What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-09 · 848 added, 779 removed, 151 unchanged (92% of the section changed)

2 unchanged sentences

thousands, except par value and share amounts )

September 30,

and cash equivalents

related party

receivable, net

receivables, related party

expenses and other current assets

assets, related party

current assets

Cash and cash equivalents

Investment, related party

Accounts receivable, net

Other receivables, related party

Inventories, net

Prepaid expenses and other current assets

Total current assets

Other receivables long term, related party

Property and equipment, net

Operating lease right-of-use assets

Intangible asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

and equipment, net

lease right-of-use assets

MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

payable, related parties

lease liabilities

expenses and other current liabilities

current liabilities

Accounts payable

Accounts payable, related parties

Accounts payable

Acquisition contract liabilities, net

Operating lease liabilities

Accrued expenses and other current liabilities

Line of credit

Total current liabilities

Long-term liabilities:

Acquisition contract liabilities, net

Warrant liabilities

Operating lease liabilities, non-current

Other liabilities

Total liabilities

Commitments and contingencies (Note 18)

lease liabilities, non-current

and contingencies (Note 17)

B-1 Convertible Preferred Stock, $ 0.001

par value, 6,586 share authorized, 4,806

shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Series B-2 Convertible Preferred Stock, $ 0.001 par value, 6,586 shares

authorized, zero shares issued and outstanding as of March 31, 2024 and December 31, 2023

Series B-3 Convertible Preferred Stock, $ 0.001 par value, 8,000 shares

authorized, zero shares issued and outstanding as of March 31, 2024 and December 31, 2023

Stockholders’

Stock, $ 0.001 par value, 19,978,828 shares authorized, zero shares issued and outstanding as of March 31, 2024 and December 31, 2023

Stock, $ 0.001 par value, 15,000,000 shares authorized;

5,089,413 and 1,517,628 shares issued and outstanding as of March 31, 2024

and December 31, 2023

paid-in capital

stockholders’ equity

Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2023 and December 31, 2022

Common Stock, $ 0.001 par value, 15,000,000 shares authorized;

1,367,628 and 1,334,950 shares issued and outstanding as of September 30, 2023 and December 31, 2022

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

liabilities, mezzanine equity and stockholders’ equity

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

1 unchanged sentence

thousands, except per share amounts and number of shares )

Three months ended September 30,

Nine months ended September 30,

Product revenues, net

Revenues, related party

Total revenues, net

Months Ended March 31,

revenues, net

related party

revenues, net

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

and development

in fair value of contingent consideration

operating expenses

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

from operations

income (expense)

in fair value of warrant liabilities

in fair value of investment, related party

on debt extinguishment

income (expense), net

other income (expense)

Change in fair value of warrant liabilities

Warrant inducement expense

Realized/Unrealized losses in investment, related party

Interest expense, net

Other income, net

Total other income (expense)

Income (loss) before income taxes

Income tax expense

Net income (loss)

Income (loss) per common share:

Weighted-average common shares outstanding:

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

before income taxes

per common share:

Basic and diluted

Weighted-average

common shares outstanding:

Basic and diluted

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

CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY

thousands, except number of shares)

and Nine Months Ended September 30, 2023

Additional Paid-

Balance, June 30, 2023

Issuance of shares in reverse stock split (for fractional shares)

Stock based compensation

Balance, September 30, 2023

$ ( 103,176 )

Balance, December 31, 2022

Issuance of shares for vested restricted stock units

Issuance of shares in reverse stock split (for fractional shares)

Stock based compensation

Balance, September 30, 2023

Months Ended March 31, 2024 and 2023

Stockholders’

B-1 Preferred Stock

January 1, 2024

of pre-funded warrants

of Series B Preferred Stock and Warrants

of Series B-1 Preferred into common stock

based compensation

March 31, 2024

$ ( 110,087 )

and Nine Months Ended September 30, 2022

Additional Paid-

Balance, June 30, 2022

Exercise of pre-funded warrants

Exercise of PIPE warrants

Issuance of shares for vested restricted stock units

Stock based compensation

Balance, September 30, 2022

Balance, December 31, 2021

Issuance of common stock and warrants under private placement, net of issuance costs

Exercise of pre-funded warrants

Exercise of PIPE warrants

Issuance of shares for vested restricted stock units

Stock based compensation

Net income (loss)

Balance, September 30, 2022

January 1, 2023

based compensation

of Series B-1 Preferred into common stock, shares

March 31, 2023

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

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

Amortization of right-of-use assets

Amortization of acquired intangible assets

Realized/Unrealized losses in investment, related party

Change in fair value of contingent consideration

Change in fair value of warrant liabilities

Warrant inducement expense

Stock-based compensation

Provision for inventory obsolescence

Provision for doubtful accounts

Non-cash interest expense

Changes in operating assets and liabilities:

Accounts receivable

Other receivables, related party

Prepaid expenses and other assets

Accounts payable and related party payables

Operating lease liabilities

Accrued expenses and other liabilities

Cash flows used in operating activities

Cash flows from investing activities

Disbursement for loan receivable

Sales of equity investment, related party

Purchases of property and equipment

Cash flows provided by (used) in investing activities

Cash flows from financing activities

Proceeds from line of credit

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

Proceeds from exercise of warrants

Repayment of line of credit

Cash flows provided by financing activities

Net increase (decrease) in cash and cash equivalents

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

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

Supplemental disclosure of cash flow information

Interest paid

Interest paid, related party

Income taxes paid, net

Supplemental non-cash investing and financing activities

Conversion of warrant liability to equity

Addition of right-of-use assets in exchange for operating lease liabilities

Months Ended March 31,

flows from operating activities:

income (loss)

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

of right-of-use assets

of acquired intangible assets

Realized/unrealized

(gain)/ loss in investment, related party

in fair value of contingent consideration

in fair value of warrant liabilities

Allowance for credit losses

on debt extinguishment

interest expense

in operating assets and liabilities:

receivables, related party

expenses and other assets

payable and related party payables

lease liabilities

expenses and other liabilities

flows used in operating activities

flows from investing activities

of equity investment, related party

of property and equipment

flows provided by (used) in investing activities

flows from financing activities

from issuance of series B-1 preferred stock and warrants to purchase series B-3 preferred stock in a private placement, net of

issuance costs

of principal short-term debt

to extinguish line of credit

flows provided by financing activities

increase (decrease) in cash and cash equivalents

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

cash equivalents and restricted cash, at the end of the period

disclosure of cash flow information

taxes paid, net

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

to Condensed Consolidated Financial Statements

Business Overview

(the “Company” or “Biofrontera”) is a U.S.-based biopharmaceutical company commercializing a portfolio of

pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”) and topical

The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions

as well as impetigo, a bacterial skin infection.

In May 2023, the Company began research and development (“R&D”) activities

to support PDT growth and will continue to opportunistically invest in these activities going forward.

Our research and development program

currently aims to improve the capabilities of our BF-RhodoLED ® lamps to better fulfill the needs of dermatologists and

improve the effectiveness of our commercial team by letting sales representatives carry approved devices with them allowing for easier

product demonstrations and evaluations.

Biofrontera includes its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI”), a limited liability company organized under the laws

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

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

lamp series, for PDT.

In the United States, the PDT treatment is used for the lesion-directed and field-directed treatment of actinic

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

We are currently selling Ameluz ® for this indication in

under an exclusive license and supply agreement (“Ameluz LSA”) with Biofrontera Pharma (“Pharma”) GmbH

and Biofrontera Bioscience GmbH (“Bioscience” and together, the “Ameluz Licensor”).

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

It is approved for use in the United States

in adults and children 2 months and older.

We are currently selling Xepi® for this indication in the United States under an exclusive

license and supply agreement, as amended (“Xepi LSA”) with Ferrer Internacional S.A.

(“Ferrer”) that was assumed

by Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.(“Cutanea”).

There has been limited

revenue during the current reporting periods and recent developments with the third-party manufacturer that was providing our supply

of Xepi® have resulted in further delays of our commercialization of the product.

However, Ferrer is qualifying a new Contract manufacturer,

Cambrex, which is expected to begin production in 2024.

June 28, 2023, the Company, filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the

“Amendment”) with the Secretary of State of the State of Delaware to (i) effect a 1-for-20 reverse stock split (the

“Reverse Stock Split”) of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), and (ii) effect a related proportional reduction in the number of the Company’s authorized shares of Common

Stock from 300,000,000 to 15,000,000

(the “Authorized Share Reduction”).

to the Amendment, the Reverse Stock Split and Authorized Share Reduction was effective at 11:59 p.m.

on July 3, 2023 (the “Split

Effective Time”), and the Common Stock began trading on the Nasdaq Capital Market on a post-split basis on July 5, 2023.

value and other terms of the Common Stock were not affected.

the Split Effective Time, every 20 shares of Biofrontera Common Stock issued and outstanding were automatically combined and

reclassified into one share of Common Stock.

Outstanding equity-based awards, warrants and other equity rights were proportionately

adjusted pursuant to their terms and the number of shares authorized and reserved for issuance upon vesting of restricted stock

units or exercise of stock options and warrants were reduced proportionately.

No fractional shares were issued as a result of the

Reverse Stock Split.

Stockholders who would otherwise hold a fractional share as a result of the Reverse Stock Split received an

additional share of Common Stock.

the terms of the applicable warrant agreement, the number of shares of Common Stock issuable on exercise of each warrant will be proportionately

Specifically, following effectiveness of the Reverse Stock Split, every 20 shares of Common Stock that may be purchased pursuant

to the exercise of public warrants now represents one share of Common Stock that may be purchased pursuant to such warrants.

for the Company’s warrants trading under the symbol “BFRIW”, every 20 warrants will be exercisable for one share of

Common Stock at an exercise price of $ 100.00 per share of Common Stock.

Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in the

Company’s equity (other than as a result of the rounding up of fractional shares).

