What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-08-13 · 272 added, 326 removed, 282 unchanged (68% of the section changed)

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The following information should provide a better understanding of the major factors and trends that affect our earnings

performance and financial condition, and how our performance during the first and second quarters of 2025 compare with prior-year periods.

performance and financial condition, and how our performance during the first three quarters of 2025 compare with prior-year

Throughout this section, Biofrontera Inc., including its wholly owned subsidiary, Biofrontera Discovery GmbH (“Discovery”

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

our ability to achieve

and sustain profitability;

our ability to compete

effectively in selling our licensed products;

our ability to expand,

manage and maintain our direct sales and marketing organizations, including our ability to obtain the financing to develop our marketing

strategy, if needed;

changes in our relationship

with our Licensors;

our Licensors’ ability

to manufacture our licensed products;

our Licensors’ ability

to adequately protect their intellectual property and operate their business without infringing upon the intellectual property rights

our estimates regarding

anticipated operating losses, future revenues, capital requirements and our needs for additional financing;

market risks regarding

consolidation and group purchasing organizations in the healthcare industry;

the willingness of healthcare

providers to purchase our licensed products if coverage, reimbursement and pricing from third-party payors for our products, or procedures

using our products significantly declines;

our ability to market,

commercialize, achieve market acceptance for and sell our licensed products;

any product quality issues,

product defects, or product liability claims;

our ability to comply with

The Nasdaq Stock Market, LLC (“Nasdaq”) continued listing standards (discussed in more detail below);

our ability to comply with

the requirements of being a public company;

the progress, timing and

completion of research, development and preclinical studies and clinical trials for our licensed products;

our Licensors’ ability

to obtain and maintain the regulatory approvals necessary for the marketing of our licensed products in the United States, and;

such other risks identified

Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (as filed with the

Securities and Exchange Commission (“SEC”) on March 20, 2025, the “Form 10-K”), Item 1A of Part II of this

Quarterly Report on Form 10-Q and any other filings with the SEC.

ability to achieve and sustain profitability;

ability to compete effectively in selling our licensed products;

ability to expand, manage and maintain our direct sales and marketing organizations, including our ability to obtain the financing

to develop our marketing strategy, if needed;

in our relationship with our Licensors;

Licensors’ ability to manufacture our licensed products;

Licensors’ ability to adequately protect their intellectual property and operate their business without infringing upon the

intellectual property rights of others;

estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;

risks regarding consolidation and group purchasing organizations in the healthcare industry;

willingness of healthcare providers to purchase our licensed products if coverage, reimbursement and pricing from third-party payors

for our products, or procedures using our products significantly declines;

ability to market, commercialize, achieve market acceptance for and sell our licensed products;

product quality issues, product defects, or product liability claims;

ability to comply with Nasdaq continued listing standards (discussed in more detail

ability to comply with the requirements of being a public company;

progress, timing and completion of research, development and preclinical studies and clinical trials for our licensed products;

Licensors’ ability to obtain and maintain the regulatory approvals necessary for the marketing of our licensed products in

the United States, and;

other risks identified in Item 1A.

Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024

(as filed with the Securities and Exchange Commission (“SEC”) on March 20, 2025, the “Form 10-K”), Item 1A

of Part II of this Quarterly Report on Form 10-Q and any other filings with the SEC.

detailed information about us and the risk factors that may affect the realization of forward-looking statements, including the forward-looking

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With our national commercial team, we generate revenue by selling our licensed products directly to dermatology offices and

are currently selling Ameluz ® in the United States under a n exclusive license

and supply agreement, the Second Amended and Restated License and Supply Agreement, effective as of February 13, 2024 with the Ameluz

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

The Second A&R Ameluz LSA reduced the price we pay per unit, based on certain

percentages of the anticipated net selling price (“Transfer Price”) of Ameluz ® from 50% to 25% which covers

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

for all purchases in 2024 and 2025.

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

25% to 35% for sales related to actinic keratosis and, if approved by the FDA, basal cell carcinoma and squamous cell carcinoma.

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

to the closing of the Strategic Transaction on October 20, 2025, we were selling Ameluz ® in the United States under an

exclusive license and supply agreement, the Second Amended and Restated License and Supply Agreement, effective as of February 13, 2024

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

The Second A&R Ameluz LSA reduced the price we pay per unit,

based on certain percentages of the anticipated net selling price (“Transfer Price”) of Ameluz ® from 50% to

25% which covers the cost of goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance

and patent administration for all purchases in 2024 and 2025.

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

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activities and continue our commercial growth trajectory.

the third quarter of 2024, the Company reached the decision to divest its Xepi product line and the related intangible asset is currently

held for sale.

