What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 477 added, 560 removed, 420 unchanged (71% of the section changed)

2 unchanged sentences

thousands, except par value and share amounts )

September 30,

Current assets:

4 unchanged sentences

Prepaid expenses and other current assets

Assets held for sale

Other assets, related party

7 unchanged sentences

Accounts payable, related parties

Accounts payable

Operating lease liabilities

9 unchanged sentences

Stockholders’ equity:

Series B Convertible Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1, 4,806 Series B-2 and 7,998 Series B-3 shares issued and outstanding as of June 30, 2024 and no shares issued and outstanding as of December 31, 2023

Series B Convertible Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1, 4,695 Series B-2 and 7,093 Series B-3 shares issued and outstanding as of September 30, 2024 and no shares issued and outstanding as of December 31, 2023

Common stock, $ 0.001 par value, 35,000,000 shares authorized;

5,094,184 and 1,517,628 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

6,529,792 and 1,517,628 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Product revenues, net

15 unchanged sentences

Loss on debt extinguishment

Interest expense, net

Other income, net

Total other income (expense)

Interest income (expense), net

Other income (expense), net

Total other expense

Loss before income taxes

7 unchanged sentences

thousands, except number of shares)

and Six Months Ended June 30, 2024

April 1, 2024

of Series B-1 Preferred into Series B-2 Preferred

of Series B-3 upon exercise of warrants

based compensation

June 30, 2024

Three and Nine Months Ended September 30, 2024

Preferred Stock

Balance, July 1, 2024

$ ( 110,344 )

Conversion of Series B Preferred into Common

Stock based compensation

Balance, September 30, 2024

$ ( 116,013 )

Balance, January 1, 2024

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Stock based compensation

Balance, June 30, 2024

$ ( 110,344 )

Balance, September 30, 2024

$ ( 116,013 )

Three and Six Months Ended June 30, 2023

Balance, April 1, 2023

Issuance of shares for vested restricted stock units

Three and Nine Months Ended September 30, 2023

Balance, July 1, 2023

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

Stock based compensation

Balance, June 30, 2023

Balance, September 30, 2023

$ ( 103,176 )

Balance, January 1, 2023

Issuance of shares for vested restricted stock units

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

Stock based compensation

Balance, June 30, 2023

The accompanying notes are an integral part of these condensed consolidated

financial statements.

Balance, September 30, 2023

$ ( 103,176 )

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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Amortization of acquired intangible assets

Realized/unrealized (gain)/ loss in investment, related party

Realized/unrealized loss in investment, related party

Change in fair value of contingent consideration

8 unchanged sentences

Prepaid expenses and other assets

Other assets, related party

Accounts payable and related party payables

11 unchanged sentences

Proceeds from line of credit

Payment to extinguish line of credit

Repayment of line of credit

Payment of principal short-term debt

5 unchanged sentences

Interest paid

Interest paid, related party

Income taxes paid, net

1 unchanged sentence

Conversion of warrant liability to equity

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

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

4 unchanged sentences

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, Biofrontera Discovery GmbH (“Discovery”), formerly known as Bio-FRI GmbH,

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

principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with PDT (when used

together, “Ameluz ® PDT”) using the BF-RhodoLED ® and the RhodoLED ® XL lamps (the

“RhodoLED ® Lamps”).

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.

The Company’s licensed products are used for the treatment of actinic keratoses (“AKs”), which

are pre-cancerous skin lesions as well as impetigo, a bacterial skin infection.

Company includes its wholly owned subsidiary, Biofrontera Discovery GmbH (“Discovery”), formerly known as Bio-FRI GmbH, a

limited liability company organized under the laws of Germany, formed on February 9, 2022, as a German presence that manages our clinical

trial work and facilitates 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 PDT (when

used together, “Ameluz ® PDT”) using the BF-RhodoLED ® and the RhodoLED ® XL

lamps (the “RhodoLED ® Lamps”).

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 Second Amended and

Restated License and Supply Agreement, effective February 13, 2024 (the “Second A&R 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 Food and Drug Administration (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.

Restated License and Supply Agreement, effective February 13, 2024 (the “Second A&R Ameluz LSA”), with the Ameluz

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 Food and Drug Administration (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

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.

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.

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

Once the new contract manufacturer is qualified, we expect the supply of Xepi ®

will meet the future market demand.

The Company has generated limited

revenue from sales of Xepi due to third-party manufacturing delays that have hampered our commercialization of the product.

is now in the process of qualifying a new contract manufacturer.

If the new contract manufacturer is qualified, we believe that it

will be able to supply enough of the Xepi ® product line to meet market demand for as long as we maintain it.

in the third quarter of 2024, the Company reached the decision to divest its Xepi product line and determined that it met the held

for sale accounting criteria.

The Company has entered into a letter of intent

and expects to complete the sale within the next six to twelve months.

The related intangible asset is presented as held for sale

under current assets in the Condensed Consolidated Balance Sheets.

Assets Held for Sale , for additional

and Going Concern

Pursuant to the requirements of the Financial Accounting

Standards Board’s 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 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 issued.

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 statements 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.

to the requirements of the Financial Accounting Standards Board’s 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 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 issued.

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

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 statements 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.

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

We incurred net cash outflows from operations of $ 8.0 million

and $ 14.0 million

for the six months ended June 30, 2024 and 2023, respectively.

