What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-12 · 326 added, 442 removed, 112 unchanged (87% of the section changed)

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

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

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

or “subsidiary”), is referred to as “Company,” “we,” “us,” or “our.” References

to “ Licensors ” refer collectively to Biofrontera Pharma, Biofrontera Bioscience and Ferrer.

References to “ Ameluz

Licensor” refer collectively to Biofrontera Pharma and Biofrontera Bioscience.

performance and financial condition, and how our performance during the first quarter of 2026 compares with prior-year periods.

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

is referred to as “Company,” “we,” “us,” or “our.” References to “ Former

Ameluz Licensor” refers to Biofrontera Pharma GmbH and references to the “Biofrontera

Group” refer to Biofrontera AG and its consolidated subsidiaries.

Trade Names, and Service Marks

trademarks, trade names, and service marks appearing in this Form 10-Q are the property of their respective owners.

Solely for convenience,

the trademarks and trade names in this Form 10-Q are referred to without the symbols ® and ™, but such references should not

be construed as any indication that their respective owners will not assert their rights thereto to the fullest extent under applicable

We do not intend to use or display other companies’ trademarks, trade names, or service marks to imply a relationship with,

or endorsement or sponsorship of us by, any other companies.

Forward-Looking

Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.

Certain statements

in this Form 10-Q constitute “forward-looking statements”.

Such statements include estimates of our expenses, future revenue,

capital requirements, our need for additional financing, statements regarding the efficacy and intended use of our technologies under

development, the timelines and strategy for bringing licensed products to market, the timeline for regulatory review and approval of

our licensed products, and other statements that are not historical facts.

The words “intends,” “may,” “will,”

“plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,”

“aims,” “believes,” “hopes,” “potential”, “target”, “goal”, “assume”,

“would”, “could” or similar words are intended to identify forward-looking statements, although not all forward-looking

statements contain these identifying words.

You should read this Form 10-Q and the documents that we have filed as exhibits completely

and with the understanding that our actual future results may be materially different from what we expect.

While we have based these

forward-looking statements on our current expectations and projections about future events, we may not actually achieve the plans, intentions

or expectations disclosed in or implied by our forward-looking statements, and you should not place undue reliance on our forward-looking

These forward-looking statements are subject to risks, uncertainties and assumptions about us and accordingly, actual results

or events could differ materially from the plans, intentions and expectations disclosed in or implied by the forward-looking statements

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

The Private Securities Litigation Reform Act of 1995 provides a “safe

harbor” for forward-looking statements.

Certain statements in this Form 10-Q constitute “forward-looking statements”.

Such statements include estimates of our expenses, future revenue, capital requirements, our need for additional financing, statements

regarding the efficacy and intended use of our technologies under development, the timelines and strategy for bringing licensed products

to market, the timeline for regulatory review and approval of our licensed products, and other statements that are not historical facts.

The words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,”

“projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,”

“potential”, “target”, “goal”, “assume”, “would”, “could” or similar

words are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

You should read this Form 10-Q and the documents that we have filed as exhibits completely and with the understanding that our actual

future results may be materially different from what we expect.

While we have based these forward-looking statements on our current expectations

and projections about future events, we may not actually achieve the plans, intentions or expectations disclosed in or implied by our

forward-looking statements, and you should not place undue reliance on our forward-looking statements.

These forward-looking statements

are subject to risks, uncertainties and assumptions about us and accordingly, actual results or events could differ materially from the

plans, intentions and expectations disclosed in or implied by the forward-looking statements we make.

