What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-19 compared with 2025-03-20 · 1109 added, 953 removed, 633 unchanged (77% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2025 and 2024

3 unchanged sentences

Notes to the Consolidated Financial Statements

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

OF 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, 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.

have audited the accompanying consolidated balance sheet of Biofrontera Inc.

(the “Company”) as of December 31, 2025, the

related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2025, and the

related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of

its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in

the United States of America .

Paragraph – Going Concern

3 unchanged sentences

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.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Those standards require that we plan and perform the audit 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 audit

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.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

CBIZ CPAs P.C.

have served as the Company’s auditor since 2023 (such date takes into account the acquisition of the certain assets of Marcum llp

by CBIZ CPAs P.C.

effective November 1, 2024).

March 19, 2026

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of

on the Financial Statements

have audited the accompanying consolidated balance sheet of Biofrontera Inc.

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

related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2024, and the

related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of

its operations and its cash flows for the year 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

4 unchanged sentences

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

1 unchanged sentence

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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.

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

Those standards require that we plan and perform the audit 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 audit

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.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

have served as the Company’s auditor since 2023.

We believe that our audit provides

a reasonable basis for our opinion.

have served as the Company’s auditor from 2023 to 2025.

March 20, 2025

Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024

5 unchanged sentences

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

2 unchanged sentences

Total current assets

Inventories, long term

Property and equipment, net

7 unchanged sentences

Accrued expenses and other current liabilities

Short term debt

Total current liabilities

7 unchanged sentences

Stockholders’ equity:

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;

8,873,932 and 1,517,628 shares issued and outstanding as of December 31, 2024 and 2023

Convertible Preferred Stock, $ 0.001

par value, 20,000,000 shares

authorized, no

and 3,366 Series B-2;

6,763 Series B-3;

D shares issued and outstanding as of December 31, 2025 and 2024, respectively

Preferred Stock

Common Stock, $ 0.001

par value, 70,000,000

shares authorized;

11,648,323 and 8,873,932

shares issued and outstanding as of December 31, 2025 and 2024, respectively

Additional paid-in capital

12 unchanged sentences

Cost of revenues, other

Cost of revenues

Selling, general and administrative

Selling, general and administrative, related party

Selling, general and administrative

Research and development

Change in fair value of contingent consideration

Total operating expenses

2 unchanged sentences

Change in fair value of warrant liabilities

Warrant inducement expense

Excess of warrant fair value over offering proceeds

Change in fair value of investment, related party

Gain on legal settlement

Loss on debt extinguishment

Interest expense, net

Other income (expense), net

Other income, net

Total other income (expense)

11 unchanged sentences

Balance at December 31, 2023

Issuance of shares for vested restricted stock units

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

Issuance of common stock and warrants, under registered public offering

Stock based compensation

Balance at December 31, 2023

Exercise of pre-funded warrants

4 unchanged sentences

Stock based compensation

Balance, December 31, 2024

Balance at December 31, 2024

$ ( 117,409 )

Issuance of Series C Preferred, net of offering costs

Issuance of Series D Preferred, net of receivable from shareholder

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

Conversion of Series C Preferred into common stock

Issuance of shares for restricted stock units

Stock based compensation

Balance at December 31, 2025

$ ( 127,945 )

5 unchanged sentences

Adjustments to reconcile net loss to cash flows used in operations

Gain on legal settlement

Amortization of right-of-use assets

Amortization of acquired intangible assets

Realized/unrealized loss in investment, related party

Change in fair value of contingent consideration

Change in fair value of warrant liabilities

Warrant inducement expense

Excess of warrant fair value over offering proceeds

Depreciation and amortization

Reduction in the carrying amount of right-of-use assets

Stock-based compensation

Provision for inventory obsolescence

Provision for doubtful accounts

Loss on debt extinguishment

Non-cash interest expense

Allowance for credit losses

Change in fair value of warrant liabilities

Gain on sale of asset held for sale

Loss from termination of operating leases

Realized/unrealized loss in investment, related party

Loss on debt extinguishment

Changes in operating assets and liabilities:

9 unchanged sentences

Cash flows from investing activities

Proceeds from sale of asset held for sale

Sales of investment, related party

3 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of Series C preferred stock, net of offering costs

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

1 unchanged sentence

Proceeds from issuance of convertible notes, net of issuance costs

Proceeds from line of credit

Proceeds from issuance of common stock and warrants

Proceeds from short term debt

Payment of short-term debt

Payment of principal short-term debt

Cash flows provided by financing activities

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Cash, cash equivalents and restricted cash, at the beginning of the year

2 unchanged sentences

Interest paid

Interest paid, related party

Income tax paid, net

Supplemental non-cash investing and financing activities

Release of start-up cost financing obligation as part of legal settlement

Release of contingent consideration obligation as part of legal settlement

Transfer of investment as part of legal settlement

Preferred stock issued as consideration in asset purchase acquisition

Asset Acquisition )

Property, plant and equipment acquired

Intangible asset acquired

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

2 unchanged sentences

Organization and Business Overview

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 ® 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.

Biofrontera Inc., a Delaware Corporation,

(the “Company,” “we,” “us,” “our,” or “Biofrontera”) is a United States based

biopharmaceutical company engaging in the development, manufacturing, and commercialization of pharmaceutical products for the treatment

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

The Company’s products, which include Ameluz ®

as well as the BF-RhodoLED ® and RhodoLED ® XL lamp series (together, the “RhodoLED ® Lamps”),

are used for the treatment of actinic keratosis (“AK”), a common skin condition characterized by the growth of pre-cancerous

skin lesions (or “AKs”).

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

offices and groups.

Effective June 1, 2024, we assumed

control of all clinical trials relating to Ameluz in the United States, allowing for more effective cost management and direct

oversight of trial efficiency through Biofrontera Discovery GmbH (“Discovery”), our wholly owned subsidiary that was formed in

Germany in 2022.

Our research and development (“R&D”) programs are focused on label expansion for Ameluz as well as

supporting PDT growth by improving the capabilities of the RhodoLED Lamps to better fulfill the needs of dermatologists.

On October 20, 2025,

we entered into i) an Asset Purchase Agreement (the “Transfer Agreement”) and ii) an Earnout Agreement (together with the

Transfer Agreement, the “Agreements”), with Biofrontera AG and its consolidated subsidiaries (the “Biofrontera Group”),

pursuant to which the Company finalized the agreements to acquire all rights in the United States (the “U.S.

Ameluz and RhodoLED (the “Strategic Transaction”).

Asset Acquisition and Note 16.

Related Party Transactions for

additional information.

In exchange for the U.S.

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

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

D Preferred Stock”).

The transaction was funded through an $ 11 million investment by existing investors, $ 8.5 million of which was funded in connection with

a binding term sheet agreement effective June 30, 2025 with the Biofrontera Group (the “Term Sheet”) with the remaining $ 2.5

million funded on October 24, 2025, following the closing of the Strategic Transaction.

On November 6, 2025, the Company completed the sale of the long-lived intangible

asset relating to its Xepi product line, previously classified as held for sale.

Assets Held for Sale , for additional

and Going Concern

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.

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

$ 117.4 million.

accompanying consolidated 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 losses.

The Company incurred net cash outflows from operations of $ 13.4

million and $ 10.3

million for the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, the Company’s accumulated

deficit was $ 127.9

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

financing transactions.

As of 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.

financing transactions including net proceeds of $ 10.9

million received in a private placement of Series C Preferred Stock in 2025.

As of December 31, 2025, we had cash and cash equivalents of

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.

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.