The Company had an accumulated deficit as of June 30, 2024 of $ 110.3 million.

We incurred net cash outflows from operations of $ 9.3

million and $ 16.0

million for the nine months ended September 30, 2024 and 2023, respectively.

The Company had an accumulated deficit as of September

30, 2024 of $ 116.0

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

financing transactions.

As of June 30, 2024, we had cash and cash equivalents of $ 4.4 million,

compared to $ 1.3 million

as of December 31, 2023.

These conditions and current cash flow projections raise substantial doubt about our ability to continue as

a going concern for at least twelve months from the issuance date of this report.

However, management believes that its plan

alleviates the substantial doubt about the Company’s ability to continue as a going concern for at least one year from the

date these financial statements are issued.

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 2023.

In addition, the terms of the Second A&R

Ameluz LSA are expected to reduce our cost of inventory in the future (See Note 12 Related Party Transactions ),

with gross margins of its primary product, Ameluz®, anticipated to be approximately 75% as opposed to the current 50%, beginning

with inventory purchases after the execution date.

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

offset by increased R&D costs, resulting in expected net savings of $ 2.7

million through August 2025.

The Company also has discretionary marketing, personnel,

software, and other expenses budgeted in fiscal year 2024, which the Company has the ability and intent, commencing in January 2025,

to reduce such spending and cash outflows by $ 5.8

million through August 31, 2025 without materially impacting planned revenues.

on the plans described above, management believes that the

Company will have sufficient liquidity to meet its funding requirements for at least one year from the date these financial statements are issued.

However, this will depend on several factors, including executing on its sales plan and planned cost reductions within

the time period needed, as well as other possible challenges and unforeseen circumstances.

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 statements.

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

of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability

and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the

uncertainties described above.

As of September 30, 2024, we had cash and cash equivalents of $ 2.9

million, compared to $ 1.3

million as of December 31, 2023.

As a result of our losses and projected cash needs,

the Company’s management has determined that substantial doubt exists about our ability to continue as a going concern for at least

twelve months from the issuance date of these financial statements.

The Company’s ability to continue as a going concern is contingent

upon successful execution of management’s plans over the next twelve months to improve the Company’s liquidity and

profitability, which includes without limitation:

· Expanding the commercialization of Ameluz ® in the United

States while decreasing discretionary expenses.

· Actively pursuing additional capital through the issuance of equity securities,

debt or the sale of assets.

· Controlling expenses and limiting capital expenditures.

· Realizing the benefit of the reduced cost of inventory in line with the

terms of the Second A&R Ameluz LSA.

believes that the implementation of such plans will provide the opportunity for the Company to continue as a going concern.

no assurance can be given that the Company will be successful in these efforts and the substantial doubt will be alleviated.

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

satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to

the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result

from the outcome of the uncertainties described above.

Summary of Significant Accounting Policies

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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 June 30, 2024, the Company’s operating results for the

three and six months ended June 30, 2024 and 2023, and the Company’s cash flows for the six months ended June 30, 2024 and 2023.

necessary to present fairly the Company’s financial position as of September 30, 2024, the Company’s operating results for

the three and nine months ended September 30, 2024 and 2023, and the Company’s cash flows for the nine months ended September 30,

2024 and 2023.

The 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.

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

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, as required by the terms of those securities.

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

Company has one reportable segment.

All amounts shown in these financial statements and tables are in thousands and amounts in the

notes are in millions, except percentages and per share and share amounts.

the 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.

Held for Sale

Company generally considers assets to be held for sale when the following criteria are met:

(i) management commits to a plan to sell

the assets, (ii) the assets are available for sale immediately, (iii) management has initiated an active program to locate a buyer

or buyers and other actions required to complete the plan to sell the assets, (iv) the sale of the assets within one year is

considered probable, (v) the assets are actively being marketed for sale at a price that is reasonable in relation to their current fair

value and (vi) significant changes to the plan to sell are not expected.

Assets classified as held for sale are no longer depreciated

and are reported at the lower of their carrying value or fair value less estimated costs to sell in accordance with ASC

360, Property, Plant and Equipment-Impairment or Disposal of Long-Lived Assets.

and Development Costs

and development expenses include costs directly attributable to the clinical development of Ameluz ® , including personnel-related expenses,

the cost of services provided by outside contractors, including services related to the Company’s clinical trials, facilities,

and development expenses include costs directly attributable to the clinical development of Ameluz ® , including personnel-related

expenses, the cost of services provided by outside contractors, including services related to the Company’s clinical trials, facilities,

depreciation, and other direct and allocated expenses.

All costs associated with research and development are expensed as incurred.

trial costs are a significant component of our research and development expenses and include costs associated with third-party

The Company outsources a substantial portion of its clinical trial activities, utilizing external entities such as

Clinical Research Organizations (“CROs”), independent clinical investigators, and other third-party service providers to

assist the Company with the execution of its clinical trials.

trial costs are a significant component of our research and development expenses and include costs associated with third-party contractors.

The Company outsources a substantial portion of its clinical trial activities, utilizing external entities such as Clinical Research

Organizations, independent clinical investigators, and other third-party service providers to assist the Company

with the execution of its clinical trials.

We record accruals for estimated costs under these contracts.

evaluating the adequacy of the accrued liabilities, we analyze the progress of the studies or clinical trials, including the phase

or completion of events, invoices received, contracted costs and purchase orders.

