unaffiliated supplier.

The Ameluz Licensor confirmed that the recalled product is not likely to cause adverse health consequences.

We promptly notified all impacted physician customers of this recall and arranged for the prompt replacement of the recalled products.

Refer to Note 25.

Subsequent Events - Voluntary Product Recall of Limited Lots of Ameluz ® for more information.

under the FDA’s medical device reporting, or MDR, regulations, our Licensors are required to report to the FDA any event which

37 unchanged sentences

and field safety corrective actions.

are working to commercialize a new lamp, the “RhodoLED ® XL,” which was approved by the FDA on October 21,

2021 and allows use of Ameluz ® on more distant Actinic Keratosis lesions.

Management believes that this new lamp, could

provide new business growth opportunities for our company.

In the United States, according to FDA guidance, products for PDT, such as

Ameluz ® gel and its corresponding lamp(s), must be approved as combination products that cover both the drug and the lamp.

In May 2016, the Biofrontera Group (which included Biofrontera prior to our initial public offering) received approval from the FDA to

market in the United States Ameluz ® in combination with photodynamic therapy using the BF-RhodoLED ® lamp

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

The applicable

office of the FDA has determined that if the Ameluz Licensor develops a new lamp to be used with Ameluz ® , beyond the existing

approved RhodoLED ® lamp series, the Ameluz Licensor must seek a new approval utilizing the “New Drug Application”

As part of a drug/device combination, the lamp is by definition classified as a class III medical device and as such requires

a premarket approval, or PMA, by the FDA.

A new lamp will also require changes in the “Prescribing Information” of the drug.

If the Ameluz Licensor develops this new lamp, once the Ameluz Licensor’s PMA application is submitted to the FDA as part of this

approval process, it may take more than six months, plus, if needed, time required to answer questions or provide additional data.

to submission, the Ameluz Licensor will need to perform final tests on the lamp prototype, including technical tests by a certified laboratory

and a usability study.

During the process, there is a risk that the FDA might ask for additional tests or even clinical trials, and there

is no assurance that the Ameluz Licensor will be able to satisfy the FDA’s requests for additional tests or trials in a timely

manner, or at all, and there is no assurance that the Ameluz Licensor will be able to develop this new lamp, or obtain approval to use

it in the United States for PDT treatment of actinic keratosis in combination with Ameluz ® .

are working to commercialize a new lamp, the “RhodoLED ® XL,” which was approved by the FDA on

October 21, 2021 and allows use of Ameluz ® on more distant Actinic Keratosis lesions.

Management believes that this new

lamp, could provide new business growth opportunities for our company.

In the United States, according to FDA guidance, products for

PDT, such as Ameluz ® gel and its corresponding lamp(s), must be approved as combination products that cover both the drug

and the lamp.

In May 2016, the Biofrontera Group (which included Biofrontera prior to our initial public offering) received approval

from the FDA to market in the United States Ameluz ® in combination with PDT using the BF-RhodoLED ®

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

The applicable office of the FDA has determined that if the Ameluz Licensor develops a new lamp to be used with Ameluz ® ,

beyond the existing approved RhodoLED ® lamp series, the Ameluz Licensor must seek a new approval utilizing the “New

Drug Application” procedure.

As part of a drug/device combination, the lamp is by definition classified as a class III medical

device and as such requires a premarket approval, or PMA, by the FDA.

A new lamp will also require changes in the “Prescribing

Information” of the drug.

If the Ameluz Licensor develops this new lamp, once the Ameluz Licensor’s PMA application is submitted

to the FDA as part of this approval process, it may take more than six months, plus, if needed, time required to answer questions or

provide additional data.

Prior to submission, the Ameluz Licensor will need to perform final tests on the lamp prototype, including technical

tests by a certified laboratory and a usability study.

During the process, there is a risk that the FDA might ask for additional tests

or even clinical trials, and there is no assurance that the Ameluz Licensor will be able to satisfy the FDA’s requests for additional

tests or trials in a timely manner, or at all, and there is no assurance that the Ameluz Licensor will be able to develop this new lamp,

or obtain approval to use it in the United States for PDT treatment of actinic keratosis in combination with Ameluz ® .

FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

18 unchanged sentences

anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results.

a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and

European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California,

the California Consumer Privacy Act (CCPA).

a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations

in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in

California, the California Consumer Privacy Act (CCPA).

Our actual or perceived failure to comply with such obligations could harm our

63 unchanged sentences

our use of data, enforcement notices, as well potential civil claims including class action type litigation where individuals suffer

January 1, 2020, California enacted the California Consumer Privacy Act, or CCPA, which, among other things, requires

new disclosures to California consumers and affords such consumers new abilities to opt out of certain sales of personal information.

This Act also applies to any information of certain patients that a drug company may

It remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted in the years

The effects of the CCPA potentially are significant, however, and may require us to modify our data processing practices

and policies and to incur substantial costs and expenses in an effort to comply.