The Company plans to address the

conditions that raise substantial doubt regarding its ability to continue as a going concern by, among other things, continuing to

expand the commercialization of Ameluz in the United States while controlling expenses, expected realization of an additional $ 1.0

million in milestone payments from the sale of the Xepi intangible asset and, if necessary, securing additional capital through equity

or debt financings.

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

reported expenses that may be necessary if the Company were unable to continue as a going concern.

Summary of Significant Accounting Policies

8 unchanged sentences

and per share and share amounts.

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

shares of the Company’s common stock, $ 0.001 par value (the “Common Stock”).

The Common Stock began trading on the

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

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.

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.

Company evaluates segment reporting in accordance with Accounting Standards Update (“ASU”) 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 (“CODM”).

In accordance with ASU 2023-07, the Company has determined that

the Chief Executive Officer functions as the CODM.

The CODM manages the Company’s business activities as a single operating

segment at the consolidated level.

Accordingly, the CODM uses consolidated net (loss) to measure segment profit or loss, allocate

resources and assess performance.

Further, the CODM reviews and utilizes functional expenses (cost of revenues, sales and marketing, R&D, and general and administrative) at the consolidated level to manage the

Company’s operations.

All of the Company’s revenues are derived from within the United States and, therefore, no

geographical segments are presented.

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.

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, contingent liability recognition, variable consideration and asset acquisitions.

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

continuously reviewed but may vary from the actual values.

and Cash Equivalents

2 unchanged sentences

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 6.

5 unchanged sentences

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

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.

The provision for credit losses is recorded in

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

Management performs ongoing credit evaluations

of its customers.

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

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 AK 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

of Credit Risk and Off-Balance Sheet Risk

instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, accounts

receivable and other receivables, related party.

The Company maintains all of its cash and cash equivalents at a single accredited financial

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.

instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts

The Company maintains all of its cash and cash equivalents at a single accredited financial 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.

Concentrations

4 unchanged sentences

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

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

are dependent on limited suppliers to provide 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.

If we fail 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, based on shipping location.

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

The Company regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes

to be impaired.

Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market

conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments.

Once inventory is written

down and a new cost basis is established, it is not written back up if demand increases.

are stated at the lower of cost or net realizable value.

Cost is calculated by applying the first-in-first-out method, based on shipping

Inventory costs include raw materials, work in process and the purchase price of finished goods and freight-in costs.

regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes to be impaired.

Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and

product life cycles when determining excess and obsolescence and net realizable value adjustments.

Once inventory is written down and

a new cost basis is established, it is not written back up if demand increases.

and Equipment

5 unchanged sentences

of Estimated Useful Lives of Property, Plant and Equipment

Estimated Useful Life in Years

Computer equipment

Computer software

Furniture and fixtures

Leasehold improvements

Shorter of estimated useful lives or the term of the lease

Machinery & equipment

Useful Life in Years

of estimated useful lives or the term of the lease

Manufacturing

cost and accumulated depreciation of assets retired or sold are removed from the respective asset category, and any gain or loss is recognized

in our statements of operations.

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

Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted

for as a business combination or asset acquisition by first applying the screen test in ASC 805-10-55-5A through 55-5C to determine if

substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable

If the screen test is met, the transaction is accounted for as an asset acquisition.

If the screen test is not met, further determination

is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet

the requirements of a business.

the acquired set of assets does not meet the definition of a business, the transaction is recorded as an asset acquisition and the cost

of a group of assets acquired in an asset acquisition shall be allocated to the individual assets acquired or liabilities assumed based

on their relative fair values and shall not give rise to goodwill.

Asset Acquisition to the consolidated financial

statements for additional information.

Contingent Consideration

In evaluating whether variable consideration

should be included in the transaction price (in the sale of asset held for sale and the sales-based earnout consideration in the

Strategic Transaction), the Company applies judgement in assessing whether it is probable that milestones or expected timing or

magnitude of future net sales will be met.

The Company will recognize the constrained variable consideration, if any, in the period

in which the associated uncertainty is resolved.

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

Intangible assets with indefinite lives are not amortized.

February 2016, the Financial Accounting Standards Board (“ FASB”) issued ASU

2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements.

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

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

3 unchanged sentences

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.

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.

Rent abatements are considered lease incentives and are

included in the determination of total lease consideration.

Total lease payments are recognized on a straight line basis over the lease

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

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.

of Long-Lived Assets

32 unchanged sentences

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 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 (“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.

and Contingencies.

T he 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 Financial Accounting Standards Board (“ 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 (“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

10 unchanged sentences

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.

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

22 unchanged sentences

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

See additional information in Note 3.

Fair Value Measurements.

Fair Value Measurements for additional information.

Value of Financial Instruments

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.

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 .

14 unchanged sentences

or services we transfer to the customer is determined to be probable.

Company realizes its revenue primarily through the sale of its Ameluz ® product, which are made directly to physicians,

hospitals or other qualified healthcare providers.

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 trade discounts and allowances, product returns,

and government rebates.

These discounts and allowances are estimated at the time of sale based on the amounts incurred or expected to

be received for the related sales.

Company realizes its revenue primarily through the sale of its Ameluz product, which are made directly to physicians, hospitals or other

qualified healthcare providers.

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 trade discounts and allowances, product returns, and government rebates.

These discounts and allowances are estimated at the time of sale based on the amounts incurred or expected to be received for the related

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

13 unchanged sentences

the Company and its customers.

Components of variable consideration include trade discounts and allowances and government

Variable consideration is recorded on the balance sheet as either a

reduction of accounts receivable, if expected to be claimed by a customer, or as a current liability, if expected to be payable to a

third party other than a customer.

Where appropriate, these estimates take into consideration relevant factors such as the Company’s

historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted

customer buying and payment patterns.

These reserves reflect the Company’s best estimates of the amount of consideration to which

it is entitled based on the terms of the contract.

Actual amounts of consideration ultimately received may differ from the Company’s

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.

Components of variable consideration include trade discounts and allowances and government rebates.

consideration is recorded on the balance sheet as either a reduction of accounts receivable, if expected to be claimed by a customer,

or as a current liability, if expected to be payable to a third party other than a customer.

Where appropriate, these estimates take

into consideration relevant factors such as the Company’s historical experience, current contractual and statutory requirements,

specific known market events and trends, industry data and forecasted customer buying and payment patterns.

These reserves reflect the

Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract.

Actual amounts

of consideration ultimately received may differ from the Company’s 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.

Discounts and Allowances – The Company provides customers with trade discounts, rebates, allowances and/or other incentives.

6 unchanged sentences

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.

Customers do not have the option to purchase the warranty separately and the

warranty does not provide the customer with a service beyond the assurance that BF-RhodoLED ® complies with agreed-upon

specifications.

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.

Customers do not have the option to purchase the warranty separately and the warranty does

not provide the customer with a service beyond the assurance that BF-RhodoLED complies with agreed-upon specifications.

Therefore, the warranty is not considered to be a performance obligation.

The lamps are subject to regulatory and quality

The lamps are subject to regulatory and quality standards.

Future warranty costs are estimated based on historical product performance rates and related costs to repair given products.

The accounting estimate related to product warranty expense involves judgment in determining future estimated warranty costs.

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

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.

The accounting

estimate related to product warranty expense involves judgment in determining future estimated warranty costs.

Should actual performance

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

Warranty expense was $ 0.1

million for each of the years ended December 31, 2025 and 2024,

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.

8 unchanged sentences

of revenues is comprised of purchase costs of our products, third party logistics and distribution costs including packaging, freight,

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

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

and distribution costs totaled $ 0.7 million and $ 0.6 million for the years ended December 31, 2025 and 2024, 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.

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.

These estimates involve inherent uncertainties

and the application of management’s judgment.

If factors change and different assumptions are used, the share-based compensation

expense could be materially different in the future.