All information included in these

consolidated financial statements has been adjusted, on a retrospective basis, to reflect the Reverse Stock Split as if it had been

effective from the beginning of the earliest period presented, unless otherwise stated.

All outstanding securities entitling their

holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock options, restricted stock units, and

warrants, were adjusted as a result of the Reverse Stock Split.

Organization and Business Overview

Inc., a Delaware Corporation (the “Company” or “Biofrontera”), is a U.S.-based biopharmaceutical company commercializing

a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”)

and topical antibiotics.

The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous

skin lesions as well as impetigo, a bacterial skin infection.

Company includes its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI”), a limited liability company organized under the

laws of Germany, formed on February 9, 2022, as a German presence to facilitate our relationship with Biofrontera Pharma GmbH

(“Biofrontera Pharma”) and Biofrontera Bioscience GmbH (“Biofrontera Bioscience,” and, together with

Biofrontera Pharma, the “Ameluz Licensor”), both of which are related parties as they are wholly owned subsidiaries of Biofrontera AG, a company holding more than five percent of the Company’s common stock.

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

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

In the United States,

the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on

the face and scalp.

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

under an exclusive license and

supply agreement (the “Ameluz LSA”) with the Ameluz Licensor.

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

bacterial growth.

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

for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes.

It is approved for

use in the United States in adults and children 2 months and older.

Our exclusive license and supply agreement, as amended

(“Xepi LSA”) with Ferrer Internacional S.A.

(“Ferrer”), assumed by the Company on March 25, 2019 through our

acquisition of Cutanea Life Sciences, Inc.

(“Cutanea”), enables the Company to market and sell this product in the

United States.

The Company has generated limited revenue from sales of Xepi during the current reporting periods and recent

developments with the third-party manufacturer that was providing our supply of Xepi® have resulted in further delays of our

commercialization of the product.

However, Ferrer is in the process of qualifying a new contract manufacturer.

Once Cambrex is qualified, we expect the supply of Xepi® will meet the

future market demand.

and Going Concern

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

from the sale of our investment, related party, and cash flows from a revolving line of credit.

As of September 30, 2023, we had cash

and cash equivalents of $ 3.4 million and investment, related party of $ 3.3 million, compared to $ 17.2 million and $ 10.5 million as of

December 31, 2022, respectively.

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

For the nine months ended September 30, 2023 and 2022, we incurred

loss from operations of $ 18.8

million and $ 13.0

million, respectively.

We incurred net cash outflows

from operations of $ 16.0

Since we commenced operations in

2015, we have generated significant losses.

We incurred net cash outflows from operations of $ 3.3

million and $ 3.7

million, for the same periods, respectively.

We had an accumulated deficit as of September 30, 2023 of $ 103.2

Additionally, we expect to continue

to incur operating losses due to significant discretionary sales and marketing, medical affairs, and dermatology community outreach efforts

as we seek to expand the commercialization of our licensed products in the United States.

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.

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.

We have implemented plans to improve our working capital position, particularly around inventory levels, and do

not expect to need a delivery until sometime in Q3 2024, depending on actual sales until then.

Management believes that the anticipated implementation of such plans, together with the recent

net capital raise of $ 4.1

million (See Note 21, Subsequent Events ) will provide the opportunity for the Company to continue as a going concern.

However, no assurance can be given that the Company will be successful in these efforts.

million for the three months ended March 31, 2024 and 2023, respectively.

The Company had an accumulated deficit as of March 31,

2024 of $ 110.1 million.

The Company’s primary sources of liquidity are its cash collected from the sales of its

products, and cash flows from financing transactions.

During the three months ended March 31, 2024, we received net proceeds of

million from the issuance of preferred stock and warrants, net of issuance costs (See Note 13.

Mezzanine Equity and

Stockholders’ Equity ).

As of March 31, 2024, we had cash and cash equivalents of $ 3.8

million, compared to $ 1.3

million as of December 31, 2023.

These conditions raise substantial doubt about our ability to continue as a going concern for at

least twelve months from the issuance date of this report, which management believes has been alleviated through its plans to

mitigate these conditions and obtain additional liquidity.

to the requirements of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification

(“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,

management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the

Company’s ability to continue as a going concern for one year from the date the consolidated financial statements included in

this Form 10-Q are issued.

This evaluation does not take into consideration the potential mitigating effect of management’s

plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans

sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of

management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented

within one year after the date that the financial statement are issued, and (2) it is probable that the plans, when implemented,

will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going

concern within one year after the date that the consolidated financial statements are issued.

an effort to alleviate these conditions, management’s plans include adhering to the 2024 budget approved by the Board of

Directors (the “Board”), which includes significant sales and marketing, medical affairs, and dermatology community

outreach efforts as we seek to expand the commercialization of Ameluz® in the United States while decreasing discretionary

expenses by approximately $ 5.5 million when compared to the year ended 2023.

We have reduced spending at both the commercial and

general and administrative level but do not expect these reductions to impact our ability to grow and achieve our revenue

February 19, 2024, the Company entered into the Second Amended and Restated License and Supply Agreement (“Second

A&R Ameluz LSA”) with the Ameluz Licensor, effective as of February 13, 2024.

The terms of the Second A&R Ameluz LSA is

expected to significantly reduce our cost of inventory in

The Company will begin to see gross margins of its primary product, Ameluz®, of approximately 75% as opposed to the prior

50% beginning with inventory purchases after the execution date.

This will reduce our cash needs for inventory which will be partially

offset by increased R&D costs, resulting in expected net savings of $ 1.5 million through May 2025 and continuing in subsequent

In addition, on February 19, 2024, the Company entered into securities purchase agreements

(collectively, the “Preferred Purchase Agreement”) with healthcare-focused institutional investors resulting in net proceeds

million, which the Company received on February 22, 2024.

Under the Preferred Purchase Agreement, we also issued warrants to purchase

shares of Series B-3 Convertible Preferred Stock at an exercise price of $ 1,000 per

As of May 15, 2024 all five investors have exercised the B-3 Preferred Convertible Share Warrants and the Company received net

proceeds of $ 7.4 million.

Mezzanine Equity and Stockholder’s Equity for more details regarding the Preferred

Purchase Agreement .

on management’s plans described above, combined with the impact of the Second A&R Ameluz LSA and Preferred Purchase

Agreement, the Company’s management believes that the Company will have sufficient liquidity and probable financing to meet

its funding requirements for at least one year from the date the financial statements in this Form 10-Q are issued.

However, this

will depend on several factors, including executing on its sales plan within the time period needed and controlling our operating

costs, as well as other possible

challenges and unforeseen circumstances.

A lack of execution or unforeseen circumstances may require the Company to raise additional

capital or debt which may not be available on acceptable terms, or at all which could result in a material adverse effect on the

Company, as well as its business, financial condition, results of operations, growth prospects and financial

accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction

3 unchanged sentences

uncertainties described above.

There could be a material adverse effect on the Company and its financial statements if management’s plans

are not achieved on a timely basis.

Summary of Significant Accounting Policies

for Preparation of the Financial Statements

accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules

and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information

and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S.

generally accepted

accounting principles (“U.S.

accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and

regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information and footnote

disclosures normally included in the annual financial statements prepared in accordance with U.S.

generally accepted accounting principles

GAAP”) have been condensed or omitted pursuant to such rules and regulations.

Company’s opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which

are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of September 30, 2023,

the Company’s operating results for the three and nine months ended September 30, 2023 and 2022, and the Company’s cash

flows for the nine months ended September 30, 2023 and 2022.

The accompanying financial information as of December 31, 2022 is

derived from audited financial statements.

Interim results are not necessarily indicative of results for a full year.

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

consolidated financial statements for the fiscal years ended December 31, 2022 and 2021 (“reaudited Consolidated Financial

Statements”), and the revised Management’s Discussion and Analysis of Financial Condition and Results of Operations for

the fiscal years ended December 31, 2022 and December 31, 2021 (“revised MD&A”), filed in a Current Report on From

8-K with the SEC on October 3, 2023.

In the Company’s opinion, the

unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature,

necessary to present fairly the Company’s financial position as of March 31, 2024, the Company’s operating results for the

three months ended March 31, 2024 and 2023, and the Company’s cash flows for the three months ended March 31, 2024 and 2023.

accompanying financial information as of December 31, 2023 is derived from audited financial statements.

Interim results are not necessarily

indicative of results for a full year.

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

the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024.

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

and per share and share amounts.

With the exception of the accounting policies below, there have been no new or material changes to the significant

accounting policies discussed in the Company’s reaudited Consolidated Financial Statements.:

Reverse Stock Split

July 3, 2023, the Company effected a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the issued and outstanding

shares of the Company’s common stock, $ 0.001 par value (the “Common Stock”).

The Common Stock began trading on the

Nasdaq Capital Market on a post-split basis on July 5, 2023.

information included in these consolidated financial statements has been adjusted, on a retrospective basis, to reflect the Reverse Stock

3 unchanged sentences

units, and warrants, were adjusted as a result of the Reverse Stock Split, as required by the terms of those securities.

and Development Costs

and development costs are expensed as incurred.

Research and development costs include external costs of outside vendors engaged to conduct

research and development activities, and other operational costs related to the Company’s research and development activities.

the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed

in the Company’s Form 10-K for the year ended December 31, 2023.

ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely

within the control of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified

as ‘mezzanine equity’ (temporary equity).

The purpose of this classification is to convey that such a security may not be

permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.

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

9 unchanged sentences

They are continuously reviewed but may vary from the actual

Adopted Accounting Pronouncements

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

Measurement of Credit Losses on Financial

Instruments , which requires entities to record expected credit losses for certain financial instruments, including trade receivables,

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

The new standard was effective

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

Acquisition Contract Liabilities

March 25, 2019, we entered into an agreement (as amended, the “Share Purchase Agreement”) with Maruho Co, Ltd.

to acquire 100 % of the shares of Cutanea Life Sciences, Inc.