As a general matter, compliance with laws,

regulations, and any applicable rules or guidance from self-regulatory organizations relating to privacy, data protection,

information security and consumer protection, may result in substantial costs and may necessitate changes to our business practices,

which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise adversely affect our

business, financial condition and operating results.

Noncompliance with CCPA could result in regulatory investigations, reputational

damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class action type

litigation where individuals suffer harm.

Since its enactment, four (4) additional states – Colorado, Connecticut, Utah, and Virginia – have enacted

comprehensive consumer data privacy laws similar to the CCPA, indicating a potential trend that may continue to spread across the U.S.

January 1, 2020, California enacted the California Consumer Privacy Act, or CCPA, which, among other things, requires new disclosures

to California consumers and affords such consumers new abilities to opt out of certain sales of personal information.

This Act also applies

to any information of certain patients that a drug company may possess.

It remains unclear what, if any, modifications will be made to

this legislation or how it will be interpreted in the years to come.

The effects of the CCPA potentially are significant, however, and

may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

As a general matter, compliance with laws, regulations, and any applicable rules or guidance from self-regulatory organizations relating

to privacy, data protection, information security and consumer protection, may result in substantial costs and may necessitate changes

to our business practices, which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise

adversely affect our business, financial condition and operating results.

Noncompliance with CCPA could result in regulatory investigations,

reputational damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class action

type litigation where individuals suffer harm.

Since its enactment, four (4) additional states – Colorado, Connecticut, Utah, and

Virginia – have enacted comprehensive consumer data privacy laws similar to the CCPA, indicating a potential trend that may continue

to spread across the U.S.

are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may

2 unchanged sentences

managerial, scientific and medical personnel with specialized scientific and technical skills.

We are highly dependent on our

management, scientific, medical and operations personnel, including Erica Monaco, our Chief Executive Officer, Prof.

Lübbert, our Executive Chairman and Fred Leffler, our Chief Financial Officer.

The loss of the services of any of our executive officers or other key employees and our

inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of

We are highly dependent on our management,

scientific, medical and operations personnel, including Prof.

Hermann Lübbert, our Chief Executive Officer and Chairman and

Leffler, our Chief Financial Officer.

The loss of the services of any of our executive officers or other key employees and our inability

to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.

our efforts to retain valuable employees, members of our management team may terminate their employment with us on short notice.

51 unchanged sentences

and sales operations.

business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

the implementation of security measures, our internal computer systems and those of our current and future contract and research organizations,

or CROs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters,

terrorism, war and telecommunication and electrical failures.

The risk of a security breach or disruption, particularly through cyber-attacks

or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number,

intensity and sophistication of attempted attacks and intrusions from around the world have increased.

While we have not experienced

any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our

operations, it could result in a material disruption of our development programs and our business operations.

business and operations would suffer in the event of system failures or cyber-attacks.

the implementation of security measures, our internal computer systems and those of our current and future contract and research

organizations, or CROs, licensors, and other contractors and consultants are vulnerable to damage from breaches of information

systems, attempts to access information, including customer and company information, malicious code, theft, misuse, loss, release,

or destruction of data (including confidential customer information), account takeovers, unavailability of service, computer

viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

The risk of a

security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign

governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and

intrusions from around the world have increased.

While we have not experienced any such material system failure or cyber-related

incident, if such an event were to occur and cause interruptions in our operations, it could (i) materially disrupt our development

The proper functioning of our networks and systems and therefore our business operations and those of our customers;

result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of confidential, sensitive, or

otherwise valuable information of ours or our customers;

(iii) result in a violation of applicable privacy, data protection, and

other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental

fines, and possible financial liability;

(iv) require significant management attention and resources to remedy the damages that

or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us.

The occurrence

of any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, in the event of a cyber-related incident, we may be delayed in identifying or responding to the incident, which could

increase the negative impact of the incident on our business, financial condition, and results of operations.

To the extent that any

disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential

or proprietary information, we could incur liability and the further development and commercialization of our licensed products and product

candidates could be delayed.

disruption or cyberrelated incident were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure

of confidential or proprietary information, we could incur liability and the further development and commercialization of our

licensed products and product candidates could be delayed.

product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization

83 unchanged sentences

position, these manufacturers would likely erode our market and negatively impact our sales revenues, liquidity and results of operations.

The results of our R&D efforts are uncertain and there can be no assurance they will enhance the commercial success of our products.

We believe that we will need

to incur additional R&D expenditures to improve the capabilities of our BF-RhodoLED® lamps to better fulfill

the needs of dermatologists and may also incur R&D expenditures to develop new products.

The products we are developing

and may develop in the future may not be technologically successful.

At this time, we have limited internal R&D personnel,

which makes us dependent on consulting relationships.

In addition, the length of our product development cycle may be greater than we originally expected, and we may experience

delays in product development.

If our resulting products are not technologically successful, they may not achieve market acceptance or

compete effectively with our competitors’ products and services.