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

ability to achieve and sustain profitability;

ability to compete effectively in selling our licensed products;

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

to develop our marketing strategy, if needed;

in our relationship with our Licensors;

Licensors’ ability to manufacture our licensed products;

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

intellectual property rights of others;

ability to compete effectively in selling our products;

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

our marketing strategy, if needed;

in our relationship with our manufacturing partners and the possible impact of tariffs;

ability to manufacture our products;

ability to adequately protect our intellectual property and operate the business without infringing upon the intellectual property

rights of others;

actual financial results may vary significantly from forecasts and from period to period;

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

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

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

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

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

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

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

risks regarding consolidation and group purchasing organizations (“GPOs”) in the healthcare industry;

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

products, or procedures using our products significantly declines;

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

fact that product quality issues or product defects may harm our business;

claims brought against the Company, including but not limited to product liability claims, claims of patent infringement, or claims

challenging the validity of our intellectual property;

ability to maintain compliance with The Nasdaq Stock Market, LLC (“Nasdaq”) continued listing standards;

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

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

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

the United States, and;

other risks identified in Item 1A.

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

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

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

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

statements in this Quarterly Report on Form 10-Q, is set forth in our filings with the SEC, including our Form 10-K.

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

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

risks listed in the sections of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) entitled “Risk Factors”.

More detailed information about us and the risk factors that may affect

the realization of forward-looking statements, including the forward-looking statements in this Quarterly Report on Form 10-Q, is set

forth in our filings with the Securities and Exchange Commission (“SEC”), including the 2025 Form 10-K.

We urge investors

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update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

(the “Company” or “Biofrontera”) is a United States based biopharmaceutical company commercializing a portfolio

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

Company’s primary licensed products, which include Ameluz ® as well as the BF-RhodoLED ® and RhodoLED ® XL

lamps (the “RhodoLED ® Lamps”), are used for the treatment of actinic keratoses, which are pre-cancerous skin

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

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

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

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

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

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

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

and patent administration for all purchases in 2024 and 2025.

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

cost management and direct oversight of trial efficiency.

Our research and development (“R&D”) program is focused on

label expansion for Ameluz ® as well as supporting PDT growth by improving the capabilities of our RhodoLED ®

Lamps to better fulfill the needs of dermatologists.

The reduced Transfer Price is expected to allow the Company to finance such R&D

activities and continue our commercial growth trajectory.

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 (“AKs”).

We generate revenue by selling our products, through our national commercial team, directly to dermatology

offices and groups in the United States.

conduct our clinical development activities and hold certain manufacturing-related assets through Discovery, our wholly owned German

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

the RhodoLED Lamps to support adoption of PDT in the United States.

Organization and Business Overview in our Notes to Condensed Consolidated Financial Statements in Part I,

Item 1 of this Form 10-Q for additional information about the Company and its subsidiary.

Key Developments

Transaction with Biofrontera AG

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

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

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

Rights”) to Ameluz ® and RhodoLED ®

(the “Strategic Transaction”).

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

transfer of the U.S.

Rights was completed on October 20, 2025.

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

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

revenue in the United States exceeds $65.0 million.

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

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

The new structure reduces overall

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

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

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

The Company expects the full transfer of assets and

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

exchange for the U.S.

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

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

D Preferred Stock”).

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

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

Closing of Asset Purchase Agreement

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

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

Xepi® (ozenoxacin) cream.

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

million in cash, paid on the Closing Date;

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

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

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

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

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

Transaction with the Biofrontera Group.

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 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 the RhodoLED Lamps (the “Strategic Transaction”).

Pursuant to the terms of the Agreements, retroactive

to June 1, 2025, the Company will pay a monthly earnout of 12% of United States revenues of Ameluz in years when United States net sales

are $65.0 million or less and an earnout of 15% on all revenue in years when United States net sales of Ameluz exceed $65.0 million, continuing

until the expiration of patent protection on Ameluz allows for generic competition in the United States.

The earnout replaces a transfer

pricing model under the Company’s Second Amended and Restated License and Supply Agreement (“Second A&R Ameluz LSA”)

by and among the Company and the Biofrontera Group, which has now been terminated pursuant to the Agreements.

The new structure reduces

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

The results of operations

for the three months ended March 31, 2026 reflect a full quarter under this revised cost structure, while the three months ended March

31, 2025 reflect the prior transfer-pricing model.