As of the date of the acquisition, Maruho owned approximately 29.9 % of Biofrontera AG through its fully owned subsidiary Maruho Deutschland GmbH.

Biofrontera AG is our former

parent, and currently a significant shareholder.

to the Share Purchase Agreement, Maruho provided $ 7.3

million in start-up cost financing for Cutanea’s redesigned business activities (“start-up costs”).

These start-up

costs are to be paid back to Maruho by the end of 2023 in accordance with contractual obligations related to an earn-out

In addition, as part of the earn-out arrangement with Maruho, the product profit amount from the sale of Cutanea

products as defined in the Share Purchase Agreement will be shared equally between Maruho and Biofrontera until 2030

(“contingent consideration”).

contingent consideration was recorded at acquisition-date fair value using a Monte Carlo simulation with an assumed discount rate of

approximately 6.0 % over the applicable term.

The contingent consideration is recorded within acquisition contract liabilities, net.

amount of contingent consideration that could be payable is not subject to a cap under the agreement.

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

assumptions and estimates at each reporting period utilizing a scenario-based method.

The contingent consideration liability was valued at $ 2.5 million with payments coming due May of 2028 through May 2031.

contract liabilities, net consist of the following:

Schedule of Acquisition Contract Liabilities

(in thousands)

September 30,

Short-term acquisition contract liabilities:

Contingent consideration

Start-up cost financing

Contract asset

Acquisition contract liabilities, net

Long-term acquisition contract liabilities:

Contingent consideration

Total acquisition contract liabilities:

Contingent consideration

Start-up cost financing

Contract asset

Total acquisition contract liabilities, net

Issued Accounting Pronouncements

August 2020, the FASB issued ASU 2020-06, Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and

Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ,

which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible

instruments and contracts on an entity’s own equity.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible

preferred stock by removing the existing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options, that requires

entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt

or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and

embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain

criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to

calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method.

In addition, entities must presume

share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

The guidance is effective

for the Company in the first quarter of fiscal year 2024.

The adoption of ASU 2020-06 did not have a material impact on our results of

operations or financial position .

November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures .

This standard update requires additional

interim and annual disclosures about a reportable segment’s expenses, even for companies with only one reportable segment.

Company is required to adopt the guidance for its 2024 annual report filed on Form 10-K, though early adoption is permitted.

is currently evaluating the impact of these amendments on its disclosures, but this standard update will not impact the Company’s

results of operations or financial position.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures .

The ASU requires

that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling

items that meet a quantitative threshold.

Further, the ASU requires certain disclosures of state versus federal income tax expense and

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption

is permitted and the amendments should be applied on a prospective basis.

We are currently evaluating the effect of adopting the ASU

on our disclosures.

Fair Value Measurements

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

30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such

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

2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair

Schedule of Fair Value Hierarchy Valuation Inputs

(in thousands)

September 30, 2023

December 31, 2022

Investment, related party

Contingent Consideration

Warrant liability – 2022 Purchase Warrants

Warrant liability - 2022 Inducement Warrants

Warrant liability

related party

of September 30, 2023 and December 31, 2022, the Company has an investment in 5,745,678

liability – 2022 Purchase Warrants

liability - 2022 Inducement Warrants

liability – 2023 Purchase Warrants

liability - 2024 Preferred Warrants

Total Liabilities

related party

of March 31, 2024 and December 31, 2023, the Company held as an investment, 63,415

and 177,465 ,

respectively of common shares of Biofrontera AG, a company traded on the Frankfurt Stock Exchange and a

significant shareholder of Biofrontera.

The fair value of this investment was determined with Level 1 inputs through references to

quoted market prices.

Investment Related Party and Note 13.

Related Party Transactions.

Consideration

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

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

The fair value is based on significant

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

The valuation of the contingent

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

and an appropriate metric risk premium.

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

discount rate.

The scenario-based

method incorporates the following key assumptions:

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

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

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

assumptions and estimates at each reporting period.

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

Schedule of Fair Value of Contingent Consideration

(in thousands)

Balance at December 31, 2022

Change in fair value of contingent consideration

Balance at September 30, 2023

Balance at December 31, 2021

Change in fair value of contingent consideration

Balance at September 30, 2022

warrant liabilities are comprised of (i) currently outstanding warrants to purchase 170,950

shares of Common Stock originally issued in a private placement on May 16, 2022, expiring five and one-half years after the issue

date and with an exercise price of $ 55.40

per share (the “Purchase Warrants”), and (ii) a warrant to purchase 214,286

shares of Common Stock issued on July 26, 2022, expiring on December 1, 2026 with an exercise price of $ 33.20

per share (the “Inducement Warrants”) and were accounted for as liabilities in accordance with ASC 815-40 and are

presented within warrant liabilities in the accompanying consolidated balance sheets.

The warrant liabilities are measured at fair

value at inception and on a recurring basis, with changes in fair value presented within the consolidated statements of operations.

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

is considered a Level 3 fair value measurement.

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

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

A significant change in one or more of these inputs used in the

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

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

fair value for the Level 3 warrants at September 30, 2023 was estimated using a Black-Scholes pricing model based on the following assumptions:

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

Expiration term (in years)

Risk-free Rate

Dividend yield

fair value for the Level 3 warrants at December 31, 2022 was estimated using a Black-Scholes pricing model based on the following assumptions:

Expiration term (in years)

Risk-free Rate

Dividend yield

following table presents the changes in the Level 3 warrant liabilities measured at fair value (in thousands):

Schedule of Changes in Level 3 Warrant Liabilities

Nine Months Ended September 30,

Fair value at beginning of period

Issuance of new warrants

Exercise of warrants

Change in fair value of warrant liabilities

Fair value at end of period

respectively, common shares of Biofrontera, AG, a company who holds a greater than five

percent of our Common Stock and is traded on the Frankfurt Stock Exchange.

The fair values of these investments were

determined with Level 1 inputs through references to quoted market prices.

Related Party

Transactions.

warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950

shares of Common Stock originally issued in a private placement on May 16, 2022, as amended on

November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the “2022

Purchase Warrants”) , (ii) warrants to purchase 214,286 shares of Common Stock issued

on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to

$ 3.55 per share (the “2022 Inducement Warrants”) , (iii) warrants to purchase 1,807,500 shares of Common Stock issued on November

2, 2023 expiring five years following the date of issuance and with an exercise price of $ 3.55 per share ( the “2023 Purchase Warrants”)

and (iv) warrants to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ 0.001 per share (the “2024 Preferred

2022 Purchase Warrants, the 2022 Inducement Warrants and the 2023 Purchase 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

The 2024 Preferred Warrants are also accounted for as liabilities as they are redeemable

in the event of a change in control, which is not solely within the control of the Company.

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.

The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair

value presented within the consolidated statement of operations.

fair value for the Level 3 2024 Preferred Warrants was estimated utilizing a probability weighted average approach, which

incorporated two scenarios.

In scenario one, the warrant value was based on the underlying

value of the convertible preferred stock, using an option-pricing model backsolve that solved for the value of our publicly traded

equity on the valuation date to obtain the valuation date fair value of the Series B-3 Convertible Preferred Stock, then applied the

Series B-3 Convertible Preferred Stock value into the Black-Scholes-Merton (“BSM”) model equation to determine the value

of the Series B-3 convertible warrants.

In scenario two, the warrant value is based on

the underlying value of the publicly traded common equity value.

scenario two assumes the preferred stock will be converted into

Common Stock prior to a liquidity event.

A simple BSM model was utilized to value the warrant under scenario two, using the closing price of our Common Stock.

BSM model used the following inputs and assumptions (i) expected stock price volatility of 79.3% to 105%;

(ii) risk-free interest rate

to 5.41% (iii) expected life of the warrants of .21 to .11 years and (iv) dividend yield of 0.0%.

fair value for the Level 3 2022 Purchase Warrants, 2022 Inducement Warrants and the 2023 Purchase Warrants was estimated using a BSM

Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s

A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change

to the fair value of our warrant liabilities which could also result in material non-cash gain or loss being reported in our consolidated

statement of operations.

The fair value of these warrants was determined using the BSM option pricing model based on the following assumptions

for the period indicated.

term (in years)

following table presents

the changes in the Level 3 warrant liabilities measured at fair value (in thousands):

of Changes in Fair Value Warrant Liabilities

Months Ended March 31,

value at beginning of period

of new warrants

in fair value of warrant liabilities

value at end of period

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

the sales of our BF-RhodoLED® lamp and Xepi® are relatively insignificant compared with the revenues generated through our sales

party revenue relates to an agreement with Bioscience for BF-RhodoLED® leasing and installation

Refer to Note 13, Related Party Transactions .

party revenue relates to an agreement with Biofrontera Bioscience for BF-RhodoLED® leasing and installation service.

Refer to Note

12, Related Party Transactions .

analysis of the changes in product revenue allowances and reserves is summarized as follows:

Schedule of Revenue Allowance and Accrual Activties

(in thousands):

Co-pay assistance program

Prompt pay discounts

Government and payor rebates

Balance at December 31, 2021

Provision related to current period sales

Credit or payments made during the period

Balance at September 30, 2022

Balance at December 31, 2022

Beginning Balance

Provision related to current period sales

Credit or payments made during the period

Balance at September 30, 2023

Ending Balance

of Revenue Allowance and Accrual Activities

assistance program

pay discounts

and payor rebates

at December 31, 2022

related to current period sales

or payments made during the period

at March 31, 2023

at December 31, 2023

related to current period sales

or payments made during the period

at March 31, 2024

Investment, Related Party

of September 30, 2023 and December 31, 2022, our investment in equity securities consisted solely of 5,745,678 and 6,446,946 , respectively

of common shares of Biofrontera AG, a significant shareholder.

of March 31, 2024 and December 31, 2023, our investments in equity securities consisted solely of 63,415 and 177,465 , respectively of

common shares of Biofrontera AG.

(See Note 12.

Related Party Transactions ).