Related to Our Financial Position and Capital Requirements

is substantial doubt about our ability to continue as a “going concern”, which has been alleviated through managements plans to mitigate these conditions and obtain additional liquidit y.

connection with our assessment of going concern considerations under applicable accounting standards, the Company’s management

has determined that substantial doubt exists about our ability to continue as a going concern for at least one year from the date the

unaudited condensed consolidated financial statements were issued, which management believes has been alleviated

through its plans to mitigate these conditions and obtain additional liquidity .

The future viability of the Company is dependent on its ability to

continue to execute its growth plan and raise additional capital or find alternative methods of financing to fund its operations during

the first half of 2024, and until cash flow from operations is sufficient, if ever.

As of March 11, 2024 our unaudited cash was approximately

$4.1 million .

There can be no guarantee that the Company will be successful in raising additional capital or finding alternative methods of

If the Company is not successful in these endeavors, it would likely have a material adverse effect on the Company’s

business, results of operations and financial condition.

Organization and Business Overview - Liquidity and Going Concern for additional information.

have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain

4 unchanged sentences

As of December 31, 2023, we had an accumulated deficit of $99.7 million.

ability to become profitable depends on our ability to further commercialize our principal licensed product Ameluz ® .

if we are successful in increasing our licensed product sales, we may never achieve or sustain profitability.

In the long term, we anticipate

increasing our sales and marketing expense as we attempt to exploit the regulatory approvals to market Ameluz ® in the

United States for the photodynamic therapy treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.

be no assurance that our sales and marketing efforts will generate sufficient sales to allow us to become profitable.

Moreover, because

of the numerous risks and uncertainties associated with commercializing pharmaceutical products, we are unable to predict the extent

of any future losses or when we will become profitable, if ever.

cannot rule out the possibility that we may engage in additional equity or debt financing in the future, which could dilute the voting

rights of stockholders and the value of their shares.

If we are unable to achieve profitability over time or to obtain additional equity

or debt financing in such a scenario, this would have a material adverse effect on our financial condition.

ability to become profitable depends on our ability to further commercialize our principal licensed product Ameluz ® and to further commercialize and obtain a larger market share for Xepi.

Even if we are successful in increasing our licensed product sales, we may never achieve or sustain profitability.

In the long term,

we anticipate increasing our sales and marketing expense as we attempt to exploit the regulatory approvals to market

Ameluz ® in the United States for the PDT treatment of actinic keratoses of mild-to-moderate severity

on the face and scalp.

There can be no assurance that our sales and marketing efforts will generate sufficient sales to allow us to

become profitable.

Moreover, because of the numerous risks and uncertainties associated with commercializing pharmaceutical

products, we are unable to predict the extent of any future losses or when we will become profitable, if ever.

will likely engage in additional equity or debt financing in the future, which could dilute the voting rights of stockholders and the

value of their shares.

If we are unable to achieve profitability over time or to obtain additional equity or debt financing in such a

scenario, this would have a material adverse effect on our financial condition.

we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization

4 unchanged sentences

to which we acquired in March 2019 through our purchase of Cutanea, and the subsequent merger of Biofrontera and Cutanea.

the year ended December 31, 2022, we received an aggregate of $14 million, including $9.4 million from a private placement, net of

issuance costs, and $4.6 million from warrants exercised for common stock.

We believe with the funds available from these

transactions and availability under a working capital line of credit, that we will have sufficient funds to support the operating,

investing, and financing activities of the Company through at least twelve months from the date of the issuance of this Form 10-K.

the year ended December 31, 2023, we received an aggregate of $4.1 million, net of issuance costs, from a registered public

On February 19, 2024, we entered into an equity financing agreement which provided net proceeds of $7.2 million with an

additional $7.2 million to be provided upon the satisfaction of certain conditions.

For additional details, see Note 25.

Subsequent Events - Securities

Purchase Agreement for Series B Convertible Preferred.

We believe that the funds available from these

transactions and under our working capital line of credit, we will have sufficient funds to support the operating,

investing, and financing activities of the Company through at least twelve months from the date of this Form 10-K.

However, changing circumstances may cause us to consume capital significantly faster than currently anticipated, and we may need to

6 unchanged sentences

cost and timing of completion of commercial-scale manufacturing activities;

cost of establishing or maintaining sales, marketing and distribution capabilities for Ameluz ® photodynamic therapy

cost of establishing or maintaining sales, marketing and distribution capabilities for Ameluz ® PDT

or other licensed products or potential products in the United States;

14 unchanged sentences

existing and any future indebtedness could adversely affect our ability to operate our business.

the Share Purchase and Transfer Agreement dated March 25, 2019 (as amended, the “Share Purchase Agreement”), by and among

Biofrontera Newderm LLC, Biofrontera AG, Maruho Co., Ltd.

and Cutanea, pursuant to which Biofrontera Newderm Inc.

