What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-20 compared with 2024-03-15 · 918 added, 1183 removed, 668 unchanged (76% of the section changed)

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Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of Biofrontera, Inc.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of

on the Financial Statements

have audited the accompanying consolidated balance sheets of Biofrontera Inc.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years

in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

(the “Company”) as of December 31, 2024 and

2023, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period

ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion,

based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024,

in conformity with accounting principles generally accepted in the United States of America.

Paragraph – Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described

in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in

regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

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conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit s

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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have served as the Company’s auditor since 2023.

Hanover, New Jersey

March 15, 2024

Consolidated Financial Statements as of and for the Years Ended December 31, 2024 and 2023

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Accounts receivable, net

Other receivables, related party

Inventories, net

Prepaid expenses and other current assets

Asset held for sale

Other assets, related party

Total current assets

Other receivables long term, related party

Property and equipment, net

Operating lease right-of-use assets

Intangible asset, net

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accounts payable, related parties, net

Accounts payable

Acquisition contract liabilities, net

Operating lease liabilities

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Long-term liabilities:

Acquisition contract liabilities, net

Convertible notes payable

Warrant liabilities

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Stockholders’ equity:

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

Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1, 3,366 Series B-2 and 6,763 Series B-3 shares issued and outstanding as of December 31, 2024 and no shares issued and outstanding as of December 31, 2023

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

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thousands, except per share amounts and number of shares )

Products revenues, net

Product revenues, net

Revenues, related party

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Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Selling, general and administrative

Research and development

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Gain on legal settlement

Loss on debt extinguishment

Interest expense, net

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thousands, except number of shares)

Balance at December 31, 2021

Issuance of common stock in exchange for investment, related party

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

Exercise of pre-funded warrants

Exercise of PIPE warrants

Issuance of shares for vested restricted stock units

Stock-based compensation

Preferred Stock

Balance at December 31, 2022

Beginning balance

Issuance of shares for vested restricted stock units

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Balance at December 31, 2023

Ending balance

Exercise of pre-funded warrants

Conversion of Series B-1 Preferred (mezzanine) into Series B-2 Preferred and common stock

Issuance of Series B-3 Preferred upon exercise of warrants

Conversion of Series B-2 and B-3 Preferred into common stock

Issuance of shares for restricted stock units

Stock based compensation

Balance, December 31, 2024

$ ( 117,409 )

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

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Amortization of acquired intangible assets

Change in fair value of investment, related party

Realized/unrealized loss in investment, related party

Change in fair value of contingent consideration

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Provision for doubtful accounts

Loss on debt extinguishment

Non-cash interest expense

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Other assets, related party

Accounts payable and related party payables

Accounts payable

Accounts payable, related parties, net

Operating lease liabilities

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Cash flows from investing activities

Purchases of investment, related party

Sales of investment, related party

Purchase of intangible assets

Purchases of property and equipment

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Cash flows from financing activities

Proceeds from issuance of Series B-1 preferred stock and warrants to purchase series B-3 preferred stock, net of issuance costs

Proceeds from issuance of Series B-3 preferred stock from exercise of warrants

Proceeds from issuance of convertible notes, net of issuance costs

Proceeds from line of credit

Proceeds from short term debt

Principal payments short term debt, net

Proceeds from issuance of common stock and warrants

Proceeds from exercise of warrants

Proceeds from short term debt

Payment of short-term debt

Cash flows provided by financing activities

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

Conversion of warrant liability to equity in connection with exercise of warrants

Issuance of common shares in exchange for investment, related party

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

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Organization and Business Overview

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

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

and topical antibiotics.

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

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

The Company includes

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

on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor.

Inc., a Delaware Corporation, (the “Company,” “we,” “us,” “our,” or

“Biofrontera”) is a United States based biopharmaceutical company commercializing a portfolio of pharmaceutical products

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

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

Company includes its wholly owned subsidiary Biofrontera Discovery GmbH (“Discovery”), a limited liability company organized

under the laws of Germany, formed on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor and

manage our clinical trial work.

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

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

In the United States,

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

the face and scalp.

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

under an exclusive license and

supply agreement (“Ameluz LSA”) with Biofrontera Pharma (“Pharma”) GmbH and Biofrontera Bioscience GmbH

(“Biofrontera Bioscience,” and, together with Pharma, the “Ameluz Licensor”), both of which are related parties.

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

bacterial growth.

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

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

It is approved for

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

Our exclusive license and supply agreement, as amended

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

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

our acquisition of Cutanea Life Sciences, Inc.

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

United States.

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

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

commercialization of the product.

However, Ferrer is qualifying a new contract manufacturer, Cambrex, which is expected to begin

production in the second half of 2024.

Once the new third-party manufacturer is qualified, we expect the supply of Xepi® will

meet our future market demand.

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

In the United States, the

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

face and scalp.

We are currently selling Ameluz ® for this indication in the United States under an exclusive license and

supply agreement (as amended, the “Second A&R Ameluz LSA”) with Biofrontera Pharma (“Pharma”) GmbH and

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

both of which are related parties.

and Going Concern

we commenced operations in 2015, we have generated significant losses and have incurred net cash outflows from operations of $ 24.9 million

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

satisfaction of liabilities in the ordinary course of business.

Since we commenced operations in 2015, we have generated significant

The Company incurred net cash outflows from operations of $ 10.3 million

and $ 24.9 million

for the years ended December 31, 2024 and 2023, respectively.

The Company had an accumulated deficit as of December 31, 2023 of $ 99.7 million.

As of December 31, 2024, the Company’s accumulated deficit was

$ 117.4 million.

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

financing transactions.

During the year ended December 31, 2023, we received proceeds of $ 4.1 million

from the issuance of common stock and warrants, net of issuance costs (See Note 18.

Stockholders’ Equity ).

December 31, 2023, we had cash and cash equivalents of $ 1.3 million,

compared to $ 17.2 million

as of December 31, 2022.

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

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

these conditions and obtain additional liquidity.

Pursuant to the requirements of the Financial Accounting

Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s

Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate,

that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated

financial statements included in this Annual Report on Form 10-K are issued.

This evaluation does not take into consideration the potential

mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the

date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating

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

The mitigating

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

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

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

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

In an effort to alleviate these conditions, management plans include execution

on the 2024 budget approved by the Board, which includes significant discretionary sales and marketing, medical affairs, and dermatology

community outreach efforts as we seek to expand the commercialization of Ameluz® in the United States, however, discretionary expenses

are about $ 5.5 million less than what was spent in 2023.

We have reduced spending at both the commercial and general and administrative

level but do not expect these reductions to impact our ability to grow and achieve our revenue targets.

We also expect to incur additional

expenses in support of our product commercialization efforts.

In addition, we expect to continue to incur significant costs to comply

with corporate governance, internal controls and similar requirements applicable to us as a public company in the U.S.

February 20, 2024, the Company entered into the 2024 LSA with Biofrontera AG which will significantly reduce our cost of inventory

in the future.

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

prior 50% beginning with inventory purchases after the execution date.

This will reduce our cash needs for inventory which will be

partially offset by R&D costs, resulting in expected net savings of $ 0.7

million by March 2025 and continuing in subsequent years.

In addition, on February 19, 2024, the Company

entered into a securities and purchase agreement with healthcare-focused institutional investors resulting in net proceeds of $ 7.2

million, which were received on February 22, 2024.

Under the agreement, we also issued warrants to purchase 8,000 shares of Series

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

If these warrants are exercised in full, we will receive additional

net proceeds of $ 7.2 million.

To encourage the investors to

exercise the warrants, they will expire within 21 days upon the satisfaction of certain conditions (but if such conditions are not met,

they will expire three years after issuance).

Even though we anticipate that we will satisfy the conditions to trigger the expiration

of the warrants and receive additional financing as a result of the exercise of the warrants, there can be no assurance that such conditions

will be met or that the investors will choose to exercise the warrants prior to expiration.

Subsequent Events-

Securities Purchase Agreement for Series B Convertible Preferred .

believes that, as a result of these plans, it has sufficient liquidity and probable financing to meet its funding requirements for

at least one year from the date the financial statements are issued.

However, the Company’s plans will depend on many factors,

including executing on our sales plan over one year from issuance, reaching at least 5% in year to date revenue growth over 2023 by

June 2024, receiving shareholder approval to increase the number of authorized shares to enable the warrant exercise, controlling

our selling, general and administrative costs, and the investors electing to exercise their warrants within the anticipated

timeframe, among other possible challenges and unforeseen circumstances.

A lack of execution or unforeseen circumstances may require

the Company to raise additional capital or debt which may not be available on acceptable terms, or at all which could result in a

material adverse effect on the Company and its financial statements.

The accompanying financial statements have been prepared

on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or

the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

As of December 31, 2024, we had cash and cash equivalents of $ 5.9 million.

The Company cannot provide assurance that it will ultimately achieve profitable operations and become operating cash flow positive

or raise additional debt or equity capital.

Additionally, the current capital resources are not adequate to continue operating and

maintaining the business strategy for a period of twelve months from the issuance date of this report.

Management believes that

these conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months

from the date of this Annual Report on Form 10-K.

plans that are intended to mitigate the conditions that raise substantial doubt about the Company’s ability to continue as

a going concern, include expanding the commercialization of Ameluz ® in the United States while

controlling expenses and limiting capital expenditures, as well as capitalizing on the reduced cost of inventory in line with the

terms of the Second A&R Ameluz LSA.

The Company also plans to secure additional capital through equity or debt financings, or

the sale of assets to carry out the Company’s planned commercial and development activities.

However, there can be no

assurance that the Company will be successful in executing the aforementioned commercial strategies and/or obtaining sufficient

funding on acceptable terms, if at all, and that the substantial doubt will be alleviated.

If the Company is unable to raise capital

when needed, it will not have sufficient cash resources and liquidity to fund its business

operations and may

be forced to delay or reduce continued commercialization efforts or R&D programs which could have a material adverse effect on the Company and its financial statements.

financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the

amounts and classification of liabilities that might result from the outcome of the uncertainties described above, that might be necessary

should the Company be unable to continue as a going concern.

Summary of Significant Accounting Policies

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and per share and share amounts.

segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief

operating decision-makers in deciding how to allocate resources and assess performance.

The Company’s chief operating decision

makers (determined to be the Chief Executive Officer and the Chief Financial Officer) do not manage any part of the Company

separately, and the allocation of resources and assessment of performance are based on the Company’s operating results.

operate in a single reporting segment, the commercialization of pharmaceutical products for the treatment of dermatological conditions

and diseases within the U.S.

All business operations focus on the products Ameluz ® , including the complementary product

BF-RhodoLED ® , and Xepi ® .

We monitor and manage our business operations across these products collectively

as one reporting segment.

Company evaluates segment reporting in accordance with ASU 2023-07, Segment Reporting ( Accounting

Standards Codification (“ASC”) Topic 280), Improvements to Reportable Segment Disclosures, each reporting

period, including by evaluating the reporting package reviewed by the Company’s chief operating decision maker

In accordance with ASU 2023-07, the Company has determined that the Chief Executive Officer functions as the

The CODM manages the Company’s business activities as a single operating segment at the consolidated level.

the CODM uses consolidated net (loss) to measure segment profit or loss, allocate resources and assess performance.

the CODM reviews and utilizes functional expenses (cost of revenues, sales and marketing, research and development

(“R&D”), and general and administrative) at the consolidated level to manage the Company’s operations.

the Company’s revenues are derived from within the United States and, therefore, no geographical segments are presented.

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

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The Common Stock began trading on the

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

Nasdaq Capital Market (“Nasdaq”) on a post-split basis on July 5, 2023.

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

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

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

GAAP requires the use of estimates and assumptions by

management that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities,

as reported on the balance sheet date, and the reported amounts of revenues and expenses arising during the reporting period.

main areas in which assumptions, estimates and the exercising of judgment are appropriate relate to realization and valuation of

receivables and inventory, valuation of contingent consideration and warrant liabilities, impairment assessment of

intangibles and other long-lived assets, share-based payments, income taxes including

deferred tax assets and liabilities and contingent liability recognition.

Estimates are based on historical experience and other assumptions that are considered

appropriate in the circumstances.

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

preparation of the consolidated financial statements in accordance with United States GAAP requires the use of estimates and assumptions by management

that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, as reported on

the balance sheet date, and the reported amounts of revenues and expenses arising during the reporting period.

The main areas in which

assumptions, estimates and the exercising of judgment are appropriate relate to realization and valuation of receivables and inventory,

valuation of warrant liabilities, impairment assessment of intangibles and other long-lived

assets, share-based payments, income taxes including deferred tax assets and liabilities and contingent liability recognition.

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

They are continuously

reviewed but may vary from the actual values.

and Cash Equivalents

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be cash equivalents.

Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation

At December 31, 2023, approximately $ 1.0 million

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

The Company has not experienced any losses on these accounts and

management does not believe that the Company is exposed to any significant risks with respect to these accounts.

The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance

Corporation (“FDIC”).

cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards (see Note 8.

Cash Balances and Statement of Cash Flows Reconciliation) .

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

consolidated balance sheet.

Related Party

Company accounts for its investment, related party in accordance with ASC 321, Investments — Equity Securities (“ASC

Equity securities, which are comprised of investments in common stock with a readily determinable fair value, are initially

recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and

losses reported in the Company’s consolidated statement of operations.

