What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 339 added, 331 removed, 300 unchanged (69% of the section changed)

28 unchanged sentences

that may cause such differences include, but are not limited to:

the success of our principal licensed product Ameluz ® ;

reliance on sales of products we license from other companies as our sole source of revenue;

the ability of Biofrontera Pharma

GmbH (“Biofrontera Pharma”), Biofrontera Bioscience GmbH (“Biofrontera Bioscience”) and Ferrer Internacional S.A.

(“Ferrer”) , referred to collectively as our (“Licensors”) to establish and maintain relationships with

contract manufacturers that are able to supply us with enough of the licensed products to meet our demand;

the ability of our Licensors or our Licensors’

manufacturing partners, as applicable, to supply Ameluz ® , RhodoLED ® Lamps, Xepi ® or other

licensed products that we market in sufficient quantities and at acceptable quality and cost levels, and to fully comply with current

good manufacturing practice or other applicable manufacturing regulations;

the ability of our Licensors to successfully defend

or enforce patents related to our licensed products;

the impact of legislative and regulatory changes;

ability to obtain additional financing as needed to implement our growth strategy;

our success in achieving profitability;

our ability to retain and recruit key personnel;

our ability to effectively manage and control costs

associated with our clinical trial operations

success of our competitors in developing generic topical dermatological products that successfully compete with our licensed products;

success of our principal licensed product Ameluz ® ;

ability of Biofrontera Pharma GmbH (“Biofrontera Pharma”), Biofrontera Bioscience

GmbH (“Biofrontera Bioscience”) and Ferrer Internacional S.A.

(“Ferrer”) , referred to collectively

as our (“Licensors”) to establish and maintain relationships with contract manufacturers that are able to supply us with

enough of the licensed products to meet our demand;

ability of our Licensors or our Licensors’ manufacturing partners, as applicable, to supply Ameluz ® , RhodoLED ®

Lamps, Xepi ® or other licensed products that we market in sufficient quantities and at acceptable quality and

cost levels, and to fully comply with current good manufacturing practice or other applicable manufacturing regulations;

ability of our Licensors to successfully defend or enforce patents related to our licensed products;

availability of insurance coverage and medical expense reimbursement for our licensed products;

impact of legislative and regulatory changes;

from other pharmaceutical and medical device companies and existing treatments, such as simple curettage and cryotherapy;

success in achieving profitability;

ability to obtain additional financing as needed to implement our growth strategy;

effect of the COVID-19 global pandemic, including mitigation efforts and economic effects;

ability to retain and recruit key personnel;

competition from other pharmaceutical and medical device companies and

existing treatments, such as simple curettage and cryotherapy;

other risks identified in Item 1A.

8 unchanged sentences

update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

About Reverse Stock Split

information included in this section has been adjusted, on a retrospective basis, to reflect our 1-for-20 Reverse Stock Split as if it

had been effective from the beginning of the earliest period discussed, unless otherwise stated.

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

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

The Company’s

licensed products are used for the treatment of actinic keratoses (“AKs”), which are pre-cancerous skin lesions, as well

as impetigo, a bacterial skin infection.

Our subsidiary, Discovery, was formed on February

9, 2022, as a German presence to facilitate our relationship with Biofrontera Pharma and Biofrontera Bioscience (together, the

“Ameluz Licensor”), both of which are related parties as they are wholly owned subsidiaries of Biofrontera

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

AKs are premalignant lesions of the skin that can potentially develop

into skin cancer (squamous cell carcinoma) if left untreated.

International treatment guidelines list PDT as the “gold standard”

for treating AK, especially multiple AKs and the surrounding photodamaged skin.

1 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 as of February 13, 2024 with the Ameluz

Licensor (the “Second A&R Ameluz LSA”).

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

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

The Company’s licensed products are

used for the treatment of actinic keratoses (“AKs”), which are pre-cancerous skin lesions, as well as impetigo, a bacterial

skin infection.

Our subsidiary, Discovery, was formed on February 9, 2022, as a German presence that manages our clinical trial work

and facilitates our relationship with Biofrontera Pharma and Biofrontera Bioscience (together, the “Ameluz Licensor”),

both of which are related parties as they are wholly owned subsidiaries of Biofrontera AG.

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

AKs are premalignant lesions of the skin

that can potentially develop into skin cancer (squamous cell carcinoma) if left untreated.

International treatment guidelines list

PDT as the “gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin.

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 as of February 13, 2024 with the Ameluz Licensor (the

“Second A&R Ameluz LSA”).