Xepi ® (ozenoxacin cream, 1%), is a topical non-fluorinated quinolone that inhibits bacterial growth.

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.

Our exclusive license and supply agreement

with Ferrer Internacional S.A.

(“Ferrer”) enables us to market and sell this product in the United Sates.

However, the Company

has not had sales of Xepi since 2023 due to third-party manufacturing delays that have impacted our commercialization of the product.

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

If the new contract manufacturer is qualified, we believe that

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

Nevertheless,

the Company is working with a potential purchaser and expects to complete a sale of the asset within the next three months.

intangible asset is presented as held for sale under current assets in the consolidated balance sheets.

Asset Held for

Sale , for additional information.

principal objective is to improve patient outcomes through adoption and use of our licensed products in the United States.

elements of our strategy include the following:

expanding our sales in

the United States of Ameluz ® in combination with the RhodoLED ® Lamps for the treatment of minimally

to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be the standard of care in

the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base;

leveraging the potential

for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the United States market

with respect to Ameluz ® and furthering the clinical development of this product after taking over responsibility for

certain ongoing clinical trials since June 1, 2024, pursuant to the Second A&R Ameluz LSA;

strategically managing

our licensed portfolio, including opportunistically adding complementary products or services to our portfolio by acquiring or licensing

IP to further leverage our commercial infrastructure and customer relationships.

executing these strategic objectives, we will fuel company growth, deepen our trusted relationships in the dermatology community, and

above all, help patients live healthier, more fulfilling lives.

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

BF-RhodoLED ® Lamps.

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

sales, short-term debt and proceeds received from convertible notes and equity financings.

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

GAAP measure as defined below).

Our sole source of product revenue is sales of products that we license from certain

related and unrelated companies.

Our long-term financial objectives include consistent revenue growth and expanding operating

Accordingly, we are focused on licensed product sales expansion to drive revenue growth and improve operating efficiencies,

including effective resource utilization, information technology leverage, and overhead cost management.

Key Developments

Transaction with Biofrontera AG

June 30, 2025, the Company signed a binding agreement (the “Term Sheet”) with its former parent company Biofrontera AG and

its subsidiaries, Biofrontera Pharma and Biofrontera Bioscience (together, the “Biofrontera Group”) pursuant to which the

Company agreed to acquire all rights in the United States (the “U.S.

Rights”) to Ameluz ® and RhodoLED ®

(the “Strategic Transaction”).

In connection with the Strategic Transaction, additional agreements were executed, and the

transfer of the U.S.

Rights was completed on October 20, 2025.

As a result of these actions, the Company will pay a monthly earnout of

12% in years where Ameluz ® revenue in the United States is at or below $65.0 million and 15% in years where Ameluz ®

revenue in the United States exceeds $65.0 million.

The earnout replaces the transfer pricing model under the Company’s Second

A&R Ameluz LSA effective as of February 13, 2024 by and among the Company, and the Biofrontera Group.

The new structure reduces overall

cost for the Company and is expected to accelerate the Company’s timeframe to reach break-even.

the completion of this agreement, the Company now assumes full responsibility for manufacturing, regulatory, quality management, pharmacovigilance,

and commercialization of Ameluz® and the RhodoLED® portfolio in the U.S.

The Company expects the full transfer of assets and

personnel to be completed by late fourth quarter of 2025 or early in the first quarter of 2026.

exchange for the U.S.

Rights, in addition to the aforementioned earnout and an agreement to transfer all costs associated with the U.S.

business, Biofrontera AG received 3,019 shares of Series D Convertible Preferred Stock, par value $0.001 per share (the “Series

D Preferred Stock”).

transaction was funded through an $11 million investment by existing investors, $8.5 million of which was funded at the time the

Term Sheet was executed and the remaining $2.5 million was funded on October 24, 2025 following the closing of the Strategic Transaction.

Closing of Asset Purchase Agreement

November 6, 2025 (the “Closing Date”), the Company entered into an Asset Purchase Agreement (the “ APA ”)

with Pelthos Therapeutics Inc., an unaffiliated party, providing for the sale of all of the assets relating to the Company’s product,

Xepi® (ozenoxacin) cream.

purchase price for the acquired assets is a maximum of $10.0 million, payable as follows:

million in cash, paid on the Closing Date;

to availability of certain commercial quantities of Xepi® and other terms and conditions of the APA, $1.0 million within thirty

(30) days following the availability of such commercial quantities;

right to receive certain earnout consideration upon the achievement of the milestone events, as further described below:

million upon the initial achievement of $10.0 million in annual net sales of Xepi®;

million upon the initial achievement of $15.0 million in annual net sales of Xepi®

with Nasdaq Listing Standards

described further below, on each of November 4, 2025 and November 6, 2025, the Company received a notice (the “November 4 Notice”

and the “November 6 Notice,” respectively) from Nasdaq notifying the Company that it has regained compliance with the continued

listing requirements under Nasdaq Listing Rule 5550(b)(1) and Nasdaq Listing Rule 5550(a)(2).