These assumptions are estimated as follows:

The Company measures and recognizes share-based compensation expense for

equity awards based on fair value at the grant date.

The fair value of restricted stock units (“RSUs”) is measured as the

grant date price of the Company’s shares.

The Company estimates the grant-date fair value of the stock options using the BSM model or a Binomial (Cox-Ross-Rubenstein) Lattice (“Lattice”) model.

The selection of valuation model depends on the specific

terms and conditions of the options including vesting, contractual term and other features that may impact the expected exercise behavior

of the option holders.

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.

models require 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 and the application

of management’s judgment.

If factors change and different assumptions are used, the share-based compensation expense could be materially

different in the future.

assumptions are estimated as follows:

Interest Rate.

1 unchanged sentence

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 and the historical equity volatility of the Company.

The peer group was developed based on companies in the biopharma

industry whose shares are publicly traded.

Due to our limited historical data and the long-term nature of the awards, the peer group

volatility was more heavily weighted.

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 industry whose shares are

publicly traded.

Due to our limited historical data and the long-term nature of the awards, the peer group volatility was more heavily

The expected term represents the period of time that options are expected to be outstanding.

2 unchanged sentences

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.

107, whereby the expected life equals the average of the vesting term and

the original contractual term.

The dividend yield is 0 % as the Company has never declared or paid, and for the foreseeable future does not expect to declare

or pay, a dividend on its common stock.

awards valued using the Lattice model, additional assumptions may include exercise multiples, and early-exercise behavior.

Currency Transactions

6 unchanged sentences

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

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,

costs are expensed as incurred and were negligible for each of the years ended December 31, 2025 and December 31, 2024.

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

4 unchanged sentences

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.

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.

5 unchanged sentences

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.

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.

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

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

28 unchanged sentences

stock method.

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.

Reclassification

of Prior Year Presentation

prior period amounts have been reclassified for consistency with the current period presentation.

Depreciation expense and amortization expense previously presented separately in the consolidated statements of cash

flows have been combined into a single line item.

The reclassification was limited to

the consolidated statements of cash flow and had no impact on the reported results of operations.

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.

We evaluate ASUs issued by the FASB.

ASUs not included in our disclosures

were assessed and determined to either be not applicable or are not expected to have a significant impact on our financial statements.

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 with early adoption permitted.

We adopted ASU 2023-09 in the

fourth quarter of 2025 and applied it prospectively, as disclosed in Note 15.

Income Taxes .

November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

(Subtopic 220-40):

Disaggregation of Income Statement Expense .

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);

8 unchanged sentences

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

In July 2025, the FASB issued ASU 2025-05, Financial

Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides

a practical expedient for estimating expected credit losses on current trade receivables and contract assets arising from revenue transactions.

This ASU is effective for public business entities for annual reporting periods beginning after December 15, 2025, with early adoption

permitted, and must be applied prospectively.

We are currently evaluating the effect that this guidance will have on our consolidated

financial statements and related disclosures.

September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) ,

which provides updates to refine the scope of the guidance on derivatives in ASC 815 and clarify the guidance on share-based noncash

payments from customers in ASC 606.

The derivative scope refinement excludes non-exchange-traded contracts with derivative accounting

apart from variables based on market rates, prices and indices, variables based on the price or performance of a financial asset or liability

of one of the parties to a contract, contracts involving the issuer’s own equity evaluated under ASC 815-40 and call or put options

on debt instruments.

The amendments in ASU 2025-07 are effective for annual reporting periods beginning after December 15, 2026, and

interim reporting periods within those annual reporting periods and should be applied either prospectively or on a modified retrospective

We are currently evaluating the effect of adopting ASU 2025-07 on our consolidated financial statements and related disclosures.

In November 2025, the FASB issued ASU 2025-11, Interim

Reporting (Topic 270) :

Narrow-Scope Improvements, which clarifies interim disclosure requirements.

The guidance is effective for

the Company’s interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

December 2025, the FASB issued ASU 2025-12, Codification Improvements (ASU 2025-12), which addresses 33 issues, representing

amendments to ASC topics that clarify, correct errors or make minor improvements.

The amendments in ASU

2025-12 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual

reporting periods.

Early adoption is permitted in both interim and annual periods in which financial statements have not yet been issued

or made available for issuance.

If an entity adopts the amendments in this ASU in an interim period, it must adopt them as of the beginning

of the annual period that includes that interim period.

An entity may elect to early adopt the amendments on an issue-by-issue basis.

We are currently evaluating the effect of adopting ASU 2025-12 on our consolidated financial statements and related disclosures.

Asset Acquisition

On October 20, 2025, the Company completed an asset

acquisition with Biofrontera Group, pursuant to which the Company acquired certain intangible assets, including intellectual property, inventory (offset

by assumed liabilities) and fixed assets in exchange for shares of the Company’s preferred stock, and an earnout arrangement.

transaction was accounted for as an asset acquisition because the acquired set of assets did not meet the definition of a business.

The preferred stock issued was measured at its fair

value of $ 4.8 million on the acquisition date and included in the cost of the acquired assets, comprised of $ 2.1 million in fixed assets,

$ 2.7 million of intangible assets and $ 2.6 million of inventory, offset by $ 2.6 million of assumed liabilities.

At the acquisition date, the Company evaluated the

terms of the earnout arrangement and concluded that the amount of contingent consideration was not reasonably estimable due to the significant

uncertainty associated with the timing and magnitude of future net sales.

Accordingly, no amount related to the earnout was included in

the initial measurement of the cost of the acquired assets.

The Company has elected to account for contingent consideration in an asset

acquisition as the contingency is resolved (earned and payable).

No contingent consideration liability is recognized for amounts

not yet earned.

The earnout consideration is calculated and

payable on a monthly basis, based on sales performance.

Related Party Transactions for details.

Earnout payments

million were recognized during the period and included in cost of revenues on the consolidated statement of operations, of which

million was reflected in accrued expenses and an additional $ 0.7 million in accounts payable, related party as of December 31,

If the Company does not achieve the Minimum Order

Amount as defined in Note 20.

Commitments and Contingencies for two consecutive calendar years starting in January 1, 2026, then

the Biofrontera Group will have the right to terminate the Agreements and recover all assets transferred to the Company.

Fair Value Measurements

2 unchanged sentences

Schedule of Fair Value Hierarchy Valuation Inputs

(in thousands)

Investment, related party

Warrant liability – 2023 Purchase Warrants

Warrant liability – 2022 Purchase Warrants

Warrant liability – 2022 Inducement Warrants

Warrant liability

Total Liabilities

related party

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 .

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”).

liability – 2023 Purchase Warrants

liability – 2022 Purchase Warrants

liability – 2022 Inducement Warrants

related party

of December 31, 2025 and 2024, the Company owned 3,019 common shares of Biofrontera AG.

The fair value of this investment was determined

with Level 1 inputs through references to quoted market prices.

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.

5 unchanged sentences

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

3 fair value measurement.

Certain inputs utilized in our Black-Scholes pricing model may fluctuate in future periods based upon factors

which are outside of the Company’s control.

A significant change in one or more of these inputs used in the calculation of the

fair value may cause a significant change to the fair value of our warrant liabilities which could also result in material non-cash gain

or loss being reported in our consolidated statement of operations.

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:

Company utilizes a BSM model to estimate the fair value of the warrant liabilities which is considered a Level 3 fair value measurement.

Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s

A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change

to the fair value of our warrant liabilities which could also result in material non-cash gain or loss being reported in our consolidated

statement of operations.

fair value for the Level 3 warrants at December 31, 2025 and December 31, 2024 was estimated using a BSM model based on the following

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

2 unchanged sentences

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):

of Changes in Fair Value Warrant Liabilities

Schedule of Changes in Fair Value Warrant Liabilities

Fair value at beginning of year

2 unchanged sentences

Change in fair value of warrant liability

Warrant inducement expense

Fair value at end of year

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 .