Period-over-period comparisons of cost of revenues and related-party cost of revenues

are therefore affected by this change, as discussed further under “Results of Operations” below.

Related Party

Transactions in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information.

with Nasdaq Listing Standards.

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

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

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

Listing Rule 5550(b)(2)

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

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

business days.

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

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

rule referred to in this paragraph.

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

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

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

Listing Rule 5550(b)(1)

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

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

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

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

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

30, 2025, the Company did not meet either of the alternative requirements of maintaining a market value of listed securities of $35 million

or achieving a net income from continuing operations of $0.5 million in the most recently completed fiscal year or in two of the last

three most recently completed fiscal years.

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

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

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

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

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

Listing Rule 5550(b)(1).

Nasdaq will continue to monitor

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

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

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

national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect

our stockholders:

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

market price of our common stock;

ability to obtain financing for the continuation of our operations;

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

number of market makers in our common stock;

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

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

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

exchange, we may have to pursue trading on a less recognized or accepted market, such as the over the counter markets, our stock may

be traded as a “penny stock” which would make transactions in our stock more difficult and cumbersome, and we may be unable

to access capital on favorable terms or at all, as companies trading on alternative markets may be viewed as less attractive investments

with higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from,

investing in our common stock.

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

On December 31, 2025, we received a letter from Nasdaq notifying us that

the listing of our common stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “the Minimum Bid Price Requirement”).

On May 6, 2026, we received written notification from Nasdaq that we had regained compliance with the Minimum Bid Price Requirement and

that the matter was closed.

There can be no assurance that we will maintain compliance with the Minimum Bid Price Requirement or other

continued listing standards in the future.

See Note 18 .

Subsequent Events in our Notes to Condensed Consolidated Financial

Statements in Part I, Item 1 of this Form 10-Q for additional information.

6, 2026, the International Trade Commission issued a Notice of Final Determination finding a violation of Section 337 of the Tariff Act of 1930 with respect to

two asserted patents involving certain components of our RhodoLED XL Lamps.

The Commission issued a Limited Exclusion Order and Cease

and Desist Orders, with the orders relating to the ‘028 patent suspended pending further proceedings before the U.S.

and Appeal Board.

Commitments and Contingencies for additional information

regarding this matter, which is referred to herein as the “ITC Matter.”

Uncertainty and Tariffs.

actions by the U.S., including the imposition of significant tariffs on imports from certain countries, have heightened uncertainty in

the global trade environment.

These tariffs, along with potential retaliatory measures by other countries, may increase inflationary

pressure and raise the costs of our products, which are exclusively imported from Europe.

While several tariff announcements have been

followed by announcements of limited exemptions and temporary pauses, these actions have caused substantial uncertainty and volatility

in financial markets, and may result in further retaliatory measures.

We may be unable to fully offset the impacts of tariffs by adjusting

the pricing of our products.

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

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

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

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

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

Recent actions by the U.S., including the imposition of significant tariffs on imports from certain countries,

have heightened uncertainty in the global trade environment.

These tariffs, along with potential retaliatory measures by other countries,

may increase inflationary pressure and raise the costs of our products, which are exclusively imported from Europe.

While several tariff

announcements have been followed by announcements of limited exemptions and temporary pauses, these actions have caused substantial uncertainty

and volatility in financial markets, and may result in further retaliatory measures.

We may be unable to fully offset the impacts of

tariffs by adjusting the pricing of our products.

We continue to monitor developments and assess the potential impact on our supply chain,

product cost, and pricing strategy.

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

The key elements

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

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

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

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

of minimally to moderately thick AKs of the face and scalp and positioning Ameluz to be the standard of care in the

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

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

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

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

for certain ongoing clinical trials since June 1, 2024;

strategically

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

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

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

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

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

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

BF-RhodoLED ® Lamps.

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

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

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

GAAP measure as defined below).

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

related and unrelated companies.

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

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

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

devote a substantial portion of our cash resources to the commercialization of Ameluz and the BF-RhodoLED Lamps.