June 1, 2024, we assumed control of all clinical trials relating to Ameluz ® in the United States, allowing for more effective

1 unchanged sentence

Our research and development (“R&D”) program is focused on

label expansion for Ameluz ® as well as supporting PDT growth by improving the capabilities of our RhodoLED ® Lamps to

better fulfill the needs of dermatologists.

label expansion for Ameluz ® as well as supporting PDT growth by improving the capabilities of our RhodoLED ®

Lamps to better fulfill the needs of dermatologists.

Our goal is to improve the effectiveness of our commercial team by allowing sales

representatives to carry approved devices with them allowing for easier product demonstrations and evaluations.

Effective with the Second A&R Ameluz LSA, the

price we pay per unit, based on certain percentages of the anticipated net selling price, (the “Transfer Price ”) of Ameluz ® was reduced from 50%

to 25% for all purchases through 2025.

Starting on January 1, 2026, until 2032 there will be stepwise increases in the Transfer Price

from 25% to 35% for sales related to AK and, if approved by the Food and Drug Administration (the “FDA”), basal cell carcinoma and squamous cell carcinoma.

The Transfer Price

for sales related to acne, another indication currently in development, will remain at 25% indefinitely.

The Transfer Price covers the

cost of goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance, and patent administration.

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 healthcare professionals greater flexibility in addressing larger or

multiple treatment areas for patients undergoing PDT for AK on the face and scalp, leading to greater convenience for both healthcare

providers and their patients.

In combination with the RhodoLED ® XL Lamp, providers can now treat a patient’s

face more efficiently.

Additionally, the change to the label and the RhodoLED ® XL are both foundational to support trunk

and extremities which we expect to add to the label in the next couple years.

Also, in October 2024, the Company received results

in its Phase III trial evaluating its drug-device therapy, Ameluz ® with the BF-RhodoLED lamp, as a treatment for

superficial basal cell carcinoma (“sBCC”).

The primary endpoint was a composite of complete clinical and histological

clearance of one preselected “main target” BCC lesion per patient 12 weeks after the start of the last PDT cycle.

According to the phase III ALA-BCC-CT013 study, Ameluz®-PDT achieved 65.5% success, compared to 4.8% success achieved with

Complete histological clearance was seen in 75.9% of these lesions in the Ameluz® arm, compared to 19.0% with

Complete clinical clearance was achieved in 83.4% of patients treated with Ameluz® compared to 21.4% with placebo.

with the Second A&R Ameluz LSA, the price we pay per unit, based on certain percentages of the anticipated net selling price, (the

“Transfer Price”) of Ameluz ® was reduced from 50% to 25% for all purchases through 2025.

Starting on January

1, 2026, until 2032 there will be stepwise increases in the Transfer Price from 25% to 35% for sales related to AK and, if approved by

the Food and Drug Administration (the “FDA”), basal cell carcinoma and squamous cell carcinoma.

The Transfer Price for sales

related to acne, another indication currently in development, will remain at 25% indefinitely.

The Transfer Price covers the cost of

goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance, and patent administration.

The reduced LSA Transfer Price will allow the Company to finance the R&D activities assumed as of June 1, 2024, and continue our

8 unchanged sentences

enables us to market and sell this product in the United States.

The Company has generated limited revenue from sales of Xepi due to third-party manufacturing delays that have hampered

our commercialization of the product.

Ferrer 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 information.

RN, Stockfleth E, Connolly SM, et al.

16 unchanged sentences

and customer relationships.

devote a substantial portion of our cash resources to the commercialization of our licensed products , Ameluz ® and

the RhodoLED ® Lamps.

We have financed our operating and capital expenditures through cash proceeds generated

from our product sales, our line of credit, short-term debt and proceeds received in equity financings.

devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz ® and the

RhodoLED ® Lamps.

We have financed our operating and capital expenditures through cash proceeds generated from our product

sales, our line of credit, short-term debt and proceeds received in equity financings.

believe that important measures of our results of operations include product revenue, operating income (loss) and adjusted EBITDA (a

12 unchanged sentences

seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.

our Licensors take reasonable precautions to ensure the successful production of our commercially licensed products, their contract manufacturers

may experience a myriad of business difficulties (i.e., workforce instability, supply chain issues, erosion of customer base, etc.) that

could impact their financial solvency.

As previously disclosed since 2021, the Xepi product has experienced manufacturing delays at Ferrer’s

third-party manufacturer, which have not yet been resolved.

We expect to receive commercial product in the second or third quarter of

In addition, we launched the commercial distribution of the RhodoLED ® XL on June 10, 2024.

However, we have historically

experienced delays due to supply chain issues, and there is a possibility that there are additional supply chain challenges, or our orders

are fulfilled at a slower rate than expected.

Despite these historic and possible future delays, we expect total revenues will not be

significantly impacted (i.e., we experience less growth than expected vs.

declining sales) since the majority of our revenues are from

sales of Ameluz ® and we have RhodoLED ® Lamps on hand and on order.

We continue to monitor the impacts

of the supply chain on our business and are focused on ensuring the stability of the supply chains for Ameluz ® and RhodoLED ®

our Licensors take reasonable precautions to ensure the successful production of our commercially licensed products, their contract

manufacturers may experience a myriad of business difficulties (i.e., workforce instability, supply chain issues, erosion of

customer base, etc.) that could impact their financial solvency.

We have historically experienced delays in delivery times of our

RhodoLED ® Lamps due to supply chain issues and there is a possibility that there may be additional supply chain

challenges, or our orders are fulfilled at a slower rate than expected.

Despite these historic and possible future delays, we expect

total revenues will not be significantly impacted (i.e., we experience less growth than expected vs.

declining sales) since the

majority of our revenues are from sales of Ameluz ® and we have RhodoLED ® Lamps on hand and on order.

We continue to monitor the impacts of the supply chain on our business and are focused on ensuring the stability of the supply

chains for Ameluz ® and RhodoLED ® Lamps.

of Our Results of Operations

generate product revenues through the third-party sales of our licensed products Ameluz ® , RhodoLED ®

Lamps and to a much lesser extent Xepi ® covered by our exclusive license and supply agreements with our Licensors .

Revenues from product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances,

product returns, government rebates, and other incentives such as patient co-pay assistance.

Revenue from the sales of our RhodoLED ®

Lamps and Xepi ® are relatively insignificant compared with revenues generated through our sales of Ameluz ® .

generate product revenues through the third-party sales of our licensed products Ameluz ® , RhodoLED ® Lamps

and to a much lesser extent Xepi ® covered by our exclusive license and supply agreements with our Licensors .

from product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances, product returns,

government rebates, and other incentives such as patient co-pay assistance.

Revenue from the sales of our RhodoLED ® Lamps

and Xepi ® are relatively insignificant compared with revenues generated through our sales of Ameluz ® .

primary factors that determine our revenue derived from our licensed products are:

4 unchanged sentences

to June 1, 2024, the date on which we took over clinical trials, we generated insignificant related party revenue in connection with

an agreement with Biofrontera Bioscience to provide BF-RhodoLED ® lamps and associated services for the clinical

trials performed by Biofrontera Bioscience.

In the future, we do not expect to receive related party revenue regarding lamps and

associated services for clinical trials.

an agreement with Biofrontera Bioscience to provide BF-RhodoLED ® lamps and associated services for the clinical trials

performed by Biofrontera Bioscience.

In the future, we do not expect to receive related party revenue regarding lamps and associated

services for clinical trials.

of Revenues, Related Party

of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz ® and RhodoLED ®

Lamps from Biofrontera Pharma and insignificant inventory adjustments due to scrapped, expiring and excess products.

Transfer Price we paid for inventory purchased through February 12, 2024, was based on the Ameluz LSA as amended on October 8, 2021, under which

the price paid per unit was based upon our sales history.

The purchase price we paid the Ameluz Licensor for Ameluz ® was

determined in the following manner:

of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz ® and RhodoLED ® Lamps

from Biofrontera Pharma and insignificant inventory adjustments due to scrapped, expiring and excess products.

Transfer Price we paid for inventory purchased through February 12, 2024, was based on the Ameluz LSA as amended on October 8, 2021,

under which the price paid per unit was based upon our sales history.

The purchase price we paid the Ameluz Licensor for Ameluz ®

was determined in the following manner:

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

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

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

the products we license from the Ameluz Licensor;

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

of the products we license from the Ameluz Licensor;

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

license from the Ameluz Licensor.

February 12, 2024, the Second A&R Ameluz LSA, among other things, was amended to change the Transfer Price to 25% of the

anticipated net selling price per unit through 2025 and then increasing over time pursuant to the schedule set forth in the Second

A&R Ameluz LSA to a maximum of 35% of the anticipated net selling price starting in 2032, subject to a minimum dollar amount per

February 12, 2024, the Second A&R Ameluz LSA, among other things, was amended to change the Transfer Price to 25% of the anticipated

net selling price per unit through 2025 and then increasing over time pursuant to the schedule set forth in the Second A&R Ameluz

LSA to a maximum of 35% of the anticipated net selling price starting in 2032, subject to a minimum dollar amount per unit.

to see an impact from the change in the transfer pricing under the Second A&R Ameluz LSA in the fourth quarter as we receive

product under the new pricing.

of Revenues, Other

17 unchanged sentences

We currently have statements of

work in place regarding, regulatory affairs, medical affairs, pharmacovigilance, and investor relations services,

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

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

As of June 30, 2024, we have eliminated the need for

information technology services from Biofrontera AG.

work in place regarding regulatory affairs, medical affairs, pharmacovigilance, and investor relations services, and are continuously

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

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

and Development

June 1, 2024, we took control of all clinical trials for Ameluz ® in the Unites States, allowing for more effective cost management and

direct oversight of trial efficiency.

Our R&D 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.

Along with our Ameluz ® clinical trials, our R&D

program also aims to improve the capabilities of our RhodoLED ® Lamps to better fulfill the needs of dermatologists

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

easier product demonstrations and evaluations.

June 1, 2024, we took control of all clinical trials for Ameluz ® in the Unites States, allowing for more effective cost

management and direct oversight of trial efficiency.

Our R&D 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.

Along with our Ameluz ®

clinical trials, our R&D program also aims to improve the capabilities of our RhodoLED ® Lamps to better fulfill

the needs of dermatologists and improve the effectiveness of our commercial team by letting sales representatives carry approved devices

with them, allowing for easier product demonstrations and evaluations.

All costs associated with research and development are expensed

in Fair Value of Contingent Consideration

connection with the Cutanea acquisition, we recorded contingent consideration related to the estimated profits from the sale of Cutanea

products to be shared equally with Maruho.

The fair value of such contingent consideration was determined to be $6.5 million on the acquisition

date of March 25, 2019 and was re-measured at each reporting date until the contingency was resolved as of December 31, 2023.

in Fair Value of Warrant Liabilities

8 unchanged sentences

exchange rates is included in gains and losses in the consolidated statement of operations.

expense, net, primarily consists of interest on our debt instruments, as well as amortization of the contract asset related to the start-up

cost financing from Maruho under a share purchase agreement, offset by immaterial amounts of interest income earned on our financing

of customer purchases of BF-RhodoLED ® lamps.

on Debt Extinguishment

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

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

Effective as of January 4, 2024,

we voluntarily terminated the Loan Agreement and recognized a $0.3 million loss on debt extinguishment upon the early termination related

to prepayment fees and the write-off of deferred financing costs.

Income (Expense), net

expense, net, primarily consists of interest on our debt instruments, offset by immaterial amounts of interest income earned on our cash

balances at financial institutions and financing of customer purchases of BF-RhodoLED ® lamps.

Income (Expense), net

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

3 unchanged sentences

of Operations

of the Three Months ended June 30, 2024 and 2023

following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:

( in thousands)

Product revenues, net

Related party revenues

of the Three Months ended September 30, 2024 and 2023

following table summarizes our results of operations for the three months ended September 30, 2024 and 2023:

revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

and development

in fair value of contingent consideration

operating expenses

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Interest expense, net

Other income (expense), net

Loss before income taxes

Income tax expenses

product revenue for the three months ended June 30, 2024 increased by $2.0 million, or 34.3% as compared to the three months ended

June 30, 2023.

This increase was driven by both a 5% higher unit sale price and a higher volume of Ameluz ® revenue in

the second quarter of 2024.

The higher sales volume was primarily caused by (i) the impact of the Change Healthcare cybersecurity

attack that occurred in the first quarter of 2024 causing reimbursement delays for our customers, which in turn shifted sales from

the first quarter of 2024 to the second quarter of 2024;

and (ii) more promotions and corresponding discounts offered in the second quarter

of 2024, compared to the same period in 2023.

from operations

in fair value of warrant liabilities

in fair value of investment, related party

income (expense), net

before income taxes

product revenue for the three months ended September 30, 2024 increased by $0.1 million, or 1.5% as compared to the three months ended

September 30, 2023.

This increase was driven by $0.6 million increase from sales of devices, specifically RhodoLED ® XL

Lamp, since its launch in June 2024, offset by net decrease in sales of Ameluz of $0.5 million.

The decrease of Ameluz sales in units

in the three months ended September 30, 2024 was impacted by the delayed shipment of about 4,600 units at the end of September 2024 due

to Hurricane Milton, which forced office closures and shipping delays through the Southeast.

All shipments were delivered, and revenue for

these sales have been recognized in October 2024.

of Revenues, Related Party

of revenues, related party for the three months ended June 30, 2024 increased by $1.3 million, or 47.6% as compared to the three months

ended June 30, 2023.

This was driven by the increase in Ameluz ® product revenue.

Cost of revenues, related party, is directly correlated

to the selling price of Ameluz ® under the Ameluz LSA.

There has been no impact from the change in the transfer pricing under the Second A&R Ameluz LSA, as we have yet

to purchase inventory under the new terms.

of revenues, related party for the three months ended September 30, 2024 increased by $0.3 million, or 6.8% as compared to the three

months ended September 30, 2023.

This was driven by an increase of $0.5 million due to the increase in RhodoLED ® XL product

revenue, partially offset by a decrease of $0.2 million, due to decrease in sales of Ameluz ® .

We expect to see an impact

from the change in the transfer pricing under the Second A&R Ameluz LSA in the fourth quarter as we are receiving product under the

General and Administrative Expenses

general and administrative expenses for the three months ended June 30, 2024 decreased by $3.5 million, or 30.9% as compared to the three

months ended June 30, 2023.

The decrease was primarily driven by a $1.5 million

decrease in legal costs, due to lower legal activity

level, especially since the settlement with Biofrontera AG in April 2023, as well as a decrease of non-personnel sales and marketing

expenses of $0.8 million,

and a decrease in general business consulting expense of $0.4 million.

The decrease was further attributable to a $0.8 million decrease

in personnel costs due to change in headcount and reduced severance, which was offset by a $0.2 million increase in accrued bonus compared

to the three months ended June 30, 2023 due to the use of a higher performance factor for the calculation.

general and administrative expenses for the three months ended September 30, 2024 decreased by $0.2 million, or 2.3% as compared to the

three months ended September 30, 2023.

The decrease was primarily driven by a $0.5 million decrease in general business administration

expenses, as well as a decrease of non-personnel sales and marketing expenses of $0.2 million, and a $0.3 million decrease in personnel

costs due to change in headcount and reduced severance, which was offset by a $0.8 million increase in legal expenses related to the

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

“SUN”) with the International Trade Commission (“ITC”) and the US District Court for the district of Massachusetts.

and Development Expenses

R&D expenses for the three months ended

June 30, 2024 increased by $0.6 million as compared to the three months ended June 30, 2023.

The increase was attributable to our

assumption of all clinical trial activities for Ameluz ® in the United States effective June 1, 2024, allowing for

more effective cost management and direct oversight of trial efficiency.

This increase to R&D expenses should be offset by a reduction in

the Transfer Price of Ameluz ® from 50% to 25% for all future purchases made in 2024 and 2025.

No such inventory

purchases were made as of June 30, 2024.

The following table summarizes our research and development expenses:

Three Months Ended June 30,

Superficial basal cell carcinoma

Actinic keratosis

Moderate to severe acne

Personnel-related costs

Other research and development

expenses for the three months ended September 30, 2024 increased by $0.6 million as compared to the three months ended September 30,

The increase was attributable to our assumption of all clinical trial activities for Ameluz ® in the United States

effective June 1, 2024, allowing for more effective cost management and direct oversight of trial efficiency.

This increase to R&D

expenses should be offset by a reduction in the Transfer Price of Ameluz ® from 50% to 25% for all future purchases made

in 2024 and 2025.

No such inventory purchases were made as of September 30, 2024.

The following table summarizes our research and development

Months Ended September 30,

to severe acne

basal cell carcinoma

Portable devices

Personnel-related

research and development

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $5.4 million for the three months ended June 30, 2024, as compared to $0.4 million

for the three months ended June 30, 2023.

The change in fair value of warrant liabilities was driven primarily by a mix of an

increased population of outstanding warrant liabilities coupled with a drop in the underlying value of the Company’s Common

Stock during the second quarter of 2024 as compared to the second quarter of 2023.

The change was primarily due to the drop in fair

value of $4.3 million related to warrants for preferred stock acquired in 2024 and an additional $1.0 million drop in fair value for

warrants acquired in November of 2023.

change in fair value of warrant liabilities was ($0.7) million for the three months ended September 30, 2024, as compared to $0.6 million

for the three months ended September 30, 2023.

The change in fair value of warrant liabilities was driven primarily by changes in the

quoted market price of the common stock.

From June 30, 2024 to September 30, 2024, the underlying value of the Company’s Common

Stock increased, leading to a corresponding increase in the value of warrant liabilities and additional expense recognized on the statements

of operations.

From June 30, 2023 to September 30, 2023, the market price decreased, causing a decrease in the value of warrant liabilities,

and a gain in in the statement of operations.

in Fair Value of Investment, Related Party

1 unchanged sentence

release of certain obligations, in accordance with the Settlement Agreement and Mutual Release (the “Release”), dated December

As a result, during the second quarter of 2024, the net balance of our investment in Biofrontera AG was minimal as was the

related change in fair value.

increase of interest expense of $0.5 million was driven by the interest and debt discount recognized on the loans issued on December 21,

2023, for an aggregate principal balance of $4.0 million.

The loans required the Company to make weekly payments of principal and interest

in the amount of approximately $0.2 million through July 5, 2024, the maturity date.

Interest 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 the Six Months ended June 30, 2024 and 2023

following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

( in thousands)

Product revenues, net

Related party revenues

As a result, during the third quarter of 2024, the net balance of our investment in Biofrontera AG was minimal as was the related

change in fair value.

of the Nine Months ended September 30, 2024 and 2023

following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

and development

in fair value of contingent consideration

operating expenses

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Loss on debt extinguishment

Interest expense, net

Other income (expense), net

Loss before income taxes

Income tax expenses

product revenue for the six months ended June 30, 2024 increased by $1.2 million, or 8.2% as compared to the six months ended June

This increase was driven by both a higher unit sale price and higher sales volume of Ameluz ® revenue in the first half of 2024.

The higher sales volume of Ameluz ® was due to more promotions and corresponding discounts that were offered to customers, which extended

into April 2024.

from operations

in fair value of warrant liabilities

in fair value of investment, related party

on debt extinguishment

income (expense), net

before income taxes

product revenue for the nine months ended September 30, 2024 increased by $1.3 million, or 5.6% as compared to the nine months ended

September 30, 2023.

This increase was mainly driven by a $1.1 million increase in the average sale price of Ameluz for the nine

months ended September 30, 2024, as well as an increase in

device sales of $0.6 million due to the launch of the RhodoLED ® XL Lamp in June 2024.

This was offset by a sales

volume decrease of approximately $0.5 million of Ameluz ® driven by the office closures and shipping delays associated

with Hurricane Milton.

As mentioned above, these delayed shipments have been delivered and revenue recognized in the fourth

of Revenues, Related Party

of revenues, related party for the six months ended June 30, 2024 increased by $0.7 million, or 9.8% as compared to the six months ended

June 30, 2023.

This was driven by the increase in Ameluz ® product revenue.

Cost of revenues, related party, is directly correlated to

the selling price of Ameluz ® under the Ameluz ® LSA.

of revenues, related party for the nine months ended September 30, 2024 increased by $1.0 million, or 8.7% as compared to the nine months

ended September 30, 2023.

This was driven by the increase in both Ameluz ® and RhodoLED ® XL Lamp product

General and Administrative Expenses

general and administrative expenses for the six months ended June 30, 2024 decreased by $4.1 million, or 19.2% as compared to the six

months ended June 30, 2023.

The decrease was primarily driven by a $2.5 million decrease in non-recurring legal costs due to the settlement

with Biofrontera AG in April 2023, a decrease of non-personnel sales and marketing expenses of $1.1 million, and a net decrease of $0.3

million in personnel expenses.

general and administrative expenses for the nine months ended September 30, 2024 decreased by $4.3 million, or 14.3% as compared to

the nine months ended September 30, 2023.

The decrease was primarily driven by a $1.7 million decrease in legal costs due to the

settlement with Biofrontera AG in April 2023, a $1.3 million decrease of non-personnel sales and marketing expenses due to a lower

level of marketing activities in general, a $0.6 million decrease in general business administration, and a net

decrease of $0.6 million in personnel expenses, partially offset by costs relating to the complaints filed by SUN.

and Development Expenses

expenses for the six months ended June 30, 2024 increased by $0.6 million as compared to the six months ended June 30, 2023.

was attributable to our assumption of all clinical trial activities for Ameluz ® in the United States effective June 1,

expenses for the nine months ended September 30, 2024 increased by $1.3 million as compared to the nine months ended September 30, 2023.

The increase was attributable to our assumption of all clinical trial activities for Ameluz ® in the United States effective

June 1, 2024.

The following table summarizes our research and development expenses:

Six Months Ended June 30,

Superficial basal cell carcinoma

Actinic keratosis

Moderate to severe acne

Personnel-related costs

Other research and development

Months Ended September 30,

to severe acne

basal cell carcinoma

Portable devices

Personnel-related

research and development

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $2.0 million for six months ended June 30, 2024, as compared to $1.4 million for the

six months ended June 30, 2023.

change in fair value of warrant liabilities was $1.3 million for nine months ended September 30, 2024, as compared to $2.0 million for

the nine months ended September 30, 2023.

The change in fair value of warrant liabilities was driven primarily by a decrease in the underlying

value of the Company’s Common Stock paired with a higher population of warrants outstanding for the six months ended

June 30, 2024 as compared to the six months ended June 30, 2023.

value of the Company’s Common Stock paired with a higher population of warrants outstanding for the nine months ended September

30, 2024 as compared to the nine months ended September 30, 2023.

in Fair Value of Investment, Related Party

As of December 31, 2023, the Company had transferred substantially all of

its investment in Biofrontera AG to Maruho in exchange for the release of certain obligations, in accordance with the Release.

during the second quarter of 2024, the net balance of our investment in Biofrontera AG was minimal as was the related change in fair value.

of December 31, 2023, the Company had transferred substantially all of its investment in Biofrontera AG to Maruho in exchange for the

release of certain obligations, in accordance with the Release.

As a result, during the third quarter of 2024, the net balance of our

investment in Biofrontera AG was minimal as was the related change in fair value.

on Debt Extinguishment

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

The Company recognized a $0.3 million loss

on debt extinguishment upon the early termination of the Loan Agreement related to prepayment fees and the write-off of deferred financing

as of January 4, 2024, we voluntarily terminated the Loan Agreement with Midcap Business Credit LLC.

The Company recognized a $0.3 million

loss on debt extinguishment upon the early termination of the Loan Agreement related to prepayment fees and the write-off of deferred

financing costs.

income (expense), net

increase of interest expense of $1.7 million was driven by the interest and debt discount recognized on the loans issued on December

21, 2023, for an aggregate principal balance of $4.0 million.

The loans required the Company to make weekly payments of principal and interest

in the amount of approximately $0.2 million through July 5, 2024, the maturity date.

Interest 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.

Loss to Adjusted EBITDA Reconciliation for the Three and Six Months Ended June 30, 2024 and 2023

The loans required the Company to make weekly payments of principal and

interest in the amount of approximately $0.2 million through July 5, 2024, the maturity date.

Interest 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.

Loss to Adjusted EBITDA Reconciliation for the Three and Nine Months Ended September 30, 2024 and 2023

define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and other

24 unchanged sentences

under the Release.

As such, our results of operations for the three and six months ended June 30, 2024 were not impacted by the change

in fair value.

As such, our results of operations for the three and nine months ended September 30, 2024 were not impacted by the

change in fair value.

in fair value of warrant liabilities:

38 unchanged sentences

our ongoing operating performance.

below table presents a reconciliation from net loss to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

table below presents a reconciliation from net loss to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Interest expense, net

10 unchanged sentences

Adjusted EBITDA margin

EBITDA increased from ($7.9) million for the three months ended June 30, 2023 to ($4.7) million for the three months ended June 30, 2024.

The increase was driven by an increase in revenue of $2.0 million and a decrease of $3.0 million in various sales, general and administrative

expenses, partially offset by an increase in our cost of revenues of $1.5 million.

EBITDA increased from ($11.9) million during the six months ended June 30, 2023 to ($9.3) million for the six months ended June 30, 2024.

The increase in Adjusted EBITDA was primarily driven by an increase in revenue of $1.2 million and a decrease in selling, general and

administrative expenses of $3.0 million, due primarily to decreased level of marketing activities and savings in legal expenses.

is partially offset by an increase in our cost of revenues of $1.0 million and an increase in R&D expenses of $0.6 million.

EBITDA decreased from ($3.9) million for the three months ended September 30, 2023 to ($4.6) million for the three months ended September

The decrease was primarily driven by an increase in R&D expenses of $0.6 million.

EBITDA increased from ($15.8) million during the nine months ended September 30, 2023 to ($13.9) million for the nine months ended September

The increase in Adjusted EBITDA was primarily driven by a decrease in selling, general and administrative expenses of $3.2

million, due primarily to a decreased level of marketing activities and savings in legal expenses.

This is partially offset by an increase

in R&D expense of $1.3 million.

and Capital Resources

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 $9.3 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

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 million.

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

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

Management’s plans include adhering to the 2024 budget approved by the Board

of Directors, 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

Based 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.

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.

A lack of execution or

unforeseen circumstances may require the Company to raise additional capital or debt which may not be available on acceptable terms,

or at all, which could result in a material adverse effect on the Company, as well as its business, financial condition, results of

operations, growth prospects and financial statements.

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.