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

Traditional PDT treatments using a lamp are

usually performed more frequently during the winter.

As such, 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.

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.

The Company maintains its cash balances at financial institutions that are

insured by the Federal Deposit Insurance Corporation, which at times may exceed federally insured 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

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

5 unchanged sentences

(in thousands)

December 31, 2024

December 31, 2023

Cash and cash equivalents

2 unchanged sentences

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

Investment, Related Party

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 ).

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

(in thousands):

Net losses recognized during the period on equity securities

Net realized losses on equity securities sold or transferred

Unrealized losses recognized during the reporting period on equity securities still held at the reporting date

Accounts Receivable, Net

12 unchanged sentences

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

allowance for credit losses was $ 0.1 million and $ 0.2 million as of December 31, 2025 and 2024, respectively.

consist of the following:

Schedule of Inventories

(in thousands)

Xepi ® license

Accumulated amortization

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

Inventory, short-term:

Finished product

Work in process

Raw materials

Total inventory, short-term

Inventory, long term

Finished product

Work in process

Raw materials

Total inventory, long-term

Total inventories

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)

Value-added tax receivable

Clinical trials

Asset Held for Sale

On November 6, 2025, the Company completed the sale

of the intangible asset related to its Xepi product line, which was previously classified as held for sale.

Prior to the sale, the asset met the criteria to

be classified as held for sale in the third quarter of 2024, as outlined in ASC 360, and was measured at the lower of its carrying

amount or fair value less costs to sell.

No further depreciation was recorded while the asset was classified as held for sale.

consideration included fixed consideration of $ 3.0 million and up to $ 7.0 million of variable consideration contingent upon the buyer’s

future activities.

Variable consideration is accounted for in accordance with ASC 610-20 and is included in the transaction price only

to the extent that it is probable that a significant reversal of a gain will not occur.

variable consideration consists of:

million payable upon the buyer achieving commercial production and other terms and conditions of the APA, which was excluded from

the transaction price as it was fully constrained at the sales date;

million payable upon the buyer achieving annual net sales of the product of $ 10.0 million, which was excluded from the transaction

price as it was fully constrained at the sales date;

million payable upon the buyer achieving annual net sales of the product of $ 15.0 million, which was excluded from the transaction

price as it was fully constrained at the sales date.

The Company will recognize the constrained

variable consideration in the period in which the associated uncertainty is resolved.

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.

Upon completion of the sale, the asset was derecognized upon transfer of control

to the buyer, and the Company recognized a gain of $ 0.7 million which is included in other income in the consolidated statements of

operations for the year ended December 31, 2025.

The gain recognized was measured as the difference between the transaction price of

$ 3.0 million and the $ 2.3 million carrying amount of the asset at the date of sale.

Under the now terminated Xepi license and supply agreement

we were obligated to make payments to Ferrer Internacional S.A upon the occurrence of certain milestones.

Specifically, we were to pay

(i) $2,000,000 upon the first occasion when annual net sales of Xepi under the Xepi LSA exceed $25,000,000, and (ii) $4,000,000 upon the

first occasion annual net sales of Xepi under the Xepi LSA exceed $50,000,000.

No payments or accruals for such payments were made during

the years ended December 31, 2025 or 2024 related to Xepi® milestones.

Property and Equipment, Net

and equipment, net consists of the following:

Schedule of Property and equipment, Net

(in thousands)

Manufacturing equipment

Computer equipment

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, 2025 and 2024, which was included in selling, general

and administrative expense on the consolidated statements of operations.

Intangible Assets, Net

assets, net are comprised of the following:

Schedule of Intangible Assets, Net

(in thousands)

Intellectual property

Intangible assets, gross

Accumulated amortization

Intangible assets, net

On October 20, 2025, the Company completed an

asset acquisition in which it acquired certain intangible assets including intellectual property.

Acquisition for additional details.

The intellectual property was recorded at acquisition-date fair value of $ 2.7

million and is amortized on a straight-line basis over the useful life of 18

Amortization expense was negligible for the year ended December 31, 2025 and $ 0.3

million for the year ended December 31, 2024.

Amortization expense is recorded in the consolidated statement of operations within

cost of goods sold or selling, general and administrative expense depending on the nature and use of the underlying intangible

The weighted average amortization period is 17.7 years.

No impairment

losses were recognized for intangible assets during the years ended December 31, 2025 and 2024.

future amortization expense as of December 31, 2025 is as follows:

of Estimated Future Amortization Expense

Year (in thousands)

Accrued Expenses and Other Current Liabilities

1 unchanged sentence

Schedule of Accrued Expenses and Other Current Liabilities

(in thousands)

December 31, 2024

December 31, 2023

Employee compensation and benefits

Professional fees

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.

compensation and benefits

and development

revenue allowances and reserves

Line of Credit

Effective 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.

As 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.

Loan Facilities

On 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 maturity.

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

f or the year ended December 31, 2024.

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.

Convertible Notes Payable

On November 22, 2024, the Company issued $ 4.2 million

in an aggregate principal amount of the Company’s Senior Secured Convertible Notes (the “Notes”) pursuant to a securities

purchase agreement entered into on November 21, 2024 with its principal stockholders.

The 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.

13 unchanged sentences

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)

In connection with the issuance of the note, the Company incurred $ 0.2

million of debt issuance costs, consisting of legal fees.

the year ended December 31, 2025, the Company recognized interest expense of $ 0.4 million

and amortization of issuance costs of $ 0.1 million.

As of December 31, 2025 and December 31, 2024, the outstanding balance of the Notes was $ 4.6 million

and $ 4.1 million,

respectively, which is shown net of the remaining unamortized issuance cost of $ 0.1 million.

The Company adopted ASU 2023-09, Income Taxes (Topic

Improvements to Income Tax Disclosures effective January 1, 2025, on a prospective basis.

The disclosures required by the standard

are included below for the year ended December 31, 2025.

Comparative prior-period disclosures have not been revised.

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

Schedule 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

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

Income tax expense incurred in 2024 and 2023 relates to state income taxes.

At December 31, 2024 and December 31, 2023, the Company had no unrecognized tax benefits.

reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company’s effective

income tax rate is as follows:

Schedule of Effective Income Tax Rate Reconciliation

Year ended December 31,

Income tax computed at federal statutory tax rate

Permanent differences – non-deductible expenses

Change in fair value of contingent consideration

a result of the net losses, we have incurred in each fiscal year since inception, we have recorded no

provision for federal or foreign income taxes for the years ended December 31, 2025 and December 31, 2024.

Income tax expense

incurred in 2025 and 2024 relates to state income taxes.

At December 31, 2025 and December 31, 2024, the Company had no

unrecognized tax benefits.