Significant judgments and estimates are made in

determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time.

Although we do not expect the estimates to be materially different from the amounts actually incurred, if the estimates of the

status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that

are too high or too low in any particular period.

Actual results could differ from our estimates.

If actual results in the future vary from the Company’s estimates,

the Company will adjust these estimates and record any necessary adjustments in the period such variances become known.

estimate clinical trial and research agreement related expenses based on the services performed, pursuant to contracts with the CROs,

independent clinical investigators, and other vendors that conduct clinical trials and research on our behalf.

In accruing clinical and

research related fees, we estimate the period over which services will be performed and activity expended in each period.

If the actual

timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.

made under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are

When evaluating the adequacy

of the accrued liabilities, we analyze the progress of the studies or clinical trials, including the phase or completion of events, invoices

received, contracted costs and purchase orders.

Significant judgments and estimates are made in determining the accrued balances at the

end of any reporting period based on the facts and circumstances known at that time.

Although we do not expect the estimates to be materially

different from the amounts actually incurred, if the estimates of the status and timing of services performed differs from the actual

status and timing of services performed, we may report amounts that are too high or too low in any particular period.

Actual results

could differ from our estimates.

If actual results in the future vary from the Company’s estimates, the Company will adjust these

estimates and record any necessary adjustments in the period such variances become known.

Payments made under these arrangements in advance of the receipt of the

related services are recorded as prepaid expenses until the services are rendered.

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

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The main areas in which assumptions,

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

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

reserves, share-based payments, accrual of research and development expenses and income taxes including deferred tax assets

and liabilities.

estimates and the exercising of judgment are appropriate relate to, valuation allowances for receivables and inventory, and warrant liabilities, realization of intangible and other long-lived assets, product sales allowances and

reserves, share-based payments, accrual of research and development expenses and income taxes including deferred tax assets and liabilities.

Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances.

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

They are continuously

reviewed but may vary from the actual values.

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 .

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Fair Value Measurements

following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30,

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

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

30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such

Schedule of Fair Value Hierarchy Valuation Inputs

(in thousands)

September 30,

Investment, related party

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related party

of June 30, 2024 and December 31, 2023, the Company held as an investment, 3,019 (as adjusted for a reverse stock split on May 14, 2024)

and 177,465 , 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.

of September 30, 2024 and December 31, 2023, the Company held as an investment, 3,019 (as adjusted for a reverse stock split on May 14,

2024) and 177,465 , 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

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

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provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under

The 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 re-measured at each balance sheet date until their exercise or expiration, and any change in

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

fair value for the Level 3 2022 Purchase Warrants, 2022 Inducement Warrants and the 2023 Purchase Warrants was estimated using a Black-Scholes-Merton

(“BSM”) model.

Certain inputs utilized in our BSM 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 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 three and six months ended June 30, 2024:

fair value of

the underlying common stock of $ 0.90

expected volatility of 95 %

risk free rate of 4.20 %

remaining contractual term of 4.34

years and a dividend

yield of 0 %.

Certain inputs utilized in our BSM 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 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 three and nine months ended September 30, 2024:

fair value of the underlying common stock of $ 0.90

to $ 1.54 , expected volatility of 95 % to 100 %, risk free rate of 3.55 % to 4.35 %, remaining contractual term of 4.09 to 4.59 years and

a dividend yield of 0 %.

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

The warrants to purchase 8,000 shares

of Series B-3 Convertible Preferred Stock, par value $ 0.001 per

share (the “2024 Preferred Warrants”), were also accounted for as liabilities, as they were redeemable in the event of a

change in control, which was not solely within the control of the Company (see Note 13.

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

were also accounted for as liabilities, as they were redeemable in the event of a change in control, which was not solely within the

control of the Company (see Note 12.

Stockholders’ Equity ).

Preferred Warrants were issued in the first quarter of 2024 and

exercised prior to the end of the second quarter of 2024.

The 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 BSM model equation to determine the value of the Series B-3 convertible warrants.

two, the warrant value was 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 as an input to the model.

The 2024 Preferred Warrants were issued in the first quarter

of 2024 and exercised prior to the end of the second quarter of 2024.

The 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 BSM model equation to determine the value of the Series B-3 convertible warrants.

In scenario two, the warrant value was 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 as an input to the model.

BSM model used the following range of inputs and assumptions for the 2024 Preferred Warrants at the issuance date of February 22, 2024,

for the three months ended March 31, 2024 and at the exercise date of May 13, 2024:

(i) expected stock price volatility of 79.3 %

(i) expected stock price volatility of 79.3 % to 105 %;

(ii) risk-free interest rate of 5.39 %;

(iii) expected life of the warrants of 0.003

to 0.21 years;

and (iv) dividend yield of 0.0 %.

(iii) expected life of the warrants of 0.003 to 0.21 years;

and (iv) dividend yield

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

Schedule of Changes in Fair Value Warrant Liabilities

Six Months Ended

Nine Months Ended

September 30,

Fair value at beginning of period

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Fair value at end of period

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

Revenue from the sales of our lamps and Xepi ® are relatively insignificant compared with the revenues generated through

our sales of Ameluz ® .

generate revenue primarily through the sales of our licensed products Ameluz ® and RhodoLED ® Lamps.

from the sales of our lamps are relatively insignificant compared with the revenues generated through our sales of Ameluz ® .