LLC, a wholly owned

subsidiary of Biofrontera Inc., acquired Cutanea from Maruho Co., Ltd., we are required to repay to Maruho Co., Ltd., $3.6 million on

December 31, 2022 and $3.7 million on December 31, 2023 in start-up costs that Maruho Co., Ltd.

paid to us, in connection with such acquisition

(not to exceed $7.3 million in the aggregate).

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 evaluating the repayment of the $7.3 million

of start-up costs.

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

In addition, on March 9, 2023, we entered into a commitment

letter (the “Commitment Letter”) with MidCap Business Credit LLC (“MidCap”), in respect of MidCap’s commitment

to provide us with a senior secured asset based revolving line of credit, 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”).

The Revolving Facility shall be secured by a lien on substantially all of the assets of the Company, subject to customary exceptions.

For additional details regarding the Revolving Facility see Item 9.B.

Other Information in this Form 10-K.

Entry into the Revolving

Facility will be subject to customary closing conditions, including the execution and delivery of appropriate definitive documentation

related to the Revolving Facility, to include customary representations, warranties, covenants, events of default and other terms and

conditions, and there can be no assurance that such closing conditions will be satisfied or that the Revolving Facility will be entered

into prior to the expiration of MidCap’s commitment or at all.

On December 21, 2023, we entered into credit facilities with two different

lenders, each pursuant to a Business Loan and Security Agreement for a term loan in the principal amount of $2,000,000 evidenced by a

Secured Promissory Note, effective as of December 21, 2023 (collectively, the “Loan Agreements”).

Each loan under the Loan Agreements (the “Loans”) requires the

Company to make weekly payments of principal and interest in the amount of approximately $102,857 through July 5, 2024, the maturity date.

Each Loan is secured by a security interest in substantially all of the Company’s assets (the “Collateral”).

interest rate for each of the Loans is 5.0%.

Loan Agreement includes limitations on the Company’s ability to sell, lease, transfer, or otherwise dispose of its assets outside

the ordinary course of its business;

or to create, incur, allow or suffer to exist any lien on any of its assets other than liens in

favor of the applicable lender and certain other permitted liens.

Each Loan Agreement also contains customary representations and warranties

and customary events of default, upon the occurrence of which, after any applicable grace period, the applicable lender would have the

ability to accelerate its loan and exercise remedies with respect to the Collateral.

indebtedness could have significant adverse consequences, including:

6 unchanged sentences

us at a competitive disadvantage to competitors that are better capitalized than we are.

may not have sufficient funds and may be unable to arrange for additional financing to pay the amounts due under our existing debt obligation

to Maruho Co.

under the terms of such Share Purchase Agreement, and which must be repaid if certain profits from the sale of Cutanea

products the Biofrontera Group agreed to share with Maruho are less than the amount of such start-up costs.

may also engage in debt financing in the future.

7 unchanged sentences

and/or results of operations.

valuation of our equity investments is subject to volatility.

market valuation of our equity investments, especially as it relates to our investment in Biofrontera AG which is publicly traded,

may experience substantial price volatility which, when accounted for under GAAP, could have a material adverse effect on our

financial condition and results of operations.

Refer to Note 6, Investments in Equity Securities , to our consolidated

financial statements for information on our equity investments.

of December 31, 2022, our investment in Biofrontera AG, a foreign publicly held company and significant shareholder, had a balance

of $10.5 million.

Our shares of Biofrontera AG are carried in our consolidated balance sheets at fair value based on the closing

price of the shares owned on the last trading day of the reporting period.

Those investments

can be negatively affected by market and economic factors including liquidity, credit deterioration, financial results, interest

rate fluctuations, or other factors.

Although we intend to liquidate our investment in Biofrontera AG within the next twelve months,

we cannot guarantee that we will able to do so within that timeframe.

As a result, as long as we hold these equity investments,

future fluctuations in their value could result

in significant losses and could have a material adverse impact on the Company’s financial condition and results of

Related to Corporate Governance, Including Being a Public Company

65 unchanged sentences

the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over

financial reporting, we will be unable to assert that our internal control over financial reporting are effective.

financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

For example, in connection

3 unchanged sentences

over financial reporting, resulting from control deficiencies related to management’s review of work performed by specialists.

identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may

not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business

If we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we

may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business

and stock price.

40 unchanged sentences

we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Even after we no longer qualify as an

emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take

advantage of many of the same exemptions from disclosure requirements, including presenting only the two most recent fiscal years of

audited financial statements and reduced disclosure obligations regarding executive compensation in this Form 10-K and

our periodic reports and proxy statements.

Even after we no longer qualify as

an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to

take advantage of many of the same exemptions from disclosure requirements, including presenting only the two most recent fiscal

years of audited financial statements and reduced disclosure obligations regarding executive compensation in this Form 10-K and our

periodic reports and proxy statements.

We will remain a smaller reporting company until the last day of the fiscal year in which (1)

the market value of our shares of common stock held by non-affiliates exceeds $250 million as of the prior the end of our second

fiscal quarter ending December 31 st of each year, or (2) our annual revenues exceeded $100 million during such completed fiscal

year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior to the end of our second

fiscal quarter ending December 31 st of each year.