The following table reconciles the U.S.

federal statutory

income tax rate to the Company’s effective income tax rate for the year ended December 31, 2025 :

Schedule of Income Tax Reconciliation

December 31, 2025

(in thousands)

Federal statutory income tax rate

State and local income taxes, net of federal income tax effect

Foreign tax effects:

Other foreign jurisdictions

Other Adjustments

Changes in valuation allowances

Nontaxable or nondeductible items:

Non-Deductible Expenses

Warrant Revaluation

Effective income tax rate

previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the effective income tax rate differed

from the federal statutory income tax rate as follows:

December 31, 2024

Federal statutory income tax rate

State income taxes, net of federal benefit

Permanent differences – non-deductible expense

Change in fair value of warrant liabilities

Gain on legal settlement

Federal R&D Credits

Foreign rate differential

Change in valuation allowance

Change in deferred tax asset valuation allowance

Effective income tax rate

principal components of the Company’s deferred tax assets and liabilities consist of the following at December 31, 2024 and 2023:

of Deferred Tax Assets and Liabilities

Company’s effective income tax rates for the years ended December 31, 2025 and 2024 were due to state income taxes.

income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The significant components of the Company’s net deferred income

taxes were as follows (in thousands):

of Deferred Tax Assets (Liabilities)

(in thousands)

December 31, 2024

December 31, 2023

Deferred tax assets (liabilities):

Net operating loss carryforwards

Credit Carryforward

Intangible assets

3 unchanged sentences

Lease liability

Investment revaluation

Total deferred tax assets

Less valuation allowance

Valuation allowance

Total deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Operating right-of-use assets

Total deferred tax assets

Net deferred taxes

Company has had no federal income tax expense due to operating losses incurred since inception.

The Company has evaluated the positive

and negative evidence bearing upon the realizability of its deferred tax assets.

Based on this, the Company has provided a valuation

allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not determined to be more

likely than not.

During 2024, the valuation allowance increased by $ 4.5 million, primarily due to the increase in the Company’s

net operating loss carryforwards during the period.

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.

These loss carryforwards

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

changes in the valuation allowance were as follows (in thousands):

of Valuation allowance

December 31, 2025

Beginning balance

Domestic federal income taxes

Domestic state & local income taxes

Foreign income taxes

Total change in valuation allowance

Ending balance

Company’s income tax provision for the year ended December 31, 2025 related to state income taxes.

has evaluated the positive and negative evidence bearing upon the reliability of its deferred tax assets.

Based on this, the

Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the

deferred tax assets is not determined to be more likely than not.

During the year ended December 31, 2025, the valuation

allowance increased by $ 2.6 million, primarily

due to book losses generated during the period.

During 2024, the valuation allowance increased by $ 4.5

million, primarily due to the increase in the Company’s net operating loss carryforwards during the

of December 31, 2025, the Company had $ 173.2 million

million of federal and state operating loss carryforwards (“NOLs”), respectively.

$ 163.8 million

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

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

for uncertain tax positions are to be recognized, measured, and recorded in financial statements;

requires certain disclosures of uncertain

specifies how reserves for uncertain tax positions should be classified on the balance sheet;

and provides transition and

interim period guidance, among other provisions.

As of December 31, 2024, the Company has not recorded any amounts for uncertain tax

The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of

income tax expense, if any, in its statements of operations.

As of December 31, 2024, the Company had no reserves for uncertain tax positions.

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

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

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

of the Company’s NOL carryforwards and research and development credit carryforwards may be subject to a substantial annual

limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with

Internal Revenue Code Section 382 as well as similar state provisions.

These ownership changes may limit the amount of NOL and

research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively.

In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain

stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

Since its formation, the

Company has raised capital through the issuance of capital stock on several occasions.

These financings could result in a change of

control as defined by Section 382.

The Company has not yet conducted an analysis under Section 382 to determine if

historical changes in ownership through December 31, 2025, would limit or otherwise restrict its ability

to utilize its NOL and research and development credit carryforwards.

In addition, future changes in ownership occurring

after December 31, 2025 could affect the limitation in future years, and any limitation may result

in expiration of a portion of the NOL or research and development credit carryforwards

before utilization.

July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law.

Among other provisions, this act includes permanently

extended and modified certain expiring provisions of the 2017 Tax Cuts and Jobs Act and restored the immediate expensing of

domestic research and development expenses.

The Company has evaluated the impacts of these provisions and has concluded the

OBBBA does not have a material impact on its consolidated financial statements other than reclassifications of the deferred

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

benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements;

requires certain

disclosures of uncertain tax matters;

specifies how reserves for uncertain tax positions should be classified on the consolidated

balance sheets;

and provides transition and interim period guidance, among other provisions.

As of December 31, 2025 and

2024, the Company has not recorded any amounts for uncertain tax positions.

The Company’s policy is to recognize interest and

penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in

its consolidated statements of operations and comprehensive loss.

As of December 31, 2025 and 2024, the Company had no

reserves for uncertain tax positions.

For the years ended December 31, 2025 and 2024, no

estimated interest or penalties were recognized on uncertain tax positions.

Company files federal income tax returns in the United States, Germany and state income tax returns in Massachusetts and various

other state jurisdictions.

The Company’s tax returns for the years ended December 31, 2022 through December 31, 2025 remain

open and subject to examination by the Internal Revenue Service and state taxing authorities.

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.

consider the Biofrontera Group to be a related party, as prior to the Strategic Transaction, we relied on the Biofrontera

Group as the sole supplier of Ameluz and the RhodoLED Lamps and following the Strategic Transaction, it is a beneficial

owner of more than five percent of our Series D Convertible Preferred Stock.

and Supply Agreement

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:

the Second A&R Ameluz LSA (applicable for any tubes purchased through May 31, 2025), the Company had an exclusive,

non-transferable license to market and sell its licensed products, Ameluz and RhodoLED Lamps, in the United States

and was required to purchase the licensed products exclusively from Biofrontera Pharma GmbH (the “Former Ameluz Licensor”), pursuant to which the price paid per unit

was based on certain percentages of the anticipated net selling price (the “Transfer Price”) that covered the cost of

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

administration, as follows:

● Twenty-five

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

1 unchanged sentence

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

million, respectively and recorded in inventories in the consolidated balance sheets, and, when sold, in cost of revenues, related

party in the consolidated statements of operations.

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

December 31, 2023 were $ 5.3

million and $ 8.5

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 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 .

● Thirty-five

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.

Second A&R Ameluz LSA 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 Former Ameluz Licensor to the

Company entered into a Release of Claims with the Former Ameluz Licensor, dated February 13, 2024, pursuant to which the Company agreed to release

the Former Ameluz Licensor from all claims and liabilities arising out of or relating to any failure by the Former 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 Former 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

In its communications, the Former 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 Former 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.

Transaction with Biofrontera Group

October 20, 2025, the Company finalized the Agreements with the Biofrontera Group to acquire the U.S.

Rights to Ameluz and RhodoLED.

Asset Acquisition .

Pursuant to the terms of the Agreements, retroactive to June 1, 2025, the Company will pay an

earnout of 12 %

in years where Ameluz revenues in the United States are less than $ 65.0

million and an earnout of 15 %

in years when Ameluz revenues in the United States exceed $ 65.0

million, continuing until the expiration of patent protection on Ameluz (if not terminated sooner by agreement of the parties).

earnout replaces a transfer pricing model under the now terminated Second Amended and Restated License and Supply Agreement

(“Second A&R Ameluz LSA”).

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, the Biofrontera Group received 3,019 shares of Series D Preferred Stock on July 2, 2025, par value $ 0.001 per share, which

represents a 10% post-money equity stake in the Company.

Stockholders Equity .

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”).

Company also agreed to assume the defense of co-defendant Biofrontera Group and all costs associated therewith in connection with certain

legal actions pending in the United States which will be paid directly to the legal advisors by the Company.

Details of the legal claims

are disclosed in Note 20.

Commitments and Contingencies – Legal Claims.

as of the date of the Strategic Transaction and for the following three years, as long as Biofrontera AG holds any shares of Series D

Preferred Stock (or shares of common stock that were converted from Series D Preferred Stock), Biofrontera AG shall have the right to

appoint (i) one individual to the Company’s board of directors if the board consists of seven or fewer members;

or (ii) two individuals

to the Company’s board of directors if the board consists of eight or more directors.