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

with the clinical lamps, which, due to the Second A&R Ameluz LSA is no longer effective as of June 30, 2024.

Refer to Note 12, Related

Party Transactions .

with the clinical lamps, which, due to the Second A&R Ameluz LSA is no longer effective as of September 30, 2024.

Refer to Note

11, Related Party Transactions .

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

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Credit or payments made during the period

Balance at June 30, 2023

Balance at September 30, 2023

Balance at December 31, 2023

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Credit or payments made during the period

Balance at June 30, 2024

Investment, Related Party

of June 30, 2024 and December 31, 2023, our investments in equity securities consisted solely of 3,019

shares (as adjusted for a 1 for 21 reverse stock split on May 14, 2024) and 177,465 shares,

respectively, of common shares of Biofrontera AG.

(See Note 12.

Related Party Transactions ).

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 and $ 0.2

million during the six months ended June 30, 2024 and 2023, respectively.

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

Six Months Ended

(in thousands)

Net loss recognized during the period on equity securities

net realized loss on equity securities sold

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

Balance at September 30, 2024

Accounts Receivable, Net

receivables are mainly attributable to the sale of Ameluz ® .

It is expected that all trade receivables will be settled

within twelve months of the balance sheet date.

It is expected that all trade receivables will

be settled within twelve months of the balance sheet date.

Trade accounts receivable are stated at their net realizable value.

The allowance for

credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience

The allowance

for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience

and current information.

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

In developing the estimate for expected credit losses, trade accounts receivable are segmented into pools of

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

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

allowance for credit losses was $ 0.3 million and $ 0.2 million as of June 30, 2024 and December 31, 2023, respectively.

are comprised of Ameluz ® , RhodoLED ® Lamps, and immaterial amounts of Xepi ® finished products.

was no provision for obsolescence recorded for the three and six months ended June 30, 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 were to be replaced by

the Ameluz Licensor at no additional cost in accordance with the Ameluz License and Supply Agreement (the “Ameluz LSA”).

Related Party Transactions

for further discussion of the voluntary recall.

allowance for credit losses was $ 0.3 million and $ 0.2 million as of September 30, 2024 and December 31, 2023, respectively.

are comprised of Ameluz ® and RhodoLED ® Lamps.

was a negligible provision for obsolescence recorded for the three and nine months ended September 30, 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 were to be replaced by the Ameluz Licensor at no additional cost in accordance with the Ameluz License and Supply Agreement

(the “Ameluz LSA”).

As of July 23, 2024, we have received the full amount of the replacement inventory for the recalled Ameluz ® .

Subsequent Events.

Intangible Asset, Net

asset, net consists of the following:

Schedule of Intangible Asset Net

Assets Held for Sale

held for sale consists of the following:

of Assets Held for Sale

(in thousands)

Capitalized software

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

Assets held for sale

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

basis over the useful life of 11 years.

Amortization expense was $ 0.1 million for each of the three-month periods ended June 30, 2024

and 2023 and $ 0.2 million for the six months ended June 30, 2024 and 2023.

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 and six months ended June 30, 2024 and none for the

three and six months ended June 30, 2023.

Amortization expense was $ 0.1 million for each of the three-month periods ended September 30,

2024 and 2023 and $ 0.3 million for the nine months ended September 30, 2024 and 2023.

the third quarter of 2024, the Company committed to a plan to sell its Xepi product line and determined that the intangible asset

meets the criteria to be classified as held for sale in accordance with ASC 360-10-45-9.

The Company has entered into a letter

of intent and expects to complete the sale within the next six to twelve months and as such has classified the asset as held

for sale under current assets in the Condensed Consolidated Balance Sheets.

The carrying amount of the asset at the time of

classification was $ 2.3

million, which was the lower of its carrying value or estimated fair value less cost to sell.

No gain or loss was recognized in the

Statement of Operations upon classification as an asset held for sale and the related revenue and expenses associated with the asset

were de-minimus.

This divestiture does not represent a strategic shift that will have a major effect on our consolidated results of

operations and therefore is not being reported as

discontinued operations.

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”).

At June 30, 2024, approximately $ 4.0 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 with respect

to these accounts.

At September 30, 2024, approximately $ 2.5 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.

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

(in thousands)

Cash and cash equivalents

Long-term restricted cash

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

September 30,

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.

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(in thousands)

September 30,

Employee compensation and benefits

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Research and development

Product revenue allowances and reserves

Product revenue reserves

Distribution and Storage

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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 six months ended June 30, 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 through July 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 and six months ended June 30, 2024 the Company recognized interest

expense of approximately $ 0.2 million and $ 1.7 million, respectively and discount amortization of $ 0.1 million and $ 0.3 million, respectively.

As of June 30, 2024 the aggregate amount of principal outstanding under the Loans was $ 0.3 million, which is shown net of the remaining

unamortized issuance cost.

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

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.

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.

of deferred financing costs, in the accompanying consolidated statement of operations for the nine months ended September 30, 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 was evidenced by a Secured Promissory Note, effective as of December 21, 2023 and required 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 related issuance costs, recognized as a debt discount (contra liability against the debt balance), that were amortized as

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

The Company recognized minimal discount amortization

and interest expense during the three months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company

recognized discount amortization and interest expense of $ 0.3

million and $ 1.7

million, respectively.

As of September 30, 2024 the Company had repaid both Loans.