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

convertible notes and equity financings.

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

before interest, taxes, depreciation and amortization (“EBITDA”;

a non GAAP measure).

Our sole source of product revenue

is sales of Ameluz and the BF-RhodoLED Lamps.

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

operating margins.

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

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

Factor Affecting Our Performance

traditional photodynamic therapy treatments using a lamp are performed more frequently during the winter, 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.

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

may not be directly comparable from period to period.

of Our Results of Operations

Revenues, Net

generate product revenues through the third-party sales of our licensed products, Ameluz ® and RhodoLED ®

Revenues from product sales are recorded net of trade discounts and allowances and government rebates.

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

generate product revenues through the sale of our products Ameluz and RhodoLED Lamps .

Revenues from product sales are recorded

net of trade discounts and allowances and government rebates.

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

level of orders generated by our sales force;

level of prescriptions and institutional demand for our licensed products;

sales prices.

Related Party

to our taking over clinical trials on June 1, 2024, we generated insignificant related party revenue in connection with an agreement

with Biofrontera Bioscience to provide RhodoLED ® Lamps and associated services for the clinical trials performed by Biofrontera

In the future, we do not expect to receive related party revenue regarding RhodoLED ® Lamps and associated

services for clinical trials.

level of prescriptions and institutional demand for our products;

sales and average sales price.

of Revenues, Related Party

of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz ® and RhodoLED ® Lamps

from Biofrontera Pharma GmbH and insignificant inventory adjustments due to scrapped, expiring and excess products.

of revenues, related party, relating to inventory purchased before the Strategic Transaction, is comprised of purchase costs of our products,

Ameluz and RhodoLED Lamps, from Biofrontera Pharma GmbH and insignificant inventory adjustments due to scrapped, expiring and excess products.

of Revenues, Other

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general and administrative expenses consist principally of costs associated with our sales force, commercial support personnel, personnel

in executive and other administrative functions, and medical affairs professionals.

Other selling, general and administrative expenses

include marketing, trade, and other commercial costs necessary to support the commercial operation of our licensed products and professional

fees for legal, consulting and accounting services.

Selling, general and administrative expenses also include the amortization of our

intangible assets and our legal settlement expenses.

in executive and other administrative functions, as well as medical affairs professionals.

Other selling, general and administrative

expenses include marketing, trade, and other commercial costs necessary to support the commercial and manufacturing operation of our

products and professional fees for legal, consulting and accounting services, product regulation, quality management, as well as depreciation

and amortization.

General and Administrative Expenses, Related Party

general and administrative expenses, related party, relate to the services provided by Biofrontera AG, primarily for regulatory support

and pharmacovigilance .

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

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

The 2021 Services Agreement

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

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

We currently have statements of work in

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

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

third-party providers.

general and administrative expenses, related party, relate to the services provided by the Biofrontera Group, primarily for regulatory

support and pharmacovigilance.

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

Master Contact Services Agreement entered into in December 2021.

and Development

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.

Along with our Ameluz ® clinical trials, our R&D program also

aims to improve the capabilities of our RhodoLED ® Lamps to better fulfill the needs of dermatologists and improve the

effectiveness of our commercial team by letting sales representatives carry approved devices with them, allowing for easier product demonstrations

June 1, 2024, we took control of all clinical trials for Ameluz in the United States, allowing for more effective cost management and

direct oversight of trial efficiency.

Our 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 trial sites, facilities, depreciation, and other direct and allocated expenses.

Along with our Ameluz clinical trials, our R&D

program also aims to improve the capabilities of our RhodoLED Lamps to better fulfill the needs of dermatologists and improve the effectiveness

of our commercial team by letting sales representatives carry approved devices with them, allowing for easier product demonstrations

and evaluations.