No appointments have been made through the

Due and Payable

due and payable to Biofrontera Group as of December 31, 2025 and 2024 were $ 4.8 million and $ 5.3 million, respectively, and were recorded

in accounts payable, related parties and when applicable, net of accounts receivable, in the consolidated balance sheets.

from the Biofrontera Group as of December 31, 2025 were $ 0.7 million recorded as other assets, related party.

There were no amounts due

from related parties as of December 31, 2024.

of the previously licensed products (inclusive of estimated and actual purchase price adjustments) were $ 7.1 million and $ 8.3 million

during the years ended December 31, 2025 and 2024, respectively.

These purchases were recorded in inventories in the consolidated balance

sheets, and, when sold, in cost of revenues, related party in the consolidated statements of operations.

the year ended December 31, 2025, the Company expensed $ 2.2 million in earnouts in connection with the Strategic Transaction related

to the sales between the acquisition date and year end.

The earnout was recorded in cost of revenues, related party in the consolidated

statements of operations .

amounts paid to the Biofrontera Group for expenses related to sales of products and services in the US, including but not limited to

product production, quality control, pharmacovigilance, regulatory activities as well as rent for the years ended December 31, 2025

and 2024 were $ 0.8

million and $ 0.5 million,

respectively.

of December 31, 2025 and 2024 , our investment, related party consisted solely of 3,019 common shares of Biofrontera AG.

The total investment

had minimal value as of December 31, 2025 and 2024.

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

sales of equity securities of $ 0.1 million during the year ended December 31, 2024.

In November 2024, the Company

issued $ 4.2 million in an aggregate principal amount of Notes to certain stockholders.

Debt-Convertible Notes Payable .

As of December 31, 2025 and 2024, the outstanding balance of the Notes was $ 4.6 million and $ 4.1 million, respectively.

Stockholders’ Equity

the Company’s Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation

(“Certificate”), filed June 16, 2025, the Company is authorized to issue 70,000,000

shares of 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.

Holders of Common Stock are not entitled to receive

dividends, unless declared by the Company’s board of directors (“Board”).

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.

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

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

of Common Stock at a combined offering price of $ 3.74 ,

(ii) 1,055,000 pre-funded

warrants to purchase up to 1,055,000 shares

of Common Stock (the “Pre-Funded Warrants”) at a combined offering price of $ 3.7399 and

(iii) 1,205,000 warrants

to purchase up to 1,807,500 shares

of Common Stock (the “Common Warrants”), resulting in gross proceeds of approximately $ 4.5 million.

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.

the years ended December 31, 2025 and 2024, the Company issued shares of common stock upon the exercise of our liability classified warrants,

conversions of preferred stock, and vesting of equity awards.

The related changes in shares outstanding are reflected in the Consolidated

Statement of Stockholder’s Equity.

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:

shares of Common Stock at a combined offering price of $ 3.74 , (ii) 1,055,000 pre-funded warrants to purchase up to 1,055,000 shares of

Common Stock (the “Pre-Funded Warrants”) at a combined offering price of $ 3.7399 and (iii) 1,205,000 warrants to purchase

up to 1,807,500 shares of Common Stock (the “Common Warrants”), resulting in gross proceeds of approximately $ 4.5 million.

The Public Offering closed on November 2, 2023.

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 Common Warrants are exercisable upon issuance, will expire five years following the

date of issuance and have an exercise price of $ 3.55 per share.

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.

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.

years following the date of issuance and have an exercise price of $ 0.0001 per share.

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 $ .0001 per share, resulting in negligible net proceeds.

During the year ended December 31, 2025, the Company

issued 1,859,508 shares of common stock upon conversion of Series B-2 Preferred Stock, 240,210 shares of common stock upon conversion

of Series B-3 Preferred Stock, 449,673 shares of common stock upon conversion of Series C Preferred Stock and 225,000 shares of common

stock for restricted stock units.

each of the years ended December 31, 2025 and 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 to $ 100.00 per share.

These warrants have expiration dates ranging from November 2026

to November 2028.

A summary of the warrants outstanding as of December 31, 2025 is presented below.

of Warrants Outstanding

Number of Shares

Schedule of Warrants Outstanding

Exercise Price

Expiration Date

Liability classified (See Note 4.

1 unchanged sentence

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

B Convertible Preferred Stock

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) 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 (the “Series B-3 Preferred Stock”), for an aggregate price of $ 8.0

The conversion price of Series B-1 Preferred Stock and Series B-3 Preferred Stock is $ 0.7074

per share of common stock, such that each Series B share is convertible into 1,413

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.

shares of the 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.

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, 2025.

2 unchanged sentences

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.

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

Stock, the Company issued 2,516,785 shares of Common Stock.

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

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

shares of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock

(as a conversion to Common Stock would have caused the holders to exceed their respective beneficial ownership limitations).

third quarter of 2024, an additional 1,016

shares of Series B Preferred Stock were converted into Common Stock.

As of December 31, 2024,

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

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).

During the third quarter of 2024, an additional 1,016 shares

of Series B Preferred Stock were converted into common stock.

May 13 and 14, 2024, 7,998

of the 2024 Preferred Warrants were exercised to purchase 7,998

5 unchanged sentences

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

million of warrant liability fair value.

As of December 31, 2024, the 2024 Preferred Warrants issued in the Offering had 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.

During the year ended

December 31, 2025, holders of the Company’s Series B-2 Preferred Stock converted 1,316 of these shares into 1,859,508 shares of

common stock and holders of the Company’s Series B-3 Preferred Stock converted 170 of these shares into 240,210 shares of common

stock, in accordance with the applicable conversion provisions of those instruments.

of December 31, 2025, there were no shares of Series B-1 Preferred Stock issued and outstanding, 2,050 shares of Series B-2 Convertible

Preferred Stock, par value $ 0.001 per share (the “Series B-2 Preferred Stock”) and 6,593 shares of the Series

B-3 Preferred Stock (collectively the “Series B Preferred Stock”) issued and outstanding with the following terms, pursuant

to the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred with the Delaware Secretary

Subject to certain limitations described in the Certificate of Designation with the Delaware Secretary of State, 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 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

3 unchanged sentences

combination or other similar recapitalization.

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

In May 2024, upon the Company’s stockholders’ approval of an increase in the

authorized shares of common stock (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,

11 unchanged sentences

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

3 unchanged sentences

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 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 (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 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

Rights Agreement, of 20 % or more of the Company’s issued and outstanding Common Stock in a transaction not approved by the Board.

The Rights Plan will expire on June 30, 2026 .

the Rights Plan, a person or group who beneficially owned 20 % or more of the Company’s outstanding Common Stock prior to the first

public announcement of the Rights Plan on October 14, 2022 will not trigger the Rights so long as they do not acquire beneficial ownership

of any additional shares of Common Stock at a time when they still beneficially own 20% or more of such Common Stock.

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.

November 22, 2024, the Company issued $ 4.2

million in an aggregate principal amount of the

permanent equity on our consolidated balance sheets and consolidated statements of changes in stockholders’ as of December 31,

2025 and 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).

C Convertible Preferred Stock

a condition precedent to the Strategic Transaction, the Company entered into a securities purchase agreement with certain accredited

investors on June 27, 2025, pursuant to which the Company agreed 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 at a price of $ 1,000 per Series C Preferred Share for an

aggregate offering price of $ 11.0 million.

The offering consisted of two tranches, of which the first tranche of 8,500 Series

C Preferred Shares closed on July 1, 2025 and the second tranche of 2,500 Series C Preferred Shares closed on October 24, 2025.

On June 30, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred

with the Delaware Secretary of State (the “Series C Certificate of Designation”) designating 11,000 shares of its authorized

and unissued preferred stock as Series C Preferred Stock each with a stated value of $ 1,000 per share.