Listing Rule 5550(b)(2)

May 8, 2025, the Company received a letter from Nasdaq notifying the Company that the listing of the Common Stock was not in compliance

with Nasdaq Listing Rule 5550(a)(2) as the closing bid price of the Common Stock was less than $1.00 per share for the

previous 33 consecutive business days.

The notice has no present

impact on the listing or trading of the Company’s securities on The Nasdaq Capital Market.

Under Nasdaq Listing Rule 5810(c)(3)(A),

the Company has a period of 180 calendar days, or until November 5, 2025, to regain compliance with the rule referred to in this paragraph.

To regain compliance, during this 180-day compliance period, the closing bid price of the Company’s common stock must be at least

$1.00 per share for a minimum of 10 consecutive business days.

the event that the Company does not regain compliance with the Nasdaq Listing Rules prior to the expiration of the 180-day compliance

period ending on November 5, 2025, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule

5810(c)(3)(A)(ii) by meeting the continued listing requirement for market value of publicly held shares and all other applicable standards

for initial listing on The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and providing written notice

to Nasdaq of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or if the Company does not meet other listing

standards, Nasdaq could provide notice that the Company’s securities will be subject to delisting.

At such time, the Company may

appeal the delisting determination to a Hearings Panel.

The Company intends to actively monitor the closing bid price of its common

stock and, as appropriate, will consider available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules.

There can be no assurance that the Company will be able to regain compliance with Rule 5550(a)(2) or maintain compliance with the other

listing requirements of the Nasdaq Capital Market.

May 21, 2025, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the

Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended March 31, 2025 was $0.5

million, the Company is no longer in compliance with the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires

that a listed company’s stockholders’ equity be at least $2.5 million.

Additionally, as of the date of the Notice or as of

June 30, 2025, 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 $0.5 million in the most recently completed fiscal year or in two

of the last three most recently completed fiscal years.

As a result, as of the date of this Report, the Company does not satisfy Nasdaq

Marketplace Rule 5550(b).

Notice has no immediate effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market.

submitted a plan to regain compliance with the Nasdaq Listing Rule 5550(b)(1) to Nasdaq and on July 24, 2025 was granted an

extension of time to regain compliance with this rule on or before October 10, 2025.

with Nasdaq Listing Rule 5550(a)(2) as the closing bid price of the Common Stock was less than $1.00 per share for the previous 33 consecutive

business days.

notice had no present impact on the listing or trading of the Company’s securities on Nasdaq.

Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days, or until November 5, 2025, to regain compliance with the

rule referred to in this paragraph.

In the November 6 Notice, Nasdaq notified the Company that, because the closing bid price of the Company’s

common stock was $1.00 per share or greater for the preceding 11 consecutive business days, the Company has regained compliance

with Listing Rule 5550(a)(2), and that this matter is now closed.

Listing Rule 5550(b)(1)

May 21, 2025, the Company received a notice from Nasdaq notifying the Company that, because the Company’s

stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended March 31, 2025 was $0.5 million, the

Company was 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 $2.5 million.

Additionally, as of the date of the notice and as of September

30, 2025, 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 $0.5 million in the most recently completed fiscal year or in two of the last

three most recently completed fiscal years.

a result of the Strategic Transaction and the Subsequent Closing, as of October 24, 2025, the Company believes its stockholders’

equity exceeds $5 million which exceeds the minimum amount required for continued listing on Nasdaq

under Nasdaq Listing Rule 5550(b)(1).

In the November 4 Notice, Nasdaq notified the Company that, based on certain disclosures in the Current Report

on Form 8-K filed by the Company on October 24, the Company is in compliance with the continued listing requirement under Nasdaq

Listing Rule 5550(b)(1).