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

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

Related Party Transactions

and Supply Agreement

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 RhodoLED ® Lamps and must purchase the licensed products

exclusively from Biofrontera Pharma.

A&R Ameluz LSA, among other things, amended the Ameluz LSA to:

update the price we pay per unit, based on certain percentages of the anticipated net selling price, (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:

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 RhodoLED ® Lamps and must purchase the licensed products exclusively

from Biofrontera Pharma.

The Second A&R Ameluz LSA, among other things, amended the Ameluz LSA to:

update the price we pay per unit, based on certain percentages of the anticipated net selling price, (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:

percent of the anticipated net selling price per unit through 2025;

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percent of the anticipated net selling price per unit 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 twenty-five

percent of the anticipated net selling price per unit indefinitely.

Transfer Price for sales related to acne, another indication currently in development, will remain at twenty-five percent of the

anticipated net selling price per unit indefinitely.

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

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for which the Company assumed responsibility under the Second A&R Ameluz LSA.

of the licensed products during the three and six months ended June 30, 2024 were $ 0.8 million and $ 1.1 million, respectively, and $ 10.4

million and $ 13.7 million for the three and six months ended June 30, 2023, respectively.

Amounts due and payable to Biofrontera Pharma

as of June 30, 2024 and December 31, 2023 were $ 2.2 million and $ 8.5 million, respectively, which were recorded net in accounts payable, 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.

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

to 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.

As of July 23, 2024, we received the full amount of the replacement inventory for the recalled Ameluz ® .

Subsequent Events.

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, 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.

W e have migrated away from Biofrontera AG to third party providers for most of our significant information technology

Expenses related to the Services Agreement were negligible for the three and six months ended June 30, 2024 and $ 0.1

million for the three and six months ended June 30, 2023 , which were recorded in selling, general

and administrative, related party.

Amounts due to Biofrontera AG related to the Services Agreement were negligible and $ 0.1 million as

of June 30, 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.

Due to the Second A&R Ameluz LSA, this agreement is no longer effective as of June 30, 2024.

revenue related to the clinical lamp lease agreement was minimal for the three and six months ended June 30, 2024 and 2023, and was recorded

as revenues, related party.

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

million as of June 30, 2024 and December 31, 2023, respectively, which were recorded as other receivables, related party in the consolidated

balance sheets.

of the licensed products during the three and nine months ended September 30, 2024 were $ 2.2 million and $ 3.3 million, respectively,

and $ 5.1 million and $ 18.8 million for the three and nine months ended September 30, 2023, respectively.

Amounts due and payable to

Biofrontera Pharma as of September 30, 2024 and December 31, 2023 were $ 3.6 million and $ 8.5 million, respectively, which were recorded

net in accounts payable, related parties in the consolidated balance sheets.

Company receives expense reimbursement from Biofrontera AG and Biofrontera Bioscience on a quarterly basis for costs incurred on behalf

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Total expense reimbursements

were $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2024 respectively.

Total expense reimbursements for the

three and six months ended June 30, 2023 were $ 0.2 million and $ 0.4 million, respectively.

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.

Company had 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 June 30, 2022,

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

was no interest income recognized for the three and six months ended June 30, 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 June 30, 2024, our investment, related party was valued at a negligible amount and consisted of 3,019

common shares of Biofrontera AG ( as adjusted for a reverse stock split on May14, 2024) .

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

Investment, Related Party.

were negligible and $ 0.3 million for the three and nine months ended September 30, 2024 respectively.

Total expense reimbursements for

the three and nine months ended September 30, 2023 were $ 0.1 million and $ 0.2 million, respectively.

Stockholders’ Equity

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par value $ .001 per share.

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) the 2024 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

Each share of Series B-1 Preferred Stock was sold for $ 1,000

per share and the consideration for each 2024 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

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) the 2024 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 2024 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).

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 offering expenses payable by the Company.

February 22, 2024, concurrent with the closing of the Offering, in exchange for the conversion of 1,780

shares of Series B-1 Preferred Stock, the Company issued 2,516,785

shares of common stock.

Pursuant to the Certificate, upon the Company’s stockholders’ May 2024 approval of an increase

in the authorized shares of Common Stock (“Stockholder Approval”), the remaining 4,806

shares of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock (as a conversion to common stock would

have caused the holders to exceed their respective beneficial ownership limitations), with 6,793,893

shares of common stock issuable upon conversion of the Series B-2 Preferred Stock.

Also, following the Stockholder Approval, upon

any liquidation event, the assets of the Company available for distribution to its stockholders will 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.

removal of the liquidation preference to Series B Preferred, the requirement for mezzanine classification was eliminated and the

Series B Preferred Stock is classified as permanent equity as of June 30, 2024.

(See Note 14.

Redeemable Preferred

The net proceeds received were approximately $ 7.3 million, after deducting fees paid to the placement

agent and other offering expenses payable by the Company.

February 22, 2024, concurrent with the closing of the Offering, in exchange for the conversion of 1,780 shares of Series B-1 Preferred

Stock, the Company issued 2,516,785 shares of common stock.

Pursuant to the Certificate, upon the Company’s stockholders’

May 2024 approval of an increase in the authorized shares of Common Stock (“Stockholder Approval”), the remaining 4,806 shares

of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock (as a conversion to common stock would have caused

the holders to exceed their respective beneficial ownership limitations), with 6,793,893 shares of common stock issuable upon conversion

of the Series B-2 Preferred Stock.

