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Item 1A. Risk Factors

2025-03-20 compared with 2024-03-15 · 617 added, 881 removed, 930 unchanged (62% of the section changed)

our common stock involves a high degree of risk.

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

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

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

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

financial condition, results of operations and growth prospects.

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

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

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

currently deem immaterial may also impair our business operations.

of Material Risk Factors

in our common stock involves a high degree of risk.

You should carefully consider the risks described below, together with other information

in this Form 10-K, and our other filings with the SEC, including our financial statements and the related notes and the sections entitled

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in such filings, before deciding

whether to invest in our common stock.

The occurrence of any of the events or developments described below could materially and adversely

affect our business, financial condition, results of operations and growth prospects.

In such an event, the market price of our common

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

Additional risks and uncertainties not presently known to us or

that we currently deem immaterial may also impair our business operations.

business, results of operations and financial condition and the industry in which we operate are subject to various risks.

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Some of these material risks include:

of Material Risk Factors

Related to the License and Supply Agreements and our Licensed Products

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

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

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

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

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

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

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

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

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

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

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

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

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

The trade secrets of our Licensors are difficult to protect.

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

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

our revenue derives solely from sales of products we license from other companies.

If the license agreements are terminated, we could

lose license rights that are important to our business.

important patents for Ameluz ® expired in 2019.

If generic versions of Ameluz ®

enter the market, we may need to reduce the price of Ameluz ® significantly, which would reduce revenues, and may lose

significant market share.

business depends substantially on the success of Ameluz ® .

If we or the Ameluz Licensor

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

additional indications, our business may be materially harmed.

the Ameluz Licensor fails to maintain its relationships with the manufacturers of Ameluz, or if those manufacturers are unable to

produce Ameluz, our business could be materially harmed.

our Licensors or our Licensors’ manufacturing partners, as applicable, fail to manufacture our licensed products in sufficient

quantities and at acceptable quality and cost levels, we may face a bar to, or delays in, the commercialization of those products

or we will be unable to meet market demand and lose potential revenues.

our Licensors’ efforts to protect the proprietary nature of their intellectual property related to our licensed products are

not adequate, we may not be able to compete effectively in our market.

party claims of intellectual property infringement may affect our ability to sell our licensed products and may also prevent or delay

our Licensors’ product discovery and development efforts.

Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products, similar suits may

arise in the future, which could be expensive, time-consuming and unsuccessful.

trade secrets of our Licensors are difficult to protect.

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

international dealings with our Licensors may pose currency risks.

Company may be unable to effectuate a sale of Xepi® in a timely manner or receive consideration in excess of the carrying value

of the asset that is currently held for sale.

Related to Our Business and Strategy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Failure to comply with the U.S.

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

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

Generic manufacturers may launch products at risk of patent infringement.

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

sourcing and manufacture of our licensed products as well as, in part, the regulatory approvals and clinical trials related to our

licensed products are currently controlled by our existing collaborators.

Our lack of control could adversely affect our ability

to implement our strategy for the commercialization of our licensed products.

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

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

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

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

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

face significant competition, and our operating results will suffer if we fail to compete effectively.

we are unable to maintain effective marketing and sales capabilities or enter into agreements with third parties to market and sell

our licensed products, we may be unable to generate revenue growth.

United States market size for Ameluz ® for the treatment of AK may be smaller than we have estimated.

our Licensors are subjected to sanctions due to noncompliance with law, our licensed products could be subject to restrictions or

withdrawal from the market.

licensed products may not gain market acceptance among members of the medical community.

failure to comply with healthcare laws and regulations and could have a material adverse effect on our results of operations and

financial condition.

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

could have a significant negative impact on us.

products subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to

Our actual or perceived failure to comply with data and data security regulations

could harm our business.

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

may be unable to successfully implement our business strategy.

employees may engage in misconduct or other improper activities.

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

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

product liability lawsuits are brought against us, we may incur substantial liabilities

to comply with applicable anti-corruption legislation could result in fines and criminal penalties.

licensed products will be subject to ongoing regulatory requirements.

manufacturers may launch products at risk of patent infringement.

results of our R&D efforts are uncertain.

Related to Our Financial Position and Capital Requirements

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

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

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

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

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

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

profitability.

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

of Xepi ® and other products we may license.

we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth.

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

Related to Clinical Trials and Regulatory Approvals of Indication Expansion

or termination of planned clinical trials would result in unplanned expenses and significantly and adversely impact our remaining

developmental activities and potential commercial prospects.

third parties conducting some of our clinical trials do not carry out their contractual duties or meet expected deadlines, we may

be unable to obtain regulatory approval to extend the indications of our licensed products.

licensed products may pose safety and other issues that could delay or prevent the regulatory approval of additional indications

and result in significant negative consequences.

we are ultimately unable to obtain regulatory approval for additional indications of our licensed products on a timely basis or at

all, our business will be substantially harmed.

Related to Corporate Governance, Including Being a Public Company

previously identified a material weakness in our internal control over financial reporting, resulting from control deficiencies related

to management’s review of work performed by specialists.

If we identify additional material weaknesses in the future or otherwise

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

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

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

to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial

reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company

and, as a result, the value of our common stock.

are an emerging growth company and smaller reporting company we cannot be certain if the reduced disclosure requirements applicable

to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.

If we fail to maintain an effective system of internal controls, our ability

to produce timely and accurate financial statements may be impaired, investors may lose confidence in our financial reporting, and the

price of our common stock may decline.

have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management devotes substantial time to compliance with our public company responsibilities.

cannot be certain if the reduced disclosure requirements applicable to us as an emerging growth company or smaller reporting company

will make our common stock less attractive to investors.

Related to Our Securities and the Ownership of Our Common Stock

Provisions of our outstanding warrants could discourage an acquisition

of us by a third party.

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

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

delisted from Nasdaq.

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

If the Preferred Warrants are not exercised, we will not

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

could have a material adverse effect on our financial condition.

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

market and result in dilution to our stockholders.

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

and trading volume could decline.

Our quarterly operating results may fluctuate significantly.

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

could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common

stock to decline.

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

pay dividends for the foreseeable future.

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

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

that stockholders may consider favorable.

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

share price may be volatile.

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

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

are exercisable for our common stock, which, if exercised, would result in dilution to our stockholders.

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

volume could decline.

quarterly operating results may fluctuate significantly.

sales and issuances of our common stock or rights to purchase our common stock could result in dilution and could cause the stock

price of our common stock to decline.

gain on an investment in our common stock likely depends on increases in the price of our common stock.

stockholder rights plan could discourage a takeover or other transaction that stockholders may favor.

charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market

price of our stock.

amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive

forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain

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

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

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

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

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

certificate of incorporation could limit our stockholders’ ability to obtain a judicial forum other than the Court of Chancery

of the State of Delaware for disputes with us or our directors, officers or employees.

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

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

of our warrants are accounted for as a liability and recorded at fair value with changes in fair value each period, which may have

an adverse effect on the market price of our common stock.

Related to the License and Supply Agreements and Our Licensed Products

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

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

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

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

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

Partners and Agreements ”.

may arise between us and any of our Licensors regarding intellectual property subject to such agreements, including:

Partners and Agreements ” in this Form 10-K.

have arisen and may continue to arise between us and any of our Licensors regarding intellectual property subject to such agreements,

scope of rights granted under the agreement and other interpretation-related issues;

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against copying by competitors expired on November 12, 2019.

This patent family included U.S.

This patent family included United States Patent No.

6,559,183, which, prior to its

expiration, served as a material, significant and possibly the only barrier to entry into the U.S.

market by generic versions of Ameluz ® .

expiration, served as a material, significant and possibly the only barrier to entry into the United States market by generic versions of Ameluz ® .

Although the process of developing generic topical dermatological products presents specific challenges that may deter potential generic

competitors, Patent No.

6,559,183 no longer prevents generic versions of Ameluz ® from entering the U.S.

market and competing

6,559,183 no longer prevents generic versions of Ameluz ® from entering the United States market and competing

with Ameluz ® .

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and, therefore, a significant drop in our profits.

We may also lose significant U.S.

market share for Ameluz ® .