Nasdaq will continue to monitor

the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic

report the Company does not evidence compliance, it may be subject to delisting.

for any reason, Nasdaq should delist our common stock from trading on its exchange and we are unable to obtain listing on another reputable

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our stockholders:

the liquidity and marketability of our common stock

and/or publicly-traded warrants;

the market price of our common stock;

our ability to obtain financing for the continuation

of our operations;

the number of institutional and general investors that

will consider investing in our common stock;

the number of market makers in our common stock;

the availability of information concerning the trading

prices and volume of our common stock;

the number of broker-dealers willing to execute trades

in shares of our common stock.

liquidity and marketability of our common stock and/or publicly-traded warrants;

market price of our common stock;

ability to obtain financing for the continuation of our operations;

number of institutional and general investors that will consider investing in our common stock;

number of market makers in our common stock;

availability of information concerning the trading prices and volume of our common stock;

number of broker-dealers willing to execute trades in shares of our common stock.

addition, if we fail to regain compliance to be eligible to trade on Nasdaq or obtain listing on another reputable national securities

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This may also cause the market price of our common stock to further decline.

Transaction with Biofrontera AG

June 30, 2025, the Company signed a binding agreement (the “Term Sheet”) with its former parent company Biofrontera AG,

Biofrontera Pharma, and Biofrontera Bioscience (together, the “Biofrontera Group”) pursuant to which the Company will

acquire all rights in the United States (the “U.S.

Rights”) to Ameluz ® and RhodoLED ® (the

“Strategic Transaction”).

In connection with the Strategic Transaction, additional agreements are to be executed, and

the transfer of the U.S.

Rights is expected to be completed by September 30, 2025.

Under the Term Sheet, and continuing once the

Rights are transferred, the Company will pay a royalty of 12% (and 15% in years where Ameluz ® revenue in the

United States exceeds $65.0 million).

The royalty will replace the transfer pricing model under the Company’s Second A&R

Ameluz LSA effective as of February 13, 2024 by and among the Company, and the Biofrontera Group.

Related Party

Transactions for additional information.

exchange for the U.S.

Rights, in addition to the aforementioned royalty and an agreement to transfer all costs associated with the U.S.

business, Biofrontera AG will receive 3,019 shares of Series D Convertible Preferred Stock, par value $0.001 per share.

Related Party Transactions, Note 18.

Commitments and Contingencies and Note 20.

Subsequent Events for additional information.

to the Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “Series

D Certificate of Designation”), each share of Series D Convertible Preferred Stock is, subject to certain limitations specified

in the Series D Certification of Designation, immediately convertible at the option of the holders thereof into shares of the Company’s

common stock, par value $0.001 per share (the “Common Stock”) and has voting rights on an as-converted basis.

no shares of Series D Convertible Preferred Stock issued as of June 30, 2025.

Subsequent Events for additional information.

Placement of Series C Preferred Stock

June 27, 2025, as a condition to the Strategic Transaction, the Company entered into a securities purchase agreement (the “Purchase

Agreement”) with certain accredited investors to issue and sell, in a private placement, up to 11,000 shares of Series C Convertible

Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) at a price of $1,000 per share for an aggregate

offering price of $11.0 million.

The Series C Preferred Stock offering consisted of two tranches with the first tranche closing on July

Gross proceeds of $8.5 million from the first tranche were received on June 30, 2025, in advance of the first tranche closing

(before deducting estimated offering expenses payable by the Company).

The second tranche is expected to close after the Company enters

into definitive documentation to consummate the Strategic Transaction, which is expected to occur on or before September 30, 2025.

gross proceeds from the second tranche are expected to be $2.5 million, before deducting estimated offering expenses payable by the Company.

The Company intends to use the net proceeds from the Series C Preferred Stock offering to fund the acquisition and transfer costs associated

with the Strategic Transaction and other general corporate purposes.

Advance from Stockholders for additional

Uncertainty and Tariffs

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the pricing of our products.

affecting our performance

Our historical results of operations may not be comparable to our results

of operations in future periods, and our results of operations may not be directly comparable from period to period due to seasonality.

historical results of operations may not be comparable to our results of operations in future periods, and our results of operations

may not be directly comparable from period to period due to seasonality.

photodynamic therapy treatments using a lamp are performed more frequently during the winter, as a result our revenue is subject to some

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

principal objective is to improve patient outcomes through adoption and use of our licensed products in the United States.

The key elements

of our strategy include the following:

our sales in the United States of Ameluz ® in combination with the RhodoLED ® Lamps for the treatment

of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be the standard

of care in the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base;

the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the United

States market with respect to Ameluz ® and furthering the clinical development of this product after taking over responsibility

for certain ongoing clinical trials since June 1, 2024, pursuant to the Second A&R Ameluz LSA;

strategically

managing our licensed portfolio, including opportunistically adding complementary products or services to our portfolio by acquiring

or licensing IP to further leverage our commercial infrastructure and customer relationships.

executing these strategic objectives, we expect to fuel company growth, deepen our trusted relationships in the dermatology community, and

above all, help patients live healthier, more fulfilling lives.