Also, following the Stockholder Approval, upon any liquidation event, the assets of the Company available

for distribution to its stockholders will 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.

With the removal of the liquidation preference to Series B Preferred, the requirement for

mezzanine classification was eliminated and the Series B Preferred Stock is classified as permanent equity as of September 30, 2024.

Redeemable Preferred Stock.

May 13 and 14, 2024, of the 8,000

2024 Preferred Warrants, 7,998 were

exercised to purchase shares of the Company’s Series B-3 Convertible Preferred stock, par value $ 0.001 per

share, for net proceeds of $ 7.4 million,

net of fees paid to the placement agent, while two warrants expired due to non-issuance of fractional shares.

All 2024 Preferred

Warrants issued in the Offering have now been exercised or expired, with 11,306,192

shares of common stock issuable upon conversion of the 7,998 shares

of Series B-3 Convertible Preferred Stock.

to the Preferred Purchase Agreement, the Company is entitled to appoint

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

2024 Preferred Warrants, 7,998

were exercised to purchase shares of the Company’s Series B-3 Convertible Preferred stock, par value $ 0.001

per share, for net proceeds of $ 7.4

million, net of fees paid to the placement agent, while two warrants expired due to non-issuance of fractional shares.

Preferred Warrants issued in the Offering have now been exercised or expired, with 11,306,192

shares of common stock issuable upon conversion of the 7,998

shares of Series B-3 Convertible Preferred Stock.

As of September 30, 2024 following the conversion of 111 shares of Series B-2 Preferred Stock and 905 shares of Series

B-3 Preferred Stock into Common Stock, there were 11,788 shares of Series B Preferred issued and outstanding.

to the Preferred Purchase Agreement, the Company is entitled to appoint two independent directors designated by Rosalind Advisors, Inc

to the Company’s Board.

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 (collectively the “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 (collectively

the “Series B Preferred Stock”).

B Preferred Stock Rights:

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

to certain beneficial ownership limitations, at the option of the Holder, each share of Series B Preferred Stock is

convertible into shares of Common Stock at the applicable Conversion Price, rounded down to the nearest whole share.

The conversion

price for the Series B Preferred Stock is $ 0.7074 per share of Common Stock, subject to adjustment in the event of any stock dividend, stock split,

Subject to certain beneficial ownership limitations, at the option of the Holder, each share of Series B Preferred Stock is convertible

into shares of Common Stock at the applicable Conversion Price, rounded down to the nearest whole share.

The conversion price for the

Series B Preferred Stock is $ 0.7074 per share of Common Stock, subject to adjustment in the event of any stock dividend, stock split,

combination or other similar recapitalization.

Following the Stockholder Approval, each share of

Series B-1 Preferred Stock was automatically converted into either Common Stock or, to the extent the conversion

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

Following the Stockholder Approval, each share of Series B-1 Preferred Stock was automatically

converted into either Common Stock or, to the extent the conversion would cause a holder to exceed its beneficial ownership limitation,

shares of Series B-2 Preferred Stock.

Liquidation .

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 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.

Following 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 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.

Participation

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

As of June 30, 2024, there were 5,094,184

As of September 30, 2024, there were 6,529,792

shares of Common Stock outstanding.

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.

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.

Redeemable Preferred Stock

to the Stockholder Approval, Series B-1 Preferred Stock was redeemable at the option of the holder and Series B-2 and B-3 Preferred

Stock were redeemable in the event of a change in control.

to the Stockholder Approval, Series B-1 Preferred Stock was redeemable at the option of the holder and Series B-2 and B-3 Preferred Stock

were redeemable in the event of a change in control.

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

(“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 was redeemable at the option of the holder, B-2 and B-3 were redeemable, upon a change in control

that was not solely within control of the Company.

Prior to the Stockholder Approval, the Series B Preferred Stock was considered

senior to the Common Stock and all other series of the Company with respect to dividend rights and rights on the distribution of

assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

As such, the Company

determined that mezzanine treatment was appropriate for the Series B Preferred Stock at issuance in February 2024 and as of March

31, 2024, and the Series B Preferred Stock was presented as such in our consolidated balance sheets and consolidated statements of

changes in stockholders’ equity and mezzanine equity for periods prior to the Stockholder Approval.

The Series B Preferred Stock was not considered mandatorily

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 was redeemable

at the option of the holder, B-2 and B-3 were redeemable, upon a change in control that was not solely within control of the Company.

Prior to the Stockholder Approval, the Series B Preferred Stock was considered senior to the Common Stock and all other series of the

Company with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the Company.

As such, the Company determined that mezzanine treatment was appropriate for the Series

B Preferred Stock at issuance in February 2024 and as of March 31, 2024, and the Series B Preferred Stock was presented as such in our

consolidated balance sheets and consolidated statements of changes in stockholders’ equity and mezzanine equity for periods prior

to the Stockholder Approval.

The Series B Preferred Stock was not considered mandatorily redeemable.

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

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classification as mezzanine equity.

Following the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders

will 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 filed on February 20, 2024.

Accordingly, the Series B Preferred stock is classified as permanent equity on our consolidated balance sheets and

consolidated statements of change in stockholders’ equity as of June 30, 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).

the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders will 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 filed on February 20, 2024.