We may also lose significant United States market share for Ameluz ® .

Ameluz Licensor holds another patent family protecting the technology relating to nanoemulsions for which they have been issued patents

in various jurisdictions and which expire in December 2027.

A corresponding U.S.

patent application has been filed by the Ameluz Licensor

A corresponding United States patent application has been filed by the Ameluz Licensor

but is still pending.

We cannot guarantee that this U.S.

patent will be issued or, if issued, will adequately protect us against copying

We cannot guarantee that this United States patent will be issued or, if issued, will adequately protect us against copying

by competitors.

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

If the Ameluz Licensor is unable

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

our business may be materially harmed.

If we or the Ameluz Licensor

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

indications, our business may be materially harmed.

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

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

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

of our product will depend on several factors, including:

completion of further clinical trials by the Ameluz Licensor;

by the Ameluz Licensor of further regulatory approvals, including for the marketing of Ameluz ® for additional indications;

of actinic keratosis in combination with PDT using the BF-RhodoLED ® Lamps, there remains a significant risk that

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

The success of

our product will depend on several factors, including:

completion of further clinical trials;

of further regulatory approvals, including for the marketing of Ameluz ® for additional indications;

contract manufacturing facility maintaining regulatory compliance;

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Ameluz Licensor protecting its intellectual property rights.

the Ameluz Licensor does not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays

or an inability to successfully commercialize our licensed products, which would materially harm our business and we may not be able

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

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

We cannot assure

you that the Biofrontera Group will develop any new lamps (beyond the BF-RhodoLED ® XL lamp which was approved by the FDA

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

we or the Ameluz Licensor do not achieve one or more of these factors in a timely manner, or at all, we could experience significant

delays or an inability to successfully commercialize our licensed products, which would materially harm our business and we may not be

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

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

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

We cannot assure you that

the Biofrontera Group will develop any new lamps (beyond the BF-RhodoLED ® XL lamp which was approved by the FDA on October

21, 2021) or obtain any such new approval.

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

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Licensor, our business could be materially harmed.

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

The Ameluz Licensor supplies us with Ameluz ® .

The Ameluz Licensor currently depends on a single unaffiliated

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

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

to ensure stability of the supply chain.

If the Ameluz Licensor fails to maintain its relationships with both of these manufacturers

or if the Ameluz Licensor fails to maintain its relationship with its current manufacturer and the second manufacturer has not yet completed

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

ensure stability of the supply chain.

If the Ameluz Licensor fails to maintain its relationships with both of these manufacturers or

if the Ameluz Licensor fails to maintain its relationship with its current manufacturer and the second manufacturer has not yet completed

the necessary steps to begin manufacturing Ameluz ® , the Ameluz Licensor may be unable to obtain an alternative manufacturer

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either manufacturer to supply the Ameluz Licensor with Ameluz ® that satisfies quality, quantity and cost requirements

in a timely manner could impair our ability to deliver Ameluz ® to the U.S.

market and could increase costs, particularly

in a timely manner could impair our ability to deliver Ameluz ® to the United States market and could increase costs, particularly

if the Ameluz Licensor is unable to obtain Ameluz ® from alternative sources on a timely basis or on commercially reasonable

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

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

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

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

to the applicable LSA, our Licensors supply us with the licensed product that we sell in the U.S.

The manufacture of the products

we license requires significant expertise and capital investment.

Currently, all commercial supply for each of our commercial licensed

products are manufactured by single unaffiliated contract manufacturers.

Our Licensors would each need to spend substantial time and

expense to replace their respective contract manufacturer if such contract manufacturer failed to deliver products in the quality and

Lamps, or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current

good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization

of the products under license to us or we will be unable to meet market demand, and lose potential revenues.

Our Licensors supply us with the licensed product that we sell in the United States market.

The manufacture of the products we license

requires significant expertise and capital investment.

Currently, all commercial supply for each of our commercial licensed products

are manufactured by single unaffiliated contract manufacturers.

Our Licensors would each need to spend substantial time and expense

to replace their respective contract manufacturer if such contract manufacturer failed to deliver products in the quality and

quantities we demand or failed to meet any regulatory or cGMP requirements.

Our Licensors take precautions to help safeguard their respective

manufacturing facilities, including acquiring insurance and performing on site audits.

However, vandalism, terrorism or a natural or

other disaster, such as a fire or flood, could damage or destroy manufacturing equipment or the inventory of raw material or finished

goods, cause substantial delays in operations, result in the loss of key information, and cause additional expenses.

Our Licensors’

insurance may not cover losses related to our licensed products in any particular case.

In addition, regardless of the level of insurance

coverage, damage to our Licensors’ facilities may have a material adverse effect on our business, financial condition and operating

Our Licensors take precautions to help safeguard their

respective manufacturing facilities, including acquiring insurance and performing on site audits.

However, vandalism, terrorism or a

natural or other disaster, such as a fire or flood, could damage or destroy manufacturing equipment or the inventory of raw material

or finished goods, cause substantial delays in operations, result in the loss of key information, and cause additional expenses.

Licensors’ insurance may not cover losses related to our licensed products in any particular case.

In addition, regardless of

the level of insurance coverage, damage to our Licensors’ facilities may have a material adverse effect on our business,

financial condition and operating results.

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

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

Ferrer’s manufacturer of Xepi ® (Teligent, Inc.) filed for

Chapter 11 bankruptcy on October 14, 2021, and on February 23, 2022 Teligent, Inc.

filed a motion to convert their bankruptcy into a

Chapter 7 liquidation.

Ferrer is in the process of qualifying a new third-party manufacturer in North America.

The process will require

significant time and expense, including the time it will take the new contract manufacturer to reach a level of production to meet our

commercial needs.

Although we have inventory of Xepi ® on hand, we do not expect it will be enough to complete the commercialization

of Xepi ® in accordance with the originally planned timeline.

If there are any significant delays to, or changes in, our

plans for the completion of the commercialization of Xepi ® , this could have a material adverse effect on our business,

prospects, financial condition and/or results of operations.

See “ Management’s Discussion and Analysis of Financial Condition

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

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

have been delayed due to supply chain matters.

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

has commenced on the units.

While we anticipate that we will be able to commercialize the

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

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

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sterilization, storage and shipping of our medical device products.

Our Licensors’ manufacturing partners must comply with federal, state

and foreign regulations, including FDA regulations governing cGMP enforced by the FDA through its facilities inspection program and by

similar regulatory authorities in other jurisdictions where we do business.

These requirements include, among other things, quality control,

quality assurance and the maintenance of records and documentation.

For the medical device products we license, our Licensors are required

to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production,

control, quality assurance, labeling, packaging, sterilization, storage and shipping of our medical device products.

Licensors’ facilities or our Licensors’ contract facilities, as applicable, have been inspected by the FDA for cGMP compliance.

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ability to commercialize our licensed products.

Further, if our Licensors encounter delays in their clinical trials, the period of time

during which we could market our licensed products under patent protection would be reduced.

Since patent applications in the United

States are confidential for a period of time after filing, we cannot be certain that our Licensors were the first to file any patent

application related to the products we license.

Furthermore, for applications in which all claims are entitled to a priority date before

March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the U.S.

Patent and Trademark Office, or

USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.

For applications

containing a claim not entitled to priority before March 16, 2013, there is greater level of uncertainty in the patent law with the passage

of the America Invents Act (2012) which brings into effect significant changes to the U.S.

patent laws that are yet untried and untested,

and which introduces new procedures for challenging pending patent applications and issued patents.

A primary change under this reform

is creating a “first to file” system in the United States.

This will require us to be cognizant going forward of the time

from invention to filing of a patent application.

Further, if the clinical trials for our licensed products are related, the period of time during

which we could market our licensed products under patent protection would be reduced.

Since patent applications in the United States

are confidential for a period of time after filing, we cannot be certain that our Licensors were the first to file any patent application

related to the products we license.

Furthermore, for applications in which all claims are entitled to a priority date before March 16,

2013, an interference proceeding can be provoked by a third party or instituted by the USPTO to

determine who was the first to invent any of the subject matter covered by the patent claims of our applications.

For applications containing

a claim not entitled to priority before March 16, 2013, there is greater level of uncertainty in the patent law with the passage of the

America Invents Act (2012) which brings into effect significant changes to the United States patent laws that are yet untried and untested, and

which introduces new procedures for challenging pending patent applications and issued patents.

A primary change under this reform is

creating a “first to file” system in the United States.

This will require us to be cognizant going forward of the time from

invention to filing of a patent application.

addition to the protection afforded by patents, our Licensors may rely on trade secret protection and confidentiality agreements to protect

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the USPTO, or oppositions and other comparable proceedings in foreign jurisdictions.

Recently, following U.S.

patent reform, new procedures

Recently, following United States patent reform, new procedures

including inter partes review and post grant review have been implemented.

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that are untried and untested and will bring uncertainty to the possibility of challenge to our patents in the future.

Numerous U.S.

and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which our Licensors

are developing product candidates.

As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases

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

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

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

certain trade secrets.

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

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

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

we may lose certain benefits of the settlement and be liable for a greater amount.

If we become liable for more than our agreed

share of the aggregate settlement amount, either of these events could have a material adverse effect on our business, prospects,

financial condition and/or results of operations.

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

amount of $0.4 million for the remaining payments due under the settlement agreement for the cost of the forensic expert and a related receivable from related party of $2.8 million for the remaining legal settlement costs to be reimbursed in accordance with the Settlement Allocation Agreement, which provided that the settlement payments, including the cost of the forensic expert, would first be made by the Company and then reimbursed by Biofrontera AG for its share.

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

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

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

of the Lanham Act, and unfair trade practices.

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

manner that is inconsistent with its approved FDA labeling.

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

District Court for

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

District Court for the District

of New Jersey.

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

Based on the Company’s assessment of

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

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

If the final resolution of the

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

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

Industries LTD in which DUSA alleges breach of contract, violation of the Lanham Act, and unfair trade practices.

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

Commitments and Contingencies – Legal Claims for more information regarding these cases .

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

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

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

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

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

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

Ideas, developments, discoveries and inventions made by such

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

of, and compensation for, inventions made by employees.

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

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

Biofrontera AG prevails or fails in any such dispute.

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

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

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

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

Ideas, developments, discoveries and inventions made

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

ownership of, and compensation for, inventions made by employees.

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

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

on whether Biofrontera AG prevails or fails in any such dispute.

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

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

due to such employees for the use of the patents.

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or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

Company may be unable to effectuate a sale of Xepi ® in a timely manner or receive consideration in excess of the carrying

value of the asset that is currently held for sale.

the third quarter of 2024, the Company committed to a plan to sell its Xepi ® product line.

Although the Company

expects a sale to be completed during 2025, it cannot provide any assurance that it will be successful in selling the asset for a

price in excess of the carrying value of the asset, which is currently classified as

“held for sale.” 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.

In the event that the Company is unable to sell its

Xepi ® product line for a price at least equal to the remaining carrying value of the assets, then it will have to

record additional charges, which could have an adverse effect on the Company’s financial position.

See Note 9, Assets Held

for Sales in our consolidated financial statements included within this Form 10-K.

Related to Our Business and Strategy

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

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

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

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

Although we have the authority under the

Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical

studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from

the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed

products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will

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

Our lack of control over some

of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products.

sourcing and manufacturing of our licensed products as well as the regulatory approvals related to our licensed products are currently

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

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

do not own or operate manufacturing facilities for clinical or commercial manufacture of any of our licensed products.

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See “—If our Licensors’ manufacturing

partners fail to manufacture Ameluz ® , RhodoLED ® lamps, Xepi ® or other marketed products

in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP,

or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license

to us or we will be unable to meet market demand, and lose potential revenues” for more information on the risks related to

the manufacture of our licensed products.

Although under the Ameluz LSA we are entitled to enter into a direct agreement with the Ameluz

Licensor’s supplier under certain circumstances, this is only with respect to the indications that the Ameluz Licensor is currently

seeking from the FDA (as well as certain other clinical studies identified in the Ameluz LSA) and there is no guarantee that we will

be able to do so under terms similar to the Ameluz Licensor’s existing agreement or without delays or difficulties, each of which

could have an adverse impact on our business or results of operations.

currently do not have the ability to conduct any clinical trials.

Under the Ameluz LSA and the Xepi LSA, our Licensors’ control

clinical development as well as the regulatory approval process for our licensed products.

Our lack of control over the clinical development

and regulatory approval process for our licensed products could result in delays or difficulties in the commercialization of our licensed

products and/or affect the development of future indications for our licensed products.

Although under the Ameluz LSA we are entitled

to take over clinical trial and regulatory work under certain circumstances with respect to the indications that the Ameluz Licensor

is currently seeking from the FDA (as well as certain other clinical studies identified in the Ameluz LSA) and subtract the cost of the

trials from the transfer price of Ameluz ® , there is no guarantee that we will be able to do so without delays or difficulties

that could have an adverse impact on our business or results of operations and we do not have that right with respect to indications

for Ameluz ® that we may desire the Ameluz Licensor to pursue in the future.

addition, under the Ameluz LSA and the Xepi LSA, we are not obligated or tasked with the duty to defend the intellectual property related

to our licensed products and rely on our Licensors to defend the relevant intellectual property.

partners fail to manufacture Ameluz ® , RhodoLED ® Lamps or other marketed products in sufficient quantities

and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable

manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license to us or we will be

unable to meet market demand, and lose potential revenues” for more information on the risks related to the manufacture of

our licensed products.

Although we are entitled to enter into a direct agreement with the Ameluz Licensor’s

supplier under certain circumstances, there is no guarantee that we will be able to do so under terms similar to the Ameluz

Licensor’s existing agreement or without delays or difficulties, each of which could have an adverse impact on our business or

results of operations.

the Second A&R Ameluz LSA, we are not obligated or tasked with the duty to defend the intellectual property related to our

licensed products and rely on our Licensors to defend the relevant intellectual property.

This lack of control may increase the

litigation risks and could limit our ability to utilize the relevant intellectual property.

See “—If our Licensors’

efforts to protect the proprietary nature of their intellectual property related to our licensed products are not adequate, we may not

be able to compete effectively in our market” for more information on the risks related to the defense of the intellectual

property related to our licensed products.

AG is a significant stockholder of the Company and, as a result of its control of the manufacture, clinical development and regulatory

approval of Ameluz ® may exert greater influence on the Company relative to the percentage of its ownership of the Company’s

outstanding common stock.

See “—Risks Related to Our Securities and Ownership of Our Common Stock— As of December

31, 2023, Biofrontera AG beneficially owns 26.4% of our stock after the completion of the initial public offering and will be able to

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

in the future” for more information on the risks related to Biofrontera AG’s beneficial ownership of the Company’s

common stock.

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

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

authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they

Licensors’ efforts to protect the proprietary nature of their intellectual property related to our licensed products are not

adequate, we may not be able to compete effectively in our market” for more information on the risks related to the

defense of the intellectual property related to our licensed products.

AG, as a result of its control of the manufacturing and regulatory approval of Ameluz ® , may exert greater influence

on the Company relative to the percentage of its ownership of the Company’s outstanding common stock.

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

with respect to future indications of our licensed products, which could make it difficult for us to sell our licensed products.

Patients who are provided medical treatment for their conditions generally

rely on third-party payors to reimburse all or part of the costs associated with their treatment.

As such, patients are unlikely to use

our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and third-party payors, such

as private health insurers and health maintenance organizations, is critical to product acceptance.

authorities and third-party payors, decide which products they

will cover and the amount of reimbursement.

Reimbursement by a third-party payor may depend upon a number of factors, including the government

Such reimbursement may depend upon a number of factors, including the government

or third-party payor’s determination that use of a product is:

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experimental nor investigational.

Coverage decisions may depend on clinical and economic

standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently

become available.

Third-party payors may refuse to include a particular branded product in their formularies or lists of medications for

which third-party payors provide coverage and reimbursement, or otherwise restrict patient access through formulary controls or otherwise

to a branded product when a less costly generic equivalent or alternative is available.

Coverage may be more limited than the purposes

for which a product is approved by the FDA or similar regulatory authorities outside the United States.

coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process

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

In particular, the Medicare Prescription Drug, Improvement, and

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

lower rates of reimbursement.

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

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

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

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

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

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

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

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

or regulatory burdens of the Affordable Care Act.

On January 28, 2021, President Joseph R.

signed the Executive Order on Strengthening

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

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

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

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

On March 11, 2021, President Joseph R.

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

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

signed the Executive Order on Continuing to Strengthen Americans’

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

in making healthcare more

affordable and accessible.

In this Executive Order, President Joseph R.

directed agencies “with responsibilities related

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

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

healthcare industry may further

lower rates of reimbursement for pharmaceutical products.

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

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

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

time to address this would be in the reauthorization of the Prescription Drug User Fee Act (“PDUFA”) in 2022 as part of

a package bill.

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

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

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

With the elimination of the cap,

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

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

price negotiation program within the U.S.

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

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

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

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

Substantial penalties can be assessed for

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

The Inflation Reduction Act of 2022 could

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

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

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

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

Americans, effective October 14, 2022.

This Executive Order is intended to drive down prescription drug costs and attempts to make use

of HHS’s Center for Medicare and Medicaid Innovation (“Innovation Center”).

The Innovation Center tests health care

payment and delivery models with the goal of improving health care quality and ensuring the efficiency of health care delivery.

Executive Order further requires that HHS consider utilizing the Innovation Center’s testing to identify payment and delivery models

that would “lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in Medicare and Medicaid

programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes

high-quality care.”

the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product

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for actinic keratosis in the United States in October 2016 and we have a limited history of marketing our licensed products in the United

In addition, we began marketing the drug Xepi ® in the United States following our acquisition of Cutanea in March

2019 and have a limited history of marketing Xepi ® in the United States.

While our licensed products have gained acceptance

in the markets we serve, our licensed products may never generate substantial revenue or profits for us.

We must establish a larger market

for our licensed products and build that market through marketing campaigns to increase awareness of, and confidence by doctors in, our

licensed products.

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

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

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

or increase profitability.

While our licensed products have gained acceptance in the markets we serve, our licensed products may never generate substantial

revenue or profits for us.

We must establish a larger market for our licensed products and build that market through marketing campaigns

to increase awareness of, and confidence by doctors in, our licensed products.

If we are unable to expand our current customer base and

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

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

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

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See “— Insurance coverage

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

it difficult for us to sell our licensed products .”

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

respect to future indications of our licensed products, which could make it difficult for us to sell our licensed products .”

industry is subject to rapid, unpredictable and significant technological change and intense competition.

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Most of our competitors

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

and manufacturing organizations and well-established sales forces.

Competition may increase further as a result of advances in the commercial

applicability of technologies and greater availability of capital for investment in these industries.

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

organizations and well-established sales forces.

Competition may increase further as a result of advances in the commercial applicability

of technologies and greater availability of capital for investment in these industries.

competitors may succeed in developing, acquiring or licensing products that are more effective or less costly than our licensed products

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licensed products, we may be unable to generate revenue growth.

order to grow the market for our licensed products, especially a newer licensed product like Xepi ® , we must continue to

build our marketing, sales and distribution capabilities in the United States.

The development and training of our sales force and related

compliance plans to market our licensed products are expensive and time consuming and can potentially delay the growth of sales of our

licensed products.

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

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

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

order to grow the market for our licensed products, we must continue to build our marketing, sales and distribution capabilities in the

United States.

The development and training of our sales force and related compliance plans to market our licensed products are expensive

and time consuming and can potentially delay the growth of sales of our licensed products.

In the event we are not successful in maintaining

our marketing and sales infrastructure, we may not be able to successfully grow the market of our licensed products, which would limit

our revenue growth.

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

public data regarding the market for actinic keratosis treatments in the United States may be incomplete.

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and judgments are based on various sources which we have not independently verified and which potentially include outdated information,

or information that may not be precise or correct, potentially rendering the U.S.

market size for treatment of actinic keratosis with

or information that may not be precise or correct, potentially rendering the United States market size for treatment of actinic keratosis with

Ameluz ® smaller than we have estimated, which may reduce our potential and ability to increase sales of Ameluz ®

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will be increased.

if our Licensors obtain regulatory approvals for our licensed products, or approvals extending their indications, they may not gain market

acceptance or become widely accepted among hospitals, physicians, health care payors, patients and others in the medical community.

May 2016, Biofrontera Bioscience received approval from the FDA to market in the United States.

Ameluz ® in combination

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

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

We launched the commercialization of Ameluz ® and the BF-RhodoLED ®

lamp for actinic keratosis in the United States in October 2016.

Even with regulatory approval, Ameluz ® may not

receive wide acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

In addition, Xepi ®

received approval from the FDA in 2017 and may not gain market acceptance over time.

Market acceptance of any of our licensed products

depends on a number of factors, including:

if we or our Licensors obtain regulatory approvals for our licensed products, or approvals extending their indications, they may not

gain market acceptance or become widely accepted among hospitals, physicians, health care payors, patients and others in the medical

May 2016, Biofrontera Bioscience received approval from the FDA to market in the United States Ameluz ® in combination

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

severity on the face and scalp.

We launched the commercialization of Ameluz ® and the BF-RhodoLED ® lamp

for actinic keratosis in the United States in October 2016.

Even with regulatory approval, Ameluz ® may not receive wide

acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

Market acceptance of any of

our licensed products depends on a number of factors, including:

clinical indications for which they are approved, including any restrictions placed upon the product in connection with its approval,

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laws could have a material adverse effect on our results of operations and financial condition.

may be subject to additional healthcare regulation and enforcement by the U.S.

federal government and by authorities in the United States.

laws include, without limitation, state and federal anti-kickback, federal false claims, privacy, security, financial disclosure

may be subject to additional healthcare regulation and enforcement by the United States federal government and by authorities in the United States.

Such United States laws include, without limitation, state and federal anti-kickback, federal false claims, privacy, security, financial disclosure

laws, anti-trust, Physician Payment Sunshine Act reporting, fair trade regulation and advertising laws and regulations.

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and our financial results.

Health and Human Services, Office of Inspector General (OIG), scrutiny on the sale of products through specialty pharmacies or through

physician practices by means of direct investigation or by issuance of unfavorable Opinion Letters which may curtail or hinder the sales

of our licensed products based on risk of enforcement upon ourselves or our buyers.

The OIG continues to make modifications to existing

Anti-Kickback Statute, or AKS, safe harbors which may increase liability and risk for our company as well as adversely impact sales relationships.

On November 20, 2020, OIG issued the final rule for Safe Harbors under the Federal AKS.

This new final rule creates additional safe harbors

including ones pertaining to patient incentives.

OIG is able to modify safe harbors as well as regulatory compliance requirements which

could impact out business adversely.

majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under

Medicaid and other state programs, or, in several states, apply regardless of the payer.

In addition, some states have laws that require

pharmaceutical companies to adopt comprehensive compliance programs.

Certain states also mandate the tracking and require reporting of

gifts, compensation, and other remuneration paid by us to physicians and other health care providers.

September 2010, OIG issued a Special Advisory Bulletin to notify drug manufacturers that OIG intended to pursue enforcement actions against

drug manufacturers that failed to submit timely average manufacturer price, or AMP, and average sales price, or ASP, information.

Medicaid Drug Rebate Program requires manufacturers to enter into and have in effect a national rebate agreement with the Secretary of

Health and Human Services in order for Medicaid payments to be available for the manufacturer’s covered outpatient drugs.

with such rebate agreements are required to submit certain drug pricing information to CMS, including quarterly and monthly pricing data.

There has been an increased level of federal enforcement against drug manufacturers that have failed to provide timely and accurate pricing

information to the government.

Since September 2010, OIG has settled 13 cases against drug manufacturers relating to drug price reporting

issues, totaling approximately $18.5 million.

We expect continued enforcement directed at companies that fail to make accurate and timely

price reports.

If we were found to make the required pricing disclosures, we could incur significant expense and delay.

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

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

Refer to Note 25.

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

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

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or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated

The FDA and other U.S.

governmental agencies regulate numerous elements of our and our Licensors’ business, including:

The FDA and other United States governmental agencies regulate numerous elements of our and our Licensors’ business, including:

design and development;

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and field safety corrective actions.

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

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

Management believes that this new

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

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

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

and the lamp.

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

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

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

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

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

Drug Application” procedure.

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

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

A new lamp will also require changes in the “Prescribing

Information” of the drug.

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

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

provide additional data.

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

tests by a certified laboratory and a usability study.

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

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

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

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

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

Biofrontera Group’s inability to demonstrate that its products are safe and effective for their intended uses or substantially

equivalent to a predicate device;

data from the Biofrontera Group’s clinical trials may not be sufficient to support clearance or approval;

manufacturing process or facilities we use may not meet applicable requirements.

addition, the FDA and other regulatory authorities may change their respective clearance and approval policies, adopt additional regulations

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

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

in the EU related to privacy, data protection and data security and, as a result of our sales in

California, the California Consumer Privacy Act (CCPA).

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

are subject to diverse laws and regulations relating to data privacy and security in the EU and eventually in the EEA, including Regulation

are subject to diverse laws and regulations relating to data privacy and security in the EU, including Regulation

2016/679, known as the GDPR.

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with these numerous, complex and often changing regulations is expensive and difficult.

Failure by us, any partners, our service providers,

or our employees or contractors to comply with the GDPR could result in regulatory investigations, enforcement notices and/or fines of

up to the higher of €20 million or up to 4% of our total worldwide annual revenue.

In addition to the foregoing, a breach of privacy

laws or data security laws, particularly those resulting in a significant security incident or breach involving the misappropriation,

loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, could have a material adverse

effect on our business, reputation and financial condition.

Failure by us, any partners, our service

providers, or our employees or contractors to comply with the these laws and regulations could result in regulatory investigations,

enforcement notices and significant fines.

In addition to the foregoing, a breach of privacy laws or data security laws, particularly those resulting in a significant security

incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient

or consumer information, could have a material adverse effect on our business, reputation and financial condition.

a data controller, we are accountable for any third-party service providers we engage to process personal data on our behalf.

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fines and penalties outlined above.

we transfer personal data of EU citizens or anyone residing in the EU out of the EU and EEA, we do so in compliance with the relevant

data export requirements from time to time.

There is currently ongoing litigation challenging the commonly used transfer mechanism, the

EU Commission approved model clauses.

On July 16, 2020, the Court of Justice of the European Union, or CJEU, issued a judgment which

annulled, without granting a grace or transition period, the European Commission’s Decision (EU) 2016/1250 of July 12, 2016 on

the adequacy of the protection provided by the U.S.

Privacy Shield (a mechanism for complying with data protection requirements when

transferring personal data from the EU to the United States).

Accordingly, such framework is not a valid mechanism to comply with EU

data protection requirements when transferring personal data from the European Union to the United States.

To the extent that we were

to rely on the EU-U.S.

Privacy Shield Framework, we will not be able to do so in the future, which could increase our costs and limit

our ability to process personal data from the EU.

The same decision also cast doubt on the viability of one of the primary alternatives

Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, as a vehicle for such transfers in

all circumstances.

Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal

regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures

and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain.

CJEU went on to state that if a competent supervisory authority believes that the Standard Contractual Clauses cannot be complied with

in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under

an obligation to suspend or prohibit that transfer.

At present, there are few, if any, viable alternatives to the Standard Contractual

Clauses, and the law in this area remains dynamic.

These changes may require us to find alternative bases for the compliant transfer

of personal data outside the EEA and we are monitoring developments in this area.

GDPR is directly applicable in each EU Member State, however, it provides that EU Member States may introduce further conditions, including

limitations which could limit our ability to collect, use and share personal data (including health and medical information), or could

cause our compliance costs to increase, ultimately having an adverse impact on our business.

The GDPR imposes onerous accountability

obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of

its mandated privacy governance framework.

It also requires data controllers to be transparent and disclose to data subjects (in a concise,

intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of personal data;

defines for the first time pseudonymized ( i.e.

, key-coded) data;

introduces mandatory data breach notification requirements;

sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities.

In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change

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

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

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

This Act also applies

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

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

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

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

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

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

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

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

adversely affect our business, financial condition and operating results.

Noncompliance with CCPA could result in regulatory investigations,

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

type litigation where individuals suffer harm.

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

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

to spread across the U.S.

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

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

We are highly dependent on our management,

scientific, medical and operations personnel, including Prof.

Hermann Lübbert, our Chief Executive Officer and Chairman and

Leffler, our Chief Financial Officer.

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

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

We are highly dependent on our

management, scientific, medical and operations personnel, including Prof.

Hermann Luebbert, our Chief Executive Officer and

Chairman and Fred Leffler, our Chief Financial Officer.

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

employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or

results of operations.

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

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

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

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

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

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

The risk of a

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

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

intrusions from around the world have increased.

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

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

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

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

otherwise valuable information of ours or our customers;

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

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

fines, and possible financial liability;

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

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

The occurrence

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

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

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

To the extent that any

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

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

licensed products and product candidates could be delayed.

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

attempts to access information, including customer and company information, information relating to our clinical trials, malicious

code, theft, misuse, loss, release, or destruction of data (including confidential customer information), account takeovers,

unavailability of service, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and

electrical failures.

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

by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication

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

Further, these risks may be exacerbated by recent

developments in artificial intelligence and its increased use to produce sophisticated malware, phishing schemes, and other

fraudulent activities.

While we have not experienced any such material system failure or cyber-related incident, if such an event

were to occur and cause interruptions in our operations, it could (i) materially disrupt our development programs.

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

(ii) result in the

unauthorized access to, and destruction, loss, theft, misappropriation, or release of confidential, sensitive, or otherwise valuable

information of ours or our customers;

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

us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental fines, and possible

financial liability;

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

or (v) harm our

reputation or cause a decrease in the number of customers that choose to do business with us.

The occurrence of any of the foregoing

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

Furthermore, in the event of a

cyber-related incident, we may be delayed in identifying or responding to the incident, which could increase the negative impact of

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

To the extent that any disruption or cyberrelated

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

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

product candidates could be delayed.

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

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of clinical trial participants;

enrollment rates of clinical trial participants;

of clinical trial sites or entire trial programs;

of investigations by regulators;

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Additionally, we cannot guarantee that continued product liability insurance coverage will be available in the future at acceptable costs.

to comply with the U.S.

Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal

to comply with the United States Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal

penalties and an adverse effect on our business.

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We are subject, however, to the risk that our officers, directors, employees, agents and collaborators may take

action determined to be in violation of such anti-corruption laws, including the U.S.

Foreign Corrupt Practices Act of 1977, the U.K.

Bribery Act 2010 and the European Union Anti-Corruption Act, as well as trade sanctions administered by the U.S.

Office of Foreign Assets

Control and the U.S.

Department of Commerce.

action determined to be in violation of such anti-corruption laws, including the United States Foreign Corrupt Practices Act of 1977, the U.K.

Bribery Act 2010 and the European Union Anti-Corruption Act, as well as trade sanctions administered by the United States Office of Foreign Assets

Control and the United States Department of Commerce.

Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties

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difficulties.

licensed drug products Ameluz ® and Xepi ® and any other drug products we license or acquire will be subject

to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of

safety and other post-market approval information, importation and exportation.

In addition, approved products, manufacturers and manufacturers’

facilities are required to comply with extensive FDA requirements and the requirements of other similar regulatory authorities, including

ensuring that quality control and manufacturing procedures conform to cGMP requirements.

licensed drug products and any other drug products we license or acquire will be subject to ongoing regulatory requirements for labeling,

packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post-market approval information,

importation and exportation.

In addition, approved products, manufacturers and manufacturers’ facilities are required to comply

with extensive FDA requirements and the requirements of other similar regulatory authorities, including ensuring that quality control

and manufacturing procedures conform to cGMP requirements.

we rely on our Licensors to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production

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

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

We believe that we will need

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

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

believe that we will need to incur additional R&D expenditures to improve the capabilities of our RhodoLED® Lamps to better fulfill

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

The products we are developing

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

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

which makes us dependent on consulting relationships.

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

delays in product development.

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

compete effectively with our competitors’ products and services.

The products we are developing and may develop

in the future may not be technologically successful.

At this time, we have limited internal R&D personnel, which makes us dependent

on consulting relationships.

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

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

with our competitors’ products and services.

Related to Our Financial Position and Capital Requirements

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

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

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

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

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

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

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

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

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

As of March 11, 2024 our unaudited cash was approximately

$4.1 million .

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

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

business, results of operations and financial condition.

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

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

the consolidated financial statements were issued.

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

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

second half of 2025, and until cash flow from operations is sufficient, if ever.

As of March 12, 2025 our unaudited cash was

approximately $2.2 million.

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

alternative methods of financing.

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

effect on the Company’s business, results of operations and financial condition.

Organization and Business

Overview - Liquidity and Going Concern for additional information.

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

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As of December 31, 2024, we had an accumulated deficit of $117.4 million.

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

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

In the long term,

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

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

on the face and scalp.

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

become profitable.

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

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

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

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

In the long term, we anticipate

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

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

There can be no assurance

that our sales and marketing efforts will generate sufficient sales to allow us to become profitable.

Moreover, because of the numerous

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

or when we will become profitable, if ever.

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

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

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

of Xepi ® and other products we may license.

we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth.

operations have consumed substantial amounts of cash since inception.

Going forward, we expect that we will require significant funds

in order to pursue our plans for strategic growth, including completing the commercialization of the drug Xepi ® , the rights

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

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

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

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

For additional details, see Note 25.

Subsequent Events - Securities

Purchase Agreement for Series B Convertible Preferred.

We believe that the funds available from these

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

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

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

spend more money than currently expected because of circumstances beyond our control.

In addition, if we choose to take significant

steps towards the realization during the current fiscal year of longer-term goals for our strategic growth, we may need to raise

additional capital through debt or equity financing in order to complete those steps during the current fiscal year.

funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

in order to pursue our plans for strategic growth,

February 19, 2024, we entered into an equity financing agreement which provided net proceeds of $14.6 million.

21, 2024, the Company entered into a Securities Purchase Agreement with its principal stockholders providing for the private

placement of $4.2 million in aggregate principal amount of the Company’s 10.0% Senior Secured Convertible Notes (the

However, we will still need to raise additional capital through debt or equity financing in order to support

our operating, investing and financing activities of the Company during the current fiscal year.

Our future funding requirements,

both near- and long-term, will depend on many factors, including, but not limited to:

effects of competing technological and market developments;

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

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

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

impact of COVID-19 on our licensor’s clinical trials, the timing of regulatory approvals obtained by our Licensors, demand

for our licensed products, our ability to market and sell our licensed products and other matters.

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

products or potential products in the United States

timing of regulatory approvals obtained by our Licensors, demand for our licensed products, our ability to market and sell our licensed

products and other matters.

cannot be certain that additional funding for any purpose will be available to us on acceptable terms, or at all.

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

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

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

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

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

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

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

interest rate for each of the Loans is 5.0%.

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

the ordinary course of its business;

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

favor of the applicable lender and certain other permitted liens.

Each Loan Agreement also contains customary representations and warranties

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

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

indebtedness could have significant adverse consequences, including:

Company funds its operations, in part, with borrowed funds.

Our existing and future indebtedness could have significant adverse

consequences, including:

us to dedicate a portion of our cash to the payment of interest and principal, reducing money available for working capital, capital

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the risk of dilution to the holders of our shares in the event any of these bonds are exercised for or converted into our ordinary

our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete, including changes

arising as a result of the COVID-19 pandemic;

our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;

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

may also engage in debt financing in the future.

Failure to make payments or comply with covenants under such debt could result in an

event of default and acceleration of amounts due.

If an event of default occurs and the lender or lenders accelerate the amounts due,

we may not be able to make accelerated payments, and such lenders could file suit against us to collect the amounts due under such obligations

or pursue other remedies.

In addition, the covenants under such debt obligations could limit our ability to obtain additional debt financing.

If we are unable to satisfy such debt obligations it could have material adverse effect on our business, prospects, financial condition

and/or results of operations.

Notes contain restrictive covenants that, among other things, generally limit the ability of the Company and its subsidiaries to (i)

create liens, (ii) pay dividends, acquire shares of capital stock and make payments on subordinated debt, (iii) incur indebtedness, or

(iv) enter into transactions with affiliates.

The foregoing restrictive covenants are subject to a number of important exceptions and

qualifications, as set forth in the Notes.

The Notes are secured by substantially all property of the Company, including but not limited

to the Company’s assets, inventory, intellectual property and accounts.

Debt , for additional information regarding

our existing indebtedness .

to make payments or comply with covenants under such debt could result in an event of default and acceleration of amounts due.

event of default occurs and the lender or lenders accelerate the amounts due, we may not be able to make accelerated payments, and such

lenders could file suit against us to collect the amounts due under such obligations or pursue other remedies.

In addition, the covenants

under such debt obligations could limit our ability to obtain additional debt financing.

If we are unable to satisfy such debt obligations

it could have material adverse effect on our business, prospects, financial condition and/or results of operations.

Related to Clinical Trials and Regulatory Approvals Regulatory Approvals of Indication Expansion

or termination of planned clinical trials for expanding the indications of Ameluz ® would result in

unplanned expenses and significantly and adversely impact our remaining developmental activities and potential commercial prospects with

respect to, and ability to generate revenues from, such indications.

may experience delays in completing ongoing trials and initiating planned trials, and we cannot be certain whether these trials or any

other future clinical trials for expanding the indications of Ameluz ® will be completed on schedule, if at all.

trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

● disagreements

with regulators as to the design or implementation of our clinical trials;

on acceptable terms with prospective CROs, clinical trial sites, and prospective strategic partners, the terms of which can be

subject to extensive negotiation and may vary significantly among different CROs, trial sites and partners;

institutional review board (“IRB”) approval at each site;

events occurring in clinical studies;

ability to enroll a sufficient number of suitable patients who remain in the trial until its conclusion;

patients complete a trial or return for post-treatment follow-up;

sites deviating from trial protocols;

we address patient safety concerns that arise during the course of a trial;

a sufficient number of clinical trial sites;

manufacturing sufficient quantities of products for use in clinical trials;

an adequate container and delivery device for the product;

changes to our financial priorities or insufficient capital available to fund clinical trials;

of trials by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board

(“DSMB”), for such trial, or by regulatory authorities.

we experience delays in the completion of, or the termination of, our clinical trials, we may experience increased costs and/or have

difficulty raising capital, either of which would cause us to have to delay our product development and regulatory approval process timelines.

Further, the commercial prospects of the expanded indications of our licensed products may be harmed, and our ability to generate product

revenues from any of these indications could be delayed or not realized at all.

Any of these occurrences may significantly harm our business,

financial condition and prospects.

rely on third parties to conduct some of our clinical trials.

If these third parties do not successfully carry out their contractual

duties or meet expected deadlines, we may be unable to obtain regulatory approval to extend the indications of our licensed products.

FDA requires us to comply with regulations and standards, commonly referred to as good clinical practice, or GCP, requirements for conducting,

monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible

and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

on medical institutions, independent clinical investigators, contract laboratories and other third parties, such as CROs, to conduct

GCP-compliant clinical trials on our licensed products properly and on time.

Although we rely on these third parties to conduct GCP-compliant

clinical trials, we remain responsible for ensuring that each of our GCP clinical trials is conducted in accordance with its investigational

plan and protocol and applicable laws and regulations.

third parties play a significant role in the conduct of these trials and the subsequent collection and analysis of data.

While we have

agreements governing their activities, we control only certain aspects of their activities and have limited influence over their actual

performance or control over the amount or timing of resources that they devote to our programs.

If the third parties conducting our GCP

clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate

their agreements with us or otherwise need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised

due to their failure to adhere to our clinical trial protocols or for any other reason, we may need to enter into new arrangements with

alternative third parties.

This could be difficult, costly or impossible, and our clinical trials may need to be extended, delayed, terminated

As a result, we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable indication,

our financial results and the commercial prospects for our licensed products would be harmed, our costs could increase, and our ability

to generate additional revenues could be delayed.

addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and

may receive compensation in connection with such services.

If these relationships and any related compensation result in perceived or

actual conflicts of interest, or the FDA concludes that the financial relationships may have affected the interpretation of the trial,

the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself

may be jeopardized, which could result in the delay or rejection by the FDA of regulatory approval of additional indications.

delay or rejection could prevent us from commercializing expanded indications of our licensed products.

licensed products may pose safety issues, cause adverse events, have side effects or have other properties that could delay or prevent

the regulatory approval of additional indications, limit the commercial profile of an approved label or result in significant negative

consequences following marketing approval, if any.

of our clinical trials could reveal a high and unacceptable severity and prevalence of adverse events or unexpected characteristics.

We, any partner with whom we may collaborate, or the FDA may suspend, delay, require modifications to or terminate our clinical trials

at any time, for various reasons, including the discovery of serious or unexpected toxicities or other safety issues experienced by trial

participants.

In addition, adverse events caused by our licensed products could cause us or regulatory authorities to interrupt, delay

or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approvals by the FDA.

Treatment-related adverse events could also affect patient recruitment or the ability of enrolled patients to complete the trial or result

in potential product liability claims.

In addition, these adverse events may not be appropriately recognized or managed by the treating

medical staff.

Any of the foregoing events could prevent us from obtaining regulatory approval for expanded indications of our licensed

products and from achieving or maintaining market acceptance of our licensed products for some or all indications, and may result in

the failure to realize significant revenues, which would materially and adversely affect our results of operations and business.

regulatory approval processes of the FDA are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to

obtain regulatory approval for additional indications of our licensed products on a timely basis or at all, our business could be substantially

are not permitted to market any indication of our product in the United States for which we have not received applicable regulatory approval.

The time required to obtain approval by the FDA is unpredictable, lengthy, and depends upon numerous factors, including the substantial

discretion of the regulatory authorities.

In addition, approval policies, regulations, or the type and amount of clinical data necessary

to gain approval may change during the course of clinical testing for expanded indications.

to obtaining marketing approval for additional indications of a product in the United States, we must demonstrate, with substantial evidence

from well-controlled clinical trials, and to the satisfaction of the FDA, that the product is safe and effective for the target indication.

The FDA can delay, limit or deny approval of additional indications of our licensed products or require us to conduct costly additional

clinical testing or abandon a program for many reasons, including:

disagreements with regulators as to the design or implementation of our clinical trials;

unfavorable or ambiguous results from our clinical trials;

results that may not meet the level of statistical significance required by the FDA for approval;

serious and unexpected drug-related adverse events experienced by participants in our clinical trials or by individuals using drugs

similar to our licensed products;

our inability to demonstrate to the satisfaction of the FDA that our licensed products are safe and effective for the proposed

the FDA’s disagreement with the interpretation of data from clinical trials;

our inability to demonstrate that the clinical and other benefits of our licensed products outweigh any safety or other perceived

the FDA’s disagreement regarding the formulation, container, dosing delivery device, labeling or the specifications of our

licensed products;

the FDA’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract;

the potential for approval policies or regulations of the FDA to significantly change in a manner rendering our clinical data

insufficient for approval.

the large number of drugs in development, only a small percentage successfully complete the FDA approval process and become commercialized.

The lengthy approval process as well as the unpredictability of outcomes from future clinical trials may result in our failing to obtain

regulatory approval to market our licensed products for additional indications.

The FDA also may approve a more limited indication than

we target, and the FDA may not approve the labeling that we believe is necessary or desirable for the successful commercialization of

our licensed products.

Any delay in obtaining, or inability to obtain, in whole or in part, applicable regulatory approval for additional

indications we are targeting would hinder the commercialization of our licensed products, which would limit our ability to increase our

revenues, materially and adversely affecting our results of operations and business.

Related to Corporate Governance, Including Being a Public Company

previously identified a material weakness in our internal control over financial reporting, resulting from control deficiencies related

to management’s review of work performed by specialists.

If we identify additional material weaknesses in the future or otherwise

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

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

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected

on a timely basis.

connection with the audit of our financial statements as of and for the year ended December 31, 2021, we identified a material weakness

in our internal control over financial reporting.

The material weakness we identified pertains to management’s review of work performed

by specialists;

as the Company’s management review control over information provided to and produced by a third-party specialist

was not sufficiently precise to identify errors in the valuation of an intangible asset.

Specifically, as part of the initial valuation

of an intangible asset in connection with the Cutanea acquisition we failed to identify a computational error within the valuation model

for the Xepi ® intangible asset.

In addition, in 2021 an error in the valuation of the same intangible asset was identified

relating to insufficient information being provided to the third-party specialist in connection with an impairment assessment.

have taken steps to enhance our internal control environment and continue to address the underlying cause of the material weakness with

the implementation of additional controls including those designed to strengthen our review and validation of the work product from third-party

service providers.

As of December 31, 2022, the steps we have taken to date were determined to be sufficient to remediate this material

As a result, management has concluded that the material weakness was fully remediated as of December 31, 2022.

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

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

in us and, as a result, our stock price.

If we fail to maintain an effective system of internal

controls, our ability to produce timely and accurate financial statements may be impaired, investors may lose confidence in our financial

reporting, and the price of our common stock may decline.

We are subject to the reporting requirements of the Exchange Act and other

laws and regulations applicable to public companies.

These laws and regulations require, among other things, that we maintain effective

procedures and internal control over financial reporting and disclosure controls.

We engage in continuous improvement of our internal

control over financial reporting, disclosure controls, and other procedures designed to provide assurance that information we disclose

in our consolidated financial statements and in the reports that we file with the SEC is recorded, processed, summarized, and reported

within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is

accumulated and communicated to our principal executive and financial officers.

Our current controls and any new controls we develop may

become inadequate because of changes in conditions in our business.

In connection with the audit of our

financial statements as of and for the year ended December 31, 2021, we identified a material weakness in our internal control over

financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial

reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements

will not be prevented or detected on a timely basis.

We have since enhanced our internal control environment and remediated this

material weakness.

However, we cannot guarantee that we will not identify different material weaknesses in the future.

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

to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us

and, as a result, our stock price.

Any failure to develop or maintain effective internal control over financial reporting and

disclosure controls, or any difficulties encountered in their implementation or improvement, could result in a restatement of our consolidated

financial statements for prior periods, cause us to fail to meet our financial and other reporting obligations, result in an adverse

opinion regarding our internal control over financial reporting from our independent registered public accounting firm, and lead to investigations

or sanctions by regulatory authorities.

Any of the foregoing could have a material adverse effect on our business, results of operations,

and financial condition, and could cause our investors to lose confidence in the accuracy and completeness of our financial reports and

the price of our common stock to decline.

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

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predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

a result of becoming a public company, we are obligated to develop and maintain proper and effective internal control over financial

reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company

and, as a result, the value of our common stock.

will be required, pursuant to Section 404 of the Sarbanes Oxley Act, or Section 404, to furnish a report by management on, among other

things, the effectiveness of our internal controls over financial reporting for the fiscal year ended December 31, 2023.

This assessment

will need to include disclosure of any material weaknesses identified by our management in our internal controls over financial reporting.

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial

reporting until our first annual report required to be filed with the SEC following the date we are no longer an emerging growth company,

as defined in the JOBS Act.

At such time as we are required to obtain auditor attestation, if we then have a material weakness, we would

receive an adverse opinion regarding our internal control over financial reporting from our independent registered public accounting

We will be required to disclose significant changes made in our internal control procedures on a quarterly basis.

have already begun the process of compiling the system and processing documentation necessary to perform the evaluation needed to comply

with Section 404 and anticipate we will be able to complete our evaluation, testing and any required remediation in a timely fashion.

Our compliance with Section 404 will require that we incur additional legal, accounting and other compliance expense and expend significant

management efforts.

We currently do not have an internal audit group, and although we have accounting and finance staff with appropriate

public company experience and technical accounting knowledge, we may need to hire additional consultants or staff to perform the evaluation

needed to comply with Section 404.

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

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

For example, in connection

with the audits of our financial statements as of and for the years ended December 31, 2021 and 2020, we identified a material weakness

in our internal control over financial reporting.

See “— We previously identified a material weakness in our internal control

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

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

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

and stock price.

cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to avoid additional material

weaknesses or significant deficiencies in our internal controls over financial reporting in the future.

Any failure to maintain effective

internal controls over financial reporting could severely inhibit our ability to accurately report our financial condition or results

of operations.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered

public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting,

we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our common

stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control

systems required of public companies, could also negatively impact our ability to access to the capital markets.

addition, effective disclosure controls and procedures enable us to make timely and accurate disclosure of financial and non-financial

information that we are required to disclose.

As a public company, if our disclosure controls and procedures are ineffective, we may

be unable to report our financial results or make other disclosures accurately on a timely basis, which could cause our reported financial

results or other disclosures to be materially misstated and result in the loss of investor confidence and cause the market price of our

are an emerging growth company and a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable

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on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We cannot predict if investors

will find our common stock less attractive because we will rely on these exemptions.

If some investors find our common stock less attractive

as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross

revenue of $1.235 billion or more;

(ii) the last day of the fiscal year following the fifth anniversary of the date of the closing of

our initial public offering;

(iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous

three fiscal years;

or (iv) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC.

Additionally,

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

Even after we no longer qualify as

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

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

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

periodic reports and proxy statements.

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

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

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

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

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

To the extent we take advantage of such reduced disclosure

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

Even after we no longer qualify as an

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

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

audited financial statements and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

To the extent we take advantage of the exemptions described above, comparison of our financial statements

with other public companies may be difficult or impossible.

If some investors find our common stock less attractive as a result of our taking advantage of such exemptions, investors

may find our common stock less attractive and there may be a less active trading market for our common stock, causing the price of our

common stock to be more volatile.

Related to Our Securities and Ownership of Our Common Stock

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success of existing or new competitive products or technologies;

actions with respect to Ameluz ® , the BF-RhodoLED ® lamp (and its successors) or Xepi ® or

our competitors’ products;

actions with respect to Ameluz ® , the BF-RhodoLED ® lamp (and its successors) or our competitors’ products;

or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual

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or loss of significant healthcare providers or other developments with respect to significant healthcare providers;

in laws or regulations applicable to Ameluz ® , the BF-RhodoLED ® lamp (and its successors) or Xepi ® ;

in laws or regulations applicable to Ameluz ® , the BF-RhodoLED ® lamp (and its successors);

or anticipated changes in our growth rate relative to our competitors;

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our management’s attention from other business concerns, which could seriously harm our business.

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

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

requires listing issuers to comply with certain standards in order to remain listed on its exchange.

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

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

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

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

Additionally,

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

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

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

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

Nasdaq Marketplace Rule 5550(b).

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

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

November 22, 2023 to evidence compliance.

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

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

exchange, we may have to pursue trading on a less recognized or accepted market, such as the over the counter markets, our stock may

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

of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could

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

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

without restrictions or further registration required under the Securities Act.

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

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

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

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

be freely tradable without restriction.

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

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

sold in the public market.

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

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

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

more information regarding the potential impact of such warrants.

If the Preferred Warrants are not exercised,

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

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

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

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

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

second quarter of 2024.

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

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

In addition, if those milestones are not met the Preferred

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

the currently anticipated timeframe.

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

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

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

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

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

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

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

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

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

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

If the Preferred Warrants are not exercised or

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

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

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

on receiving the anticipated proceeds.

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

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

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

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

public market and result in dilution to our stockholders.

of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress

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

We had 8,873,932 shares of common stock outstanding as of March 19, 2025, of which 8,473,932 shares are freely tradable without

restrictions or further registration required under the Securities Act.

The remaining 400,000 shares are currently unregistered and held

by Biofrontera AG.

addition, we have issued warrants to purchase our common stock that, if such warrants are exercised, could be sold in the public market.

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

which, if exercised or converted, could substantially increase the number of shares eligible for future resale in the public market and

result in dilution to our stockholders” for more information regarding the potential impact of such warrants.

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

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

and result in dilution to our stockholders.

of March 19, 2025, we have a total of 2,269,356 outstanding warrants which may each be exercised for one share of our common stock

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

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

Any shares of our common

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

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

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

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

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

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

of common stock.

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

shares of common stock.

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

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

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

While it is not certain that any of the Preferred

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

shares of common stock.

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

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

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

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

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

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

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

Under the terms of the Certificate

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

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

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

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

Sales of substantial numbers of any

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

In addition, we have shares of Series B-2 and Series B-3 Convertible Preferred Stock (“Series B Preferred Stock”).

of Series B Preferred Stock may be converted into approximately 1,413 shares of our common stock (based on the conversion price of $0.7074

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

As of March 19, 2025 we have 10,129 shares

of Series B Preferred Stock outstanding, which could be converted into up to 14,318,632 shares of common stock.

the Series B Preferred Stock has a beneficial ownership limitation that prevents the holder from converting if it would result in the

holder’s beneficial ownership exceeding 9.99% of the then outstanding common stock, the remaining Series B Preferred Stock could

be converted into common stock at a future date if the total number of outstanding shares of our common stock increases, if the beneficial

ownership limitation is removed, or if the holders of the Series B Preferred Stock sell any of the common stock they currently hold.

of the shares issuable upon exercise of these warrants or the conversion of the Series B Preferred Stock have been registered on effective

registration statements and therefore, when issued, will be freely tradable without restriction or further registration required under

the Securities Act.

Any shares of our common stock issued upon exercise of outstanding warrants or conversion of the Series B convertible

preferred stock will result in dilution to the then existing holders of our common stock and increase the number of shares eligible for

resale in the public market.

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

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litigation, including intellectual property infringement lawsuits related to our licensed products, in which we may become involved;

developments affecting Ameluz ® , the BF-RhodoLED ® lamp (and its successors) or Xepi ® ;

developments affecting Ameluz ® , the BF-RhodoLED ® lamp (and its successors);

execution of any licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;

seasonality in the demand for traditional PDT treatment using a lamp;

delays in the delivery of our products due to supply chain issues;

timing of milestone payments under our existing license agreements;

level of underlying demand for Ameluz ® and Xepi ® and customers’ buying patterns.

level of underlying demand for Ameluz ® and customers’ buying patterns.

our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could

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to as the “Distribution Date”).

At any time after a person becomes an Acquiring Person, the Board of Directors may, at its

At any time after a person becomes an Acquiring Person, our Board of Directors may, at its

option, exchange all or any part of the then outstanding and exercisable Rights for shares of common stock at an exchange ratio of one

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common stock and result in the market price of our common stock being lower than it would be without these provisions.

amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive

amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive

forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable

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to enforce any liability or duty created by the Exchange Act or to any claim for which the federal courts have exclusive jurisdiction.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any

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

We note that investors cannot waive compliance

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

Our amended and restated certificate of incorporation will

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

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

The Supreme Court of the State of

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

While there can be no assurance that federal or state courts

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

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

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

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

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

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

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

for as a warrant liability or as equity.

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market price of our common stock.

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

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

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

of the indexation guidance under ASC 815-40.

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

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

warrants issued in connection with the private placement offerings (completed on December 1 , 2021, May 16, 2022, July 26, 2022,

and November 2, 2023) (collectively, the “PIPE Warrants”) were accounted for as liabilities as these warrants provide for

a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40.

The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair

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

Refer to Note 3.

Fair Value Measurements.

of the date of this Form 10-K, 2,269,356 liability classified Warrants remain outstanding.

Stockholders’ Equity in

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

information on the Warrants.

Stockholders’ Equity

in our audited financial statements for the fiscal year ended December 31, 2024 and 2023 included in this Form 10-K for more information

on the Warrants.

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

What changed 10-K

Item 1A. Risk Factors