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

BF-RhodoLED ® Lamps.

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

sales, short-term debt and proceeds received from convertible notes and equity financings.

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

GAAP measure as defined below).

Our sole source of product revenue is sales of products that we license from certain

related and unrelated companies.

Our long-term financial objectives include consistent revenue growth and expanding operating

Accordingly, we are focused on licensed product sales expansion to drive revenue growth and improve operating efficiencies,

including effective resource utilization, information technology leverage, and overhead cost management.

of Our Results of Operations

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

the level of orders generated

by our sales force;

the level of prescriptions

and institutional demand for our licensed products;

unit sales prices.

level of orders generated by our sales force;

level of prescriptions and institutional demand for our licensed products;

sales prices.

Related Party

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and pharmacovigilance .

These expenses are charged to us based on costs incurred plus 6% in accordance with the Amended and Restated Master

Contact Services Agreement entered into in December 2021 (the “2021 Services Agreement”).

The 2021 Services Agreement enables

us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically provided to us, including regulatory

and pharmacovigilance support for as long as we deem necessary.

We currently have statements of work in place regarding regulatory affairs,

medical affairs, and pharmacovigilance, 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.

These expenses are charged to us based on costs incurred plus 6% in accordance with the Amended and Restated

Master Contact Services Agreement entered into in December 2021 (the “2021 Services Agreement”).

The 2021 Services Agreement

enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically provided to us, including

regulatory and pharmacovigilance support for as long as we deem necessary.

We currently have statements of work in

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

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

third-party providers.

and Development

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of Operations

of the Three Months ended June 30, 2025 and 2024

following table summarizes our results of operations for the three months ended June 30:

of the Three Months ended September 30, 2025 and 2024

following table summarizes our results of operations for the three months ended September 30:

( in thousands)

Product Revenues, net

Related party revenues

Revenues, net

Operating expenses:

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Change in fair value of investment, related party

Interest expense, net

Interest income (expense), net

Other income, net

2 unchanged sentences

Income tax expenses

product revenue for the three months ended June 30, 2025 increased by $1.2 million, or 15.3% as compared to the three months ended June

This increase was driven by both a 5% higher unit sale price and 9.5% increase in sales volume of Ameluz ® in

the second quarter of 2025.

The higher sales volume of Ameluz ® was due to improvements in direct sales team efficiency.

product revenue for the three months ended September 30, 2025 decreased by $2.0 million, or 22.5% as compared to the three months ended

September 30, 2024.

This decrease was primarily driven by a decrease in sales volume of Ameluz ® in the third quarter of

The lower sales volume of Ameluz ® in the third quarter of 2025 as compared to the same period of 2024 was due to

customer buy-in before the increase in the price of Ameluz ® in October 2024.

of Revenues, Related Party

of revenues, related party for the three months ended June 30, 2025 decreased by $1.7 million, or 41.8% as compared to the three months

ended June 30, 2024.

of revenues, related party for the three months ended September 30, 2025 decreased by $2.9 million, or 60.0% as compared to the three

months ended September 30, 2024.

This was primarily due to the reduced cost structure under the Second A&R Ameluz LSA.

See N ote 12.

Party Transactions.

Related Party Transactions.

General and Administrative Expenses

general and administrative expenses for the three months ended June 30, 2025 increased by $2.6 million, or 33.0% as compared to the three

months ended June 30, 2024.

The increase was primarily driven by a $3.4 million increase in legal costs due to patent claims, which was

partially offset by $0.5 million in personnel savings within both the direct sales team and general and administrative staff due to headcount

fluctuation, and $0.3 million decrease in miscellaneous general and administrative expenses.

general and administrative expenses for the three months ended September 30, 2025 increased by $1.6 million, or 19.3% as compared to

the three months ended September 30, 2024.

The increase was primarily driven by increase in legal costs due to patent claims.

Commitments and Contingencies – Legal Proceedings .

and Development Expenses

expenses for the three months ended June 30, 2025 increased by $0.2 million as compared to the three months ended June 30, 2024.

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

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

The following table summarizes

our R&D expenses by indication:

Three Months Ended June 30,

expenses for the three months ended September 30, 2025 increased by $0.2 million, or 27.7% as compared to the three months ended September

The increase was attributable to higher external investigator fees and clinical site setup costs, reflecting the progress of

trials in 2025.

following table summarizes our R&D expenses by indication:

Three Months Ended September 30,

Superficial basal cell carcinoma

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in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $0.2 million for the three months ended June 30, 2025, as compared to $5.4 million for

the three months ended June 30, 2024.