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 intended plan over the next twelve

months to improve the Company’s liquidity and profitability, which includes without limitation:

the commercialization of Ameluz ® in the United States while decreasing discretionary

pursuing additional capital through the issuance of equity securities, debt or the sale of

● Controlling

expenses and limiting capital expenditures.

the benefit of the reduced cost of inventory in line with the terms of the Second A&R

The company believes that the implementation of such plans will provide

the opportunity for the Company to continue as a going concern.

However, no assurance can be given that the Company will be successful

in these efforts and 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.

A lack of execution or unforeseen circumstances may require the Company to raise additional capital or debt which may not be available

on acceptable terms, or at all, which could result in a material adverse effect on the Company, as well as its business, financial condition,

results of operations, growth prospects and financial 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.

following table summarizes our cash provided by and (used in) operating, investing and financing activities:

Six Months Ended June 30,

(in thousands)

Net cash used in operating activities

Net cash provided by (used) in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and restricted cash

the six months ended June 30, 2024, operating activities used $8.0 million of cash, primarily resulting from our loss from operations

Months Ended September 30,

cash used in operating activities

cash provided by (used) in investing activities

cash provided by financing activities

increase (decrease) in cash and restricted cash

the nine months ended September 30, 2024, operating activities used $9.3 million of cash, primarily resulting from our loss from operations

of $16.4 million, adjusted for non-cash expense of stock-based compensation of $0.7 million, non-cash interest expense of $0.2 million,

1 unchanged sentence

in our operating assets and liabilities of $6.1 million, offset by the change in fair value of warrant liabilities of $1.3 million,.

the six months ended June 30, 2023, operating activities used $14.0 million of cash, primarily resulting from our loss from operations

the nine months ended September 30, 2023, operating activities used $16.0 million of cash, primarily resulting from our loss from operations

of $23.7 million, adjusted for non-cash expense of stock-based compensation of $0.8 million, non-cash interest expense of $0.3 million,

depreciation and amortization in the aggregate of $0.5 million, and the change in fair value of investment, related party of $4.4 million,

offset by net cash used by changes in our operating assets and liabilities of $1.0 million, the change in fair value of contingent consideration

of $0.1 million and the change in fair value of warrant liabilities of $1.4 million.

the six months ended June 30, 2024, net cash used in investing activities consisted of $0.1 million of capitalized software

and computer purchases, which were partially offset by the proceeds from the sales of equity investments.

the six months ended June 30, 2023, net cash provided by investing activities consisted of the proceeds from the sales of equity investments,

partially offset by the purchase of machinery & computer equipment.

the six months ended June 30, 2024, net cash from financing activities consisted of proceeds of $7.7 million, net of capitalized issuance

costs, from the issuance of preferred stock and warrants, and $7.4 million from the exercise of warrants for preferred stock, offset

by repayments of $3.7 million on our short-term loan, repayments of $0.2 million on our line of credit and prepayment fees of $0.2 million

to extinguish our line of credit.

depreciation and amortization in the aggregate of $0.8 million, net cash used by changes in our operating assets and liabilities of $0.9

million, the change in fair value of contingent consideration of $0.1 million and the change in fair value of investment, related party

of $6.6 million;

partially offset by the change in fair value of warrant liabilities of $2.0 million.

the nine months ended September 30, 2024, net cash used in investing activities consisted of $0.1 million of capitalized software and

computer purchases, which were partially offset by the proceeds from the sales of equity investments.

the nine months ended September 30, 2023, net cash provided by investing activities of $0.5 million consisted of the proceeds from the

sales of equity investments of $0.6 million, partially offset by the purchase of machinery and computer equipment.

the nine months ended September 30, 2024, net cash from financing activities consisted of proceeds of $7.7 million, net of capitalized

issuance costs, from the issuance of preferred stock and warrants, and $7.4 million from the exercise of warrants for preferred stock,

offset by repayments of $4.0 million on our short-term loan, repayments of $0.2 million on our line of credit and prepayment fees of

$0.2 million to extinguish our line of credit.

See Note 10 Debt.

the six months ended June 30, 2023, net cash from financing activities consisted of a net $1.1 million of proceeds from our line of credit.

the nine months ended September 30, 2023, net cash from financing activities consisted of a net $1.7 million of proceeds from our line

Policies and Significant Judgments and Estimates

18 unchanged sentences

There were no material

changes to our critical accounting estimates for the six months ended June 30, 2024, except for the following:

changes to our critical accounting estimates for the nine months ended September 30, 2024, except for the following:

warrants for convertible preferred stock issued in conjunction with our private placement offering conducted pursuant to the securities

30 unchanged sentences

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 2. Management’s Discussion and Analysis