During the year ended December 31, 2025, holders of the Company’s Series C Preferred Stock converted 281 of

these shares into 449,673 shares of common stock in accordance with the applicable conversion provisions of those instruments.

of December 31, 2025, there were 10,719 shares of Series C Preferred Stock issued and outstanding with the following terms, pursuant

to the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred with the Delaware

Secretary of State:

Holders of Series C Preferred Stock will be entitled to one vote for each whole share of common stock into which their

Series C Preferred Stock is then-convertible on all matters submitted to a vote of stockholders, subject to certain limitations.

share of Series C Preferred Stock is, subject to certain limitations, immediately convertible at the option of the holder thereof

into the number of shares of the Company’s common stock equal to the original share price of $ 1,000

divided by $ 0.6249 ,

rounded down to the nearest whole share.

Liquidation .

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 C Preferred Stock, Series D Preferred Stock, any other classes of capital stock with liquidation rights and common stock, pro rata based on the number of shares of common stock held by each such holder, treating for this purpose all shares of

Series C Preferred Stock as if they had been converted to common stock immediately prior to such liquidation, without regard to any limitations

on conversion or otherwise.

D Convertible Preferred Stock

July 2, 2025, the Company issued 3,019 shares of Series D Convertible Preferred Stock, par value $ 0.001 per share (the

“Series D Preferred Stock”), each at a price of $ 1,000 per Series D Preferred Stock, in connection with the Term Sheet, as a precursor to the Strategic Transaction.

Under the Term Sheet, for a period of twelve months following the date of issuance of the Series D Preferred Stock, the Company shall

not issue any additional equity securities or any debt convertible into equity.

In connection

with the Strategic Transaction, on June 30, 2025, the Company filed the Certificate of Designation of Preferences, Rights and Limitations

of Series D Convertible Preferred Stock with the Delaware Secretary of State (the “Series D Certificate of Designation”)

designating 3,019 shares of its authorized and unissued preferred stock as Series D Preferred Stock each with a stated value of $ 1,000

of December 31, 2025 , there were 3,019 shares of the Series D Preferred Stock issued and outstanding with the following terms, pursuant

to the Series D Certificate of Designation:

Holders of Series D Preferred Stock will be entitled to one vote for each whole share of common stock into which their

Series D Preferred Stock is then-convertible on all matters submitted to a vote of stockholders, subject to certain limitations.

Each share of Series D Preferred Stock, subject to certain limitations, is immediately convertible at the option of the holder thereof

into the number of shares of the Company’s common stock equal to the original share price of $ 1,000 divided by 0.6249 , rounded

down to the nearest whole share.

Liquidation .

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 D Preferred Stock, Series C Preferred Stock, any other classes of capital stock with liquidation rights and common stock, pro rata based on the number of shares of common stock held by each such holder, treating for this purpose all shares of

Series D Preferred Stock as if they had been converted to common stock immediately prior to such liquidation, without regard to any limitations

on conversion or otherwise.

as of the date of the Strategic Transaction and for the following three years, as long as Biofrontera AG holds any shares of Series D

Preferred Stock (or shares of common stock that were converted from Series D Preferred Stock), Biofrontera AG shall have the right to

appoint (i) one individual to the Company’s board of directors if the board consists of seven or fewer members;

or (ii) two individuals

to the Company’s board of directors if the board consists of eight or more directors.

No appointments have been made

through the filing date.

Preferred Stock

issuance, the Series C Preferred and Series D Preferred Stock were redeemable in the event of a change in control that was not solely

within the control of the Company.

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

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.

The Series C Preferred and Series D Preferred Stock had preference in liquidation over common stock

upon deemed liquidation events that were not solely within the issuer’s control.

As such the limited scope exception for permanent

equity did not apply and the Series C Preferred and Series D Preferred Stock were classified as mezzanine equity at issuance.

the Company’s Special Shareholder Meeting on September 16, 2025, the holders of Series C Preferred Stock and Series D

Preferred Stock are entitled to receive the same form of consideration upon a liquidation event.

Accordingly, the Series C Preferred

Stock and Series D Preferred Stock were classified as permanent equity on our consolidated balance sheets and consolidated

statements of change in stockholders’ equity and are presented as such as of December 31, 2025, due to the limited exception

under ASC 480-10-S99-3A(3)(f).

November 22, 2024, the Company issued $ 4.2 million in an aggregate principal amount of the Notes.

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

shares of common stock to be issued upon conversion for principal plus additional shares for PIK interest.

Debt - Convertible

Notes Payable , for additional details.

Equity Incentive Plans and Share-Based Payments

9 unchanged sentences

Employee stock options granted under the 2021 Plan generally

vest in equal annual installments over three years and are exercisable for a period of up to ten years from the grant date.

director options vest in equal monthly installments following the date of grant and will be fully vested on the one-year anniversary

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.

vest in equal annual installments over three years or semi-annually over one year in accordance with the respective award agreements

and are exercisable for a period of up to ten years from the grant date.

Non-employee director options vest in equal monthly installments

following the date of grant and will be fully vested on the one-year anniversary of the date of grant.

All stock options are exercisable

at a price equal to or greater than 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

requisite service period.

The fair value of stock options is estimated at the time of grant using the Black-Scholes option pricing model,

which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price of the option, expected

term, risk-free interest rate, expected volatility and dividend yield.

The fair value of stock options is estimated at the time of grant using either a Lattice model, or the

BSM model for “plain vanilla’ options, each of which requires the use of inputs and assumptions such as the fair value

of the underlying stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend

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 assumptions:

Schedule of Stock Options Assumptions

Expected volatility

Expected term (in years)

Risk-free interest rate

4.2 % - 4.3 %

3.5 4% - 4.66 %

Expected dividend yield

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.

The assumptions and key inputs for the stock options granted in

2025 which were valued using the Lattice model were:

exercise price of $ 1.00 ,

risk-free rate of approx.

4.3 %, volatility of 95 %, a dividend yield of 0.0 %, and an option exercise multiple of 2.50 x.

assumptions and key inputs for the stock options granted in 2024 valued using the BSM model were:

exercise price of $ 0.99 to $ 1.38 , risk-free rate of approx.

4.2 % to 4.3 %, volatility of 100 %, expected term of 5.24 to 6

years, and a dividend yield of 0.0 %.

total grant-date fair value of options granted during the years ended December 31, 2025 and 2024 was $ 0.4 million and $ 1.1 million, respectively.

The weighted average grant-date fair value of options granted during the years ended December 31, 2025 and 2024 was $ 0.61 and $ 0.82 ,

respectively.

compensation expense related to stock options of $ 0.7 million and $ 0.8 million was recorded in selling, general and

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

operations for the years ended December 31, 2025 and 2024, respectively.

outstanding and exercisable under the employee share option plan as of December 31, 2025 and 2024, and a summary of option activity during

the year then ended is presented below.

of Stock Option Activity

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value (1)

Schedule of Stock Option Activity

Exercise Price

Intrinsic Value (1)

Outstanding at December 31, 2023

7 unchanged sentences

of December 31, 2025, there was $ 0.7 million of unrecognized compensation cost related to unvested stock options held by employees and

directors, which is expected to be recognized over a weighted-average period of approximately 2.4 years.

directors, which is expected to be recognized over a weighted-average period of 1.25 years.

Compensation (RSUs)

Stock Units (“RSUs”) will vest annually over two years, subject to the recipient’s continued service with the Company

through the applicable vesting dates.

The fair value of each RSU is estimated based on the closing market price of the Company’s

Common Stock on the grant date.

will vest either annually over two years, or semi-annually over one year in accordance with the respective award agreements,

subject to the recipient’s continued service with the Company through the applicable vesting dates.