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

of outstanding warrant liabilities due to exercise of warrants for preferred shares in May 2024 (of the 2024 change, $4.3 million was

attributable to the warrants for preferred stock), coupled with a drop in the underlying value of the Company’s Common Stock during

the second quarter of 2025 as compared to the second quarter of 2024.

expense decreased by $0.5 million due to the lower interest rate applicable to the outstanding convertible notes of $4.2 million issued

by the Company in November 2024, as compared to the interest rate applicable to the Company’s $4.0 million term loan that matured

on July 5, 2024.

of the Six Months ended June 30, 2025 and 2024

following table summarizes our results of operations for the six months ended June 30:

change in fair value of warrant liabilities was $0.3 million for the three months ended September 30, 2025, as compared to $0.7 million

for the three months ended September 30, 2024.

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

underlying value of the Company’s Common Stock during the third quarter of 2025 as compared to the third quarter of 2024.

expense increased by $0.1 million due to the issuance of Senior Secured Convertible Notes of $4.2 million 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 through the issuance of additional principal on a quarterly basis.

of the Nine Months ended September 30, 2025 and 2024

following table summarizes our results of operations for the nine months ended September 30:

( in thousands)

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Revenues, Net

product revenue for the six months ended June 30, 2025 increased by $1.9 million, or 12.0% as compared to the six months ended June 30,

This increase was driven by a higher unit sales price contributing $0.6 million and increased sales volume of Ameluz ®

contributing $1.0 million, as well as a $0.3 million increase in sales of the RhodoLED ® Lamps.

The higher sales

volume of Ameluz ® was due to improvements in direct sales team efficiency.

product revenue for the nine months ended September 30, 2025 decreased by $0.1 million, or 0.6% as compared to the nine months ended

September 30, 2024.

This decrease was driven by a decreased sales volume of Ameluz ® contributing a decrease of $1.4 million,

offset by an increase of $1.6 million due to a higher unit sales price.

of Revenues, Related Party

of revenues, related party for the six months ended June 30, 2025 decreased by $2.6 million, or 32.1% as compared to the six months ended

June 30, 2024.

of revenues, related party for the nine months ended September 30, 2025 decreased by $5.5 million, or 42.5% as compared to the nine months

ended September 30, 2024.

This was driven by the reduced cost structure under the Second A&R Ameluz LSA.

General and Administrative Expenses

general and administrative expenses for the six months ended June 30, 2025 increased by $2.0 million, or 11.8% as compared to the six

months ended June 30, 2024.

The increase was primarily attributable to a $4.4 million increase in legal expenses driven by patent claim

related legal costs.

The increased legal expenses were partially offset by savings in personnel expenses of $0.9 million due to headcount

fluctuations in our direct sales and administrative teams, as well as a decrease of $0.5 million in expenses relating to sales support

functions and a decrease of $0.4 million in issuance costs.

general and administrative expenses for the nine months ended September 30, 2025 increased by $3.6 million, or 14.2% as compared to the

nine months ended September 30, 2024.

The increase was primarily attributable to a $6.2 million increase in legal expenses driven by

patent claims.

The increased legal expenses were partially offset by savings in personnel expenses of $1.1 million, mainly due to headcount

fluctuations in our direct sales and administrative teams, as well decreases of $0.4 million in expenses relating to sales support functions

and $0.6 million in insurance and finance expenses, and savings of $0.5 million in other general and administrative expenses.

and Development Expenses

expenses for the six months ended June 30, 2025 increased by $1.4 million as compared to the six months ended June 30, 2024.

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

expenses for the nine months ended September 30, 2025 increased by $1.6 million as compared to the nine months ended September 30, 2024.

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

June 1, 2024.

The following table summarizes our research and development expenses by indication:

Six Months Ended June 30,

Nine Months Ended September 30,

Superficial basal cell carcinoma

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in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $0.7 million for the six months ended June 30, 2025, as compared to $2.0 million for

the six months ended June 30, 2024.

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

of the Company’s Common Stock for each of the six months ended June 30, 2025 and June 30, 2024.

expense decreased by $1.8 million due to the decrease in the interest rate applicable to the outstanding convertible notes of $4.2 million

issued in November of 2024, compared to the $4.0 million term loan that matured on July 5, 2024 .

Loss to Adjusted EBITDA Reconciliation for the Three and Six Months Ended June 30, 2025 and 2024

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

non-operating items from our statements of operations as well as certain other items considered outside the normal course of our operations

specifically described below.

change in fair value of warrant liabilities was $0.4 million for the nine months ended September 30, 2025, as compared to $1.3 million

for the nine months ended September 30, 2024.