Accordingly, the Series B Preferred stock is classified as

permanent equity on our consolidated balance sheets and consolidated statements of change in stockholders’ equity as of September

30, 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).

Equity Incentive Plans and Share-Based Payments

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contractual term is 10 years for stock options issued.

On June 12, 2024, the stockholders of the Company approved an

amendment to the Biofrontera Inc.

2021 Omnibus Incentive Plan to increase the number of shares authorized for issuance by 3,483,010 shares,

from 266,990 shares to 3,750,000 shares.

As of June 30, 2024, there were 3,636,788 shares available for future awards under the amended

On June 12, 2024, the stockholders of the Company approved an amendment to the

Biofrontera Inc.

2021 Omnibus Incentive Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990

shares to 3,750,000 shares.

As of September 30, 2024, there were 1,948,876 shares available for future awards under the amended 2021

Non-qualified

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The Company elects to account for forfeitures as they occur.

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 and six months ended June 30, 2024.

compensation expense related to stock options of approximately $ 0.2

million and $ 0.3

million was recorded in selling, general and

administrative expenses, with a negligible amount recorded as research and development on the accompanying consolidated statement of

operations for the three and six months ended June 30, 2024, respectively.

Share-based compensation expense of $ 0.2 million and $ 0.4

million related to stock options for the three and six months ended June 30, 2023,

respectively,

was recorded in selling, general and administrative expenses.

outstanding and exercisable under the employee share option plan as of June 30, 2024, and a summary of option activity during the six

months then ended is presented below.

the three months ended September 30, 2024, the Company granted 1,242,722 options.

The fair value of each option was estimated

on the grant date of July 12, 2024 using the BSM option pricing model with the following assumptions:

fair value of the underlying unit

of $ 1.06 , expected volatility of 100.0 %, risk free rate of 4.20 %, term ranging from 5.24 years to 6 years, and a dividend yield of zero.

compensation expense for stock options for the three and nine months ended September 30, 2024 was approximately $ 0.2 million and $ 0.6

million, respectively, and was recorded in selling, general and administrative expenses, with a negligible amount recorded as research

and development on the accompanying consolidated statement of operations.

For the three and nine months ended September 30, 2023, share-based

compensation expense of $ 0.1 million and $ 0.5 million, respectively, was recorded in selling, general and administrative expenses.

outstanding and exercisable under the employee share option plan as of September 30, 2024, and a summary of option activity during the

nine months then ended is presented below.

of Stock Option Activity

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Canceled or forfeited

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Outstanding at September 30, 2024

Exercisable at September 30, 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 June 30, 2024.

of June 30, 2024, there was $ 0.6 million of unrecognized compensation cost related to unvested stock options, which is expected to be

recognized over a weighted-average period of approximately 1.51 years.

of the Common Stock for the options that were in the money at September 30, 2024.

of September 30, 2024, there was $ 1.3 million of unrecognized compensation cost related to unvested stock options, which is expected

to be recognized over a weighted-average period of approximately 2.63 years.

Compensation (RSUs)

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Common Stock on the grant date.

compensation expense for the RSUs was negligible and $ 0.1 million for the three and six months ended June 30, 2024, respectively, and

$ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023 respectively, and was recorded in selling, general and

administrative expenses in the accompanying consolidated statements of operations.

compensation expense for the RSUs was $ 0.1 million for the three and nine months ended September 30, 2024, and $ 0.1 million and $ 0.3

million for the three and nine months ended September 30, 2023, respectively, and was recorded in selling, general and administrative

expenses in the accompanying consolidated statements of operations.

of Restricted Stock Units

Weighted Average Remaining Contractual Term

Weighted Average Grant Date Fair Value

Weighted Average

Outstanding at December 31, 2023

Canceled or forfeited

Outstanding at June 30, 2024

of June 30, 2024, there was no unrecognized compensation cost related to RSUs.

Outstanding at September 30, 2024

of September 30, 2024, there was $ 0.4 million unrecognized compensation cost related to RSUs, which is expected to be recognized over

a weighted-average period of approximately 1.78 years.

Interest Expense, net

expense, net consists of the following:

of Interest Expense

(in thousands)

of Interest Expense, Net

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Interest expense

Interest expense, related party

Interest expense

Contract asset interest expense

Interest income

Interest expense, net

Interest income (expense), net

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

7 unchanged sentences

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

No dividends were declared or paid for the three and six

months ended June 30, 2024 and 2023.

No dividends were declared or paid for the three and nine

months ended September 30, 2024 and 2023.

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

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

average common shares outstanding, basic and diluted

loss per share, basic and diluted

Three Months Ended

Nine Months Ended

September 30,

Weighted average common shares outstanding, basic and diluted

Net 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

1 unchanged sentence

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

September 30,

Common stock warrants

7 unchanged sentences

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

The Company has the option to extend

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

The extension period has not been included in

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

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

in the consolidated balance sheets.

The Company has the option

to extend the term of the lease for a five-year period upon written notice to the landlord.

The extension period has not

been included in the determination of the ROU asset or the lease liability as the Company concluded that it is not reasonably

certain that it would exercise this option.

The Company provided the landlord with a security deposit in the amount of $ 0.1

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

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

2 unchanged sentences

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

expiration dates through March 2027.

lease payments under non-cancelable leases as of June 30, 2024 were as follows (in thousands):

expiration dates through October 2027.

the nine months ended September 30, 2024, the Company recorded lease expense of $ 0.6 million under selling, general and administrative

expenses in the consolidated statements of operations.