As the fair value of the Company’s investments is

reported in a foreign currency, the change in fair value attributable to changes in foreign exchange rates is included in other income,

net in the consolidated statement of operations.

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

balance sheet.

receivable are reported at their net realizable value.

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have standard payment terms that generally require payment within approximately 30 to 90 days.

Management performs ongoing credit evaluations

of its customers.

The allowance for estimated credit losses represents management’s best

estimate of probable credit losses.

The allowance is based upon a number of factors, including the length of time accounts receivable

are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation and any other forward-looking

Management performs ongoing credit

evaluations of its customers.

The allowance for estimated credit losses represents management’s best estimate of probable

credit losses.

The allowance is based upon a number of factors, including the length of time accounts receivable are past due, the

Company’s previous loss history, the specific customer’s ability to pay its obligation and any other forward-looking

data regarding customers’ ability to pay which may be available.

In addition, management considered other qualitative factors, particularly

in relation to the greater actinic keratosis and dermatological market.

Receivables are written off against the allowance when management

believes that the amount receivable will not be recovered.

Provisions for the allowance for doubtful accounts are recorded in selling, general and administrative expenses in the accompanying statements

of operations.

In addition, management considered other qualitative factors,

particularly in relation to the greater actinic keratosis and dermatological market.

Receivables are written off against the

allowance when management believes that the amount receivable will not be recovered.

The provision for credit losses is recorded in

selling, general and administrative expenses in the accompanying statements of operations.

Concentration

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institution, in amounts that exceed federally insured limits.

The Company has no significant off-balance sheet risk such as foreign exchange

contracts, option contracts, or other foreign hedging arrangements.

The Company has no significant off-balance sheet risk such

as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

Concentrations

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We continue to monitor these conditions and assess their possible impact on our business.

The Company has a receivable due from Biofrontera AG for its 50% share of a legal settlement and related costs

for which they are jointly and severally liable for the total settlement amount.

The Company has a contractual right to repayment of

its share of the settlement payment from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021, which

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

this receivable has credit risk, it is mitigated by the Settlement Allocation Agreement as amended on March 31, 2022, which

provides certain remedies to the Company, if Biofrontera AG fails to make timely reimbursements, which the Company may implement in its

sole discretion, including the ability to charge interest at a rate of 6.0% per annum for each day that any reimbursement is past due

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

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

The Addendum to Amended and Restated License

and Supply Agreement, effective December 5, 2023, and as amended on January 29, 2024, allows for the Company to set off the amounts due to Biofrontera

AG and Ameluz Licensor, with the amounts due from Biofrontera AG and Ameluz Licensor.

As such, in accordance with ASC 210-20-45-1

the other receivables, related party have been offset against accounts payable, related parties for the year ended December 31, 2023.

are dependent on two licensors, Biofrontera Pharma and Ferrer, to supply drug products, including all underlying

components, for our commercial efforts.

These efforts could be adversely affected by a significant interruption in the supply of our

finished products.

These licensors may have risks associated with limited source suppliers and contract manufacturers.

If our licensors

fail to maintain relationships with these suppliers and manufacturers or they are unable to produce product, our business could be materially

are dependent on Biofrontera Pharma to supply drug products, including all underlying components, for our

commercial efforts.

These efforts could be adversely affected by a significant interruption in the supply of our finished products.

licensor may have risks associated with limited source suppliers and contract manufacturers.

If our licensor fails to maintain relationships

with suppliers and manufacturers or they are unable to produce product, our business could be materially harmed.

goods consist of pharmaceutical products purchased for resale and are stated at the lower of cost or net realizable value.

Cost is calculated

by applying the first-in-first-out method (FIFO).

by applying the first-in-first-out method, based on shipping location.

Inventory costs include the purchase price of finished goods and freight-in costs.

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in our statements of operations.

Accumulated depreciation was $ 0.6 million for each of the years ended December 31, 2024 and 2023.

assets with finite lives are amortized over their estimated useful lives.

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The Company adopted the standard effective January 1, 2023.

The adoption of the new lease standard resulted in the addition of an operating lease

right-of-use asset and an operating lease liability in the amount of $ 1.8 million to the consolidated balance sheet as of January 1,

The adoption of the new lease standard resulted in the addition of an operating

lease right-of-use asset and an operating lease liability in the amount of $ 1.8 million to the consolidated balance sheet as of January

the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and

circumstances present.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present

value of lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily

determinable.

As such, the Company utilizes its incremental borrowing rate (“IBR”), which is the rate incurred to borrow

on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

the twelve months ended December 31, 2023 was 9.5%.

Given the absence of an outstanding debt agreement for the twelve months ended December 31, 2022, a synthetic credit rating

analysis was used in estimating the Company’s IBR.

on a synthetic credit rating of Ba3 and a term of 3.33 to six years, the IBR was determined to be 6% for lease liabilities at

inception and 8.5% for 2022 lease liabilities.

No adjustments to the right-of-use asset were required for items such as

initial direct costs paid or incentives received.

Company has elected to adopt the practical expedient provided in ASC 842 and not reassess leases that existed prior to the commencement

Whether any expired or existing contracts are or contain leases, 2).

Lease classification, or 3).

Initial indirect costs for

any existing leases.

The Company has elected to combine lease and non-lease components as a single component for certain asset classes,

when applicable.

Operating leases are recognized on the balance sheet as operating lease right-of-use assets, operating lease liabilities

current and operating lease liabilities non-current.

The Company also elected to utilize the short-term lease recognition exemption and

for those leases that qualified, the Company did not recognize right-of-use assets or lease liabilities.

These leases are recognized

on a straight-line basis over the expected term.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value

of lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily determinable.

As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized

basis over a similar term an amount equal to the lease payments in a similar economic environment.

No adjustments to the right-of-use

asset were required for items such as initial direct costs paid, or incentives received.

Company has elected to adopt the practical expedient provided in ASC 842 and not reassess contracts and leases that existed prior to

the commencement date (i) to determine whether any expired or existing contracts are or contain leases, (ii) for lease

classification, or (iii) for initial indirect costs for any existing leases.

The Company has elected to combine lease and

non-lease components as a single component for certain asset classes, when applicable.

Operating leases are recognized on the

balance sheet as operating lease right-of-use assets, operating lease liabilities current and operating lease liabilities

The Company also elected to utilize the short-term lease recognition exemption and for those leases that qualified, the

Company did not recognize right-of-use assets or lease liabilities.

These leases are recognized on a straight-line basis over the

expected term.

of Long-Lived Assets

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down to their estimated fair values and the loss is recognized in the statements of operations.

Refer to Note 12.

Intangible Asset,

Consideration

consideration in a business combination is included as part of the acquisition cost and is recognized at fair value as of the acquisition

For contingent consideration, management is responsible for determining the appropriate valuation model and estimated fair value,

and in doing so, considers a number of factors, including information provided by an outside valuation advisor.

Contingent consideration

liabilities are reported at their estimated fair values based on probability-adjusted present values of the consideration expected to

be paid, using significant inputs and estimates.

Key assumptions used in these estimates include probability assessments with respect

to the likelihood of achieving certain milestones and discount rates consistent with the level of risk of achievement.

The fair value

of contingent consideration liabilities is remeasured each reporting period, with changes in the fair value included in current operations.

The remeasured liability amount could be significantly different from the amount at the acquisition date, resulting in material charges

or credits in subsequent reporting periods.

Held for Sale

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

(i) management commits to a plan to sell

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

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

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

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

Assets classified as held for sale are no longer depreciated and are reported

at the lower of their carrying value or fair value less estimated costs to sell in accordance with ASC 360, Property, Plant and Equipment-Impairment

or Disposal of Long-Lived Assets.

Assets Held for Sale.

Contingencies

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Legal costs associated with legal proceedings are expensed when incurred.

Commitments and Contingencies.

Company accounts for Common Stock warrants as either equity-classified or liability-classified instruments based on an assessment of

the specific terms of the warrants and applicable authoritative guidance in FASB Accounting Standards Codification (“ASC”)

480, Distinguishing Liabilities from Equity (“ASC 480”) and Derivatives and Hedging (“ASC 815”).

the specific terms of the warrants and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity

(“ASC 480”) and Derivatives and Hedging (“ASC 815”).

classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no

further adjustments to their valuation are made.

Warrants classified as derivative liabilities that require separate accounting as liabilities

are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and are revalued on each

subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods

recorded as other income or expense.

Management estimates the fair value of these liabilities using the Black-Scholes-Merton model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well

as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.

their issuance date on November 2, 2023, the Pre-Funded Warrants (“2023 Pre-Funded Warrants”) (see Note 18.

Stockholders’ Equity) were accounted for as equity as these instruments met all of the requirements for equity classification

under ASC 815-40.

Warrants classified as derivative liabilities that require separate accounting as

liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and are

revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value

between reporting periods recorded as other income or expense.

Management estimates the fair value of these liabilities using the

Black-Scholes-Merton (“BSM”) model and assumptions that are based on the individual characteristics of the warrants or

instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and

risk-free interest rate.

Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative

financial instruments to be separately accounted for in accordance with ASC Topic 815:

Derivatives and Hedging .

The accounting

treatment of derivative financial instruments requires that the Company record qualifying embedded conversion options and any related

freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance

Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance

The Company reassesses the classification of its derivative instruments at each balance sheet date.

If the classification

changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

Embedded conversion options classified as derivative liabilities and any related equity classified freestanding instruments are recorded

as a discount to the host instrument.

The fair value for the warrants issued on February 22, 2024, to purchase shares of Series B-3 Convertible Preferred

Stock, was estimated utilizing a probability weighted average approach, involving two scenarios;

one based on the underlying value of

the convertible preferred stock and the other based on the underlying value of the publicly traded common equity value.

Fair Value Measurements for additional information.

Issuance Costs

issuance costs on debt financings are deferred and amortized over the term of the debt using the interest method or the

straight-line method, (if results are not materially different than the interest method).

If a conversion of the underlying debt occurs prior to maturity a

proportionate share of the unamortized amount is expensed.

Any unamortized debt issuance costs are presented net of the related debt

on the consolidated balance sheets

Value Measurements

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of any input that is significant to the fair value measurement.

See additional information in Note 3.

Fair Value Measurements.

Value of Financial Instruments

carrying amounts reflected in the consolidated balance sheets for, accounts receivable, other receivables,

accounts payable and start-up cost financing included in acquisition contract liabilities approximate their fair values, due to their

short-term nature.

carrying amounts reflected in the consolidated balance sheets for accounts receivable, other receivables, and accounts payable

approximate their fair values due to their short-term nature.

Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers .

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be received for the related sales.

is sold directly to specialty pharmacies.

Sales are recognized net of sales deductions when ownership and control are transferred

to the customer, which is generally upon delivery.

Sales deductions include expected returns, discounts and incentives such as payments

made under patient assistance programs.

These rebates are estimated at the time of sale based on the amounts incurred or expected to

be received for the related sales.

payment terms for sales of our pharmaceutical products are generally short-term payment terms with the possibility of volume-based discounts,

co-pay assistance discounts, or other rebates.

RhodoLED ® is also sold directly to physicians, hospitals or other qualified healthcare providers through (i) direct sales,

(ii) rental agreements, or (iii) an evaluation period up to six-month for a fee, after which a customer can decide to purchase or return

Lamps are also sold directly to physicians, hospitals or other qualified healthcare providers through (i) direct sales, (ii) rental

agreements, or (iii) an evaluation period up to six-month for a fee, after which a customer can decide to purchase or return the lamp.

For direct sales, revenue is recognized only after complete installation has taken place.

As directed by the instruction manual,

the lamp may only be used by the customer once it has been professionally installed.

A final decision to purchase the lamps that are

within the evaluation period does not need to be made until the end of the evaluation period.

Lamps that are not returned at the end

of the evaluation period are converted into sales in accordance with the contract terms.

The Company generates immaterial revenues from

the monthly fees during the evaluation or rental period and from the sale of lamps at the end of the evaluation period.

As directed by the instruction manual, the

lamp may only be used by the customer once it has been professionally installed.

A final decision to purchase the lamps that are within

the evaluation period does not need to be made until the end of the evaluation period.

Lamps that are not returned at the end of the

evaluation period are converted into sales in accordance with the contract terms.

The Company generates immaterial revenues from the

monthly fees during the evaluation or rental period and from the sale of lamps at the end of the evaluation period.

Consideration

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the Company and its customers.

Components of variable consideration include trade discounts and allowances, product returns, government

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

Components of variable consideration include trade discounts and allowances and government

Variable consideration is recorded on the balance sheet as either a

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The Company records estimates for these items as a reduction of revenue in the same period the revenue is recognized.

and Payor Rebates – The Company contracts with, or is subject to arrangements with, certain third-party payors, including pharmacy

benefit managers and government agencies, for the payment of rebates with respect to utilization of its commercial products.

is also subject to discount and rebate obligations under state and federal Medicaid programs and Medicare.

The Company records estimates

for these discounts and rebates as a reduction of revenue in the same period the revenue is recognized.

Incentives – The Company has historically maintained a co-pay assistance program, which is intended to provide financial assistance

to qualified patients with the cost of purchasing Xepi ® .

The Company estimates and records accruals for these incentives

as a reduction of revenue in the period the revenue is recognized.