Of these shares,

3,377,346 are not fully in our control to vote or dispose of as we see fit as they are not held in a brokerage account registered in

our name, however, we are currently engaged with advisors to transfer such shares to our brokerage account.

Equity securities gains and

losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own, as well as

gains and losses on securities we sold during the period.

As reflected in the consolidated statements of cash flows, we received proceeds

from sales of equity securities of approximately $ 0.6 million during the nine months ended September 30, 2023.

losses on investment, related party were $ 1.9 million and $ 6.2 million, respectively, for the three and nine months ended September 30, 2023.

no unrealized gains and losses for the three and nine months ended September 30, 2022.

Equity securities

gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own,

as well as gains and losses on securities we sold during the period.

As reflected in the consolidated statements of cash flows, we received

proceeds from sales of equity securities of approximately $ 0.1 million during the three months ended March 31, 2024.

Gain/(loss) on investment, related party, was comprised of the following:

Schedule of Unrealized Gains and Losses on Investments in Equity Securities

(in thousands)

Three months ended

September 30,

Nine months ended

September 30,

(in thousands)

Net losses recognized during the period on equity securities

Net realized losses on equity securities

Unrealized losses recognized during the reporting period on equity securities still held at the reporting date

months ended March 31,

gain (loss) recognized during the period on equity securities

Net realized loss on equity securities sold

gain/(loss) recognized during the reporting period on equity securities still held at the reporting date

Accounts Receivable, net

12 unchanged sentences

of any customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded.

allowance for credit losses was $ 0.2 million and $ 0.1 million as of September 30, 2023 and December 31, 2022, respectively.

Other Receivables, Related Party

of September 30, 2023 the Company has a receivable, related party of $ 2.7 million primarily due from Biofrontera AG for its 50 % share

of the balance of a legal settlement (See Note 18.

Commitments and Contingencies – Legal proceedings ) for which both parties

are jointly and severally liable.

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

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

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

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

The Allocation Agreement, as amended, provides certain remedies to the

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

ability to charge interest at a rate of 6.0 % per annum for each day that any reimbursement is past

due and the ability to offset any overdue reimbursement amounts against payments owed to Biofrontera AG by the Company (including amounts

owed under the Company’s license and supply agreement for Ameluz ® ).

such , no reserve for the receivable was deemed necessary as of September 30, 2023 or December

allowance for credit losses was $ 0.3 million and $ 0.2 million as of March 31, 2024 and December 31, 2023, respectively.

are comprised of Ameluz ® , the BF-RhodoLED ® lamps and immaterial amounts of Xepi ® finished

provision for obsolescence recorded for the three

months ended March 31, 2024 and 2023.

As of December 31, 2023, in connection with the voluntary recall by the Ameluz Licensor, we

recorded an inventory write-off of $ 5.2

million with a corresponding asset for the anticipated

replacement from the licensor to other assets, related party, as the recalled lots of Ameluz products will be replaced by the Ameluz

Licensor at no additional cost in accordance with the Ameluz LSA.

Related Party Transactions for further discussion

of the voluntary recall.

Intangible Asset, Net

1 unchanged sentence

Schedule of Intangible Asset Net

(in thousands)

September 30,

Xepi® license

Accumulated amortization

Intangible asset, net

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

over the useful life of 11 years.

Amortization expense for the three months ended September 30, 2023 and 2022 was $ 0.1 million and $ 0.3

million for the nine months ended September 30, 2023 and 2022.

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

carrying amount of the assets may not be fully recoverable.

There has been limited revenue during the current reporting periods and recent developments with the third-party

manufacturer that was providing our supply of Xepi® have resulted in further constraints on the commercialization of the product.

However, Ferrer is qualifying a new Contract manufacturer, Cambrex, which is expected to begin production in 2024.

Company performed an impairment analysis because of this situation and determined no impairment charges were deemed necessary during

the three and nine months ended September 30, 2023.

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

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

Amortization expense was $ 0.1

million for each of the three-month periods ended March 31, 2024 and 2023.

The Company capitalizes the application development phase costs of internal use software in accordance with ASC 350-40,

“ Intangibles-Goodwill and Other-Internal Use Software.” Capitalized costs will be amortized on a straight-line

basis over the estimated useful life of the asset upon completion.

There was minimal amortization expense for the three months ended

March 31, 2024 and none for the three months ended March 31, 2023.

Cash Balances and Statement of Cash Flows Reconciliation

Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).

The FDIC provides coverage of up to $ 250,000 per depositor, per financial institution.

At September 30, 2023, approximately $ 3.0 million

of the Company’s cash balances were in excess of FDIC limits.

The Company has not experienced any losses on these accounts and

management does not believe that the Company is exposed to any significant risks.

At March 31, 2024, approximately $ 3.7 million of the Company’s cash balances were in excess of FDIC limits.

The Company has not

experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks with respect

to these accounts.

cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards.

Long-term restricted cash was recorded in other assets in the consolidated

balance sheet.

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

statements of cash flows:

Long-term restricted

cash was recorded in other assets in the consolidated balance sheet.

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

of cash flows:

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

(in thousands)

September 30,

Cash and cash equivalents

Long-term restricted cash

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

and cash equivalents

restricted cash

cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows

restricted cash was recorded in other assets in the consolidated balance sheet.

Accrued Expenses and Other Current Liabilities

1 unchanged sentence

Schedule of Accrued Expenses and Other Current Liabilities

(in thousands)

September 30,

Legal settlement (See note 18)

Employee compensation and benefits

Professional fees

Product revenue allowances and reserves

Line of Credit

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

providing us with a revolving line of credit in the aggregate principal amount of up to $ 6.5 million, subject to a borrowing base and

an availability block, with a maturity date of May 8, 2026.

The Loan Agreement is secured by a lien on substantially all of the assets

of the Company, subject to customary exceptions.

under the Loan Agreement bear interest at the 30-Day Adjusted Term Secured Overnight Financing Rate (“SOFR Rate”), set monthly

on the first day of the month based on 30-Day Term SOFR plus a spread adjustment of 15 basis points and subject to a floor of 2.25%,

plus 4.00% calculated and charged monthly in arrears.

In the event of a called event of default, a default interest rate of 3.00% percent

shall be added to the aforementioned rate.

Under the terms of the Loan Agreement, amounts available for advances would be subject to

a borrowing base, which is a formula based on certain eligible receivables and inventory, and a block on such availability in the amount

of $ 650,000 .

Currently, our borrowing capacity is based on our eligible receivables with an additional $ 1.0 million borrowing capacity

based on inventory.

The borrowing base is up to 85% of accounts receivable, plus the least of (a) $ 1.0 million for inventory

and (b) 85% of accounts receivable, less borrowing base reserve, if any, as defined in the Loan Agreement.

The Loan Agreement also includes

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

interest rate as of September 30, 2023 was 5.48 % and interest expense for the nine months ended September 30, 2023 was negligible.

Company recorded approximately $ 0.2 million of costs related to the line of credit as an asset to be amortized on a straight-line basis

over the term of the line of credit.

The Company recognized minimal amortization expense in connection with this Line of Credit for the

nine months ended September 30, 2023, which is recorded as interest expense on the accompanying consolidated statement of operations.

compensation and benefits

revenue allowances and reserves

as of January 4, 2024, we voluntarily terminated the Loan and Security Agreement with Midcap Business Credit LLC (the “Loan

Agreement”), paying a total of approximately $ 0.4 million,

consisting of (1) the outstanding principal of and interest balance due under the Loan Agreement, aggregating approximately $ 0.2 million,

and (2) early termination fees of approximately $ 0.2 million.

As a result of the termination of the Loan Agreement, the

Company recognized a $ 0.3 million loss related to prepayment

fees and the write-off of deferred financing costs, in the accompanying consolidated statement of operations for the three months ended

March 31, 2024.

December 21, 2023, we entered into credit facilities with two different lenders (the “Loans”), each pursuant to a

Business Loan and Security Agreement providing for a term loan in the principal amount of $ 2,000,000 .

Each of the Loans is evidenced by a Secured Promissory Note, effective as of December 21, 2023.

Each of the Loans requires the

Company to make weekly payments of principal and interest in the amount of approximately $ 102,857

5, 2024 , the maturity date.

There were approximately $ 0.3

million of related issuance costs, recognized as a debt discount (contra liability against the debt balance), that are being

amortized as interest expense over the life of the loan using the effective interest method.

During the three months ended March 31,

2024 the Company recognized interest expense and discount amortization of approximately $ 1.2

million and $ 0.2

million, respectively.

As of March 31, 2024 the aggregate amount of principal outstanding under the Loans was $ 2.5

million, which is shown net of the remaining unamortized issuance cost of $ 0.1

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

The Company will pay interest in the aggregate amount of $ 880,000 on each of the Loans, assuming all payments under the Loans are

made on a timely basis.

The stated interest rate is 44 %

and the default interest rate for each of the Loans is an additional 5.0 %.

of the Business Loan and Security Agreements 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 either lender and certain other permitted liens.

Each of the Business Loan and Security Agreements

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.

expense is recognized using the effective interest method, such that a constant effective interest rate is applied to the carrying amount

of the debt at the beginning of each period until maturity.

Related Party Transactions

and Supply Agreement

October 8, 2021, we entered into an amendment to the Ameluz LSA under which the price we pay per unit will be based upon our sales

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

and sell the licensed products, Ameluz® and BF-RhodoLED® and must purchase the licensed products exclusively from Pharma.

a result of this amendment, the purchase price we pay the Ameluz Licensor for Ameluz ® will be determined in the

following manner:

percent of the anticipated net price per unit until we generate $ 30 million in revenue from sales of the products we license from

the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA);

percent of the anticipated net price per unit for all revenues we generate between $ 30 million and $ 50 million from sales of the

products we license from the Ameluz Licensor;

percent of the anticipated net price per unit for all revenues we generate above $ 50 million from sales of the products we license

from the Ameluz Licensor.

of the licensed products during the three and nine months ended September 30, 2023 were $ 5.1 million and $ 18.8 million, respectively,

and $ 5.2 million and $ 16.6 million, respectively for the three and nine months ended September 30, 2022.