To the extent we take advantage of such reduced disclosure obligations,

it may also make comparison of our financial statements with other public companies difficult or impossible.

fiscal quarter ending December 31 st of each year, or (2) our annual revenues exceeded $100 million during such completed

fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior to the end of

our second fiscal quarter ending December 31 st of each year.

To the extent we take advantage of such reduced disclosure

obligations, it may also make the comparison of our financial statements with other public companies difficult or

Related to Our Securities and Ownership of Our Common Stock

of December 31, 2022, Biofrontera AG beneficially owns 30.0% of our outstanding shares of common stock and will be able to exert significant

control over matters subject to stockholder approval, and its interests may conflict with ours or other stockholders in the future.

of December 31, 2022, Biofrontera AG beneficially owns in the aggregate approximately 30.0% of our outstanding voting stock and will

continue to exert significant influence on the company.

In addition, Biofrontera AG’s beneficial ownership would be further

reduced by the exercise of any of the 9,197,109 outstanding warrants issued in connection with our initial public offering and private placements.

However, it would likely continue to have a significant portion (and perhaps even a majority) of the voting power in a shareholder

As a result, Biofrontera AG will have the ability to significantly influence us through this ownership position.

Biofrontera AG may be able to determine all matters requiring stockholder approval.

For example, Biofrontera AG may be able to

control elections of directors, amendments of our organizational documents, our financing and dividend policy and approval of any

merger, sale of assets or other major corporate transaction.

This may prevent or discourage unsolicited acquisition proposals or

offers for our common stock that you may feel are in your best interest as one of our stockholders .

because of the significant ownership position held by Biofrontera AG and our classified board structure, new investors may not be able

to effect a change in the Company’s business or management, and therefore, stockholders would be subject to decisions made by management

and Biofrontera AG.

AG’s interests may differ from our interests and the interests of our other stockholders, and therefore actions Biofrontera AG

takes with respect to us, as a significant shareholder, including under the Ameluz LSA, may not be favorable to us or our public stockholders.

For a discussion of the risks related to our license agreement with Biofrontera AG, see “ Risks Related to the License and Supply

Agreements and Our Licensed Products .”

Biofrontera AG is a public company with a comparatively low amount of shares that are regularly traded and several shareholders who each

hold a significant stake in Biofrontera AG.

Any of these shareholders may exert their influence on Biofrontera AG by voting in favor

of proposals that are in their individual interest or electing members to Biofrontera AG’s supervisory board who could act to align

Biofrontera AG’s actions with the interests of such shareholders.

Under German law, company management must obtain the consent

of the supervisory board for certain actions.

Since 2017, several legal actions have been filed by one of Biofrontera AG’s significant

shareholders opposing resolutions passed at the shareholders’ meetings, including actions for annulment and rescission of resolutions

related to financing transactions undertaken by Biofrontera AG and they could seek to cause Biofrontera AG to take actions as our significant

shareholder that no longer support our strategy as set forth in this Form 10-K and may be contrary to the interests of our other stockholders.

Biofrontera AG sells a controlling interest in our company to a third party in a private transaction, you may not realize any change-of-control

premium on shares of our common stock and we may become subject to the control of a presently unknown third party.

Biofrontera AG holds less than the majority of the voting power of our common stock, it may still exert a controlling influence over

us, since many shares of our common stock are held by retail investors who may not vote at shareholder meetings.

The ability of Biofrontera

AG to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of the shares

of our common stock held by our other stockholders, could prevent you from realizing any change-of-control premium on your shares of

our common stock that may otherwise accrue to Biofrontera AG on its private sale of our common stock.

Additionally, if Biofrontera AG

privately sells its controlling equity interest in our company, we may become subject to the control of a presently unknown third party.

Such third party may have conflicts of interest with those of other stockholders.

In addition, if Biofrontera AG sells a controlling

interest in our company to a third party, our indebtedness may be subject to acceleration, and our other commercial agreements and relationships,

including any remaining agreements with Biofrontera AG, could be impacted, all of which may adversely affect our ability to run our business

as described herein and may have a material adverse effect on our business, financial condition and results of operations.

of our outstanding warrants could discourage an acquisition of us by a third party.

54 unchanged sentences

number of broker-dealers willing to execute trades in shares of our common stock.

February 24, 2023, we received a letter (the “Notice”) from the Listing Qualifications Staff of the Nasdaq Stock Market,

LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business

days, we are no longer in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on

the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) .

We were provided a compliance period of 180 calendar days

from the date of the Notice, or until August 23, 2023, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq

Listing Rule 5810(c)(3)(A).

If we fail to regain compliance within the allotted compliance periods,

including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock and publicly-traded warrants

will be subject to delisting.