The fair value of each RSU

is estimated based on the closing market price of the Company’s common stock on the grant date.

compensation expense related to RSUs of $ 0.3 million and $ 0.2 million for the RSUs was recorded in selling, general and administrative

1 unchanged sentence

of December 31, 2025, there was $ 0.2 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized

over a weighted-average period of approximately 1.5 years.

over a weighted-average period of 1.0 years.

following table summarizes the activity for RSUs during the year ended December 31, 2025 and December 31, 2024:

of Restricted Stock Units

Weighted Average Grant Date Fair Value

Outstanding balance at December 31, 2022

Outstanding balance at December 31, 2023

Outstanding balance at December 31, 2024

Interest Expense, net

expense, net consists of the following:

of Interest Expense, Net

For years ended December 31,

(in thousands)

Interest expense

Interest expense, related party

Interest expense

Contract asset interest expense

Interest income

Interest expense, net

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

income, net consists of the following:

Schedule of Other Income, Net

(in thousands)

For years ended December 31,

(in thousands)

Gain on termination of operating leases

Foreign currency transactions

Bank service charges

Other expense

Other income (expense), net

Schedule of Restricted Stock Units

Weighted Average

Grant Date Fair

Unvested balance at December 31, 2023

Unvested balance at December 31, 2024

Unvested balance at December 31, 2025

Net Loss per Share

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.

net loss per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the

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):

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

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

For years ended December 31,

1 unchanged sentence

Net loss per share, basic and diluted

following table sets forth securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute

following table sets forth securities that were anti-dilutive for diluted earnings per share (“EPS”) for the periods presented but which could potentially dilute

EPS in the future:

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

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

Common stock warrants

2 unchanged sentences

Series B-2 convertible preferred stock

Series B-3 convertible preferred stock

Series C convertible preferred stock

Series D convertible preferred stock

Convertible notes

1 unchanged sentence

Commitments and Contingencies

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

The Company has the option to extend

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

The extension period has not been included in

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

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

in the consolidated balance sheets.

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

After an initial non-cancelable twelve-month period, each vehicle

is leased on a month-to-month basis.

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

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):

lease for our office space at 120 Presidential Way, Woburn, MA expired in November 2025.

The Company elected to not renew the lease and

has no remaining commitments under this agreement.

Lease expense was recognized through the expiration date, and the ROU asset and related

lease liability were derecognized.

July 30, 2025, the Company entered into an agreement to lease office space for its corporate headquarters at 660 Main Street, Woburn,

The lease commenced on December 1, 2025, with an original term of 63 months, terminating on February 28, 2031, unless extended.

Under the terms

of the agreement, the Company is entitled to a rent-free period for the first three months of the lease and reduced rent payments for

months four through nine, followed by periodic escalated payments thereafter.

The Company provided the landlord with a security deposit

in the amount of $ 0.2 million, which was recorded as other assets in the consolidated balance sheets.

Company has a master lease agreement for its vehicles, pursuant to which each vehicle is leased for an initial non-cancelable twelve-month

period, and thereafter on a month-to-month basis.

Based on historical retention experience of approximately three years,

the vehicles have varying expiration dates through January 2029.

components of lease expense for the years ended December 31, 2025 and 2024 were as follows (in thousands except lease term and discount

Schedule of Components of Lease Expense and Other Information

Operating Lease expense

December 31, 2024

December 31, 2023

Amortization of ROU assets (operating lease cost)

9 unchanged sentences

Years ending December 31,

Future lease commitments

Total future minimum lease payments

1 unchanged sentence

Total lease liability

of Operating Lease Liability

December 31, 2024

Schedule of Operating Lease Liability

Operating lease liability, current

Operating lease liability, non-current

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 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

14 unchanged sentences

Company did not make any milestone or royalty payments or accruals for such payments during the years ended December 31, 2025 or 2024.

payments with Ferrer Internacional S.A.

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 or accruals

for such payments were made during the years ended December 31, 2024 or 2023 related to Xepi ® milestones.

A&R Ameluz LSA Sales Commitment and Minimum Research and Development Costs

Second A&R Ameluz LSA, as amended by the Term Sheet, remained in full force and effect until the date of the Strategic Transaction

of October 20 2025, at which time it was terminated.

The Company was not required to make any payments under the Second A&R Ameluz

LSA for the years ended December 31, 2025 and 2024.

Sales or Minimum Order

the earlier to occur of (i) the Company manufactures orders meeting one million tubes of Ameluz during the period from June 1, 2025 through

May 31, 2031, or (ii) the expiration of patent protection, which is expected to occur in December 2043 (the “Asset Reversion Term”),

starting January 1, 2026 and continuing until the end of the Asset Reversion Term, the Company shall be required to manufacture or order

from suppliers at least 80,000 tubes of Ameluz per year (the “Minimum Order Amount”).

On December 12, 2025, Discovery entered into a Supply Agreement (“Supply Agreement”) with Midas Pharma

GmbH (“Midas”).

Among other things, the Supply Agreement provides that Midas will supply to Discovery or its contract manufacturers, in the aggregate, 100kg

of the active pharmaceutical ingredient 5-Aminolevulinic acid Hydrochloride through the second quarter of 2028.

Under the terms of the Supply Agreement, Discovery will provide Midas with a twenty-four (24) months non-binding rolling forecast, which

shall 1) indicate the anticipated quantity of API required by the company and 2) be updated every twelve (12) months during the term of

the agreement.

each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably

3 unchanged sentences

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

(“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges 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.

and Sun Pharmaceutical Industries LTD (collectively, “SUN”) in which SUN 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.

SUN has since amended its complaint to include the allegations contained

therein with its existing claims.

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.

Based on the Company’s assessment of the facts underlying the above claims and the uncertainty of litigation, the Company cannot

estimate the possibility of a material loss, nor the potential range of loss that may result from 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 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 (the “Massachusetts District Court”) and

the International Trade Commission (“the Commission”), both alleging that the RhodoLED-XL infringes either/both 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 investigation before the Commission.

A hearing was held in front of an administrative

law judge (“ALJ”) between June 30, 2025 and July 3, 2025, and on September 30, 2025, the ALJ issued an Initial Determination

(“ID”) finding the Sun Patents to be valid and that importation of Biofrontera’s RhodoLED XL violates Section 337 of

the Tariff Act of 1930.

The ID may be reviewed by the Commission, following which the Commission may adopt, reverse, or remand the ID

to the ALJ for further proceedings.

The ID has no immediate effect and will only become effective if adopted by the Commission in its

“Final Determination”.

The Commission’s Final Determination is expected by April 30, 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

In addition, 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 discretionarily denied by the PTAB on July 2,

2025 on administrative reasons.

However, after instituting the other such petition in February of 2025, the PTAB issued final written decision on February

23, 2026 finding all of the claims in the SUN Patent challenged by Biofrontera to be unpatentable.

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.

damages are not available to Sun through the case before the Commission, 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.

If the final resolution of the case before the Massachusetts District Court 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

6 unchanged sentences

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

Company operates as one

operating segment, that derives revenue primarily from our

principal product, Ameluz, which is a prescription drug approved for use in PDT using our RhodoLED Lamps, for the treatment of AKs.

We are currently selling Ameluz for this indication in the United States.

Ameluz (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, 2025, and 2024 :

Schedule of Operating Segment

( in thousands)

December 31, 2024

December 31, 2023

Revenues, net

4 unchanged sentences

Research and development

Other operating expenses

Total operating expenses

3 unchanged sentences

Income tax expenses

Subsequent Events

have completed an evaluation of subsequent events after the balance sheet date of December 31, 2024 through the date this Annual Report

on Form 10-K was filed with the SEC.

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