Amounts due and payable to Pharma as of September 30, 2023 and December 31, 2022 were $ 7.0 million and $ 1.3 million, respectively,

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

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

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

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

us to continue to use the IT resources of Biofrontera AG and its wholly owned subsidiaries (the “Biofrontera Group”) as well

as providing access to the Biofrontera Group’s resources with respect to quality management, regulatory affairs and medical affairs.

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

assessing the other services historically provided to us by Biofrontera AG to determine 1) if they will be needed, and 2) whether they

can or should be obtained from other third-party providers.

As of September 30, 2023, we have migrated away from Biofrontera AG to third

party providers for most of our significant IT services.

Expenses related to the service agreement were $ 0.1 million and $ 0.2 million

for the three and nine months ended September 30, 2023 and $ 0.2 million and $ 0.6 million for the three and nine months ended September

30, 2022, respectively.

These expenses were recorded in selling, general and administrative, related party.

Amounts due to Biofrontera

AG related to the service agreement as of September 30, 2023 and December 31, 2022 were $ 0.2 million and $ 0.2 million, respectively,

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

Lamp Lease Agreement

August 1, 2018, the Company executed a clinical lamp lease agreement with Bioscience to provide

lamps and associated services.

revenue related to the clinical lamp lease agreement was minimal and $ 0.1 million for the three and nine months ended September 30, 2023,

respectively and minimal for the three and nine months ended September 30, 2022, and was recorded as revenues, related party.

due from Bioscience for clinical lamp and other reimbursements were approximately $ 0.1 million as of September 30, 2023 and December

31, 2022, which were recorded as other receivables, related party in the consolidated balance sheets.

Company has recorded a receivable of $ 2.8

the Ameluz LSA, the Company obtained an exclusive, non-transferable license to use Biofrontera Pharma’s technology to market

and sell the licensed products, Ameluz® and BF-RhodoLED® and must purchase the licensed products exclusively from

Biofrontera Pharma.

On February 19, 2024, we entered into the Second A&R Ameluz LSA, effective as of February 13, 2024, which among other

things, amended the Ameluz LSA to:

update the price we pay per unit (the “Transfer Price”) that covers the cost of goods, royalties on sales, and services,

including all regulatory efforts, agency fees, pharmacovigilance, and patent administration, as follows:

● Twenty-five percent through 2025;

percent for 2026 to 2028;

percent for 2029 to 2031;

● Thirty-five

percent for 2032 and beyond, subject to a minimum dollar amount per unit;

Transfer Price for sales related to acne, another indication currently in development, will

remain at 25 % indefinitely.

provide for the transfer of responsibilities for clinical trials relating to Ameluz ® in the US on or before June 1, 2024, including the Company

assuming related contracts and transferring key personnel from the Ameluz Licensor to the Company.

in connection with the Second A&R Ameluz LSA, the Company entered into a Release of Claims, with the Ameluz Licensor, dated

February 13, 2024, pursuant to which the Company agreed to release the Ameluz

Licensor from all claims and liabilities arising out of or relating to any failure by the Ameluz Licensor to perform certain

obligations under the Second A&R Ameluz LSA with respect to clinical trials that the Company will assume responsibility for

under the Second A&R Ameluz LSA.

of the licensed products during the three months ended March 31, 2024 and 2023 were $ 0.3

million and $ 4.6

million as of September 30, 2023 and December

31, 2022, respectively, due from Biofrontera AG for its 50 %

million, respectively.

Amounts due and payable

to Biofrontera Pharma as of March 31, 2024 and December 31, 2023 were $ 4.0

million and $ 8.5

million, respectively, which were recorded net

in accounts payable or accounts receivable, related parties in the consolidated balance sheets.

February 9, 2024, Biofrontera was notified that the Ameluz Licensor had 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.

In its communications, the Ameluz Licensor confirmed that the recalled product is not likely to cause adverse health consequences.

the Ameluz LSA, the Company will not bear any financial responsibility for the costs associated with this recall.

As such, the Company does

not anticipate a material financial impact on its business as a result of the recall.

As of December 31, 2023, in connection with

the voluntary recall by the Ameluz Licensor, the Company recorded an inventory write-off of $ 5.2

million with a corresponding asset for the anticipated replacement from the licensor to other assets, related party.

December 2021, we entered into an Amended and Restated Master Contract Services Agreement (the “Services Agreement”),

which provides for the execution of statements of work, by and among the Company, Biofrontera AG, Biofrontera Pharma and Biofrontera

Bioscience, primarily for regulatory support and pharmacovigilance.

Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically

provided to us for as long as we deem necessary.

We currently have statements of work in place

regarding pharmacovigilance, regulatory affairs, medical affairs, information technology, and investor relations services and are

continuously assessing the other services historically provided to us by Biofrontera AG to determine (i) if they will be needed, and

(ii) whether they can or should be obtained from other third-party providers.

of March 31, 2024, we have migrated away from Biofrontera AG to third party providers for most of our significant information

technology services.

Expenses related to the Services Agreement were negligible for the three months ended March 31, 2024 and 2023,

which were recorded in selling, general and administrative, related party.

Amounts due to Biofrontera AG related to the Services

Agreement were $ 0.1

million as of each of March 31, 2024 and December 31, 2023, which were recorded in accounts payable, related parties in the

consolidated balance sheets.

Lamp Lease Agreement

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

revenue related to the clinical lamp lease agreement was minimal for the three months ended March 31, 2024 and 2023, and was

recorded as revenues, related party.

Amounts due from Biofrontera Bioscience for clinical lamp and other reimbursements were

approximately $ 0.2

million as of each of March 31, 2024 and December 31, 2023, which were recorded as other receivables, related party in the

consolidated balance sheets.

Company recorded a receivable of $ 2.8

million as of December 31, 2023, due from Biofrontera AG (presented net in accounts payable, related party) for its 50 %

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

Other Receivables,

Related Party ) .

interest income recognized for the nine months

ended September 30, 2023 and $ 0.1

million of interest income for the nine months

ended September 30, 2022, in connection with this receivable.

of September 30, 2023, our investment, related party is valued at $ 3.3 million and consists of 5,745,678

common shares of Biofrontera AG, a significant shareholder of the Company.

Company has a contractual right to repayment of its share of the settlement payments, plus interest and other miscellaneous

settlement costs, from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021 and as amended on

March 31, 2022, which provides that the settlement payments would first be made by the Company and then reimbursed by Biofrontera AG

for its share.

interest income recognized for the three months ended March 31, 2024 and 2023, in connection with this receivable and the $ 2.8

million balance was net settled against payments for inventory in February 2024.

of March 31, 2024, our investment, related party was valued at a negligible amount and consisted of 63,415

common shares of Biofrontera AG.

As of December 31, 2023, our investment in equity securities

was valued at $ 0.1 million and consisted of 177,465 common shares of Biofrontera AG.

Investment, Related Party.

Stockholders’ Equity

the Company’s Certificate of Amendment to the Amended and Restated Certificate of incorporation, effective July 3, 2023, the Company

is authorized to issue 15,000,000 shares

Mezzanine Equity and Stockholders’ Equity

the Company’s Certificate of Amendment to the Amended and Restated Certificate of incorporation, effective July 3, 2023, the

Company is authorized to issue 15,000,000 shares

of Common Stock and 20,000,000 shares

of preferred stock, par value $ .001

Reverse Stock Split for information

and disclosures relating to adjustments for the 1-for-20

Reverse Stock Split.

of preferred stock, par value $ .001 per

Subsequent Events for information relating to the increase in authorized shares of Common Stock

from 15,000,000

shares to 35,000,000

February 19, 2024, the Company entered into the Preferred Purchase Agreement, pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”), (i) 6,586 shares

of Series B-1 Convertible Preferred Stock, par value $ 0.001 per share (the “Series B-1 Preferred Stock”), and (ii) warrants

(the “Preferred Warrants”) to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ 0.001 per share

(the “Series B-3 Preferred Stock”) for an aggregate offering price of $ 8.0 million.

Each share of Series B-1 Preferred Stock

was sold for $ 1,000 per share and the consideration for each Preferred Warrant was $ 0.125 per share of common stock that each share of

Series B-3 Preferred Stock may be converted into (or 11,309,019 common stock shares).

The conversion price of Series B Preferred Stock

is $ 0.7074 per share of Common Stock, such that each Series B share is convertible into 1,413.6 shares of the Common Stock.

The net proceeds

received were approximately $ 7.3 million, after deducting fees paid to the placement agent and other estimated offering expenses payable

by the Company.

aggregate exercise price of the Preferred Warrants is approximately $ 8.0

million, exercisable for an aggregate of 8,000

shares of Series B-3 Preferred Stock commencing on the Exercisability Date (as defined in the form of Preferred Warrant included as

Exhibit 4.14 to the Company’s Form 10-K for the year ended December 31, 2023) until the earlier of (i) 5

days following the date of completion of (A) the Company’s public announcement of (I) at least 95% of the

Company’s territory managers, medical science liaisons, and reimbursement employees are using the Company’s customer

relationship management system routinely or on a performance improvement plan and (II) the Company’s revenue, excluding

revenue from related parties (including Biofrontera AG), for the period starting on January 1, 2024 and ending no earlier than April

30, 2024 is at least 5% higher than the Company’s revenue,

excluding revenue from related parties (including Biofrontera AG), for the corresponding period of the same length, starting on

January 1, 2023, which announcement shall be made promptly after certification by the

Company’s Board that such targets have been completed ;

(B) the Stockholder Approval (as defined below) and

Stock underlying all shares of Series B-3 Preferred Stock and (ii) February 22, 2027.