We would then be entitled to appeal Nasdaq’s determination, but there can be no assurance that Nasdaq

would grant our request for continued listing.

will continue to monitor the closing bid price of our common stock and seek to regain compliance with all applicable Nasdaq requirements

within the allotted compliance periods and may, if appropriate, consider available options, including implementation of a reverse stock

split of our common stock, to regain compliance with the minimum closing bid requirement.

If we seek to implement a reverse stock split

in order to remain listed on Nasdaq, the announcement or implementation of such a reverse stock split could negatively affect the price

of our common stock and/or publicly-traded warrants.

November 22, 2023, we received a letter (the “Notice”) from the Listing Qualifications staff of Nasdaq notifying the Company that, because the Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for

the period ended September 30, 2023 was $1,038,000, the Company is no longer in compliance with the continued listing requirement under

Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000.

Additionally,

as of the date of the Notice, the Company did not meet either of the alternative requirements of maintaining a market value of listed

securities of $35 million or achieving a net income from continuing operations of $500,000 in the most recently completed fiscal year

or in two of the last three most recently completed fiscal years.

As a result, as of the date of this Report, the Company does not satisfy

Nasdaq Marketplace Rule 5550(b).

We submitted a compliance plan to Nasdaq on January 8, 2024.

The compliance plan was accepted and we were granted 180 calendar days from

November 22, 2023 to evidence compliance.

addition, if we fail to regain compliance to be eligible to trade on Nasdaq or obtain listing on another reputable national securities

8 unchanged sentences

depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity

We had 26,699,002 shares of common stock outstanding as of December 31, 2022, of which 18,699,002 shares are freely

tradable without restrictions or further registration required under the Securities Act.

The remaining 8,000,000 million shares are

currently unregistered and held by Biofrontera AG.

are exercisable for our common stock, which would increase the number of shares eligible for future resale in the public market and result

in dilution to our stockholders.

of March 10, 2023, we have a total of 9,197,109 outstanding warrants which may each be exercised for one share of our common

All of the shares issuable upon exercise of the warrants have been registered on effective registration statements and therefore,

when issued, will be freely tradable without restriction or further registration required under the Securities Act.

Any shares of our

common stock issued upon exercise of outstanding warrants will result in dilution to the then existing holders of our common stock and

increase the number of shares eligible for resale in the public market.

Sales of substantial numbers of such shares in the public market

could adversely affect the market price of our common stock.

We had 5,089,413 shares of common stock outstanding as of March 11, 2024, of which 2,172,628 shares are freely tradable

without restrictions or further registration required under the Securities Act.

2,516,785 shares were issued in a private placement

that closed on February 22, 2024 (the “Offering”) and are currently unregistered, but are subject to registration

We have filed a registration statement to register the resale of the shares issued in the Offering and once it is declared

effective by the SEC (which we expect to occur soon after the date of this Annual Report on Form 10-K) those 2,516,785 shares will

be freely tradable without restriction.

The remaining 400,000 shares are currently unregistered and held by Biofrontera

In addition, we have issued warrants to purchase our common stock that, if such warrants are exercised, could be

sold in the public market.

See “We have issued several warrants that are exercisable for our common stock and issued Series B

Convertible Preferred Stock, which, if exercised or converted, could substantially increase the number of shares eligible for future resale

in the public market and result in dilution to our stockholders” for

more information regarding the potential impact of such warrants.

If the Preferred Warrants are not exercised,

we will not receive up to $8 million in aggregate gross proceeds from the exercise of the Warrants which could have a material adverse effect on our financial condition .

We issued warrants (the “Preferred Warrants”) to purchase up to 8,000 shares of Series B-3 Convertible

Preferred Stock (the “Series B-3 Preferred Stock”) at an exercise price of $1,000 per share of Series B-3 Preferred Stock.

If the Preferred Warrants are exercised, we will receive up to $8.0 million in gross proceeds as a result of such exercise.

The Preferred Warrants will expire within 5 days of meeting certain milestones, which we expect to occur in the

second quarter of 2024.

Although we anticipate that the holders of the Preferred Warrants will exercise the Preferred Warrants prior to

their expiration, the holders of the Preferred Warrants are not required to do so.

In addition, if those milestones are not met the Preferred

Warrants will not expire until February 22, 2027 and the Preferred Warrants, if they are exercised at all, will not be exercised within

the currently anticipated timeframe.

In addition, while the Company has reserved sufficient shares of Common Stock to cover the

number of shares issuable upon conversion of the remaining shares of Series B-1 Convertible Preferred Stock, the Company does not currently

have enough authorized shares of Common Stock to cover the shares of Common Stock that would be issuable upon conversion of the Series

B-3 Preferred Stock if the investors exercised all of their Warrants.

Based on the current conversion price of $0.7074 per share, an

additional 11,309,019 shares of Common Stock would need to be reserved and, unless the stockholders approve an amendment to our Amended

and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, we only have 7, 354,059

shares of common stock available to reserve for the issuance of common stock upon conversion of the Series B-3 Preferred Stock.