The change in fair value of warrant liabilities was driven by a mix of a decreased population

of outstanding warrant liabilities due to the exercise of warrants for preferred shares in May 2024, coupled with a drop in the underlying

value of the Company’s Common Stock for each of the nine months ended September 30, 2025 and September 30, 2024.

expense decreased by $1.7 million due a lower interest rate applicable to the outstanding convertible notes of $4.2 million issued in

November of 2024, compared to the interest rate on the $4.0 million term loan that matured on July 5, 2024 .

Loss to Adjusted EBITDA Reconciliation for the Three and Nine Months Ended September 30, 2025 and 2024

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

other non-operating items from our statements of operations as well as certain other items considered outside the normal course of

our operations specifically described below.

Adjusted EBITDA is not a presentation made in accordance with U.S.

Our definition of adjusted EBITDA

may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation

and differences due to items subject to interpretation.

Adjusted EBITDA should not be considered as an alternative to net income or loss,

operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with U.S.

as measures of operating performance or liquidity.

Adjusted EBITDA has limitations as an analytical tool and should not be considered

in isolation or as a substitute for analysis of our results as reported under U.S.

Our definition

of adjusted EBITDA may vary from the use of similarly titled measures by others in our industry due to the potential inconsistencies

in the method of calculation and differences due to items subject to interpretation.

Adjusted EBITDA should not be considered as an

alternative to net income or loss, operating income/(loss), cash flows from operating activities or any other performance measures

derived in accordance with U.S.

GAAP as measures of operating performance or liquidity.

Adjusted EBITDA has limitations as an

analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S.

on debt extinguishment:

Effective as of January 4, 2024, we voluntarily terminated the Loan and Security Agreement with

Midcap Business Credit LLC and recognized a $0.3 million loss on debt extinguishment upon the early termination of the loan.

the impact of this loss as it is attributed to the prepayment fee, which is considered non-recurring, and the write-off of deferred financing

costs, which is considered non-cash.

Effective as of January 4, 2024, we voluntarily terminated the Loan and Security Agreement with Midcap Business

Credit LLC and recognized a $0.3 million loss on debt extinguishment upon the early termination of the loan.

We exclude the impact of

this loss as it is attributed to the prepayment fee, which is considered non-recurring, and the write-off of deferred financing costs,

which is considered non-cash.

in fair value of warrant liabilities:

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our ongoing operating performance.

below table presents a reconciliation from net loss to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

below table presents a reconciliation from net loss to Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Interest expense, net

September 30,

Nine Months Ended

September 30,

Interest (income) expense, net

Income tax expenses

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Adjusted EBITDA margin

EBITDA decreased $0.4 million from ($4.7) million for the three months ended June 30, 2024 to ($5.1) million for the three months

ended June 30, 2025.

EBITDA decreased $1.4 million from ($4.6) million for the three months ended September 30, 2024 to ($6.0) million for the three months

ended September 30, 2025.

This is the result of the increases in selling, general and administrative expenses and research and development

expenses, which were partially offset by the increase in gross profit.

EBITDA for the six months ended June 30, 2025 decreased $0.2 million from ($9.3) million for the six months ended June 30, 2024

to ($9.5) million for the six months ended June 30, 2025.

This decrease is mainly due to the increase in legal expense, partially offset

by savings in other selling, general and administrative expenses and the increase in gross profit, including the sales revenue increase

of $1.9 million and cost of revenue decrease of $2.6 million.

EBITDA for the nine months ended September 30, 2025 decreased $1.9 million from ($9.3) million for the nine months ended September 30,

2024 to ($13.9) million for the nine months ended September 30, 2025.

This decrease is mainly due to the increase in legal expenses,

partially offset by savings in other selling, general and administrative expenses and the increase in gross profit of $5.2 million.

and Capital Resources

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generally accepted accounting principles (“U.S.

GAAP”) assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and

satisfaction of liabilities in the normal course of business.

assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction

of liabilities in the normal course of business.

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

The Company incurred net cash outflows from operations of $11.0

million and $8.0 million for the six months ended June 30, 2025 and 2024, respectively.

The Company had an accumulated deficit as of

June 30, 2025 of $126.9 million.

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

and cash flows from financing transactions, including $8.5 million received in a private placement of Series C Preferred Stock, with

a second tranche to be received on or before September 30, 2025.

As of June 30, 2025, we had cash and cash equivalents of $7.2 million,

compared to $5.9 million as of December 31, 2024.