Subsequent Events- Preferred Warrants Expedited Expiration Date for status of the Exercisabilty

to certain conditions, the shares of the Series B-1 Preferred Stock issued in the Offering are immediately convertible, and the

Series B-3 Preferred Stock issuable upon exercise of the Preferred Warrants will not become convertible until the Company’s

stockholders approve (i) an increase to the Company’s authorized share capital, and (ii) to the extent required under the

Nasdaq listing rules:

(a) the issuance of all Common Stock issuable upon conversion of the issued Series B-1 Preferred Stock and the

Series B-3 Preferred Stock or (b) the Series B-3 Preferred Stock upon exercise of the Preferred Warrants (collectively, the

“Stockholder Approval”).

to the Preferred Purchase Agreement and as soon as practicable following the date of the Stockholder Approval, the Company shall appoint

two independent directors designated by Rosalind Advisors, Inc to the Company’s Board.

February 22, 2024, concurrent with the closing of the Offering, each purchaser delivered a notice of initial conversion requesting that

the Company convert the Series B-1 Preferred Stock they had acquired in the Offering up to the number of shares equal to 9.99% of the

outstanding Common Stock (the “Cap”) for each purchaser.

As a result of this conversion, the Company issued 2,516,785

shares of the Company’s common stock to

the purchasers, and as of February 22, 2024, the total number of the Company’s outstanding shares of common stock was 5,089,413

and the total number of the Company’s outstanding

shares of Series B-1 Convertible Preferred Stock was 4,806 ,

with 6,793,893

shares of common stock issuable upon conversion

of the Series B-1 Preferred Stock.

Upon obtaining the Stockholder Approval, there will be 11,309,019

shares of common stock issuable upon conversion

of all of the Series B-3 Convertible Preferred Stock, that may be acquired upon exercise of the Warrants.

Events for more details regarding the Stockholder Approval .

Classification

B-1 Preferred Stock is redeemable at the option of the holder and Series B-2 and B-3 Preferred Stock is redeemable in the event of a

change in control.

ASC 480-10-S99-3A(2) of the SEC’s Accounting Series Release No.

268 (“ASR 268”) requires preferred

securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a

fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event

that is not solely within the control of the issuer.

Preferred securities that are mandatorily redeemable are required to be classified

by the issuer as liabilities whereas under ASR 268, an issuer should classify a preferred security whose redemption is contingent on

an event not entirely in control of the issuer as mezzanine equity.

The Series B-1 Preferred Stock is redeemable at the option of the

holder, B-2 and B-3 are redeemable, upon a change in control that is not solely within control of the Company, and accordingly, the Company

determined that mezzanine treatment is appropriate for the Series B Preferred Stock and has presented it as such in our consolidated

balance sheets and consolidated statements of changes in stockholders’ equity and mezzanine equity as of and for the period ending

March 31, 2024 and December 31, 2023.

Series B Preferred Stock is not considered mandatorily redeemable.

Amendment to Articles

of Incorporation – Series B Preferred Stock

to the terms of the Preferred Purchase Agreement, on February 20, 2024, the Company filed the Certificate of Designation with the Delaware

Secretary of State designating 6,586 shares of its authorized and unissued preferred stock as Series B-1 Preferred Stock, 6,586 shares

as Series B-2 Preferred Stock and 8,000 shares as Series B-3 Convertible Preferred Stock, with a par value of $ 0.001 per share.

B Preferred Stock Rights:

Subject to certain limitations described in the Certificate of Designation, the Series B Preferred Stock is voting stock.

Holders of the Series B Preferred Stock are entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock basis.

Holders of Common Stock are entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.

Accordingly, holders of Series B Preferred Stock will be entitled to one vote for each whole share of Common Stock into which their Series

B Preferred Stock is then convertible on all matters submitted to a vote of stockholders.

to the Company’s stockholders (i) approving the issuance of all Common Stock issuable upon conversion to the Series B

Preferred Stock (if required by Nasdaq Rule 5635) and (ii) increasing the Company’s authorized share capital, the Series B Preferred Stock is not convertible in excess of the Cap.

Following the Stockholder

Approval, each share of Series B-1 Preferred Stock will automatically convert into either Common Stock or, to the extent the

conversion would cause a holder to exceed their beneficial ownership limitation, shares of Series B-2 Preferred Stock.

Subsequent Events-Special Meeting of Stockholders.

Liquidation .

Prior to the Stockholder Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company,

including a change of control transaction, or Deemed Liquidation Event , as defined in the Certificate of Designation (any

such event, a “ Liquidation ”) the holders of shares of Series B Preferred Stock then outstanding shall be entitled

to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Deemed Liquidation

Event, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable

to stockholders in such Deemed Liquidation Event or the other proceeds available for distribution to stockholders, before any payment

shall be made to the holders of any other shares of capital stock of the Company by reason of their ownership thereof, an amount per

share equal to the greater of (i) three times the original per share price of $1,000 together with any dividends accrued but unpaid thereon (the

“ Liquidation Preference ”) or (ii) such amount per share as would have been payable had all shares of Series B Preferred

Stock been converted into Common Stock (without regard to any limitations on conversion set forth in the Certificate of Designation or

otherwise) immediately prior to such Liquidation (the amount payable pursuant to this sentence is hereinafter referred to as the “ Series

B Liquidation Amount ”).

If upon any such Liquidation, the assets of the Company available for distribution to its stockholders

shall be insufficient to pay the holders of shares of Series B Preferred Stock the full Liquidation Preference, the holders of shares

of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective

amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with

respect to such shares were paid in full.

After the payment in full of all Series B Liquidation Amount, the remaining assets of the Company

available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders

of shares of Series B Preferred Stock pursuant to the Certificate of Designation shall be distributed among the holders of shares of

Common Stock, pro rata based on the number of shares held by each such holder.

the Stockholder Approval, upon any Liquidation, the assets of the Company available for distribution to its stockholders shall be distributed

among the holders of the shares of Series B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such

holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the

terms of the Certificate of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth

in the Certificate of Designation or otherwise.

Subsequent Events-Special Meeting of Stockholders.

In the event the Stockholder Approval is not obtained within one year following February 20, 2024, (the “Issuance Date”),

shares of Series B-1 Preferred Stock shall be redeemed by the Company at a price equal to the then Liquidation Preference at any time

for up to three years following the Issuance Date commencing not more than 60 days after receipt by the Company at any time on or after

the one year anniversary of the Issuance Date of written notice from the holders of a majority of the then outstanding shares of Series

B-1 Preferred Stock, voting together as a single class.

Subsequent Events-Special Meeting of Stockholders.

Participation

For a period of one year following the closing of the Offering, the purchasers will have the right to participate

as an investor in any securities offering consummated by the Company.

holders of Common Stock are entitled to one vote for each share held.

Common Stockholders are not entitled to receive dividends,

unless declared by the Board of Directors.

Common Stockholders are not entitled to receive dividends, unless

declared by the Board.

The Company has not declared dividends since inception.

In the event of liquidation of

the Company, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining after

payment of liabilities.

In the event of liquidation of the Company,

dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities.

The Common Stock has no preemptive or conversion rights or other subscription rights.

redemption or sinking fund provisions applicable to the Common Stock.

The outstanding shares of Common Stock are fully paid and

non-assessable.

There are no redemption or sinking fund provisions

applicable to the Common Stock.

The outstanding shares of Common Stock are fully paid and non-assessable.

of Common Stock Pursuant to the Exercise of 2023 Pre-Funded Warrants and Conversion of Series B-1 Preferred Stock

January 8, 2024 and February 2, 2024, an investor exercised 167,000

and 888,000 pre-funded

warrants to purchase the Company’s common stock, par value $ 0.001 per share (the “Pre-Funded Warrants”), respectively, and

purchased a total of 1,055,000

shares of common stock at an exercise price of $ .0001

per share, resulting in negligible net proceeds.

February 22, 2024, concurrent with the closing of the Offering, 2,516,785

shares of common stock were issued upon conversion of 1,780

shares of Series B-1 Preferred Stock.

Equity Incentive Plans and Share-Based Payments

Omnibus Incentive Plan

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

Under the original

2021 Plan, 137,500 shares are reserved and authorized for awards and the maximum contractual term is 10 years for stock options issued

under the 2021 Plan.

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

under the 2021 Plan was increased by 129,490 to 266,990 .

As of September 30, 2023, there were 163,362 shares available for future awards

under the amended 2021 Plan.

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

original 2021 Plan, 137,500 shares

are reserved and authorized for awards and the maximum contractual term is 10 years

for stock options issued under the 2021 Plan.

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

shares authorized for awards under the 2021 Plan was increased from 137,500 to 266,990 .

As of March 31, 2024, there were 151,900 shares

available for future awards under the amended 2021 Plan.

Non-qualified

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requisite service period.

The fair value of stock options is estimated at the time of grant using the Black-Scholes (“BSM”)

option pricing model, which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price

The fair value of stock options is estimated at the time of grant using the BSM option pricing model, which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price

of the option, expected term, risk-free interest rate, expected volatility and dividend yield.

1 unchanged sentence

as they occur.

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

Schedule of Stock Options Assumptions

Nine Months Ended September 30,

Expected volatility

Expected term (in years)

Risk-free interest rate

3.5 % - 3.9 %

1.34 % - 4.10 %

Expected dividend yield

compensation expense of approximately $ 0.1 million and $ 0.5 million was recorded in selling, general and administrative expenses on the

accompanying consolidated statement of operations for the three and nine months ended September 30, 2023, respectively and $ 0.3 million

and $ 0.6 million for the three and nine months ended September 30, 2022.

outstanding and exercisable under the employee share option plan as of September 30, 2023 and a summary of option activity during the

nine months then ended is presented below.

fair value of each option was estimated on the date of the grant using the BSM option pricing model.

There were no equity grants during

the three months ended March 31, 2024.

compensation expense related to stock options of approximately $ 0.1 million

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

the three months ended March 31, 2024 and 2023, respectively.

outstanding and exercisable under the employee share option plan as of March 31, 2024 and a summary of option activity during the nine

months then ended is presented below.