If we are unable to obtain the stockholder approval necessary to reserve sufficient shares to cover the conversion of the Series B-3

Preferred Stock, then the investors will not be able to exercise any of their Warrants.

If the Preferred Warrants are not exercised or

are not exercised within the currently anticipated timeline for any of the reasons described above or if the Preferred Warrants are not

exercised in full, we would not receive the anticipated proceeds from the exercise of the Preferred Warrants which could have a material

adverse effect on our financial condition since our current plans for ensuring sufficient liquidity to continue as a going concern depend

on receiving the anticipated proceeds.

Even if there were alternate sources of financing available to us, there is no guarantee that

they would be sufficient to offset the loss of such proceeds.

have issued several warrants, which are exercisable for our common stock, and issued Series B Convertible Preferred Stock ,

which, if exercised or converted, as applicable, could substantially increase the number of shares eligible for future resale in the

public market and result in dilution to our stockholders.

of March 10, 2024, we have a total of 2,269,356 outstanding warrants which may each be exercised for one share of our common stock.

All of the shares issuable upon exercise of these warrants have been registered on effective registration statements and therefore, when

issued, will be freely tradable without restriction or further registration required under the Securities Act.

Any shares of our common

stock issued upon exercise of outstanding warrants will result in dilution to the then existing holders of our common stock and increase

the number of shares eligible for resale in the public market.

In addition, in the Offering we issued shares of Series B-1 Convertible Preferred Stock (“Series B-1 Preferred

Each share of Series B-1 Preferred Stock may be converted into approximately 1,413 shares of our common stock (based on

the conversion price of $0.7074 per share and a liquidation preference of $1,000 per share of Series B-1 Preferred Stock).

of issuance, the holders of the Series B-1 Preferred Stock converted some of their shares resulting in the issuance of 2,516,785 shares

of common stock.

However, 4,806 shares of Series B-1 Preferred Stock remain outstanding, which could be converted into up to 6,793,893

shares of common stock.

also issued in the Offering, the Preferred Warrants, which if exercised, would result in the issuance of Series B-3 Preferred Stock.

Each share of Series B-3 Preferred Stock may convert into approximately 1,413 shares of our common stock (based on the conversion price

of $0.7074 per share and a liquidation preference of $1,000 per share of Series B-3 Stock).

While it is not certain that any of the Preferred

Warrants will be exercised, if they are exercised in full, the Series B-3 Preferred Stock issued could be converted into up to 11,309,019

shares of common stock.

the Series B-1 Preferred Stock and Series B-3 Preferred Stock each have a beneficial ownership limitation that prevents the holder

from converting if it would result in the holder’s beneficial ownership exceeding 9.99% of the then outstanding common stock

and although the initial conversion into 2,516,785 shares is close to the beneficial ownership limitation for all current holders of

the Series B-1 Stock and the Preferred Warrants, the remaining Series B-1 Preferred Stock and any Series B-3 Preferred Stock issued

upon exercise of the Preferred Warrants could be converted into common stock at a future date if the total number of outstanding

shares of our common stock increases, if the beneficial ownership limitation is removed or if the holders of the Series B-1

Preferred Stock and Series B-3 Preferred Stock sell any of the common stock they currently hold.

Under the terms of the Certificate

of Designation for the Series B Convertible Preferred Stock, if our stockholders approve an amendment to our Amended and Restated

Certificate of Incorporation to increase the number of authorized shares, the Series B-1 Preferred Stock will automatically be

converted into common stock (to the extent such conversion does not exceed the beneficial ownership limitation described above) or

Series B-2 Convertible Preferred Stock with the same terms as the Series B-3 Preferred Stock.

Sales of substantial numbers of any

such shares described above in the public market could adversely affect the market price of our common stock.

securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading

53 unchanged sentences

The description and terms of the Rights are set forth in the Stockholder Rights Agreement between the Company

and Computershare Trust Company, N.A., as rights agent, dated as of October 13, 2022.

and Computershare Trust Company, N.A., as rights agent, dated as of October 13, 2022, as amended by Amendment No.1 to the Stockholder

Rights Agreement, dated as of April 26, 2023.

Rights Agreement imposes a significant penalty upon any person or group that acquires 20% or more (but less than 50%) of our then-outstanding

17 unchanged sentences

of 50% or more of the Common Stock of the Company.

Rights will expire at the close of business on October 13, 2023;

provided that if the Company’s stockholders have not ratified

the Stockholder Rights Agreement by the close of business on the first day after the Company’s 2023 annual meeting of stockholders

(including any adjournments or postponement thereof), the Rights will expire at such time, in each case, unless previously redeemed or

exchanged by the Company.

Rights will expire at the earlier of (a) June 30, 2026 or (b) the first day after the Company’s 2025 annual meeting, if stockholder

approval has not been obtained prior to such date, the Rights will expire at such time, in each case, unless previously redeemed or exchanged

by the Company.

Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable.

2 unchanged sentences

of our stock.

amended and restated certificate of incorporation and our amended and restated bylaws contains provisions that could delay or prevent

amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent

a change in control of our company.

28 unchanged sentences

duty or liability created by the Securities Act or the rules and regulations thereunder.

that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

and restated certificate of incorporation will further provide that, unless we consent in writing to the selection of an alternative

forum, the federal district courts are the sole and exclusive forum for the resolution of any complaint asserting a right under the Securities

The Supreme Court of the State of Delaware has held that such provisions are facially valid under Delaware law.

While there can

be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the provision should

be enforced in a particular case, application of the provision means that suits brought by our stockholders to enforce any duty or liability

created by the Securities Act must be brought in federal court and cannot be brought in state court.

We note that investors cannot waive compliance

with the federal securities laws and the rules and regulations thereunder.

Our amended and restated certificate of incorporation will

further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole

and exclusive forum for the resolution of any complaint asserting a right under the Securities Act.

The Supreme Court of the State of

Delaware has held that such provisions are facially valid under Delaware law.

While there can be no assurance that federal or state courts

will follow the holding of the Delaware Supreme Court or determine that the provision should be enforced in a particular case, application

of the provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be

brought in federal court and cannot be brought in state court.

becoming a stockholder in our Company, you will be deemed to have notice of and have consented to the provisions of our amended and restated

30 unchanged sentences

in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.

GAAP, we are required to evaluate the outstanding warrants to purchase our common stock to determine whether they should be

accounted for as a warrant liability or as equity.

At each reporting period (1) the accounting treatment of the warrants will be

reevaluated for proper accounting treatment as a liability or equity and (2) the fair value of the liability of the warrants will be

re-measured and the change in the fair value of the liability will be recorded as other income (expense) in our consolidated statement of

GAAP, we are required to evaluate the outstanding warrants to purchase our common stock to determine whether they should be accounted

for as a warrant liability or as equity.

At each reporting period (1) the accounting treatment of the warrants will be reevaluated for

proper accounting treatment as a liability or equity and (2) the fair value of the liability of the warrants will be re-measured and

the change in the fair value of the liability will be recorded as other income (expense) in our consolidated statement of operations.

Such accounting treatment may adversely affect the market price of our securities.

In addition, changes in the inputs

and assumptions for the valuation model we use to determine the fair value of such liability may have a material impact on the

estimated fair value of the warrant liability.

As a result, our financial statements and results of operations will fluctuate

quarterly, based on various factors, such as the share price of our common stock, many of which are outside of our control.

share price is volatile, we expect that we will recognize non-cash gains or losses on our warrants or any other similar derivative

instruments in each reporting period and that the amount of such gains or losses could be material.

The impact of changes in fair

value on earnings may have an adverse effect on the market price of our common stock.

warrants issued in connection with our initial public offering, the (“IPO Warrants”) were accounted for as equity as these

instruments meet all of the requirements for equity classification under ASC 815-40.

(See Note 19.

Stockholders’ Equity)

warrants issued in connection with the private placement offerings (completed on December 1 , 2021 and May 16, 2022), as well as

the Inducement Warrants issued on July 26, 2022 were accounted for as liabilities as these warrants provide for a cashless settlement

provision which fails the requirement of the indexation guidance under ASC 815-40 (collectively

“PIPE Warrants”).

The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration,

and any change in fair value is recognized in the Company’s consolidated statement of operations.

Refer to Note 4.

Measurements.

As of the date of this Form 10-K,

7,704,715 PIPE Warrants remain outstanding.

Stockholders’ Equity in our audited financial statements for the fiscal

year ended December 31, 2022 included in this Form 10-K for more information on the Warrants.

Unresolved Staff Comments

headquarters is located in Woburn, Massachusetts, where we lease approximately 16,128 square feet under a lease agreement that has an

initial term expiring in September 2025.

In addition, changes in the inputs and assumptions

for the valuation model we use to determine the fair value of such liability may have a material impact on the estimated fair value of

the warrant liability.

As a result, our financial statements and results of operations will fluctuate quarterly, based on various factors,

such as the share price of our common stock, many of which are outside of our control.

If our share price is volatile, we expect that

we will recognize non-cash gains or losses on our warrants or any other similar derivative instruments in each reporting period and that

the amount of such gains or losses could be material.

The impact of changes in fair value on earnings may have an adverse effect on the

market price of our common stock.

The warrants issued in connection with the private placement offerings (completed

on December 1 , 2021, May 16, 2022, July 26, 2022, and November 2, 2023) (collectively, the “PIPE Warrants”) were accounted

for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement

of the indexation guidance under ASC 815-40.

The resulting warrant liabilities are re-measured at each balance sheet date until their

exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statement of operations.

Fair Value Measurements.

of the date of this Form 10-K, 2,192,736 liability classified Warrants remain outstanding.

Stockholders’ Equity in

our audited financial statements for the fiscal year ended December 31, 2023 and 2022 included in this Form 10-K for more

information on the Warrants.

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

What changed 10-K

Item 1A. Risk Factors