The Company estimates amounts for co-pay assistance based upon the

number of claims and the cost per claim that the Company expects to receive associated with products sold to customers but remaining

in the distribution channel at the end of each reporting period.

During 2023, due to the continued delays with the supply of Xepi ® ,

the co-pay assistance program was discontinued.

arrangements that include sales-based royalties, the Company recognizes royalty expense at the later of (i) when the related sales occur,

or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Product Warranty

Company generally provides a 36-month warranty for sales of BF-RhodoLED ® for which estimated contractual warranty obligations

and Payor Rebates – The Company contracts with, or is subject to arrangements with, certain third-party payors, including government

agencies, for the payment of rebates with respect to utilization of its commercial products.

The Company is also subject to discount

and rebate obligations under state and federal Medicaid programs and Medicare.

The Company records estimates for these discounts and

rebates as a reduction of revenue in the same period the revenue is recognized.

Company generally provides a 36-month warranty for sales of RhodoLED ® Lamps for which estimated contractual warranty obligations

are recorded as an expense at the time of installation.

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actual performance rates or repair costs differ from estimates, revisions to the estimated warranty liability would be required.

expenses were $ 0.1 million and negligible for the years ended December 31, 2023 and 2022, respectively, and are recognized as selling, general and administrative

expenses were negligible and $ 0.1 million for the years ended December 31, 2024 and 2023, respectively, and are recognized as selling,

general and administrative expenses.

costs of obtaining a contract with a customer may be recorded as an asset if the costs are expected to be recovered.

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transportation, shipping and handling costs, and inventory adjustment due to expiring products, as well as sales-based royalties.

and distribution costs totaled $ 0.5 million for each of the years ended December 31, 2023 and 2022, respectively.

and distribution costs totaled $ 0.6 million and $ 0.5 million for the years ended December 31, 2024 and 2023, respectively.

Company measures and recognizes share-based compensation expense for equity awards based on fair value at the grant date.

uses the Black-Scholes-Merton option pricing model to calculate the fair value of its stock option grants.

The compensation

cost for restricted stock awards is based on the closing price of the Company’s common stock on the date of grant.

compensation expense recognized in the statements of operations is based on the period the services are performed and recognized as compensation

expense on a straight-line basis over the requisite service period.

The compensation cost for

restricted stock awards is based on the closing price of the Company’s Common Stock on the date of grant.

Share-based compensation

expense recognized in the statements of operations is based on the period the services are performed and recognized as compensation expense

on a straight-line basis over the requisite service period.

The Company accounts for forfeitures as they occur.

Black-Scholes-Merton option pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected volatility

of the value of the Company’s common stock, and the expected term of the option.

Black-Scholes-Merton option pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected

volatility of the value of the Company’s Common Stock, and the expected term of the option.

These estimates involve inherent uncertainties

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grant for a period that is commensurate with the assumed expected term.

The Company based the volatility assumption on a weighted average of the peer group re-levered equity volatility, the warrant

implied volatility and the historical equity volatility of the Company.

The Company based the volatility assumption on a weighted average of the peer group re-levered equity volatility and the historical equity volatility of the Company.

The peer group was developed based on companies in the biopharma

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data and given the plain vanilla nature of the options granted by the Company, the expected term is determined using the “simplified”

method, as prescribed in SEC Staff Accounting Bulletin (“SAB”) No.

107 (“SAB 107”), whereby the expected life

method, as prescribed in SEC Staff Accounting Bulletin No.

107, whereby the expected life

equals the average of the vesting term and the original contractual term.

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our product and professional fees for legal, consulting, and other general and administrative costs.

costs are expensed as incurred.

For the years ended December 31, 2023 and 2022, advertising costs totaled $ 0.2 million and $ 0.1 million,

respectively.

R&D costs are expensed as incurred.

R&D costs include external costs of outside vendors engaged to conduct

R&D activities, and other operational costs related to the Company’s R&D activities.

costs are expensed as incurred and were negligible for the year ended December 31, 2024 and totaled $ 0.2 million for the year ended December31,

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

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

depreciation, and other direct and allocated expenses.

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

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

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

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

of its clinical trials.

We record accruals for estimated costs under these contracts.

When evaluating the adequacy of the accrued liabilities,

we analyze the progress of the studies or clinical trials, including the phase or completion of events, invoices received, contracted

costs and purchase orders.

Significant judgments and estimates are made in determining the accrued balances at the end of any reporting

period based on the facts and circumstances known at that time.

Although we do not expect the estimates to be materially different from

the amounts actually incurred, actual results could differ from

our estimates.

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

any necessary adjustments in the period such variances become known.

Payments made under these arrangements in advance of the receipt

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

Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes , which requires

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stock method.

Issued Accounting Pronouncements

September 2016, the FASB issued Accounting Standards Update (“ASU ”) 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

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

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

The new standard was effective

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

In November 2023, FASB issued ASU 2023-07, Segment

Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements

through enhanced disclosures about significant segment expenses on an interim and annual basis.

All disclosure requirements of ASU 2023-07

are required for entities with a single reportable segment.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023,

and interim periods for the fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods

Reclassification of Prior Year Presentation

Certain prior period amounts have been reclassified for consistency with

the current period presentation.

The reclassification was limited to the condensed consolidated statements of cash flow and had no impact

on the reported results of operations.

Specifically, accounts payable-related parties of $ 4.4 million was reclassed from accounts payable

and related party payables for prior year presentation.

Issued or Adopted Accounting Pronouncements

November 2023, FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to

Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant

segment expenses on an interim and annual basis.

All disclosure requirements of ASU 2023-07 are required for entities with a single reportable

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for the fiscal years beginning

after December 15, 2024, and should be applied on a retrospective basis to all periods presented.

adopted this ASU retrospectively on December 31, 2024.

Segment Reporting .

In August 2020, FASB issued ASU

2020-06 - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging and

Contracts in Entity’s Own Equity (Subtopic 815-40) , aimed at simplifying the accounting for certain financial

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash

conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity

classification of contracts in an entity’s own equity.

Additionally, the new standard introduces enhanced disclosures for

convertible debt and freestanding instruments indexed to and settled in an entity’s own equity.

It also amends the diluted

earnings per share guidance, mandating the use of the if-converted method for all convertible instruments.

ASU 2020-06 is

effective for fiscal years beginning after December 15, 2023, and must be applied on a full or modified retrospective basis.

adopted the ASU effective January 1, 2024, which did not have a material impact on the Company’s financial statements.

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

The ASU requires

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

items that meet a quantitative threshold.

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

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

Early adoption

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

We are evaluating the

effect that this guidance will have on our consolidated financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-03, I ncome

Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement

The new guidance requires disaggregated information about certain income

statement expense line items on an annual and interim basis.

This ASU is effective for public business

entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

The new standard permits early adoption and can be applied prospectively or retrospectively.

We are evaluating the effect that this guidance

will have on our consolidated financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20);

Induced Conversions of Convertible

This ASU clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible

debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted

for as an induced conversion.

It is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim

reporting periods within those annual reporting periods.

Early adoption is permitted.

We are currently evaluating the effect of adopting the ASU on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income

Taxes (Topic 740) – Improvements to Income Tax Disclosures .

The ASU requires that an entity disclose specific categories

in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold.

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

The amendments in this ASU are

required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption is permitted and the amendments should be applied

on a prospective basis.

We are currently evaluating the effect of adopting the ASU on our disclosures.

Acquisition Contract Liabilities

March 25, 2019, we entered into an agreement (as amended, the “Share Purchase Agreement” or “SPA”)

with Maruho Co, Ltd.

(“Maruho”) to acquire 100 %

of the shares of Cutanea Life Sciences, Inc.

As of the date of the acquisition, Maruho owned approximately 29.9 %

of Biofrontera AG through its wholly-owned subsidiary, Maruho Deutschland GmbH.

Biofrontera AG is our former parent, and currently a

significant shareholder.

to the Share Purchase Agreement, Maruho agreed to provide $ 7.3 million in start-up cost financing for Cutanea’s redesigned business

activities (“start-up costs”).

These start-up costs were to be paid back to Maruho by the end of 2023 in accordance

with contractual obligations related to an earn-out arrangement.

In addition, as part of the earn-out arrangement with Maruho, the product

profit amount from the sale of Cutanea products as defined in the share purchase agreement was be shared equally between Maruho and Biofrontera

until 2030 (“contingent consideration”).

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

6.0 % over the applicable term.

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

The amount of contingent

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

The Company re-measured contingent consideration and

re-assessed the underlying assumptions and estimates at each reporting period utilizing a scenario-based method.

December 29, 2023, we entered into a Confidential Settlement Agreement and Mutual Release (the “Release”), with Maruho, and

a Share Transfer Agreement (together with the Release, the “Settlement Agreement”).

The Settlement Agreement resolves the arbitration proceeding initiated by the Company against Maruho in the

International Chamber of Commerce (the “Arbitration”) in which the Company alleged certain claims against Maruho concerning

the Share Purchase Agreement.

In the Arbitration, the Company sought, in part, a declaration that it is not obligated to repay $ 7.3 million

of “start-up costs” to Maruho.

Settlement Agreement contains a mutual release whereby each of the Company and Maruho agreed to release and discharge the other party

from any and all claims, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,

covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and

demands whatsoever, in law, admiralty, equity, arbitration or otherwise, which against the other arising from or in connection with or

in any manner relating to the Share Purchase Agreement, including but not limited to any claims that were or could have been asserted

in the Arbitration.

the Settlement Agreement, the obligations of the Company to repay the $ 7.3

million of start-up costs to Maruho, and to make the contingent consideration payments, were released.

In exchange the Company agreed to transfer to Maruho 5,451,016

shares of Biofrontera AG.

The exchange of the shares of Biofrontera AG for the release of the liabilities mentioned above, both of

which were recorded at their respective fair values at the exchange date, resulted in a gain.

following table provides a summary of the transaction under the settlement Agreement:

Schedule of Acquisition Contract Liabilities

(in thousands)

Release of contingent consideration

Release of start-up cost financing

Transfer of Investment in Biofrontera AG

Gain on settlement

We are currently evaluating the effect that this

guidance will have on our consolidated financial statements and related disclosures.

Fair Value Measurements

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Investment, related party

Contingent Consideration

Warrant liability – 2023 Purchase Warrants

Warrant liability – 2022 Purchase Warrants

Warrant liability – Purchase Warrants

Warrant liability – 2022 Inducement Warrants

Warrant liability

Total Liabilities

related party

of December 31, 2023 and 2022, the Company has an investment in 177,465 and 6,466,946 , respectively, of common shares of Biofrontera

AG, a company traded on the Frankfurt Stock Exchange and a significant shareholder of Biofrontera.

The fair value of this investment

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

Investment Related Party and

of December 31, 2024 and 2023, the Company owned 3,019 and 8,450 common shares of Biofrontera AG, respectively.

The fair value of this investment was determined with Level 1 inputs through references to quoted market prices.

Investment Related Party and Note 13.

Related Party Transactions .

Consideration

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

Purchase Agreement, is reflected at fair value within acquisition contract liabilities, net on the consolidated balance sheets.

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

The valuation of the contingent consideration utilizes a scenario-based method under which a set of payoffs are calculated using the

term of the earnout, projections, and an appropriate metric risk premium.

These payoffs are then discounted back from the payment date

to the valuation date using a payment discount rate.

Finally, the discounted payments are summed together to arrive at the value of the

contingent consideration.

The scenario-based method incorporates the following key assumptions:

(i) the forecasted product profit amounts,

(ii) the remaining contractual term, (iii) a metric risk premium, and (iv) a payment discount rate.

The Company re-measures contingent

consideration and re-assesses the underlying assumptions and estimates at each reporting period.

the Settlement Agreement (see Note 3), the obligations of the Company to make the profit-sharing payments related

to the products acquired by the Company pursuant to the Share Purchase Agreement were released.

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

Schedule of Fair Value of Contingent Consideration

(in thousands)

Balance at December 31, 2021

Change in fair value of contingent consideration

Balance at December 31, 2022

Change in fair value of contingent consideration

Release of contingent consideration

Balance at December 31, 2023

increase/(decrease) in fair value of the contingent consideration in the amount of $ 0.1 million and $ ( 3.8 ) million during the years ended

December 31, 2023 and 2022 was recorded in operating expenses in the statements of operations.

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

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

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

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

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

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

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

Stockholders’ Equity - Registered Public Offering and Warrant Amendment for additional

The 2022 Purchase

Warrants, the 2022 Inducement Warrants and the 2023 Purchase Warrants were accounted for as liabilities as these warrants provide for

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

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

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

The warrant liabilities are measured at fair

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

warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of Common Stock originally issued in a

private placement on May 16, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise

the exercise price to $ 3.55 per share (the “2022 Purchase Warrants”) (ii) warrants to purchase 214,286 shares of Common

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

exercise price to $ 3.55 per share (the “2022 Inducement Warrants”) and (iii) warrants to purchase 1,807,500 shares of

Common Stock issued on November 2, 2023 expiring five years following the date of issuance and with an exercise price of $ 3.55 per

share ( the “2023 Purchase Warrants”).

Stockholders’ Equity for additional details.