However, substantial doubt exists about the Company’s ability to continue as

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

Company plans to address the conditions that raise substantial doubt regarding its ability to continue as a going concern by, among

other things, utilizing external financing options, including a short-term line of credit, as well as finalizing the sale of its

Xepi product line within the next one to three months.

However, there can be no assurance that the Company will be successful in

obtaining sufficient funding on acceptable terms, if at all, or close the Xepi disposition as intended.

If the Company is unable to

raise additional 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.

million and $9.3 million for the nine months ended September 30, 2025 and 2024, respectively.

The Company had an accumulated deficit

as of September 30, 2025 of $133.6 million.

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

its products, and cash flows from financing transactions, including $11.0 million received in a private placement of Series C Preferred

Stock, (received in two separate tranches of $8.5 million in July 2025 and $2.5 million in October 2025).) As of September 30, 2025,

we had cash and cash equivalents of $3.4 million, compared to $5.9 million as of December 31, 2024.

These factors raise substantial

doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the issuance date

of this report.

Company plans to address the conditions that raise substantial doubt regarding its ability to continue as a going concern by, among other

things, utilizing external financing options, including a short-term line of credit, as well as finalizing the sale of its Xepi product

line on November 6, 2025.

However, there can be no assurance that the Company will be successful in obtaining sufficient funding on acceptable

terms, if at all.

If the Company is unable to raise additional 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.

consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and

1 unchanged sentence

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Net increase (decrease) in cash and restricted cash

the six months ended June 30, 2025, operating activities used $7.2 million of cash, primarily resulting from our loss from operations

the nine months ended September 30, 2025, operating activities used $11.0 million of cash, primarily resulting from our loss from operations

of $16.2 million, adjusted for non-cash expense of stock-based compensation of $0.7 million, depreciation and amortization in the aggregate

1 unchanged sentence

million, partially offset by the change in fair value of warrant liabilities of $0.4 million.

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

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

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

loss on debt extinguishment of $0.3 million, depreciation and amortization in the aggregate of $0.9 million, and net cash used by changes

in our operating assets and liabilities of $3.0 million, partially offset by the change in fair value of warrant liabilities of $2.0

the six months ended June 30, 2025, net cash used in investing activities consisted of negligible fixed asset purchases.

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

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

the six months ended June 30, 2025, net cash from financing activities consisted of an advance from certain stockholders in accordance

with a securities purchase agreement dated June 27, 2025, for the issuance of Series C Preferred Stock, which was not issued until July

On July 1, 2025, upon issuance of the Series C Preferred Stock, the advance from stockholders was settled and reclassed to mezzanine

Stockholders’ Equity , for additional details.

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

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

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

the nine months ended September 30, 2025, net cash used in investing activities consisted of negligible fixed asset purchases.

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

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

the nine months ended September 30, 2025, net cash from financing activities consisted of proceeds received in June 2025 in accordance

with a securities purchase agreement dated June 27, 2025, for the issuance of Series C Preferred Stock, and initially recorded as an

advance from certain stockholders as the stock was not issued until July 1, 2025.

On July 1, 2025, upon issuance of the Series C Preferred

Stock, the advance from stockholders was settled and reclassed to equity.

Stockholders’ Equity , for additional

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

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

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

$0.2 million to extinguish our line of credit.

See Note 11 Debt.

Policies and Significant Judgments and Estimates

1 unchanged sentence

which have been prepared in accordance with generally accepted accounting principles of U.S.

The preparation of

the financial statements in accordance with U.S.

GAAP requires the use of estimates and assumptions by management that affect the value

of assets and liabilities, as well as contingent assets and liabilities, as reported on the balance sheet date, and revenues and expenses

arising during the reporting period.

The main areas in which assumptions, estimates and the exercising of a degree of judgment are appropriate

relate to contingent consideration, fair value measurements, valuation of intangible assets and impairment assessment, and stock compensation.

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.

The preparation of the financial statements

in accordance with U.S.

GAAP requires the use of estimates and assumptions by management that affect the value of assets and liabilities,

as well as contingent assets and liabilities, as reported on the balance sheet date, and revenues and expenses arising during the reporting

The main areas in which assumptions, estimates and the exercising of a degree of judgment are appropriate relate to fair value

measurements, valuation of intangible assets and impairment assessment, and stock compensation.

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

significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies , to

5 unchanged sentences

There were no material

changes to our critical accounting estimates for the six months ended June 30, 2025.

changes to our critical accounting estimates for the nine months ended September 30, 2025.

Sheet Arrangements

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis