Biofrontera Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Audited Financial Statements as of and for the Years Ended December 31, 2025 and 2024 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 199 ) F-2 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 688 ) F-3 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-4 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-7 Notes to the Consolidated Financial Statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Biofrontera Inc. Opinion on the Financial Statements We 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 . Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We 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. The Company 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. Our 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. /s/ CBIZ CPAs P.C. CBIZ CPAs P.C . We 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). Morristown, New Jersey March 19, 2026 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Biofrontera Inc. Opinion on the Financial Statements We 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. Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We 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. The Company 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. Our 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. /s/ Marcum llp Marcum llp We have served as the Company’s auditor from 2023 to 2025. Morristown, New Jersey March 20, 2025 F- 3 Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024 BIOFRONTERA INC. CONSOLIDATED BALANCE SHEETS ( In thousands, except par value and share amounts ) 2025 2024 December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 6,392 $ 5,905 Investment, related party 9 7 Accounts receivable, net 7,291 5,315 Inventories 1,426 6,646 Prepaid expenses and other current assets 2,279 527 Asset held for sale - 2,300 Other assets, related party 686 - Total current assets 18,083 20,700 Inventories, long term 3,729 - Property and equipment, net 2,158 80 Operating lease right-of-use assets 1,584 903 Intangible assets, net 2,650 35 Other assets 360 383 Total assets $ 28,564 $ 22,101 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable 1,855 1,856 Accounts payable, related parties, net 4,811 5,344 Operating lease liabilities 332 548 Accrued expenses and other current liabilities 4,897 4,273 Total current liabilities 11,895 12,021 Long-term liabilities: Convertible notes payable 4,589 4,098 Warrant liabilities 351 1,250 Operating lease liabilities, non-current 1,240 276 Other liabilities 9 23 Total liabilities 18,084 17,668 Commitments and contingencies (see Note 20) - - Stockholders’ equity: Convertible Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1; 2,050 and 3,366 Series B-2; 6,593 and 6,763 Series B-3; 10,719 and 0 Series C and 3,019 and 0 Series 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 12 9 Additional paid-in capital 138,413 121,833 Accumulated deficit ( 127,945 ) ( 117,409 ) Total stockholders’ equity 10,480 4,433 Total liabilities and stockholders’ equity $ 28,564 $ 22,101 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024 BIOFRONTERA INC. CONSOLIDATED STATEMENTS OF OPERATIONS ( In thousands, except per share amounts and number of shares ) 2025 2024 December 31, 2025 2024 Product revenues, net $ 41,705 $ 37,303 Revenues, related party - 18 Total revenues, net 41,705 37,321 Operating expenses Cost of revenues, related party 10,111 17,855 Cost of revenues, other 853 752 Cost of revenues 853 752 Selling, general and administrative 37,751 33,793 Selling, general and administrative, related party 619 42 Research and development 3,719 2,089 Total operating expenses 53,053 54,531 Loss from operations ( 11,348 ) ( 17,210 ) Other income (expense) Change in fair value of warrant liabilities 899 1,680 Change in fair value of investment, related party 2 ( 14 ) Loss on debt extinguishment - ( 316 ) Interest expense, net ( 452 ) ( 2,035 ) Other income, net 388 158 Total other income (expense) 837 ( 527 ) Loss before income taxes ( 10,511 ) ( 17,737 ) Income tax expense 25 22 Net loss $ ( 10,536 ) $ ( 17,759 ) Loss per common share: Basic and diluted $ ( 1.04 ) $ ( 3.22 ) Weighted-average common shares outstanding: Basic and diluted 10,171,921 5,516,334 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024 BIOFRONTERA INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) Shares Amount Shares Amount Capital Deficit Total Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance at December 31, 2023 - $ - 1,517,628 $ 2 $ 104,441 $ ( 99,650 ) $ 4,793 Exercise of pre-funded warrants - - 1,055,000 1 ( 1 ) - - Conversion of Series B-1 Preferred (mezzanine) into Series B-2 Preferred and common stock 3,790 - 3,952,393 4 3,566 - 3,570 Issuance of Series B-3 Preferred upon exercise of warrants 7,998 - - - 12,810 - 12,810 Conversion of Series B-2 and B-3 Preferred into common stock ( 1,659 ) - 2,344,140 2 ( 2 ) - - Issuance of shares for restricted stock units - - 4,771 - - - - Stock based compensation - - - - 1,019 - 1,019 Net loss - - - - - ( 17,759 ) ( 17,759 ) Balance at December 31, 2024 10,129 $ - 8,873,932 $ 9 $ 121,833 $ ( 117,409 ) $ 4,433 Issuance of Series C Preferred, net of offering costs 11,000 - - 10,850 - 10,850 Issuance of Series D Preferred, net of receivable from shareholder 3,019 - - 4,782 - 4,782 Conversion of Series B-2 and B-3 Preferred into common stock ( 1,486 ) - 2,099,718 2 ( 2 ) - - Conversion of Series C Preferred into common stock ( 281 ) - 449,673 1 ( 1 ) - - Issuance of shares for restricted stock units - - 225,000 - - - - Stock based compensation - - - - 951 951 Net Loss - - - - - ( 10,536 ) ( 10,536 ) Balance at December 31, 2025 22,381 $ - 11,648,323 $ 12 $ 138,413 $ ( 127,945 ) $ 10,480 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024 BIOFRONTERA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) 2025 2024 Years ended December 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 10,536 ) $ ( 17,759 ) Adjustments to reconcile net loss to cash flows used in operations Depreciation and amortization 138 421 Reduction in the carrying amount of right-of-use assets 730 728 Stock-based compensation 951 1,019 Non-cash interest expense 491 297 Allowance for credit losses ( 69 ) 162 Change in fair value of warrant liabilities ( 899 ) ( 1,680 ) Gain on sale of asset held for sale ( 700 ) - Loss from termination of operating leases 19 - Realized/unrealized loss in investment, related party ( 2 ) 14 Loss on debt extinguishment - 316 Changes in operating assets and liabilities: Accounts receivable ( 1,907 ) ( 315 ) Other receivables, related party - 2 Prepaid expenses and other assets ( 1,728 ) ( 141 ) Other assets, related party ( 686 ) 5,159 Inventories 1,445 4,233 Accounts payable ( 2 ) ( 1,452 ) Accounts payable, related parties, net ( 533 ) ( 355 ) Operating lease liabilities ( 683 ) ( 689 ) Accrued expenses and other liabilities 610 ( 230 ) Cash flows used in operating activities ( 13,361 ) ( 10,270 ) Cash flows from investing activities Proceeds from sale of asset held for sale 3,000 - Sales of investment, related party - 57 Purchase of intangible assets - ( 50 ) Purchases of property and equipment ( 2 ) ( 10 ) Cash flows provided by (used in) investing activities 2,998 ( 3 ) Cash flows from financing activities Proceeds from issuance of Series C preferred stock, net of offering costs 10,850 - Proceeds from issuance of Series B-1 preferred stock and warrants to purchase series B-3 preferred stock, net of issuance costs - 7,662 Proceeds from issuance of Series B-3 preferred stock from exercise of warrants - 7,438 Proceeds from issuance of convertible notes, net of issuance costs 4,050 Payment of principal short-term debt - ( 4,315 ) Cash flows provided by financing activities 10,850 14,835 Net increase in cash and cash equivalents 487 4,562 Cash, cash equivalents and restricted cash, at the beginning of the year 6,105 1,543 Cash, cash equivalents and restricted cash, at the end of the year $ 6,592 $ 6,105 Supplemental disclosure of cash flow information Interest paid $ 6 $ 1,728 Income tax paid, net $ 25 $ 24 Supplemental non-cash investing and financing activities Preferred stock issued as consideration in asset purchase acquisition (See Note 3. Asset Acquisition ) $ 4,782 $ - Property, plant and equipment acquired 2,126 - Intangible asset acquired 2,656 - Addition of right-of-use assets in exchange for operating lease liabilities $ 1,371 $ 55 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Notes to the Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2025 and 2024 1. Organization and Business Overview 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. Rights”) to Ameluz and RhodoLED (the “Strategic Transaction”). See Note 3. 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 U.S. business, Biofrontera AG received 3,019 shares of Series D Convertible Preferred Stock, par value $ 0.001 per share (the “Series D Preferred Stock”). 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. See Note 10. Assets Held for Sale , for additional information. Liquidity and Going Concern The 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 million. The Company’s primary sources of liquidity are its cash collected from the sales of its products, and cash flows from financing transactions including 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 $ 6.4 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. F- 8 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. The 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. 2. Summary of Significant Accounting Policies Basis for Preparation of the Consolidated Financial Statements The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements include the accounts of our wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The information presented reflects the application of significant accounting policies described below. All amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages and per share and share amounts. Segment Reporting The 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. Use of Estimates The 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, contingent liability recognition, variable consideration and asset acquisitions. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values. F- 9 Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation. Restricted Cash Restricted cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards (see Note 6. Cash Balances and Statement of Cash Flows Reconciliation) . Long-term restricted cash was recorded in other assets in the consolidated balance sheet. Accounts Receivable Accounts receivable are reported at their net realizable value. Any value adjustments are booked directly against the relevant receivable. We 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 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 Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. 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 of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due to the wide variety of customers using our products. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. We continue to monitor these conditions and assess their possible impact on our business. We 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. Inventories Inventories 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 raw materials, work in process and 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. F- 10 Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is generally applied straight-line over the estimated useful life of assets. Leasehold improvements are amortized over the shorter of the asset’s estimated useful life or the lease term. The estimated useful lives of property and equipment are: Schedule of Estimated Useful Lives of Property, Plant and Equipment Estimated Useful Life in Years Computer equipment 3 years Computer software 3 years Furniture and fixtures 3 - 5 years Leasehold improvements Shorter of estimated useful lives or the term of the lease Machinery & equipment 3 - 4 years Manufacturing equipment 10 - 20 years The 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. Asset Acquisitions The 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 assets. 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. If 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. See Note 3. 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. Intangible Assets Intangible assets with finite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. Leases At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, 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 term. F- 11 The Company has elected to combine lease and non-lease components as a single component for certain asset classes, when applicable. Operating leases are recognized on the balance sheet as operating lease right-of-use assets, operating lease liabilities current and operating lease liabilities non-current. The Company also elected to utilize the short-term lease recognition exemption and for those leases that qualified, the Company did not recognize right-of-use assets or lease liabilities. These leases are recognized on a straight-line basis over the expected term. Impairment of Long-Lived Assets The Company considers whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use, including right-of-use assets, are present. To the extent indicators of impairment exist, the determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the statements of operations. Assets Held for Sale The Company generally considers assets to be held for sale when the following criteria are met: (i) management commits to a plan to sell the assets, (ii) the assets are available for sale immediately, (iii) management has initiated an active program to locate a buyer or buyers and other actions required to complete the plan to sell the assets, (iv) the sale of the assets within one year is considered probable, (v) the assets are actively being marketed for sale at a price that is reasonable in relation to their current fair value and (vi) significant changes to the plan to sell are not expected. Assets classified as held for sale are no longer depreciated and are reported at the lower of their carrying value or fair value less estimated costs to sell in accordance with ASC 360, Property, Plant and Equipment-Impairment or Disposal of Long-Lived Assets. See Note 10. Assets Held for Sale. Contingencies Loss contingency provisions are recorded if the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable, and the amount can be reasonably estimated, or a range of loss can be determined. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. On a quarterly basis, we review the status of each significant matter and assess its potential financial exposure. Significant judgment is required in both the determination of probability and as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may change our estimates. Legal costs associated with legal proceedings are expensed when incurred. See Note 20. Commitments and Contingencies. Derivative Instruments 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”). Warrants 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. F- 12 The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815: Derivatives and Hedging . The accounting treatment of derivative financial instruments requires that the Company record qualifying embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options classified as derivative liabilities and any related equity classified freestanding instruments are recorded as a discount to the host instrument. Debt Issuance Costs Debt issuance costs on debt financings are deferred and amortized over the term of the debt using the interest method or the straight-line method, (if results are not materially different than the interest method). If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amount is expensed. Any unamortized debt issuance costs are presented net of the related debt on the consolidated balance sheets Fair Value Measurements The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC 820, Fair Value Measurements and Disclosures , or ASC 820, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The three levels of the fair value hierarchy are described below: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs using estimates or assumptions developed by the Company, which reflect those that a market participant would use in pricing the asset or liability. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See Note 4. Fair Value Measurements for additional information. . Fair Value of Financial Instruments The 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. F- 13 Revenue Recognition The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. We recognize revenue when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer. To determine revenue recognition, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when collectability of the consideration to which we are entitled in exchange for the goods or services we transfer to the customer is determined to be probable. The 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. RhodoLED Lamps are also sold directly to physicians, hospitals or other qualified healthcare providers through (i) direct sales, (ii) rental agreements, or (iii) an evaluation period up to six-month for a fee, after which a customer can decide to purchase or return the lamp. For direct sales, revenue is recognized only after complete installation has taken place. As directed by the instruction manual, the lamp may only be used by the customer once it has been professionally installed. A final decision to purchase the lamps that are within the evaluation period does not need to be made until the end of the evaluation period. Lamps that are not returned at the end of the evaluation period are converted into sales in accordance with the contract terms. The Company generates immaterial revenues from the monthly fees during the evaluation or rental period and from the sale of lamps at the end of the evaluation period. Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which sales reserves are established and which result from discounts, rebates and other incentives that are offered within contracts between the Company and its customers. Components of variable consideration include trade discounts and allowances and government rebates. 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 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. Trade Discounts and Allowances – The Company provides customers with trade discounts, rebates, allowances and/or other incentives. The Company records estimates for these items as a reduction of revenue in the same period the revenue is recognized. Government and Payor Rebates – The Company contracts with, or is subject to arrangements with, certain third-party payors, including government agencies, for the payment of rebates with respect to utilization of its commercial products. The Company is also subject to discount and rebate obligations under state and federal Medicaid programs and Medicare. The Company records estimates for these discounts and rebates as a reduction of revenue in the same period the revenue is recognized. F- 14 Product Warranty The 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 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. 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. Contract Costs Incremental costs of obtaining a contract with a customer may be recorded as an asset if the costs are expected to be recovered. As a practical expedient, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Sales commissions earned by the Company’s sales force are considered incremental costs of obtaining a contract. To date, we have expensed sales commissions as these costs are generally attributed to periods shorter than one year. Sales commissions are included in selling, general and administrative expenses. Cost of Revenues Cost 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 earnout. Logistics and distribution costs totaled $ 0.7 million and $ 0.6 million for the years ended December 31, 2025 and 2024, respectively. Share-Based Compensation 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. Both 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. These assumptions are estimated as follows: Risk-Free Interest Rate. The risk-free rate is based on the interest rate payable on United States Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term. Expected Volatility. 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. F- 15 Expected Term. The expected term represents the period of time that options are expected to be outstanding. Due to the lack of historical exercise data and given the plain vanilla nature of the options granted by the Company, the expected term is determined using the “simplified” method, as prescribed in SEC Staff Accounting Bulletin No. 107, whereby the expected life equals the average of the vesting term and the original contractual term. Dividend Yield. 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. For awards valued using the Lattice model, additional assumptions may include exercise multiples, and early-exercise behavior. Foreign Currency Transactions Transactions realized in currencies other than USD are reported using the exchange rate on the date of the transaction. Selling, General and Administrative Expense Selling, general and administrative expenses are primarily comprised of compensation and benefits associated with our sales force, commercial support personnel, personnel in executive and other administrative functions, as well as medical affairs professionals. Other selling, general and administrative expenses include marketing, advertising, and other commercial costs to support the commercial operation of our product and professional fees for legal, consulting, and other general and administrative costs. Advertising costs are expensed as incurred and were negligible for each of the years ended December 31, 2025 and December 31, 2024. R&D Costs R&D expenses include costs directly attributable to the clinical development of Ameluz , including personnel-related expenses, the cost of services provided by outside contractors, including services related to the Company’s clinical trials, facilities, depreciation, and other direct and allocated expenses. All costs associated with research and development are expensed as incurred. Clinical trial costs are a significant component of our research and development expenses and include costs associated with third-party contractors. The Company outsources a substantial portion of its clinical trial activities, utilizing external entities such as Clinical Research Organizations, independent clinical investigators, and other third-party service providers to assist the Company with the execution of its clinical trials. We record accruals for estimated costs under these contracts. When evaluating the adequacy of the accrued liabilities, we analyze the progress of the studies or clinical trials, including the phase or completion of events, invoices received, contracted costs and purchase orders. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time. Although we do not expect the estimates to be materially different from the amounts actually incurred, actual results could differ from our estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates and record any necessary adjustments in the period such variances become known. Payments made under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. F- 16 Income Taxes The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net Loss per Share Basic and diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company’s net income attributable to common stockholders by the weighted average number of common shares outstanding and the impact of all dilutive potential common shares outstanding during the period, including stock options, restricted stock units, and warrants, using the treasury stock method. Reclassification of Prior Year Presentation Certain 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. Recently Issued or Adopted Accounting Pronouncements 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 . In 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. F- 17 In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20); Induced Conversions of Convertible Debt. This ASU clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. It is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the effect that this 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. In 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 basis. 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. In 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. 3. 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. The transaction was accounted for as an asset acquisition because the acquired set of assets did not meet the definition of a business. F- 18 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. See Note 16. Related Party Transactions for details. Earnout payments of $ 2.2 million were recognized during the period and included in cost of revenues on the consolidated statement of operations, of which $ 0.8 million was reflected in accrued expenses and an additional $ 0.7 million in accounts payable, related party as of December 31, 2025. 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. 4. Fair Value Measurements The following table presents information about the Company’s assets that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: Schedule of Fair Value Hierarchy Valuation Inputs (in thousands) Level December 31, 2025 December 31, 2024 Assets: Investment, related party 1 $ 9 $ 7 Liabilities: Warrant liability – 2023 Purchase Warrants 3 $ 289 $ 1,030 Warrant liability – 2022 Purchase Warrants 3 $ 28 $ 98 Warrant liability – 2022 Inducement Warrants 3 $ 34 $ 122 Total Liabilities $ 351 $ 1,250 Investment, related party As 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 The 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”). See Note 17. Stockholders’ Equity for additional details. F- 19 The 2023 Purchase Warrants, the 2022 Inducement Warrants and the 2022 Purchase Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statement of operations. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations. The 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 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. The 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 assumptions: Schedule of Fair Value Warrant by Using Black-Scholes Pricing Model Assumptions December 31, 2025 December 31, 2024 Stock price $ 0.57 $ 1.09 Expiration term (in years) 2.84 3.84 Volatility 105 % 105 % Risk-free Rate 3.51 % 4.27 % Dividend yield 0.0 % 0.0 % The following table presents the changes in the warrant liabilities measured at fair value (in thousands): Schedule of Changes in Fair Value Warrant Liabilities December 31, 2025 December 31, 2024 Fair value at beginning of year $ 1,250 $ 4,210 Issuance of new warrants - 4,092 Exercise of warrants - ( 5,372 ) Change in fair value of warrant liability ( 899 ) ( 1,680 ) Fair value at end of year $ 351 1,250 5. Revenue We 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. 6. Cash Balances and Statement of Cash Flows Reconciliation 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 accounts. Restricted cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards. Long-term restricted cash was recorded in other assets in the consolidated balance sheet. F- 20 The following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the statements of cash flows: Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash (in thousands) December 31, 2025 December 31, 2024 Cash and cash equivalents $ 6,392 $ 5,905 Long-term restricted cash 200 200 Total cash and cash equivalent, and restricted cash shown on the statements of cash flows $ 6,592 $ 6,105 Long-term restricted cash was recorded in other assets in the consolidated balance sheet. 7. Accounts Receivable, Net Accounts receivables are mainly attributable to the sale of Ameluz . It is expected that all trade receivables will be settled within twelve months of the balance sheet date. Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience and current information. In developing the estimate for expected credit losses, trade accounts receivable are segmented into pools of assets depending primarily on delinquency status, and reserve percentages are established for each pool of trade accounts receivables. In determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain customers, regulatory and legal environments and other relevant current and future forecasted macroeconomic factors. If we become aware of any customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. The allowance for credit losses was $ 0.1 million and $ 0.2 million as of December 31, 2025 and 2024, respectively. 8. Inventories Inventories consist of the following: Schedule of Inventories (in thousands) December 31, 2025 December 31, 2024 Inventory, short-term: Finished product $ 1,426 $ 6,646 Work in process - - Raw materials - - Total inventory, short-term $ 1,426 $ 6,646 Inventory, long term Finished product $ 1,102 $ - Work in process 649 - Raw materials 1,978 - Total inventory, long-term $ 3,729 $ - Total inventories $ 5,155 $ 6,646 F- 21 9. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: Schedule of Prepaid Expenses and Other Current Assets (in thousands) December 31, 2025 December 31, 2024 Value-added tax receivable $ 1,218 $ 57 Licenses 403 59 Clinical trials 171 61 Insurance 151 168 Other 336 182 Total $ 2,279 $ 527 10. 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. The 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. The variable consideration consists of: ● $ 1.0 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; ● $ 3.0 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; and ● $ 3.0 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. This divestiture does not represent a strategic shift that will have a major effect on our consolidated results of operations and therefore is not being reported as discontinued operations. 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. F- 22 11. Property and Equipment, Net Property and equipment, net consists of the following: Schedule of Property and equipment, Net (in thousands) December 31, 2025 December 31, 2024 Manufacturing equipment $ 2,126 $ - Computer equipment 102 102 Furniture & fixtures 81 81 Leasehold improvement - 368 Machinery & equipment 116 142 Property and equipment, gross 2,425 693 Less: Accumulated depreciation ( 267 ) ( 613 ) Property and equipment, net $ 2,158 $ 80 Depreciation 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. 12. Intangible Assets, Net Intangible assets, net are comprised of the following: Schedule of Intangible Assets, Net (in thousands) December 31, 2025 December 31, 2024 Intellectual property $ 2,656 $ - Software 50 50 Intangible assets, gross 50 50 Accumulated amortization ( 56 ) ( 15 ) Intangible assets, net $ 2,650 $ 35 On October 20, 2025, the Company completed an asset acquisition in which it acquired certain intangible assets including intellectual property. See Note 3. Asset 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 years. 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 asset. 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. Estimated future amortization expense as of December 31, 2025 is as follows: Schedule of Estimated Future Amortization Expense Year (in thousands) Amount 2026 $ 163 2027 148 2028 146 2029 146 2030 146 Thereafter 1,901 Total $ 2,650 13. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: Schedule of Accrued Expenses and Other Current Liabilities (in thousands) December 31, 2025 December 31, 2024 Employee compensation and benefits $ 2,805 $ 2,428 Professional fees 1,305 632 Research and development 410 542 Product revenue allowances and reserves 57 58 Other 320 613 Total $ 4,897 $ 4,273 14. Debt 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. F- 23 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. 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. The Notes mature on November 22, 2027, unless earlier converted or repurchased. The Company may not redeem the Notes at its option prior to maturity. Upon maturity, the Company will pay to the holders of the Notes an amount in cash representing all of the outstanding aggregate principal amount of the Notes, together with any accrued and unpaid interest. Alternatively, the entire amount of the note will be automatically converted to shares of common stock if the 10-day volume weighted average price of a share of the Company’s common stock on Nasdaq is greater than 250 % of the conversion price, and certain other conditions are met. The Notes provide for customary events of default and contain conversion limitations, providing that no conversion may be made if the aggregate number of shares of common stock beneficially owned by the holder would exceed 9.99 % immediately after conversion. There were no events of default at December 31, 2025. The Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts. The Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815. Based on the Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability. In connection with the issuance of the note, the Company incurred $ 0.2 million of debt issuance costs, consisting of legal fees. During 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. F- 24 15. Income Taxes The Company adopted ASU 2023-09, Income Taxes (Topic 740): 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. The components of loss before income taxes are as follows (dollars in thousands): Schedule of components of (loss) 2025 2024 Year ended December 31, 2025 2024 Domestic $ ( 10,474 ) $ ( 17,228 ) Foreign ( 37 ) ( 509 ) (Loss) before income taxes $ ( 10,511 ) $ ( 17,737 ) As 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 Year Ended December 31, 2025 (in thousands) Amount Percentage Federal statutory income tax rate $ ( 2,207 ) 21.0 % State and local income taxes, net of federal income tax effect 25 ( 0.2 )% Foreign tax effects: Other foreign jurisdictions 8 ( 0.1 )% Other Adjustments True-up 18 ( 0.2 )% Changes in valuation allowances 2,330 ( 22.2 )% Nontaxable or nondeductible items: Non-Deductible Expenses 40 ( 0.4 )% Warrant Revaluation ( 189 ) 1.8 % Effective income tax rate $ 25 ( 0.3 )% F- 25 As 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: Year Ended December 31, 2024 Federal statutory income tax rate 21.0 % State income taxes, net of federal benefit 4.3 % Permanent differences – non-deductible expense ( 1.0 )% Change in fair value of warrant liabilities 2.0 % True-ups ( 0.6 )% Federal R&D Credits ( 0.0 )% Foreign rate differential 0.1 % Change in deferred tax asset valuation allowance ( 25.9 )% Effective income tax rate ( 0.1 )% The Company’s effective income tax rates for the years ended December 31, 2025 and 2024 were due to state income taxes. Deferred 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): Schedule of Deferred Tax Assets (Liabilities) (in thousands) December 31, 2025 December 31, 2024 Deferred tax assets (liabilities): Net operating loss carryforwards $ 43,369 $ 41,154 Intangible assets 4,438 3,794 Property and equipment 149 140 Accrued expenses and reserves 350 404 Stock based compensation 1,135 937 Lease liability 395 215 Other 275 705 Total deferred tax assets 50,111 47,349 Valuation allowance ( 49,713 ) ( 47,114 ) Total deferred tax assets, net of valuation allowance 398 235 Deferred tax liabilities: Operating right-of-use assets ( 398 ) ( 235 ) Total deferred tax assets ( 398 ) ( 235 ) Net deferred taxes $ - $ - The changes in the valuation allowance were as follows (in thousands): Schedule of Valuation allowance Year Ended December 31, 2025 Beginning balance $ 47,114 Domestic federal income taxes 2,330 Domestic state & local income taxes 261 Foreign income taxes 8 Total change in valuation allowance 2,599 Ending balance $ 49,713 F- 26 The Company’s income tax provision for the year ended December 31, 2025 related to state income taxes. The Company 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 period. As of December 31, 2025, the Company had $ 173.2 million and $ 133.3 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 Utilization 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. On 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 tax assets. The 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. The 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. F- 27 16. Related Party Transactions We 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. License and Supply Agreement Under 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; ● Thirty percent of the anticipated net selling price per unit for 2026 to 2028; ● Thirty-two percent of the anticipated net selling price per unit for 2029 to 2031; ● Thirty-five percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit; and ● The 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. The 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. 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. On 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 supplier. 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. Strategic Transaction with Biofrontera Group On October 20, 2025, the Company finalized the Agreements with the Biofrontera Group to acquire the U.S. Rights to Ameluz and RhodoLED. See Note 3. 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). The earnout replaces a transfer pricing model under the now terminated Second Amended and Restated License and Supply Agreement (“Second A&R Ameluz LSA”). In 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. See Note 17. Stockholders Equity . The 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. F- 28 Effective 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. Amounts Due and Payable Amounts 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. Amounts due 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. Inventory Purchases Purchases 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. Earnout For 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 . Other Total 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. As 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. See Note 14. 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. 17. Stockholders’ Equity Under 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”). F- 29 Common Stock The 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”). 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. 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. During 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. On October 30, 2023, the Company entered into a securities purchase agreement (“2023 Purchase Agreement”) with an institutional investor for the purchase and sale, in a registered public offering (the “Public Offering”) by the Company of: (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. 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 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 share. On 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. For 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. Schedule of Warrants Outstanding Warrants Number of Shares Exercise Price Expiration Date Liability classified (See Note 4. Fair Value Measurements ) 2,192,736 $ 3.55 11/02/2028 Equity classified 76,620 100.00 11/02/2026 Series B Convertible 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) 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 price of $ 8.0 million. 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 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. On February 20, 2024, the Company filed the Certificate of Designation with the Delaware Secretary of State designating 6,586 shares of its authorized and unissued preferred stock as Series B-1 Preferred Stock, 6,586 shares as Series B-2 Preferred Stock and 8,000 shares as Series B-3 Convertible Preferred Stock, with a par value of $ 0.001 per share (collectively the “Series B Preferred Stock”). On 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). During the third quarter of 2024, an additional 1,016 shares of Series B Preferred Stock were converted into common stock. On May 13 and 14, 2024, 7,998 of the 2024 Preferred Warrants were exercised to purchase 7,998 shares of Series B-3 Convertible Preferred stock, par value $ 0.001 per share for net proceeds of $ 7.4 million, net of fees paid to the placement agent, while two warrants expired due to non-issuance of fractional shares. As of the exercise date, $ 12.8 million was applied to additional paid-in-capital, comprised of the $ 7.4 million of net proceeds and $ 5.4 million of warrant liability fair value. As of December 31, 2024, the 2024 Preferred Warrants issued in the Offering had been exercised or expired. 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. As 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 of State: Voting Rights . Subject to certain limitations described in the Certificate of Designation with the Delaware Secretary of State, 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. Conversion . Subject to certain beneficial ownership limitations, at the option of the holder, each share of Series B Preferred Stock is convertible into shares of common stock at the applicable conversion price, rounded down to the nearest whole share. The conversion price for the Series B Preferred Stock is $ 0.7074 per share of common stock, subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. 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, shares of Series B-2 Preferred Stock. F- 30 Liquidation . Following the Stockholder Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, including a change of control transaction, or Deemed Liquidation Event, as defined in the Certificate of Designation (any such event, a “ Liquidation ”), the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of Series B Preferred Stock and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to common stock pursuant to the terms of the Certificate of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth in the Certificate of Designation or otherwise. Participation Right . For a period of one year following the closing of the Offering, the purchasers will have the right to participate as an investor in any securities offering consummated by the Company. Following the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders will be distributed among the holders of the shares of Series B Preferred Stock and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to common stock pursuant to the terms of the Certificate of Designation filed on February 20, 2024. Accordingly, the Series B Preferred Stock is classified as permanent equity on our consolidated balance sheets and consolidated statements of changes in stockholders’ as of December 31, 2025 and 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f). Series C Convertible Preferred Stock As 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. As 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: Voting Rights . 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. Conversion . Each 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. F- 31 Series D Convertible Preferred Stock On 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 per share. As 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: Voting Rights . 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. Conversion . 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. Effective 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. Redeemable Preferred Stock At 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. Following 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). Convertible Debt On 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. See Note 14. Debt - Convertible Notes Payable , for additional details. 18. Equity Incentive Plans and Share-Based Payments 2021 Omnibus Incentive Plan In 2021, the Board adopted, and our shareholders approved, the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum contractual term is 10 years for stock options issued. On June 12, 2024, the stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990 shares to 3,750,000 shares. As of December 31, 2025, there were 1,200,101 shares available for future awards under the amended 2021 Plan. F- 32 Non-qualified stock options We maintain the 2021 Plan for the benefit of our officers, directors and employees. Employee stock options granted under the 2021 Plan generally 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. The 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 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 yield. The Company elects to account for forfeitures as they occur. 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. The 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 %. The 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. Share-based 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. Options 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. Schedule of Stock Option Activity Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1) Outstanding at December 31, 2023 99,486 $ 39.36 8.79 $ - Granted 1,289,954 $ 1.37 Exercised - $ - Canceled or forfeited ( 30,722 ) $ 11.77 Outstanding at December 31, 2024 1,358,718 $ 3.88 9.36 $ - Granted 719,844 $ 1.00 Exercised - $ - Canceled or forfeited ( 191,844 ) $ 4.65 Outstanding at December 31, 2025 1,886,718 $ 2.70 7.46 $ - Exercisable at December 31, 2025 515,408 $ 6.61 8.26 $ - (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at December 31, 2025 and December 31, 2024. As 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 1.25 years. F- 33 Share-Based Compensation (RSUs) RSUs 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. Share-based compensation expense related to RSUs of $ 0.3 million and $ 0.2 million for the RSUs was recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations for the years ended December 31, 2025 and 2024. As 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 1.0 years. The following table summarizes the activity for RSUs during the year ended December 31, 2025 and December 31, 2024: Schedule of Restricted Stock Units Shares Weighted Average Grant Date Fair Value Unvested balance at December 31, 2023 4,771 $ 52.20 Awarded 450,000 $ 1.06 Issued ( 4,771 ) $ 52.20 Forfeited - $ - Unvested balance at December 31, 2024 450,000 $ 1.06 Awarded 187,500 $ 0.90 Issued ( 225,000 ) $ 1.06 Forfeited - $ - Unvested balance at December 31, 2025 412,500 $ 0.99 19. Net Loss per Share Basic net loss per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. 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. The following table sets forth the computation of the Company’s basic and diluted net earnings (loss) per share attributable to common stockholders (in thousands, except share and per share data): Schedule of Basic and Diluted Net Loss per Share Attributable to Common Stockholders 2025 2024 For years ended December 31, 2025 2024 Net loss $ ( 10,536 ) $ ( 17,759 ) Weighted average common shares outstanding, basic and diluted 10,171,921 5,516,334 Net loss per share, basic and diluted $ ( 1.04 ) $ ( 3.22 ) F- 34 The 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: Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share December 31, 2025 2024 Common stock warrants 2,269,356 2,269,356 Common stock options and RSUs 2,299,218 1,808,718 Unit Purchase Options 20,182 20,182 Series B-2 convertible preferred stock 2,896,650 14,318,632 Series B-3 convertible preferred stock 9,315,909 - Series C convertible preferred stock 17,153,187 - Series D convertible preferred stock 4,831,185 - Convertible notes 6,006,345 5,384,615 Total 44,792,032 23,801,503 Anti-dilutive securities 44,792,032 23,801,503 20. Commitments and Contingencies Leases The 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. On July 30, 2025, the Company entered into an agreement to lease office space for its corporate headquarters at 660 Main Street, Woburn, MA. 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. The 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. The components of lease expense for the years ended December 31, 2025 and 2024 were as follows (in thousands except lease term and discount rate): Schedule of Components of Lease Expense and Other Information Operating Lease expense December 31, 2025 December 31, 2024 Amortization of ROU assets (operating lease cost) $ 730 $ 728 Interest on lease liabilities 60 88 Total lease expense $ 790 $ 816 Other Information Operational cash flow used for operating leases $ 731 $ 778 ROU assets obtained in exchange for lease liabilities 1,371 55 Weighted -average remaining lease term (in years) 4.43 1.55 Weighted -average discount rate 9.88 % 8.22 % Future lease payments under non-cancelable leases as of December 31, 2025 were as follows (in thousands): Schedule of Future Commitments and Sublease Income Years ending December 31, Future lease commitments 2026 471 2027 393 2028 355 2029 342 2030 351 Thereafter 59 Total future minimum lease payments $ 1,971 Less imputed interest $ ( 399 ) Total lease liability $ 1,572 F- 35 Schedule of Operating Lease Liability Reported as: December 31, 2025 Operating lease liability, current $ 332 Operating lease liability, non-current 1,240 Total 1,572 Licensing Agreement with Optical Tools On December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”). The Agreement allowed for the transfer of the assigned patents and trademarks, and upon notification by the Company to Optical Tools, the research and development of certain prototypes. The Company paid a licensing fee of $ 0.2 million which was expensed during the year ended December 31, 2022. On May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy lamp prototypes (“PDT Device”) using the technology in the assigned patents. The PDT Device provides illumination, based on different light profiles, to the external skin surface of the human body. The Company is to reimburse Optical Tools for all reasonable out-of-pocket, material and labor costs per the Agreement. As part of the Agreement, Optical Tools will be eligible to receive regulatory and sales milestone payments totaling up to $ 1.0 million, and royalties of up to 3 % of net revenue of certain products developed under this Agreement. The Company did not make any milestone or royalty payments or accruals for such payments during the years ended December 31, 2025 or 2024. Second A&R Ameluz LSA Sales Commitment and Minimum Research and Development Costs The 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. Minimum Sales or Minimum Order Until 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”). Supply Agreement 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. Legal proceedings At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic 450, Contingencies . The Company expenses as incurred the legal costs related to such legal proceedings. F- 36 Legal Claims On September 13, 2023, Biofrontera was served with a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc., 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. Discovery is ongoing in the above-referenced matters. The Company denies the claims brought by SUN and intends to defend them vigorously. Based on the Company’s assessment of the facts underlying the above claims 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. Separately, on June 26, 2024 and June 27, 2024, SUN filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District Court for the District of Massachusetts (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. The Company denies SUN’s patent claims and intends to defend them vigorously in the above-referenced matters. 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. Based 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 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 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. F- 37 21. Retirement Plan The Company has a defined-contribution plan under Section 401(k) of Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company matches 50% of employee contributions up to a maximum of 6% of employees’ salary. Matching contribution costs paid by the Company were $ 0.2 million and $ 0.2 million for the years ended December 31, 2025 and 2024, respectively. 22. Segment Reporting The 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. The 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. The 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, 2025 December 31, 2024 Revenues, net 41,705 37,321 Operating expenses: Cost of revenues 10,964 18,607 Direct sales 7,963 9,058 Sales support 7,541 8,498 General and administrative 22,866 16,279 Research and development 3,719 2,089 Total operating expenses 53,053 54,531 Loss from operations ( 11,348 ) ( 17,210 ) Other income (expense), net 837 ( 527 ) Loss before income taxes ( 10,511 ) ( 17,737 ) Income tax expenses 25 22 Net loss $ ( 10,536 ) $ ( 17,759 ) F- 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.