2023 Purchase Warrants, the 2022 Inducement Warrants and the 2022 Purchase Warrants were accounted for as liabilities as these warrants

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

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

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

The warrant liabilities are measured

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

Company utilizes a Black-Scholes option pricing model to estimate the fair value of the warrant liabilities which is considered a Level

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or loss being reported in our consolidated statement of operations.

fair value at issuance for the Level 3 warrants was estimated using a Black-Scholes pricing model based on the following assumptions

at May 16, 2022 for the 2022 Purchase Warrants, July 26, 2022 for the 2022 Inducement Warrants, and November 2, 2023 for the 2023

Purchase Warrants:

fair value for the Level 3 warrants at December 31, 2024 and December 31, 2023 was estimated using Black-Scholes pricing model based

on the following assumptions:

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

2023 Purchase

Expiration term (in years)

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Dividend yield

fair value for the Level 3 warrants at December 31, 2023 was estimated using Black-Scholes pricing model based on the following assumptions:

2023 Purchase

2022 Purchase

2022 Inducement

Expiration term (in years)

Risk-free Rate

Dividend yield

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

Expiration term (in years)

Risk-free Rate

Dividend yield

The warrants issued

on February 22, 2024 to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ 0.001 per share (the “2024 Preferred

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

within the control of the Company (see Note 14.

Stockholders’ Equity ) .

The 2024 Preferred Warrants were issued in the first quarter of 2024 and exercised prior to the end of the second quarter of 2024.

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

two scenarios.

In scenario one, the warrant value was based on the underlying value of the convertible preferred stock, using an option-pricing

model backsolve that solved for the value of our publicly traded equity on the valuation date to obtain the valuation date fair value

of the Series B-3 Convertible Preferred Stock, then applied the Series B-3 Convertible Preferred Stock value into the BSM model equation

to determine the value of the Series B-3 convertible warrants.

In scenario two, the warrant value was based on the underlying value of

the publicly traded common equity value.

Scenario two assumes the preferred stock will be converted into Common Stock prior to a liquidity

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

to the model.

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

February 22, 2024, for the three months ended March 31, 2024 and at the exercise date of May 13, 2024:

(i) expected stock price volatility

of 79.3 % to 105 %;

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

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

and (iv) dividend yield of 0.0 %.

The fair value of the 2024 Preferred Warrants was $ 4.1 million at issuance and $ 5.4 million

at the exercise date.

Stockholders’ Equity for additional details.

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

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Change in fair value of warrant liability

Warrant inducement expense (See Note 18.

Stockholders’ Equity -

Exercise of 2021 Purchase Warrant and Issuance of 2022 Inducement Warrant)

Warrant inducement expense

Fair value at end of year

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

Revenue from the sales of our BF-RhodoLED ® lamp and Xepi ® are relatively insignificant compared with the

revenues generated through our sales of Ameluz ® .

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

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

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

with the clinical lamps.

This arrangement is no longer effective as of December 31, 2024.

Refer to Note

13, Related Party Transactions .

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

of Revenue Allowance and Accrual Activities

Cash Balances and Statement of Cash Flows Reconciliation

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

At December 31, 2024, approximately $ 5.7 million of the Company’s cash balances were in excess of FDIC limits.

The Company has

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

respect to these accounts.

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

Long-term restricted

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

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

of cash flows:

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

(in thousands)

Balance at December 31, 2021

Provision related to current period sales

Credit or payments made during the period

Balance at December 31, 2022

Beginning balance

Provision related to current period sales

Credit or payments made during the period

Balance at December 31, 2023

Ending balance

December 31, 2024

December 31, 2023

Cash and cash equivalents

Long-term restricted cash

Total cash and cash equivalent, and restricted cash shown on the statements of cash flows

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

Investment, Related Party

of December 31, 2023 and December 31, 2022, our investment in equity securities consisted solely of 177,465

and 6,466,946 ,

respectively of common shares of Biofrontera AG, a significant shareholder.

(See Note 17.

of December 31, 2024 and December 31, 2023, our investment in equity securities consisted solely of 3,019 and 8,450 , common shares of Biofrontera AG, respectively (See Note 13.

Related Party Transactions ).

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

we still own, as well as gains and losses on securities we sold or transferred during

As reflected in the consolidated statements of cash flows, we received proceeds from sales of equity securities of

approximately $ 0.6

million during the twelve months ended December 31, 2023.

There were no

proceeds from sales of equity securities during the twelve months ended December 31, 2022.

Equity securities gains and losses

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

and losses on securities we sold or transferred during the period.

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

proceeds from sales of equity securities of approximately $ 0.1 million and $ 0.6 million during the year ended December 31, 2024

and 2023, respectively.

of Related Party Investments in Equity Securities

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Accounts Receivable, net

receivable are mainly attributable to the sale of Ameluz ® .

It is expected that all trade receivables will

be settled within twelve months of the balance sheet date.

receivables are mainly attributable to the sale of Ameluz ® .

It is expected that all trade receivables will be settled

within twelve months of the balance sheet date.

Trade accounts receivable are stated at their net realizable value.

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

historical experience and current information.

In developing the estimate for expected credit losses, trade accounts receivable are

segmented into pools of assets depending primarily on delinquency status, and fixed reserve percentages are established for each

pool of trade accounts receivable.

The allowance for

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

and current information.

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

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

determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain

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If we become aware

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

allowance for doubtful accounts was $ 0.2 million and $ 0.1 million as of December 31, 2023 and 2022, respectively.

Other Receivables, Related Party

of December 31, 2023 and 2022 the Company had a receivable, related party of $ 2.8 million

(presented net in accounts payable, related party) and $ 6.5 million ($ 3.7 million

short term and $ 2.8 million long term), respectively, primarily due from Biofrontera AG for its 50 %

share of the balance of a legal settlement (See Note 23.

Commitments and Contingencies – Legal proceedings ) for which

both parties are jointly and severally liable.

The Company has a contractual right to repayment of its share of the settlement

payments, plus interest and other miscellaneous settlement costs, from Biofrontera AG under the Settlement Allocation Agreement

(“Allocation Agreement”) entered into on December 9, 2021 and as amended on March 31, 2022, which provides that the

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

The Allocation

Agreement, as amended, provides certain remedies to the Company if Biofrontera AG fails to make timely reimbursements, which the

Company may implement in its sole discretion, including the ability to charge interest at a rate of 6.0 %

per annum for each day that any reimbursement is past due and the ability to offset any overdue reimbursement amounts against

payments owed to Biofrontera AG by the Company (including amounts owed under the Company’s license and supply agreement for

Related Party.

The Addendum to Amended

and Restated License and Supply Agreement, effective December 5, 2023, and as amended on January 29, 2024, allows for us to set off

the amounts due to Biofrontera AG and the Ameluz Licensor, with the amounts due from Biofrontera AG, and the Ameluz Licensor.

such, in accordance with ASC 210-20-45-1 the other receivables, related party have been offset against accounts payable, related

parties for the year ended December 31, 2023.

for the receivable was deemed necessary as of December 31, 2023 or December 31, 2022.

are comprised of Ameluz ® , Xepi ® and the BF-RhodoLED ® finished products.

provision related to BF-RhodoLED ® devices was negligible and $ 0.1 million

for the years ended December 31, 2023 and 2022, respectively.

The provision for Xepi ® inventory obsolescence was

$ 0.1 million

and negligible for the years ended December 31, 2022 and 2023, respectively.

There was no provision

relating to Ameluz ® at December 31, 2022.

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

Ameluz Licensor, we recorded an inventory write-off of $ 5.2 million

with a corresponding asset for the anticipated replacement from the licensor to other assets, related party, as the recalled lots of

Ameluz products will be replaced by the Ameluz Licensor at no additional cost in accordance with the Ameluz LSA.

Subsequent Events , Voluntary Product Recall of Limited Lots of Ameluz® for further discussion of the voluntary

Prepaid Expenses and Other Current Assets

expenses and other current assets consist of the following:

Schedule of Prepaid Expenses and Other Current Assets

(in thousands)

Prepaid expenses

Security deposits

Property and Equipment, Net

and equipment, net consists of the following:

Schedule of Property and Equipment

(in thousands)

Computer equipment

Computer software

Furniture & fixtures

Leasehold improvement

Machinery & equipment

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

expense was $ 0.1 million for each of the years ended December 31, 2023 and 2022, respectively, which was included in selling, general

and administrative expense on the consolidated statements of operations.

Intangible Asset, Net

asset, net consists of the following:

Schedule of Intangible Asset Net

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

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

are comprised of Ameluz ® and RhodoLED ® Lamps.

was a negligible adjustment to realizable value recorded for the years ended December 31, 2024 and 2023.

As of December 31, 2023, in connection

with a voluntary recall by the Ameluz Licensor, we recorded an inventory write-off of $ 5.2 million with a corresponding asset for the

anticipated replacement from the licensor to other assets, related party, as the recalled lots of Ameluz ® products were

to be replaced by the Ameluz Licensor at no additional cost in accordance with the Second A&R Ameluz

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

Assets Held for Sale

held for sale consists of the following:

of Assets Held for Sale

(in thousands)

Capitalized software costs

Xepi ® license

Accumulated amortization

Intangible asset, net

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

basis over the useful life of 11 years.

Amortization expense was $ 0.4 million for each of the years ended December 31, 2023 and 2022.

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

the carrying amount of the asset group may not be fully recoverable.

The Company has generated limited revenue from the sales of

Xepi ® during the current reporting periods and recent developments with the third-party manufacturer that was

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

However, Ferrer is

qualifying a new Contract manufacturer, Cambrex, which is expected to begin production in the second half of 2024.

Company performed an impairment analysis because of this situation, coupled with the relief from the start-up cost and contingent consideration payment obligations under the Release, which significantly increased the carrying value of the asset group, and determined no impairment charges were deemed necessary during

the twelve months ended December 31, 2023.

Software Costs.

The Company capitalizes the application development phase costs of internal use software in accordance with ASC 350-40, “ Intangibles-Goodwill and Other-Internal Use Software”.

costs will be amortized on a straight-line basis over the estimated useful life of the asset upon completion.

There was no amortization

expense as of December 31, 2023.

Cash Balances and Statement of Cash Flows Reconciliation

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

At December 31, 2023, approximately $ 1.0 million

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

The Company has not experienced any losses on these accounts and

management does not believe that the Company is exposed to any significant risks with respect to these accounts.

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

Long-term restricted

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

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

of cash flows:

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

(in thousands)

Cash and cash equivalents

Long-term restricted cash

Total cash and cash equivalent, and restricted cash shown on the statements of cash flows

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

Assets held for sale

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

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

The Company is working with a potential purchaser and expects

to complete a sale within the next three to six months and, as such, has classified the asset as held for sale under current

assets in the Consolidated Balance Sheets.

The carrying amount of the asset at the time of classification was $ 2.3 million,

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

No gain or loss was recognized in the Statement

of Operations upon classification as an asset held for sale and the related revenue and expenses associated with the asset were de-minimus.

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

is not being reported as discontinued operations.

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

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

Prior to recording it as held for sale, amortization expense was $ 0.3

million and $ 0.4

million for the years ended December 31, 2024 and 2023, respectively.

Accrued Expenses and Other Current Liabilities

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(in thousands)

Legal settlement (See Note 24)

December 31, 2024

December 31, 2023

Employee compensation and benefits

Professional fees

Distribution and Storage

Research and Development

Product revenue allowances and reserves

Legal settlement

Distribution and Storage

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

paying a total of approximately $ 0.4 million, consisting of (1) the outstanding principal of and interest balance due under the Loan

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

a result of the termination of the Loan Agreement, the Company recognized a $ 0.3

million loss related to prepayment fees and the write-off of deferred financing costs in the accompanying consolidated statement of

operations for the year ended December 31, 2024.

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

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

Each of the Loans was evidenced by a Secured

Promissory Note, effective as of December 21, 2023, and required the Company to make weekly payments of principal and interest in the

amount of approximately $ 102,857 through July 5, 2024 , the maturity date.

Interest expense was recognized using the effective interest

method, such that a constant effective interest rate was applied to the carrying amount of the debt at the beginning of each period until

There were approximately $ 0.3 million of related issuance costs, recognized as a debt discount (contra liability against the

debt balance), that were amortized as interest expense over the life of the loan using the effective interest method, The Company recognized

discount amortization and interest expense of $ 0.3 million and $ 1.7 million for the year ended December 31, 2024 and negligible amounts

for the year ended December 31, 2023.

As of December 31, 2024, the Company had repaid both Loans.

Notes Payable

November 22, 2024, the Company issued $ 4.2

million in an aggregate principal amount of the Company’s 10.0 %

Senior Secured Convertible Notes (the “Notes”) pursuant to a Securities Purchase Agreement entered into on November 21,

2024 with its principal stockholders.

Notes bear interest at 10.0 % per annum, payable in-kind (“PIK interest”) through the issuance of additional principal on

a quarterly basis.

In the Event of Default (as defined in the Notes), the interest will increase to 15 % per annum from the date of written

notice from the holder.

The Notes may be converted at any time into shares of the Company’s Common Stock at a conversion price

of $ 0.78 per share subject to customary adjustments for stock splits, stock dividends and recapitalizations, as described in the Notes.

Notes mature on November 22, 2027, unless earlier converted or repurchased.

The Company may not redeem the Notes at its option prior

Upon maturity, the Company will pay to the holders of the Notes an amount in cash representing all of the outstanding aggregate

principal amount of the Notes, together with any accrued and unpaid interest.

Alternatively, the entire amount of the note will be automatically

converted to shares of Common Stock if the 10-day volume weighted average price of a share of the Company’s Common Stock on Nasdaq

is greater than 250% of the conversion price, and certain other conditions are met.

Notes provide for customary events of default and contain conversion limitations, providing that no conversion may be made if the aggregate

number of shares of Common Stock beneficially owned by the holder would exceed 9.99 % immediately after conversion.

There were no events

of default at December 31, 2024.

Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual

property and accounts.

Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815.

Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability.

of December 31, 2024, the outstanding balance of the Notes was $ 4.1 million including PIK interest and net of unamortized issuance costs

of $ 0.1 million.

The components of (loss) before income taxes are as follows (dollars in thousands):

of components of (loss)

Year ended December 31,

(Loss) before income taxes

a result of the net losses, we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes

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Federal R&D Credits

Foreign rate differential

Change in valuation allowance

3 unchanged sentences

(in thousands)

December 31, 2024

December 31, 2023

Deferred tax assets (liabilities):

2 unchanged sentences

Intangible assets

Acquisition contract liabilities

Property and equipment

14 unchanged sentences

net operating loss carryforwards during the period.

of December 31, 2023, the Company had approximately $ 148.6 million and $ 111.5 million of Federal and state net operating loss carryforwards,

respectively.

of December 31, 2024, the Company had approximately $ 164.5

million and $ 126.3

million of Federal and state net operating loss (“NOL”) carryforwards, respectively.

million of the federal NOLs are not subject to expiration and the remaining NOLs begin to expire in 2035.

loss carryforwards are available to reduce future federal taxable income, if any.

These loss carryforwards are subject to review and

possible adjustment by the appropriate taxing authorities.

The amount of loss carryforwards that may be utilized in any future period

may be limited based upon changes in the ownership of the Company’s shareholders.

These loss carryforwards

are available to reduce future federal taxable income, if any.

These loss carryforwards are subject to review and possible

adjustment by the appropriate taxing authorities.

The amount of loss carryforwards that may be utilized in any future period may be

limited based upon changes in the ownership of the Company’s shareholders.

Company follows the provisions of ASC 740-10, “Accounting for Uncertainty in Income Taxes,” which specifies how tax benefits

9 unchanged sentences

For the year ended December 31, 2024 no estimated interest or penalties were recognized on uncertain tax positions.

Company’s tax returns for 2019 through 2023 remain open and subject to examination by the Internal Revenue Service and state

taxing authorities.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are

subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Net operating loss and tax

credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest

of significant shareholders over a three-year period in excess of 50 percentage points, as defined under Sections 382 and 383 of the

Internal Revenue Code, respectively, as well as similar state provisions.

This could limit the amount of tax attributes that can be

utilized annually to offset future tax liabilities.

The amount of the annual limitation is determined based on the value of the

Company immediately prior to an ownership change.

Company’s tax returns for 2021 through 2024 remain open and subject to examination by the Internal Revenue Service and state taxing

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review

and possible adjustment by the Internal Revenue Service and state tax authorities.

Net operating loss and tax credit carryforwards may

become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders

over a three-year period in excess of 50 percentage points, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively,

as well as similar state provisions.

This could limit the amount of tax attributes that can be utilized annually to offset future tax

The amount of the annual limitation is determined based on the value of the Company immediately prior to an ownership change.

Subsequent ownership changes may further affect the limitation in future years.

The Company has completed numerous financings since its inception, which may have resulted in a change in control as defined by

Sections 382 and 383 of the Internal Revenue Code.

As of December 31, 2023, we have not completed a formal Internal Revenue Code

Section 382 analysis of our equity changes.

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

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

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

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

of the Company, subject to customary exceptions.

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

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

plus 4.00% calculated and charged monthly in arrears.

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

shall be added to the aforementioned rate.

terms of the Loan Agreement, amounts available for advances would be subject to a borrowing base, which is a formula based on certain

eligible receivables and inventory, and a block on such availability in the amount of $ 650,000 .

Our borrowing capacity is based on our eligible receivables with an additional $ 1.0

million borrowing capacity based on inventory.

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

less borrowing base reserve, if any, as defined in the Loan Agreement.

The Loan Agreement also

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

interest rate as of December 31, 2023 was 5.5 % and interest expense for the twelve months ended December 31, 2023 was $ 0.1 million.

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

basis over the term of the line of credit.

The Company recognized minimal amortization expense in connection with this line of credit

for the twelve months ended December 31, 2023, which is recorded as interest expense on the accompanying consolidated statement of operations.

The line of credit balance as of December 31, 2023 was $ 0.2 million.

of January 4, 2024, we voluntarily terminated the Loan Agreement and paid the outstanding principal balance on the revolving

line of credit of approximately $ 194,000 .

We also paid a termination fee of $ 150,000 in connection with the early termination of the revolving

line of credit.

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.

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

5, 2024 , the maturity date.

Each of the Loans is secured by a security interest in substantially all of the Company’s assets (the

“Collateral”).

The default interest rate for each of the Loans is 5.0 %.

of the Business Loan and Security Agreements includes limitations on the Company’s ability to sell, lease, transfer, or otherwise

dispose of its assets outside the ordinary course of its business;

or to create, incur, allow or suffer to exist any lien on any of its

assets other than liens in favor of either lender and certain other permitted liens.

Each of the Business Loan and Security Agreements

also contains customary representations and warranties and customary events of default, upon the occurrence of which, after any applicable

grace period, the applicable lender would have the ability to accelerate its loan and exercise remedies with respect to the Collateral.

The interest rate as of December 31, 2023 was 44 % and interest expense for the twelve months ended December 31, 2023 was negligible.

The loan balance as of December 31, 2023 was $ 3.7 million.

The Company has completed numerous financings since its

inception, which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code.

As of December

31, 2024, we have not completed a formal Internal Revenue Code Section 382 analysis of our equity changes.

Related Party Transactions

consider Biofrontera AG and its consolidated subsidiaries, (“the Biofrontera Group”) to be a related party.

The Biofrontera Group held

more than 5 %

of the outstanding shares of our common stock until December 10, 2024, and we continue to rely on the Biofrontera Group as the sole

supplier of Ameluz ® and the RhodoLED ® Lamps.

and Supply Agreement

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

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

technology to market and sell the licensed products Ameluz® and BF-RhodoLED® and must purchase the such products exclusively

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

in the following manner:

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

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

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

products we license from the Ameluz Licensor;

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

from the Ameluz Licensor.

of the licensed products from Pharma, inclusive of estimated and actual purchase price adjustments during the years ended December 31, 2023 and 2022 were $ 23.4

the Second A&R Ameluz LSA, the Company has an exclusive, non-transferable license to market and sell the licensed products, Ameluz ®

and RhodoLED ® Lamps, in the United States and must purchase the licensed products exclusively from Biofrontera Pharma.

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

(i) updated the price we pay per unit, based on certain

percentages of the anticipated net selling price, (the “Transfer Price”) that covers the cost of goods, royalties on sales,

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

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

percent of the anticipated net selling price per unit for 2026 to 2028;

percent of the anticipated net selling price per unit for 2029 to 2031;

percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit;

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

anticipated net selling price per unit indefinitely.

(ii) provided for the transfer of responsibilities

for clinical trials relating to Ameluz ® in the US on June 1, 2024, including the Company assuming related contracts and

transferring key personnel from the Ameluz Licensor to the Company.

The Company entered into a Release of Claims with the Ameluz Licensor, dated February

13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and liabilities arising out of or relating

to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials

for which the Company assumed responsibility.

February 9, 2024, Biofrontera was notified that the Ameluz Licensor had initiated a voluntary recall of a limited number of lots of Ameluz ®

due to a manufacturing defect in the impacted product’s packaging, which is provided by an unaffiliated supplier.

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

The Company did not bear any financial responsibility for the costs associated with this recall and it did not have

a material financial impact on its business as a result of the recall.

As of December 31, 2023, in connection with the voluntary recall

by the Ameluz Licensor, the Company recorded an inventory write-off of $ 5.2 million with a corresponding asset for the anticipated replacement

from the licensor to other assets, related party.

As of July 23, 2024, we received the full amount of the replacement inventory for the

recalled Ameluz ® .

of licensed products, inclusive of estimated and actual purchase price adjustments during the years ended December 31, 2024 and 2023

million and $ 23.4

1 unchanged sentence

party in the consolidated statements of operations.

Amounts due and payable to Pharma as of December 31, 2023 and 2022 were $ 8.5

million and $ 1.3

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

December 12, 2023, we entered into an addendum (the “Addendum ”), effective as of

December 5, 2023, to the Ameluz LSA.

The Addendum provides, among other things, for a schedule of payments in relation to

various financial obligations among the Company, Biofrontera Pharma, Biofrontera

Bioscience, and Biofrontera AG, including updated terms relating to payments by the Company to Pharma for purchases of Licensed

Products (as that term is defined in the Amulez LSA) under the Amulez LSA through the

As of December 31, 2023 any receivable amounts from related parties were offset against accounts payable, related

parties in accordance with the Addendum.

February 19, 2024, we entered into the Second Amended and Restated License and Supply Agreement (the “Second A&R Amezuz LSA”), effective as of February 13, 2024, by and among the Company, Biofrontera

Pharma, and Biofrontera Bioscience.

Subsequent Events - Ameluz LSA Amendment, for new terms effective February 13, 2024.

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

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

Bioscience, primarily for regulatory support and pharmacovigilance.

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

provided to us for as long as we deem necessary.

We currently have statements of work in place

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

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

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

of December 31, 2023, we have migrated away from Biofrontera AG to third party providers for most of our significant information

technology services.

Expenses related to the Services Agreement were $ 0.2

Amounts due and payable to Biofrontera Pharma as of December 31, 2024 and

December 31, 2023 were $ 5.3

million and $ 8.5

million for the years ended December 31, 2023 and 2022, which were recorded in selling, general and administrative, related party.

Amounts due to Biofrontera AG related to the Services Agreement were $ 0.1

million and $ 0.2 million as of December 31, 2023 and 2022, respectively which were

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

of December 31, 2023, any receivable amounts from related parties were offset against accounts payable, related parties in accordance

with the Addendum.

million, respectively, and were recorded in accounts payable, related parties net of applicable accounts receivable in the consolidated balance sheets.

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

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

primarily for regulatory support and pharmacovigilance.

The Services Agreement enables us to continue relying on Biofrontera AG and its

subsidiaries for various services it has historically provided to us for as long as we deem necessary.

We currently have statements of

work in place regarding pharmacovigilance, regulatory affairs, and medical affairs, and are continuously assessing the other services

historically provided to us by Biofrontera AG to determine (i) if they will be needed, and (ii) whether they can or should be obtained

from other third-party providers.

Expenses related to the Services Agreement were negligible and $ 0.2 million for the years ended December

31, 2024 and 2023, respectively, and were recorded in selling, general and administrative, related party.

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

31, 2024 and 2023, respectively, and were recorded in accounts payable, related parties in the consolidated balance sheets.

Lamp Lease Agreement

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

revenue related to the clinical lamp lease agreement was approximately $ 0.1

million for each of the years ended December

31, 2023 and 2022 and recorded as revenues, related party.

Amounts due from Biofrontera Bioscience for clinical lamp and other reimbursements

were approximately $ 0.2

million for each of the years ended December

31, 2023 and 2022, which were offset against accounts payable, related parties in accordance with

the Addendum.

Company has recorded a receivable of $ 2.8 million and $ 6.4 million as of December 31, 2023 and December 31, 2022, respectively, due from

Biofrontera AG for its 50 % share of the balance of a legal settlement for which both parties are jointly and severally liable.

Other Receivables, Related Party .

The Company recognized $ 0 and $ 0.1 million of interest income in connection with this

receivable for the years ended December 31, 2023 and 2022, respectively.

of December 31, 2023 and December 31, 2022, our investment, related party consisted solely of 177,465

and 6,466,946 ,

respectively, of common shares of Biofrontera AG.

In accordance with a Share Purchase and Transfer Agreement dated, November 3, 2022,

the Company had purchased approximately 1,674,996 shares (of the total 6,466,946 shares) for $ 1.7 million from Maruho.

The total investment

was valued at $ 0.1

million and $ 10.5

million, as of December

31, 2023 and 2022, respectively.

revenue related to the clinical lamp lease agreement was negligible and $ 0.1 million for the years ended December 31, 2024 and 2023 and

recorded as revenues, related party.

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

and $ 0.2 million for the years ended December 31, 2024 and 2023, which were offset against accounts payable, related parties.

The Company recorded a receivable of $ 2.8 million

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

of a legal settlement for which both parties were jointly and severally liable.

There was no interest income recognized for

the years ended December 31, 2024 and 2023, in connection with this receivable and the $ 2.8 million balance was net settled against

payments for inventory in February 2024.

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

of these entities, which are netted against expenses incurred within selling, general and administrative expenses.

Total expense

reimbursements were $ 0.3 million and $ 0.7 million for the years ended December 31, 2024 and 2023 respectively.

of December 31, 2024 and December 31, 2023, our investment, related party consisted solely of 3,019 and 8,450 common

shares of Biofrontera AG, respectively.

The total investment had minimal value as of December 31, 2024 and $ 0.1 million

as of December 31, 2023.

Investment, Related Party .

In 2023, under the Release, the Company transferred 5,451,016

shares of our shares

in Biofrontera AG to Maruho in exchange for the extinguishment of the total acquisition costs due to Maruho.

of December 31, 2023, any receivable amounts for related party transactions among

the Company, Pharma, Bioscience and Biofrontera AG were offset against accounts payable, related parties in accordance

with the Addendum.

Stockholders’ Equity

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

is authorized to issue 15,000,000 shares of common stock, par value $ 0.001 per share and 20,000,000 shares of preferred stock, par value

$ 0.001 per share.

Summary of Significant Accounting Policies for information relating to the Reverse Stock Split.

the Company’s Certificate of Second Amendment to the Amended and Restated Certificate of Incorporation

(“Certificate”), effective April 25, 2024, the Company is authorized to issue 35,000,000 shares

of common stock, par value $ 0.001

per share (“Common Stock”), and 20,000,000 shares

of preferred stock, par value $ 0.001 per

share (“Preferred Stock”).

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

Common stockholders are not entitled to receive dividends, unless

declared by the Board of Directors.

Holders of Common Stock are not entitled to receive

dividends, unless declared by the Company’s board of directors (“Board”).

The Company has not declared dividends since inception.

In the event of liquidation of the Company,

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

In the event of liquidation of the

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

of liabilities.

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

There are no redemption or sinking fund provisions

applicable to the common stock.

There are no redemption or

sinking fund provisions applicable to the Common Stock.

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

Public Offering - On October 30, 2023, the Company entered into a securities purchase agreement (“2023 Purchase

Agreement”) with an institutional investor for the purchase and sale, in a registered public offering (the “Public

Offering”) by the Company of:

of December 31, 2024, there were 8,873,932

shares of Common Stock outstanding.

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

institutional investor for the purchase and sale, in a registered public offering (the “Public Offering”) by the

(i) 150,000 shares

7 unchanged sentences

The Public Offering closed on November 2, 2023.

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

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

price of $ 0.0001 per share.

October 30, 2023, in connection with the 2023 Purchase Agreement, the Company entered into an amendment to amend the 2022 Purchase Warrant

and the 2022 Inducement Warrant (the “Existing Warrants Amendment”) pursuant to which the Company agreed, effective November

2, 2023, to (i) revise the exercise price of the Existing Warrants to $ 3.55 and (ii) extend the date until which the Existing Warrants

can be exercised until November 2, 2028.

No other terms of the Existing Warrants were revised or changed.

a result of this amendment to the Existing Warrants, the Company recorded an inducement expense on modification of common stock warrants

in the amount of $ 1.0 million.

The Common Warrants are exercisable upon issuance, will expire five

years following the date of issuance

and have an exercise price of $ 3.55 per

The Pre-Funded Warrants are exercisable upon issuance, will expire five

years following the date of issuance

and have an exercise price of $ 0.0001 per

In connection with the 2023 Purchase

Agreement, the Company amended the 2022 Purchase Warrant and the 2022 Inducement Warrant (together, the “Existing

Warrants”) pursuant to which the Company agreed, effective November 2, 2023, to (i) revise the exercise price of the Existing

Warrants to $ 3.55 and

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

No other terms of the Existing

Warrants were revised or changed.

As a result of this

amendment to the Existing Warrants, the Company recorded an inducement expense on modification of common stock warrants in the

amount of $ 1.0 million.

The loss represents the increase in fair value of the Existing Warrants, as amended.

The increase in fair

value was calculated as the difference in value immediately before and after modification using the Black-Scholes option pricing model.

The fair value of the Existing Warrants was determined to be $ 0.4 million immediately prior to the modification in accordance with the

following key assumptions:

of Fair Value Warrant by Using Black-Scholes Pricing Model Assumptions Prior to Modification

2022 Purchase

2022 Inducement

Expiration term (in years)

Risk-free Rate

Dividend yield

fair value of the Existing Warrants was determined to be $ 1.4 million immediately after the modification in accordance with the following

key assumptions:

2022 Purchase

2022 Inducement

Expiration term (in years)

Risk-free Rate

Dividend yield

– The details of all outstanding warrants as of December 31, 2023 were as follows:

of Outstanding Warrants

Warrant Shares

Weighted Average

The increase in fair value was calculated as

the difference in value immediately before and after modification using the Black-Scholes option pricing model.

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

and 888,000 ,

respectively, of the Pre-Funded Warrants, purchasing a total of 1,055,000

shares of Common Stock at an exercise price of

per share, resulting in negligible net proceeds.

of December 31, 2024, we had outstanding warrants to purchase an aggregate of 2,269,356

shares of Common Stock with an exercise price range of $ 3.55

These warrants have expiration dates ranging from November 2026 to November 2028.

A summary of the warrants outstanding as of December 31, 2024 is presented below.

of Warrants Outstanding

Number of Shares

Exercise Price

Balance, December 31, 2021

Balance, December 31, 2022

Balance, December 31, 2023

Stock Split - On July 3, 2023 Biofrontera Inc.

effected a 1-for-20 reverse stock split (the “Reverse Stock Split”) of

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

Stock began trading on the Nasdaq Capital Market on a post-split basis on July 5, 2023.

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

Split as if it had been effective from the beginning of the earliest period presented, unless otherwise stated.

All outstanding securities

entitling their holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock options, restricted stock

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

of 2021 Purchase Warrant and Issuance of 2022 Inducement Warrant – On July 26, 2022, the Company entered into the Reprice and

Reload Offer of Common Stock Purchase Warrants (the “Inducement Letter”) with the holder of the Company’s 2021 Purchase

Warrant (the “Investor”).

The Investor agreed to exercise for cash, the 2021 Purchase Warrant, in exchange

for the Company’s agreement to (i) lower the exercise price of the 2021 Purchase Warrant from $ 105.00

per share and (ii) issue the 2022 Inducement

Warrant to purchase up to 214,286

Expiration Date

Liability classified (See Note 3.

Fair Value Measurements )

Equity classified

B Preferred Stock:

On February 19, 2024, the Company

entered into a securities purchase agreement (the “Preferred Purchase Agreement”), with certain accredited investors,

pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”), (i) 6,586

shares of Series B-1 Convertible Preferred Stock, par value $ 0.001

per share (the “Series B-1 Preferred Stock”), and (ii) the 2024 Preferred Warrants to purchase 8,000

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

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

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

per share and the consideration for each 2024 Preferred Warrant was $ 0.125

per share of Common Stock that each share of Series B-3 Preferred Stock may be converted into (or 11,309,019

Common Stock shares).

The conversion price of Series B Preferred Stock is $ 0.7074

per share of Common Stock, such that each Series B share is convertible into 1,413.6

shares of the Common Stock.

The net proceeds received were approximately $ 7.3

million, after deducting fees paid to the placement agent and other offering expenses payable by the Company.

Pursuant to the Preferred Purchase Agreement,

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

No such appointment has been made as of December 31, 2024.

February 20, 2024, the Company filed the Certificate of Designation with the Delaware Secretary of State designating 6,586 shares of

its authorized and unissued preferred stock as Series B-1 Preferred Stock, 6,586 shares as Series B-2 Preferred Stock and 8,000 shares

as Series B-3 Convertible Preferred Stock, with a par value of $ 0.001 per share (collectively the “Series B Preferred Stock”).

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

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

shares of Common Stock.

The Company received

proceeds of $ 4.6 million,

from the exercise of the 2021 Purchase Warrant and expensed the related issuance costs of $ 0.3

The 2021 Purchase Warrant modification

along with the fair value of the 2022 Inducement Warrant of $ 2.6

million was expensed as warrant modification

expense in the accompanying consolidated statement of operations for the year ended December 31, 2022.

Placement – On May 16, 2022, the Company entered into a Securities Purchase Agreement (“May 2022 PIPE”).

the May 2022 PIPE, the Company issued for the gross cash receipts of $ 9.4 million

(i) 92,500 shares

of the common stock, (ii) a warrant to purchase up to 170,950 shares

of the common stock (“2022 Purchase Warrant”) and (iii) a warrant to purchase up to 78,450 shares

of the common stock (“2022 Pre-Funded Warrant”).

The purchase price for one share of common stock (or common stock

equivalent) and a warrant to purchase one share of common stock was $ 55.00 .

In connection with the 2023 Purchase Agreement ,

the Company entered into the Amendment to Common Stock Purchase Warrants effective November 2, 2023, to (i) revise the exercise price

from $ 55.40 to $ 3.55 and (ii) extend the date which the warrant can be exercised from November 18, 2027 until November 2, 2028 for the

2022 Purchase Warrant.

Because the warrants are accounted for as liabilities, the May 2022 PIPE proceeds were allocated the first to the

warrants based on their fair value with the remaining proceeds allocated to common stock and additional paid in capital.

The 2022 Pre-Funded Warrant had a

term of exercise equal to five ( 5 ) years with a nominal exercise price of $ 0.02 per share and was exercised on July 14, 2022, for

a total of 78,450 shares of common stock, resulting in negligible net proceeds.

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

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

shares of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock

(as a conversion to Common Stock would have caused the holders to exceed their respective beneficial ownership limitations).

third quarter of 2024, an additional 1,016

shares of Series B Preferred Stock were converted into Common Stock.

As of December 31, 2024,

2023, there were no 2022 Pre-Funded Warrants outstanding.

there were 10,129

shares of Series B Preferred Stock issued and outstanding (convertible into 14,318,632 shares

of Common Stock) and all of the 2024 Preferred Warrants had been exercised for Series B-3 Preferred Stock.

On May 13 and 14, 2024, 7,998

of the 2024 Preferred Warrants were exercised to purchase 7,998

shares of Series B-3 Convertible Preferred stock, par value $ 0.001

per share for net proceeds of $ 7.4

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

exercise date, $ 12.8

million was applied to additional paid-in-capital, comprised of the $ 7.4

million of net proceeds and $ 5.4

of million warrant liability fair value.

As of December 31, 2024, the 2024 Preferred Warrants issued in the Offering have been

exercised or expired.

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

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

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

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

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

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

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

The conversion price for the

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

combination or other similar recapitalization.

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

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

shares of Series B-2 Preferred Stock.

Liquidation .

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

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

a “ Liquidation ”), the assets of the Company available for distribution to its stockholders shall be distributed among

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

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

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

the Certificate of Designation or otherwise.

Participation

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

investor in any securities offering consummated by the Company.

Classification

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

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

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

(“ASR 268”) requires preferred securities that are redeemable for cash or other assets to be classified outside of

permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of

the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer.

Preferred securities that

are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, an issuer should

classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity.

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

were redeemable, upon a change in control that was not solely within control of the Company.

Prior to the Stockholder Approval, the

Series B Preferred Stock was considered senior to the Common Stock and all other series of the Company’s capital stock with respect to dividend

rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the

affairs of the Company.

As such, the Company determined that mezzanine treatment was appropriate for the Series B Preferred Stock at

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

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

Stockholder Approval.

The Series B Preferred Stock was not considered mandatorily redeemable.

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

the conversion would cause a holder to exceed its beneficial ownership limitation, shares of Series B-2 Preferred Stock, thereby removing

the redemption feature at the option of the holder (which was only present for Series B-1) and eliminating one of the requirements for

classification as mezzanine equity.

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

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

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

to the terms of the Certificate of Designation filed on February 20, 2024.

Accordingly, the Series B Preferred stock is classified as

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

31, 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).

of a stockholder rights plan.

On October 13, 2022 the Company’s Board of Directors (“Board”) authorized and

declared a dividend distribution of one Preferred Stock Purchase Right (a “Right”) for each outstanding share of common

stock to stockholders of record as of the close of business on October 24, 2022.

In addition, one Right will automatically attach to

each share of Common Stock issued between the record date of the distribution and the earlier of the distribution date and the

expiration date of the Rights.

Each Right entitles the registered holder to purchase from the Company a unit consisting of one

ten-thousandth of a share (a “Unit”) of Series A Junior Participating Cumulative Preferred Stock, par value $ 0.001

per share, of the Company at a cash exercise price of $ 5.00

per Unit, subject to adjustment, under certain conditions.

On October 13, 2022 the Board authorized and declared a dividend distribution of one

Preferred Stock Purchase Right (a “Right”) for each outstanding share of Common Stock to stockholders of record as of

the close of business on October 24, 2022 (the “Rights Plan”).

In addition, one Right will automatically attach to each share of Common Stock issued

between the record date of the distribution and the earlier of the distribution date and the expiration date of the Rights.

Right entitles the registered holder to purchase from the Company a unit consisting of one ten-thousandth of a share (a

“Unit”) of Series A Junior Participating Cumulative Preferred Stock, par value $ 0.001 per

share, of the Company at a cash exercise price of $ 5.00 per

Unit, subject to adjustment, under certain conditions.

The complete terms of the Rights are set forth in the Stockholder Rights

Agreement, dated October 13, 2022, as amended by Amendment No.

Agreement, dated October 13, 2022 (the “Rights Agreement”), as amended by Amendment No.

1 to the Stockholder Rights Agreement, dated as of April 26, 2023,

between the Company and Computershare Trust Company, N.A, as Rights agent.

the stockholder rights plan described above (the “Rights Plan”) became effective immediately, the Rights would become exercisable

the Rights Plan became effective immediately, the Rights would become exercisable

only if a person or group, or anyone acting in concert with such a person or group, acquires beneficial ownership, as defined in the

5 unchanged sentences

A Junior Participating Cumulative Preferred Stock.

In connection with the adoption of the Rights Plan, the Board approved a Certificate

of Designations of Series A Junior Participating Cumulative Preferred Stock which designates the rights, preferences and privileges of

5,000 shares of Preferred Stock.

The Certificate of Designations was filed with the Secretary of State of Delaware and became effective

on October 13, 2022.

Agreement – On October 25, 2022, the Company entered into private exchange agreements with certain holders of options to

acquire ordinary shares, nominal value € 1.00

per share, of Biofrontera AG pursuant to which the parties agreed to a negotiated private exchange, and closed on a series of

private exchanges of 3,148,042

shares of the Company’s common stock in exchange for the AG Options.

In connection with the adoption of the Rights Plan, the Board approved a

Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock which designates the rights, preferences and

privileges of 5,000 shares of Preferred Stock.

The Certificate of Designations was filed with the Secretary of State of Delaware

and became effective on October 13, 2022.

November 22, 2024, the Company issued $ 4.2

million in an aggregate principal amount of the

The Notes allow for up to 5,384,615

shares of Common Stock to be issued upon conversion

for principal plus additional shares for PIK interest.

Debt - Convertible Notes Payable , for additional

Equity Incentive Plans and Share-Based Payments

Omnibus Incentive Plan

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

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

was increased from 137,500 shares to 266,990 shares.

The maximum contractual term for stock options issued under the 2021 Plan is ten

As of December 31, 2023, there were 141,824 shares available for future awards under the amended 2021 Plan.

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

contractual term is 10 years for stock options issued.

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

2021 Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990 shares to 3,750,000 shares.

December 31, 2024, there were 1,915,602 shares available for future awards under the amended 2021 Plan.

Non-qualified

5 unchanged sentences

of the date of grant.

All stock options are exercisable at a price equal to the market value of

the common shares underlying the option on the grant date.

All stock options are exercisable at a price equal to the market value of the common shares underlying the option

on the grant date.

Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the

4 unchanged sentences

The Company elects to account for forfeitures as they occur.

fair value of each option was estimated on the date of the grant using the Black-Scholes option pricing model with the following

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

Schedule of Stock Options Assumptions

Expected volatility

Expected term

Expected term (in years)

Risk-free interest rate

4.2 % - 4.3 %

3.5 4% - 4.66 %

Expected dividend yield

The weighted average grant-date fair value of options

granted during the years ended December 31, 2023 and 2022 was $ 6.40 and $ 29.28 , respectively.

compensation expense related to stock options of approximately $ 0.7

million and $ 0.8

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

the years ended December 31, 2023 and 2022, respectively.

The total grant-date fair value of options granted

during the year ended December 31, 2024 was $ 1.1 million.

The weighted average grant-date fair value of options granted during the years

ended December 31, 2024 and 2023 was $ 0.82 and $ 6.40 , respectively.

compensation expense related to stock options of approximately $ 0.8 million and $ 0.7 million was recorded in selling, general and administrative

expenses on the accompanying consolidated statement of operations for the years ended December 31, 2024 and 2023, respectively.

outstanding and exercisable under the employee share option plan as of December 31, 2024 and 2023, and a summary of option activity during

the year then ended is presented below.

Schedule of Stock Option Activity

of Stock Option Activity

Weighted Average Exercise Price

7 unchanged sentences

Exercisable at December 31, 2024

(1) The aggregate intrinsic

value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for

the options that were in the money at December 31, 2023 and December 31, 2022.

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

of the Common Stock for the options that were in the money at December 31, 2024 and December 31, 2023.

of December 31, 2024, there was $ 1.0 million of unrecognized compensation cost related to unvested stock options held by employees and

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Common Stock on the grant date.

compensation expense related to RSUs of $ 0.3

million and $ 1.0

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

operations for the years ended December 31, 2023 and 2022.

compensation expense related to RSUs of $ 0.2 million and $ 0.3 million for the RSUs was recorded in selling, general and administrative

expenses in the accompanying consolidated statement of operations for the years ended December 31, 2024 and 2023.

of December 31, 2024, there was $ 0.4 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

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expense, net consists of the following:

Schedule of Interest Expense

of Interest Expense, Net

For years ended December 31,

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Interest expense, related party

Interest expense

Contract asset interest expense

Interest income- related party

Interest income – other

Interest income

Interest expense, net

expense is comprised primarily of interest on our Loan and Security Agreements.

Interest expense, related

party relates to interest incurred on late payments to the Biofrontera Group.

asset interest expense relates to the $ 1.7 million contract asset in connection with the $ 7.3 million start-up cost financing received

from Maruho under the Cutanea acquisition Share Purchase Agreement.

The contract asset was amortized on a straight-line basis using a

6 % interest rate over the financing arrangement contract term, which ended on December 31, 2023 .

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

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

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

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

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

Other Income, net

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Schedule of Other Income, Net

(in thousands)

For years ended December 31,

(in thousands)

Gain/Loss on termination of operating leases

Gain on termination of operating leases

Foreign currency transactions

Bank service charges

Interest expense, net

Other expense

Other income (expense), net

Net Loss per Share

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

outstanding during the period.

As noted in ASC 260-10-45-13, shares issuable for little to no

consideration should be included in the number of outstanding shares used for basic EPS.

As such, the 2022 Pre-Funded Warrants are

included in the outstanding shares for EPS purposes.

Diluted net earnings per common share are calculated by dividing net

income (loss) by the diluted weighted average number of common shares outstanding during the period.

The diluted shares include the

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

In periods where a net loss is recorded, no effect is

given to potentially dilutive securities, since the effect would be anti-dilutive.

net loss per common share is calculated by dividing net income by the weighted average number of common shares outstanding during

As noted in ASC 260-10-45-13, shares issuable for little to no consideration should be included in the number of

outstanding shares used for basic earnings per share (“EPS”).

As such, the Pre-Funded Warrants were included in the outstanding

shares for EPS purposes, until exercised in January 2024.

Diluted net loss per common share is calculated by dividing net loss by

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

The diluted shares include the dilutive effect

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

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

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

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

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

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

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

For years ended December 31,

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EPS in the future:

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

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

Common stock warrants

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Unit Purchase Options

Anti-dilutive securities excluded from computation of earnings per share

Series B convertible preferred stock

Convertible notes

Anti-dilutive securities

Commitments and Contingencies

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

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

The Company has the option to extend

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

expiration dates through March 2027.

expiration dates through January 2028.

components of lease expense for the year ended December 31, 2024 were as follows (in thousands except lease term and discount rate):

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Operating lease liability, non-current

Ameluz LSA Sales Commitment

A&R Ameluz LSA Sales Commitment

Second A&R Ameluz LSA will remain in effect for 15 years from its effective date and shall renew automatically for a period of

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

million over the preceding five years.

If we fail to earn $ 150

million in revenues from Ameluz ®

and t he RhodoLED ® lamp

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

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

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

providing one (1) year written notice.

See Note 25, Subsequent Events, Amendments to the Ameluz LSA.

million in revenues from Ameluz ® and the RhodoLED ® Lamps over the preceding five (5) year period prior

to the Second A&R Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Second A&R Ameluz

LSA by providing one (1) year written notice.

addition, starting in 2025, under the Second A&R Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of

Ameluz ® per year as set forth in the Second A&R Ameluz LSA or (ii) 75% of the annual average of

audited Ameluz ® tubes sold during the preceding four (4) full calendar years (“Annual Minimum Sales”).

we fail to achieve the respective Annual Minimum Sales for any calendar year, such failure will constitute a termination event,

unless waived by the Ameluz Licensor.

Minimum Research and Development Costs

the years 2025 through 2030, we will be required to fund minimum R&D costs in an amount that is at least 85% of

the difference between (i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it

would have been determined under the previous version of the license and supply agreement with the Ameluz Licensor, dated October 8,

If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera Pharma on February 15, 2031, in either

cash or our Common Stock, at our discretion.

Agreement with Optical Tools

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

Tobin and Paul Sowyrda (the “Agreement”).

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

and upon notification by the Company to Optical Tools, the research and development of certain prototypes.

The Company paid a licensing

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

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

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

The PDT Device provides illumination, based

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

The Company is to reimburse Optical Tools for all reasonable

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

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

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

Company did not make any milestone or royalty payments or accruals for such payments during the years ended December 31, 2024 or 2023.

payments with Ferrer Internacional S.A.

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

Specifically, we must pay

Ferrer i) $ 2,000,000

upon the first occasion when annual net sales of Xepi ® under the Xepi LSA exceed $ 25,000,000 ,

and ii) $ 4,000,000

the Xepi license and supply agreement we are obligated to make payments to Ferrer upon the occurrence of certain milestones.

Specifically, we must pay Ferrer

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

$ 4,000,000 upon the first occasion annual net sales of Xepi ® under the Xepi LSA exceed $ 50,000,000 .

No payments were made in 2023 or 2022 related to Xepi ® milestones.

No payments or accruals

for such payments were made during the years ended December 31, 2024 or 2023 related to Xepi ® milestones.

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

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to such legal proceedings.

Agreement with DUSA Pharmaceuticals Inc.

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

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

misappropriated certain trade secrets.

In the settlement, the Company and Biofrontera AG together agreed to make an aggregate

payment of $ 22.5

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

13, 2023, we were served with a new complaint filed by DUSA Pharmaceuticals Inc.

See DUSA – 2023 Legal Claim section below for

of December 31, 2023, we have reflected a legal settlement liability in the amount of $ 0.4

million for the remaining payments due under the settlement for the estimated remaining cost of the forensic expert and a

related receivable from related party of $ 2.8

million (presented net in accounts payable, related party) 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.

Agreement with Biofrontera AG

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

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

things, to take the following actions:

On July 7, 2023, in connection with the AG Settlement

Agreement, Board appointed Heikki Lanckriet to the Board.

Lanckriet will serve as a Class I Director

to hold office for a term expiring at the annual meeting of the Company’s stockholders for fiscal year 2025.

term as director began upon his appointment at the July 7, 2023 meeting.

The Company will begin a

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

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

Balaton Aktiengesellschaft and any of their respective affiliates, to be nominated for election as a Class II

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

The Board will increase its size to seven members, including

the two directors appointed and elected pursuant to the AG Settlement Agreement as noted above.

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

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

changes to the Company’s stockholder rights plan.

Under the AG Settlement Agreement, Biofrontera AG also agrees, subject to

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

With the closing

of the Securities Purchase Agreement, dated February 19, 2024 (see Note 25.

Subsequent Events), Biofrontera AG ceased to own

at least 20 % of our common stock outstanding.

Accordingly, if Biofrontera AG does not acquire sufficient shares of our common stock

to own at least 20% within 30 days from the date of notice, February 26, 2024, the Board representation provisions, and the

standstill/voting provisions noted above shall terminate.

Our Related Party Transaction Committee has elected to waive the

requirement that AG must cause its sitting non-independent director, Heikki Lanckriet, to resign from his position of

DUSA – 2023 Legal

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

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

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

stem from allegations that Biofrontera has promoted its Ameluz product in a manner that is inconsistent with its approved FDA labeling.

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

District Court for the District of Massachusetts, this matter has been transferred

by agreement of the parties to the U.S.

District Court for the District of New 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 filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc.

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

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

All claims stem from allegations that Biofrontera has promoted its

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

Though this complaint was originally

filed in the United States District Court for the District of Massachusetts, this matter has been transferred by agreement of the parties to

the United States District Court for the District of New Jersey.

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

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

Biofrontera subsequently answered Sun’s

complaint and filed counterclaims on October 30, 2024 alleging i) violation of the Lanham Act, ii) deceptive trade practices under

Georgia law, and iii) trade libel/product disparagement, which Sun answered on December 17, 2024.

On March 11, 2025, Biofrontera received an additional notice alleging breach of contract through

unlawful marketing practices which makes reference to similar previous communications sent by Sun to Biofrontera on February 4, 2022 and

September 9, 2022.

Discovery is ongoing in the above-referenced matters.

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

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

of the case, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from this

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.

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 (“ITC”), both alleging infringement of two patents held by Sun (the “Sun Patents”).

The complaint filed in the

United States District Court for the District of Massachusetts has been held in abeyance pending the completion of the case before

A hearing is scheduled to be held in front of an administrative law judge on June 30, 2025, with an Initial Determination expected by

October 1, 2025.

The Commission’s Final Determination is expected by February 2, 2026.

Company denies Sun’s patent claims and intends to defend them vigorously in the above-referenced matters.

Biofrontera has challenged the validity of the Sun Patents by filing separate petitions for inter partes review at the United States

Patent Trial and Appeal Board (“PTAB”) for each of the Sun Patents.

One such petition was instituted by the PTAB on

February 24, 2025, and an institution decision on the other petition is anticipated to be received from the PTAB in June,

on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as 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.

Money damages are not available to Sun through the case before the ITC, and an adverse ruling could result in an exclusion order being

imposed on the allegedly infringing product.

If the final resolution of the case before the United States District Court for the District

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

or cash flows.

Retirement Plan

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contribution costs paid by the Company were $ 0.2 million and $ 0.3 million for the years ended December 31, 2024 and 2023, respectively.

Segment Reporting

Company operates as one operating segment, that derives revenue primarily from our principal licensed product, Ameluz ® ,

which is a prescription drug approved for use in PDT using our RhodoLED ® Lamps, for the treatment of actinic keratoses.

We are currently selling Ameluz ® for this indication in the United States under an exclusive license and supply agreement.

(including the RhodoLED® Lamps) accounts for approximately 100% of our revenue.

Company’s CODM is its Chief Executive Officer, who reviews financial information

presented on a consolidated basis.

The CODM uses consolidated net income to allocate resources and assesses financial performance by

comparing actual results to historical results and previously forecasted financial information.

following table presents selected financial information with respect to the Company’s single operating segment for the years

ended December 31, 2024, and 2023 :

of Operating Segment

( in thousands)

December 31, 2024

December 31, 2023

Revenues, net

Operating expenses:

Cost of revenues

Sales support

General and administrative

Research and development

Other operating expenses

Total operating expenses

Loss from operations

Other income (expense), net

Loss before income taxes

Income tax expenses

Subsequent Events

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on Form 10-K was filed with the SEC.

of Loan Agreement

as of January 4, 2024, we voluntarily terminated the Loan Agreement (See Note 16.

We repaid the outstanding principal balance on the revolving line of credit of approximately $ 194,000

and paid a termination fee of $ 150,000

in connection with the early termination of the revolving line of credit.

Exercise of 2023 Pre-Funded Warrants

On January 8, 2024 and February 2, 2024, an investor exercised 167,000 and 888,000 the 2023 Pre-Funded Warrants,

respectively and purchased a total of 1,055,000 shares of common stock at an exercise price of $ .0001 per share, resulting in

negligible net proceeds,

November 22, 2023, we received a letter (the “Notice”) from the Listing Qualifications Staff of Nasdaq notifying

us that, because our stockholders’ equity as reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2023

was $1,038,000, we are 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 Form 10-K, we do not satisfy Nasdaq Marketplace Rule 5550(b) .

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.

to the Ameluz LSA

January 29, 2024, we entered into an amendment and restatement (the “Amendment”), effective January 26, 2024 , of the

The Amendment modifies a schedule of payments in relation to various financial obligations among the Company, Biofrontera

Pharma, Biofrontera Bioscience, and Biofrontera AG, including terms relating to payments by the Company to Biofrontera Pharma for purchases

of Licensed Products (as that term is defined in the Ameluz LSA) under the Ameluz LSA.

Among other things, the Addendum provides that

payment that was due from the Company on January 31, 2024 be deferred to February 29, 2024.

February 19, 2024, we entered into the Second A&R Ameluz LSA,

effective as of February 13, 2024, by and among the Company, Biofrontera Pharma, and Biofrontera Bioscience.

The Second A&R Ameluz LSA amends

and restates the Ameluz LSA, originally dated as of October 1, 2016 which was previously amended on July 1, 2019, June 16, 2021, October

8, 2021, December 5, 2023 and January 26, 2024.

other things, the Second A&R Ameluz LSA has been amended to (i)

change the Transfer Price (as defined in the Second A&R Ameluz LSA) to 25% through 2025 and then increasing over time pursuant

to the schedule set forth in the Second A&R Ameluz LSA to a maximum of 35% starting in 2032, subject to a minimum dollar amount

per unit, from the previous Transfer Price of 50% of annual revenue up to $30 million, and then decreasing on further sales until

reaching 30% of annual revenue at and above $50 million, (ii) provide for the transfer of responsibilities for Ongoing Trials (as

defined in the Second A&R Ameluz LSA) on or before June 1, 2024, including the Company assuming related contracts and

transferring key personnel from Pharma and Bioscience to the Company, and (iii) make the failure to achieve the applicable Annual

Minimum Sales (as defined in the Second A&R Ameluz LSA) a termination event in certain circumstances, unless waived by

Biofrontera Pharma and Biofrontera Bioscience.

The Second A&R Ameluz LSA also includes an Addendum to the Second A&R Ameluz

LSA which modifies a schedule of payments in relation to various financial obligations among the Company, Biofrontera Pharma,

Biofrontera Bioscience, and Biofrontera AG, including terms relating to payments by the Company to Biofrontera Pharma for purchases

of Licensed Products (as that term is defined in the Second A&R Ameluz LSA) under the Second A&R Ameluz

Based on the most current budget projections, we expect to order Ameluz

to be delivered in Q4 2024, and therefore, the positive effects of the Second A&R Ameluz LSA amendment will not be realized until

connection with the Second A&R Ameluz LSA, the Company entered into a Release of Claims, dated February 13, 2024, by and among

the Company, Biofrontera Pharma and Biofrontera Bioscience, pursuant to which the Company agreed to release Biofrontera Pharma and

Biofrontera Bioscience from all claims and liabilities arising out of or relating to any failure by Biofrontera Pharma and

Biofrontera Bioscience to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials that the Company

will assume responsibility for under the Second A&R Ameluz LSA.

Product Recall of Limited Lots of Ameluz®

February 9, 2024, we were notified that our Ameluz Licensor, had initiated a voluntary recall of a limited number of lots of Ameluz®

due to a manufacturing defect in the impacted product’s packaging, which is provided by an unaffiliated supplier.

In its communication,

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

We have notified all impacted

physician customers of this recall and have arranged for the prompt replacement of the recalled products.

There were no sales of recalled

product for the year ended December 31, 2023.

Inventories for impact to inventory as of December 31, 2023.

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

As such, the Company

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

Securities Purchase Agreement

for Series B Convertible Preferred

On February 19, 2024, we entered

into a securities purchase agreement (the “Preferred Purchase Agreement”) with certain accredited investors (the “ Preferred

Investors ”), pursuant to which the Company agreed to issue and sell, in a private placement (the “ Offering ”),

shares of Series B-1 Convertible Preferred Stock, par value $ 0.001

per share (the “ Series B-1 Preferred Stock ”), and (ii) warrants (the “ Preferred Warrants ”)

to purchase shares of Series B-3 Convertible Preferred Stock, par value $ 0.001

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

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

per share and the consideration for each Preferred Warrant was $ 0.125

per share of common stock that each share of Series B-3 Preferred Stock may be converted into.

The net proceeds of the Offering were approximately $ 7.2 million, after deducting fees paid to the placement agent

and other estimated offering expenses payable by the Company.

The Company intends to use the net proceeds from the Offering for working

capital purposes and other general corporate purposes and ongoing activities related to expediting the development and approval of additional

indications for Ameluz®.

The aggregate exercise price of the Preferred

Warrants is approximately $ 8.0

million, exercisable for an aggregate of 8,000

shares of Series B-3 Preferred Stock commencing on the Exercisability Date (as defined in the Form of Preferred Warrant) until the

earlier of (i) 5 days following the date of completion of (A) the Company’s public

announcement of (I) at least 95% of the Company’s territory managers, medical science liaisons, and reimbursement

employees are using the Company’s customer relationship management system routinely or on a performance improvement plan and

(II) the Company’s revenue for the period starting on January 1, 2024 and ending no earlier than April 30, 2024 excluding

revenue from related parties (including Biofrontera AG) is at least 5% higher than the Company’s revenue excluding revenue

from related parties (including Biofrontera AG) for the corresponding period of the same length, starting on January 1,

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

Company’s board of directors that such targets have been completed, and (B) the Stockholder Approval (as defined below) and

Securities and Exchange Commission covering the resale of the Common

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

Subject to the terms and limitations contained in the Certificate of Designation,

the shares of the Series B-1 Preferred Stock issued in the Offering are immediately convertible and the Series B-3 Preferred Stock issuable

upon exercise of the Warrants issued in the Offering will not become convertible until the Company’s stockholders approve (i) the

issuance of all Common Stock issuable upon conversion of the Issued Preferred Stock and the Series B-3 Preferred Stock or the Series B-3

Preferred Stock upon exercise of the Preferred Warrants to the extent required under the Nasdaq listing rules, (iii) an increase to the

Company’s authorized share capital (collectively, the “Stockholder Approval”).

Pursuant to the Preferred Purchase Agreement and as

soon as practicable following the date of the Stockholder Approval, the Company shall appoint two independent directors to the Company’s

Board who are designated by Rosalind Advisors, Inc.

On February 22, 2024, concurrent with the

closing of the Offering, each purchaser delivered a notice of initial conversion requesting that the Company convert the Series B-1

Preferred Stock they had acquired in the Offering up to the Cap (as defined in the Certificate of Designation) for each purchaser.

As a result of this conversion, the Company issued 2,516,785 shares of the Company’s common stock to the purchasers, and as of

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

the Company’s outstanding shares of Series B-1 Convertible Preferred Stock is 4,806 , with 6,793,893 shares of common stock

issuable upon conversion of the Series B-1 Preferred.

Upon obtaining the Stockholder Approval, there will be 11,309,019 shares of common stock issuable upon conversion

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

Amendment to Articles

of Incorporation - Series B Preferred Stock

Pursuant to the terms of the Preferred Purchase

Agreement, on February 20, 2024, the Company filed the Certificate of Designation with the Delaware Secretary of State designating 6,586

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

shares as Series B-2 Preferred Stock and 8,000

shares as Series B-3 Convertible Preferred Stock, each with a stated value of $ 1,000

The Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series B Preferred

The company will need to increase the number of authorized shares from the current 15,000,000 in order to have enough

common shares available to allow for the conversion of the B-2 and B-3 Preferred Stock.

The Board of Directors has approved an increase

of authorized shares up to 35,000,000 on March 4, 2024, subject to shareholder approval.

following is a summary of the terms of the Series B Preferred Stock:

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

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

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

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

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

and until the Company has obtained the Stockholder Approval, the number of shares of Common Stock that shall be deemed issued upon conversion

of the Series B Preferred Stock (for purposes of calculating the number of aggregate votes that the holders of Series B Preferred Stock

are entitled to on an as-converted basis) will be equal to that number of shares equal to 9.9 % of the Company’s outstanding Common

Stock as of the Signing Date (excluding for purposes of the calculation, any securities issued on the Signing Date) (the “ Cap ”),

which each such holder being able to vote the number of shares of Series B Preferred Stock held by it relative to the total number of

shares of Series B Preferred Stock then outstanding multiplied by the Cap.

Notwithstanding the foregoing, the holders of the Series B

Preferred Stock are not entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock-basis with regard to the

approval of the issuance of units upon conversion of the Series B-1 Preferred Stock and the issuance of all Common Stock upon conversion

of the Series B Preferred Stock.

to the Stockholder Approval, the Series B Preferred Stock is not convertible in excess of the Cap.

Following the Stockholder Approval,

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

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

Liquidation .

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

including a change of control transaction, or Deemed Liquidation Event (any such event, a “ Liquidation ”) the holders

of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution

to its stockholders, and in the event of a Deemed Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding

shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or the other proceeds

available for distribution to stockholders, before any payment shall be made to the holders of any other shares of capital stock of the

Company by reason of their ownership thereof, an amount per share equal to the greater of (i) three times the Original Per Share Price,

together with any dividends accrued but unpaid thereon (the “ Liquidation Preference ”) or (ii) such amount per share

as would have been payable had all shares of Series B Preferred Stock been converted into Common Stock (without regard to any limitations

on conversion set forth in the Certificate of Designation or otherwise) immediately prior to such Liquidation (the amount payable pursuant

to this sentence is hereinafter referred to as the “ Series B Liquidation Amount ”).

If upon any such Liquidation, the

assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred

Stock the full Liquidation Preference, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the

assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held

by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

After the payment in full

of all Series B Liquidation Amount, the remaining assets of the Company available for distribution to its stockholders or, in the case

of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Series B Preferred Stock pursuant to the Certificate

of Designation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each

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

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

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

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

in the Certificate of Designation or otherwise.

Unless prohibited by Delaware law governing distributions to stockholders, in the event the Stockholder Approval is not obtained within

one year following the Issuance Date, shares of Series B-1 Preferred Stock shall be redeemed by the Company at a price equal to the then

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

the Company at any time on or after the one year anniversary of the Issuance Date of written notice from the holders of a majority of

the then outstanding shares of Series B-1 Preferred Stock, voting together as a single class (the “ Redemption Request ”)

requesting redemption of all shares of Series B-1 Preferred Stock (such date, the “ Redemption Date ”).

of a Redemption Request, the Company shall apply all of its assets to any such redemption, and to no other corporate purpose, except

to the extent prohibited by Delaware law governing distributions to stockholders.

On the Redemption Date, the Company shall redeem, on

a pro rata basis in accordance with the number of shares of Series B-1 Preferred Stock owned by each holder, the total number of shares

of Series B-1 Preferred Stock outstanding immediately prior to the Redemption Date;

provided, however, that Excluded Shares (as defined

in the Certificate of Designation) shall not be redeemed and shall be excluded from the calculations set forth in this sentence.

on the Redemption Date, Delaware law governing distributions to stockholders prevents the Company from redeeming all shares of Series

B-1 Preferred Stock to be redeemed, the Company shall ratably redeem the maximum number of shares that it may redeem consistent with

such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.

Participation

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

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

There have been no subsequent events that occurred during such period that would require disclosure in

or would be required to be recognized in the financial statements as of December 31, 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data