Schedule of Stock Option Activity

Outstanding at December 31, 2022

Canceled or forfeited

Outstanding at September 30, 2023

Exercisable at September 30, 2023

at December 31, 2023

at March 31, 2024

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

of the Common Stock for the options that were in the money at September 30, 2023.

of September 30, 2023, there was $ 1.0 million of unrecognized compensation cost related to unvested stock options, which is expected

to be recognized over a weighted-average period of approximately 1.8 years.

of the Common Stock for the options that were in the money at March 31, 2024.

of March 31, 2024, there was $ 0.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be

recognized over a weighted-average period of approximately 1.68 years.

Compensation (RSUs)

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through the applicable vesting dates.

The fair value of each RSU is estimated based on the closing market price of the Company’s

The fair value of each RSU is determined based on the closing market price of the Company’s

Common Stock on the grant date.

compensation expense of $ 0.1 million and $ 0.3 million for the RSUs for the three and nine months ended September 30, 2023, respectively,

and $ 0.1 million and $ 0.9 million for the three and nine months ended September 30, 2022 and was recorded in selling, general and administrative

expenses in the accompanying consolidated statements of operations.

compensation expense was $ 0.1

million for the RSUs for each of the three-month periods ended March 31, 2024 and 2023, and was recorded in selling, general and

administrative expenses in the accompanying consolidated statements of operations.

Schedule of Restricted Stock Units

Weighted Average Remaining Contractual Term

Weighted Average Grant Date Fair Value

Outstanding at December 31, 2022

Canceled or forfeited

Outstanding at September 30, 2023

of September 30, 2023, there was $ 0.2 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

over a weighted-average period of approximately 0.6 years.

Average Remaining Contractual Term

Average Grant Date Fair Value

at December 31, 2023

at March 31, 2024

of March 31, 2024, there was minimal unrecognized compensation cost related to unvested RSUs, which is expected to be

recognized over a weighted-average period of approximately 0.14 years.

Interest Expense, net

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Schedule of Interest Expense

(in thousands)

For three months ended

September 30,

For nine months ended

September 30,

(in thousands)

Interest expense

Interest expense, related party

Contract asset interest expense

Interest income – related party

Interest income – other

Interest expense, net

expense is comprised primarily of interest on our Loan and Security Agreement with MidCap Business Credit LLC.

asset interest expense relates to the $ 1.7

million contract asset in connection with the $ 7.3

million start-up cost financing received from Maruho under the Cutanea acquisition Share Purchase Agreement.

The contract asset is

amortized on a straight-line basis using a 6 %

interest rate over the financing arrangement contract term, which ends on December

income - related party interest income relates to default interest on the recorded receivable of $ 6.1 million as of September 30, 2022

from Biofrontera AG for its 50 % share of the balance of a legal settlement.

Months Ended March 31,

asset interest expense

expense is comprised primarily of interest on our short-term loans and line of credit, including amortization of deferred costs.

asset interest expense related to a $ 1.7 million contract asset in connection with a $ 7.3 million start-up cost financing received from

Maruho Co., Ltd.

(“Maruho”) under a share purchase agreement.

The contract asset was amortized on

a straight-line basis using a 6 % interest rate over the financing arrangement contract term, which ended on December 31, 2023 .

income relates primarily to interest earned on funds deposited in our bank accounts.

Net Earnings (Loss) per Share

net earnings (loss) per common share are calculated by dividing net income by the weighted average number of common shares

outstanding during the period.

Diluted net earnings per common share are calculated by dividing net income (loss) by the diluted

weighted average number of common shares outstanding during the period.

The diluted shares include the dilutive effect of

stock-based awards based on the treasury stock method.

In periods where a net loss is recorded, no effect is given to potentially

dilutive securities, since the effect would be anti-dilutive.

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

(in thousands, except share and per share data):

Company uses the two-class method to calculate net income (loss) per share.

No dividends were declared or paid for the three months

ended March 31, 2024 and 2023.

Undistributed earnings for each period are allocated equally to common shareholders and participating

securities based on the contractual participation rights of the security to share in the current earnings as if all current period

earnings had been distributed.

Under the two-class method, the undistributed losses will be allocated entirely to the common stock

shareholders.

Basic net earnings (loss) per common share are calculated by dividing net income by the weighted average number of

common shares outstanding during the period.

Diluted net earnings per common share are calculated by dividing net income (loss) by

the diluted weighted average number of common shares outstanding during the period.

The diluted shares include the dilutive effect

of stock-based awards based on the treasury stock method.

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

effect would be anti-dilutive.

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

stockholders (in thousands, except share and per share data):

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

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Basic weighted average common shares outstanding

Effect of dilutive securities

Stock options and restricted stock units

Diluted weighted average common shares outstanding

Net earnings (loss) per share:

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

could potentially dilute EPS in the future:

Months Ended March 31,

average common shares outstanding, basic and diluted

loss per share, basic and diluted

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

dilute EPS in the future:

Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share

Nine Months Ended September 30,

Common stock warrants

Common stock options and RSUs

Unit Purchase Options

Anti-dilutive securities excluded from computation of earnings per share

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

stock warrants

stock options and RSUs

Purchase Options

Shares related to Series B-1 convertible preferred stock

Stock warrants include Purchase Warrants, Inducement Warrants and warrants issued in the Company’s initial

public offering.

The table does not include 11,309,019 shares of common stock underlying the Warrants for Series B-3 Preferred Stock,

as exercisability is contingent upon the Company increasing the number of authorized shares of Common Stock, which was not obtained as

of March 31, 2024.

Commitments and Contingencies

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

expiration dates through January 2027.

components of lease expense for the three and nine months ended September 30, 2023 were as follows (in thousands except lease term and

discount rate):

Schedule of Components of Lease Expense and Other Information

Lease expense

Operating Leases

Amortization of ROU assets (operating lease cost)

Interest on lease liabilities

Total lease expense

Other Information

Operational cash flow used for operating leases

Weighted -average remaining lease term (in years)

Weighted -average discount rate

lease payments under non-cancelable leases as of September 30, 2023 were as follows (in thousands):

expiration dates through March 2027.

lease payments under non-cancelable leases as of March 31, 2024 were as follows (in thousands):

Schedule of Future Commitments and Sublease Income

Years ending December 31,

Future lease commitments

Total future minimum lease payments

Less imputed interest

Total lease liability

Schedule of Operating Lease Liability

Operating lease liability, current

Operating lease liability, non-current

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

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

have filed for arbitration against Maruho with the International Chamber of Commerce regarding issues with Maruho’s

contract manufacturer that were not disclosed at the time of the Share Purchase Agreement and therefore are withholding the repayment

of the start-up cost financing until a decision is reached through the arbitration process.

The arbitration notes that Maruho breached

the agreement with Cutanea due to undisclosed manufacturing issues and seeks damages as well as a declaration that we are not obligated

to repay Maruho.

As such, the required contractual payments noted above have not been made as of the financial statement filing date.

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

Refer to Note 3, Acquisition

Contract Liabilities .

payments with Ferrer Internacional S.A.

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

Specifically, we must pay Ferrer

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

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

No Xepi ® milestones

have been achieved as of the financial statement filing date.

ending December 31,

lease commitments

future minimum lease payments

imputed interest

lease liability

of Operating Lease Liability

lease liability, current

lease liability, non-current

LSA Sales Commitment

we fail to earn $ 150 million in revenues from Ameluz ® and t he

RhodoLED ® lamp series over the preceding five (5) year period leading to the Ameluz LSA’s termination date

(either fifteen (15) years from the date of the Amended and Restated License and Supply Agreement, dated June 16, 2021 or any later termination

date following the automatic renewal of this Agreement), Biofrontera Pharma has the right to terminate the Ameluz LSA by providing one

(1) year written notice.

addition, starting in 2025, under the Second A&R Ameluz LSA, we agree to purchase the higher of a minimum quantity of tubes of Ameluz®

per year or at least a minimum 75% of the annual average of audited Ameluz® tubes sold during the preceding four (4) full calendar

years (“Annual Minimum Sales”).

If we fail to achieve the respective Annual Minimum Sales for any calendar year, such failure

will constitute a termination event, unless waived by the Ameluz Licensor.

Ameluz Minimum Research and Development Costs (“Minimum

During the years 2025 through 2030, we will be

required to fund Minimum R&D Costs in an amount that is at least 85% of the difference between (i) the Transfer Price for

product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous

Ameluz LSA, dated October 8, 2021.

If we fail to meet the minimum requirement, the

difference shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion.

Agreement with Optical Tools

December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), and

Stephen Tobin and Paul Sowyrda (the “Agreement”).

December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”).

The Agreement allowed for the transfer of the assigned patents and trademarks,

2 unchanged sentences

fee of $ 0.2 million which was expensed during the year ended December 31, 2022.

May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy

lamp prototypes (“PDT Device”) using the technology in the assigned patents.

The PDT Device provides illumination, based

on different light profiles, to the external skin surface of the human body.

The Company shall reimburse Optical Tools for all reasonable

out-of-pocket, material and labor costs per the Agreement.

May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic

therapy lamp prototypes (“PDT Device”) using the technology in the assigned patents.

The PDT Device provides

illumination, based on different light profiles, to the external skin surface of the human body.

The Company is to reimburse Optical

Tools for all reasonable out-of-pocket, material and labor costs per the Agreement.

part of the Agreement, Optical Tools will be eligible to receive regulatory and sales milestone payments totaling up to $ 1.0 million,

and royalties of up to 3 % of net revenue of certain products developed under this Agreement.

Company did not make any milestone or royalty payments during the three or nine months ended September 30, 2023.

Company did not make any milestone or royalty payments or accruals for such payments during the three months ended March 31, 2024 or

Milestone payments with Ferrer Internacional S.A.

Under the Xepi LSA, we are obligated to make payments

to Ferrer upon the occurrence of certain milestones.

Specifically, we must pay Ferrer i) $ 2,000,000 upon the first occasion when annual

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

Xepi ® under the Xepi LSA exceed $ 50,000,000 .