Future lease payments under non-cancelable leases as of September 30, 2024 were

as follows (in thousands):

of Future Commitments and Sublease Income

Years ending December 31,

Future lease commitments

Remainder of 2024

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LSA Sales Commitment

The term shall renew automatically for a

period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and lamps equal to or greater than $ 150

million over the preceding five years.

If we fail to earn

million in revenues from Ameluz ® and t he

RhodoLED ® L amp s over

the preceding five (5) year period prior to the Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Ameluz LSA by providing one (1) year written

term shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and

lamps equal to or greater than $ 150 million over the preceding five years.

If we fail to earn $ 150 million in revenues from Ameluz ®

and the RhodoLED ® Lamps over the preceding five (5) year period prior to the Ameluz LSA’s termination date,

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 ®

24 unchanged sentences

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 or accruals for such payments during the three and six months ended June 30, 2024

Company did not make any milestone or royalty payments or accruals for such payments during the three and nine months ended September

30, 2024 or 2023.

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

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 or accruals for such payments were made during the three and six months ended June 30, 2024 or 2023 related to

Xepi ® milestones.

and Development Arrangements

the course of normal business operations, the Company enters into agreements with contract research organizations (“CROs”)

to assist in the performance of research and development activities.

Expenditures to CROs represent a significant cost in clinical development

for the Company.

The Company may be obligated to make future payments should certain developments be achieved.

Costs for certain research

and development activities are recognized based on the terms of the individual arrangements, which may differ from the timing of receipt

of invoices and payment of invoices and are reflected in the financial statements as a prepaid or accrued expense.

The Company could

also enter into additional contract research agreements in the future, which may require upfront payments and long-term commitments of

No payments or accruals

for such payments were made during the three and nine months ended September 30, 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

3 unchanged sentences

September 13, 2023, Biofrontera was served with a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc.

(“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges breach of contract, violation of the Lanham Act,

and unfair trade practices.

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

manner that is inconsistent with its approved FDA labeling.

(“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham

Act, and iii) unfair trade practices under Massachusetts law.

All claims stem from allegations that Biofrontera has promoted its Ameluz ®

product in a manner that is inconsistent with its approved FDA labeling.

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

District Court

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

District Court for the

District of New Jersey.

Biofrontera filed a partial motion to dismiss the Lanham Act and unfair trade practices claims on

April 8, 2024.

This motion remains pending, and fact discovery commenced on August 1, 2024.

On June 26, 2024 and June 27, 2024, Sun filed two additional complaints

against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District Court for the District of Massachusetts and the International Trade Commission,

respectively, both alleging infringement of two patents held by Sun.

Company denies these claims and intends to defend these matters vigorously.

Based on the Company’s assessment of

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

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

If the final resolution of the

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

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

Court for the District of New Jersey.

In March of 2024, Biofrontera Company filed a partial motion to dismiss

the Lanham Act and Massachusetts statutory claims, which was denied on October 15, 2024.

Biofrontera subsequently answered Sun’s

complaint and filed counterclaims alleging i) violation of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade

libel/product disparagement.

on June 26, 2024 and June 27, 2024, Sun filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and

Biofrontera Bioscience with the United States District Court for the District of Massachusetts and the International Trade

Commission, respectively, both alleging infringement of two patents held by Sun.

The complaint filed in the United States District Court for the District of Massachusetts has been held in abeyance

pending the completion of the case before the International Trade Commission.

is ongoing in the above-referenced matters.

The Company denies the claims brought by Sun and intends to defend them vigorously.

Based on the Company’s assessment of the facts underlying the above claims, the uncertainty of litigation and the

preliminary stage of the case, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that

may result from either action.

If the final resolution of the matter is adverse to the Company, it could have a material impact on

the Company’s financial position, results of operations, or cash flows.

Subsequent Events

have completed an evaluation of subsequent events after the balance sheet date of June 30, 2024 through the date this Quarterly Report

on Form 10-Q was submitted to the SEC, and determined that the following material subsequent event required

As of July 23, 2024, we have received the full

amount of replacement inventory for the recalled Ameluz® (See Note 12 Related Party Transactions ).

have completed an evaluation of subsequent events after the balance sheet date of September 30, 2024 through the date this Quarterly

Report on Form 10-Q was submitted to the SEC, and determined that the following material subsequent event required disclosure.

In October 2024,

the FDA approved the Company’s Supplemental New Drug Application to increase the maximally approved dosage of Ameluz ®

from one to three tubes per treatment.

This approval allows for larger field treatment of AK on face and scalp with Ameluz®-PDT

using the BF-RhodoLED ® or the RhodoLED ® XL lamp.

November 2024, 863 shares of Series B Convertible Preferred were converted into 1,219,419 shares of common stock.

November 11, 2024, the Company entered into an amended and restated employment agreement with Hermann Luebbert, its Chief Executive Officer

and Chairman.

The amended and restated agreement (a) requires that Mr.

Luebbert deliver a waiver and release of claims in a form reasonably

acceptable to the Company prior to Mr.

Luebbert receiving any severance payment;

and (b) increases the amount of severance payment payable

Luebbert if his employment is terminated within 3 months prior to or 12 months after a “Change in Control” (as defined

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 agreement filed as Exhibit 10.1 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