No payments were made during the three months ended March 31, 2024 or 2023

related to Xepi ® milestones.

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

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to such legal proceedings.

Agreement with DUSA Pharmaceuticals Inc.

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.

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

(“DUSA”) for the full cash settlement amount, meaning that in the event Biofrontera AG does not pay all or a portion

of the amount it owes under the settlement agreement, DUSA could compel us to pay Biofrontera AG’s share.

As of September 30, 2023, we have reflected a legal settlement liability in the amount

of $ 6.0 million for the remaining payments due under the settlement, including the estimated remaining cost of the forensic expert and

a related receivable from related party of $ 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.

Pursuant to the Settlement Agreement, if DUSA believes Biofrontera

has violated any terms of the settlement and release agreement, the parties must engage in certain alternative dispute resolution activities,

including a meeting between company representatives and non-binding mediation before a court action can be initiated.

Agreement with Biofrontera AG

to the terms of that certain Settlement Agreement, dated as of April 11, 2023, among the Company, Biofrontera AG and certain current

and former directors of the Company (the “Settlement Agreement”), the Company has taken or committed, among other

things, to take the following actions:

July 7, 2023, in connection with the Biofrontera AG settlement agreement, the board of directors of the Company appointed Heikki

Lanckriet to the Board.

Lanckriet will serve as a Class I Director to hold office for a term expiring at the annual meeting of

the Company’s stockholders for fiscal year 2025.

Lanckriet’s term as director began upon his appointment at the July

7, 2023 meeting.

The Company will begin

a search, pursuant to the conditions set forth in the Settlement Agreement including a strike right granted to the aforementioned

director nominated by Biofrontera AG, for an additional director candidate, who is fully independent from Biofrontera AG, Deutsche

Balaton Aktiengesellschaft (“DB”) and any of their respective affiliates, to be nominated for election as a Class II

Director at the Company’s 2024 annual meeting of stockholders.

Board will increase its size to seven members, including the two directors appointed and elected pursuant to the Settlement Agreement

as noted above.

addition, the Settlement Agreement contains provisions to maintain Biofrontera AG’s representation on the Board of Directors as

long as it holds at least 20% of the Company’s outstanding common stock and to limit further increases in the size of the Board

of Directors or changes to the Company’s stockholder rights plan.

Under the Settlement Agreement, Biofrontera AG also agrees, subject

to certain conditions, to vote in support of the directors nominated by, and the proposals recommended by, the Board of Directors.

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

by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD (collectively

“DUSA” or “Plaintiffs”) 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.

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

DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD (collectively “DUSA”

or “Plaintiffs”) in which DUSA alleges breach of contract, violation of the Lanham Act, and unfair trade practices.

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

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.

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

Retirement Plan

Company has a defined-contribution plan under Section 401(k) of Internal Revenue Code (the “401(k) Plan”).

The 401(k) Plan

covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual

compensation on a pre-tax basis.

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

contribution costs paid by the Company for the three and nine months ended September 30, 2023 were $ 0.1 million and $ 0.2 million,

respectively and $ 0.1 million

and $ 0.2 million

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

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified

to their own line items within the Consolidated Statement of Operations and Consolidated Statements of Cash Flow.

Specifically, warrant

inducement expense of $ 2.6 million was reclassed from change in fair value of warrant liabilities for prior year presentation.

These reclassifications

had no effect on the reported results of operations.

Subsequent Events

have completed an evaluation of subsequent events after the balance sheet date of September 30, 2023 through the date this Quarterly

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

October 30, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”) with an institutional investor

for the purchase and sale, in a registered public offering by the Company (the “Public Offering”) of an aggregate of 1,205,000

shares of the Company’s Common Stock,

or pre-funded warrants to purchase Common Stock in lieu thereof, each of which is coupled with a warrant to purchase one and one-half

shares of Common Stock.

Specifically, the

Company agreed to issue and sell to the institutional investor:

(i) 150,000 shares of Common Stock at a combined offering price of $3.74, (ii) 1,055,000 pre-funded warrants to purchase up to 1,055,000 shares of Common Stock (the “Pre-Funded Warrants”)

at a combined offering price of $3.7399 and (iii) 1,205,000 warrants to purchase up to 1,807,500 shares of Common

Stock (the “Common Warrants”), resulting in gross proceeds of approximately $4.5 million.

The Public Offering closed on November

Common Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise price of $ 3.55

The Pre-Funded Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise

price of $ 0.0001 per share.

previously reported in a Current Report on Form 8-K filed with the SEC on May 20, 2022, the Company issued (i) a common stock

purchase warrant, dated May 16, 2022 and exercisable until November 18, 2027 , to purchase up to 170,950 shares of Common Stock, at an

exercise price of $ 55.40 and (ii) a common stock purchase warrant, dated July 26, 2022 and exercisable until December 1, 2026 , to purchase

up to 214,286 shares of Common Stock at an exercise price of $ 33.20 (collectively, the “Existing Warrants”) to an institutional

October 30, 2023, in connection with the Purchase Agreement, the Company entered into an amendment to the Existing Warrants pursuant

to which the Company agreed, effective November 2, 2023, to (i) revise the exercise price of the Existing Warrants to $ 3.55 and (ii)

extend the date until which the Existing Warrants can be exercised until November 2, 2028.

No other terms of the Existing Warrants were

revised or changed.

have completed an evaluation of subsequent events after the balance sheet date of March 31, 2024 through the date this Quarterly Report

on Form 10-Q was submitted to the SEC.

Special Meeting of Stockholders

On April 24, 2024, the Company held

a Special Meeting of Stockholders, at which the stockholders approved an amendment to the Company’s Amended and Restated

Certificate of Incorporation to increase the number of authorized shares of Common Stock from 15,000,000 shares

to 35,000,000 shares (the “Authorized Share Increase”).

On April 25, 2024, the Company filed a Certificate of Second Amendment

to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate”)

to increase the number of the Company’s authorized shares of Common Stock accordingly.

Pursuant to the Certificate, upon the increase

to the authorized shares of Common Stock, each share of Series B-1 Preferred Stock will automatically convert into either Common Stock

or, to the extent the conversion would cause a holder to exceed their beneficial ownership limitation, shares of Series B-2 Preferred

Preferred Warrants Exercised

On May 2, 2024, the Board certified

and the Company publicly announced, that the Company has achieved certain milestones as described in the Preferred Warrants to

purchase shares of Series B-3 Preferred Stock.

Specifically, the Board certified that (i) at least 95% of the Company’s

territory managers, medical science liaisons, and reimbursement employees are using the Company’s customer relationship

management system routinely or on a performance improvement plan, and (ii) the Company’s revenue for the period starting on

January 1, 2024 and ending April 30, 2024 excluding revenue from related parties (including Biofrontera AG) is at least 5% higher

than the Company’s revenue excluding revenue from related parties (including Biofrontera AG) for the corresponding period of

the same length, starting on January 1, 2023 (collectively, the “Milestones”).

(i) the Board has certified, and the Company has publicly announced the Company’s achievement of the Milestones, (ii) the Company

has completed the Authorized Share Increase on April 25, 2024, and (iii) the registration

statement registering the resale of such shares filed with the SEC on May 2, 2024, became effective on May 9, 2024 an expiration date

of May 14, 2024 has been triggered on with respect to the Preferred Warrants.

On May 13 and 14, 2024, the Preferred

Warrants were exercised (the “Exercise”) to purchase 7,998 shares of the Company’s Series B-3 Convertible Preferred

stock, par value $ 0.001 per share, for net proceeds of $ 7.4 million.

As a result of the Exercise, all Preferred Warrants issued in the

Offering have now been exercised.

Mezzanine Equity and Stockholder’s Equity for details of the Offering.

Agreement with Biofrontera AG

May 6, 2024, the Company (along with certain current directors) and Biofrontera AG entered into an amendment (the “Amendment”)

to a Settlement Agreement, dated as of April 11, 2023, by and among the Company, Hermann Luebbert, John J.

Borer, Loretta M.

Wedge, Beth J.

Hoffman, Kevin

Weber, and Biofrontera AG, as previously amended on October 12, 2023.

to the Amendment, the search for an additional independent Class III director to be mutually selected by the Company and Biofrontera

AG, which was to occur no earlier than January 1, 2024 and no later than September 1, 2024, will no longer be required.

foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment,

a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.

Nasdaq Compliance

previously disclosed, the

Company received a notice from the Listing Qualifications Staff of The Nasdaq Stock Market (“Nasdaq”)

in November 2023 stating 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 was no longer in compliance with Nasdaq’s continued listing

requirement as set forth in Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity

be at least $2,500,000 (the “Stockholders’ Equity Requirement”).

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.

The Company submitted

a compliance plan to Nasdaq in January 2024 that detailed the Company’s plan to regain compliance with the Stockholders’

Equity Requirement.

Nasdaq accepted the plan and granted the Company an extension to evidence compliance.

The Company has executed components

of the plan by reducing costs and raising equity in 2024.

As of the date of this filing, the Company has stockholders’ equity

above the $ 2.5 million requirement.

to Executive Employment Contracts

May 10, 2024, the Company entered into amended and restated employment agreements with Fred Leffler, the Company’s Chief

Financial Officer, and Hermann Luebbert, its Chief Executive Officer and Chairman.

The amended and restated agreements (a) provide

for increases in the respective base salaries of Messrs.

Leffler and Luebbert;

and (b) permit future increases in their respective

base salaries, provided that such increases are approved by the Company’s Board and/or its Compensation Committee, as

In addition, a number of non-substantive revisions have been made to Mr.

Luebbert’s previous employment agreement

to conform to changes in his role with the Company.

foregoing description of the amended and restated employment agreements does not purport to be complete and is qualified in its entirety by reference to the copy of

the amended and restated employment agreements filed as Exhibits 10.2 and 10.3 to this report and incorporated herein by reference.

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

What changed 10-Q

Item 1. Financial Statements