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

All costs associated with R&D are expensed as incurred.

in Fair Value of Warrant Liabilities

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expire or other facts and circumstances lead the warrant liabilities to be reclassified to stockholders’ equity or deficit.

in Fair Value of Investment, Related Party

investments are comprised of equity securities in shares of Biofrontera AG, which are initially recorded at cost, plus transaction costs,

and subsequently measured at fair value, based on quoted market prices, with the gains and losses reported in the Company’s consolidated

statement of operations.

For the investments held in foreign currencies, the change in fair value attributable to changes in foreign

exchange rates is included in gains and losses in the consolidated statement of operations.

on Debt Extinguishment

January 4, 2024, we voluntarily terminated the Loan and Security Agreement with MidCap Business Credit LLC, for our revolving line of

credit and recognized a $0.3 million loss on debt extinguishment upon the early termination related to prepayment fees and the write-off

of deferred financing costs.

Income (Expense), net

expense, net, primarily consists of interest on our convertible notes and short-term debt, including amortization of deferred costs.

Income (Expense), net

income (expense), net primarily includes (i) gain (loss) on return of leased assets and (ii) gain (loss) on foreign currency transactions.

income (expense), net primarily includes (i) gain on return of leased assets and (ii) gain (loss) on foreign currency transactions.

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

2 unchanged sentences

of Operations

of the Three Months ended September 30, 2025 and 2024

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

( in thousands)

Product Revenues, net

Operating expenses:

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

Total operating expenses

Loss from operations

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Interest income (expense), net

Other income, net

Total other expense

Loss before income taxes

Income tax expenses

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

September 30, 2024.

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

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

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

of Revenues, Related Party

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

months ended September 30, 2024.

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

Related Party Transactions.

General and Administrative Expenses

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

the three months ended September 30, 2024.

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

Commitments and Contingencies – Legal Proceedings .

and Development Expenses

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

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

trials in 2025.

following table summarizes our R&D expenses by indication:

Three Months Ended September 30,

Superficial basal cell carcinoma

Actinic keratosis

Moderate to severe acne

Personnel-related costs

Other research and development

in Fair Value of Warrant Liabilities

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

for the three months ended September 30, 2024.

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

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

expense increased by $0.1 million due to the issuance of Senior Secured Convertible Notes of $4.2 million pursuant to a securities purchase

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

Notes bear interest at 10.0% per annum, payable in-kind through the issuance of additional principal on a quarterly basis.

of the Nine Months ended September 30, 2025 and 2024

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

of the Three Months ended March 31, 2026 and 2025

following table summarizes our results of operations for the three months ended March 31, 2026 and 2025:

( in thousands)

Product revenues, net

Related party revenues

Revenues, net

Operating expenses:

3 unchanged sentences

Selling, general and administrative, related party

Patent remediation expense

Research and development

1 unchanged sentence

Loss from operations

Other income (expense):

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Loss on debt extinguishment

Interest expense, net

Other income (expense), net

Other expense, net

Total other income (expense)

Loss before income taxes

Income tax expenses

Income tax benefit

Revenues, net

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

September 30, 2024.

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

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

product revenue for the three months ended March 31, 2026 was $10.1 million, an increase of $1.5 million, or 17.4%, compared to the three

months ended March 31, 2025.

The increase was primarily attributable to higher Ameluz® net sales, reflecting 15.9% growth in unit

volume, as well as the full period impact of a price increase implemented in the fourth quarter of 2025 that contributed approximately

$0.2 million revenue increase.

of Revenues, Related Party

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

ended September 30, 2024.

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

of revenues, related party for the three months ended March 31, 2026 decreased $1.2 million, or 40.5%, compared to the three months ended

March 31, 2025.

The decrease was primarily driven by a reduction in the purchase price of Ameluz® resulting from the transition pursuant to the Strategic Transaction from

the transfer pricing model in place under the now-terminated Second A&R Ameluz LSA, which was 25% of net revenue, to

a significantly lower cost structure comprised only of Ameluz direct cost and the 12% earnout applied to

the net revenue.

General and Administrative Expenses

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

nine months ended September 30, 2024.

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

patent claims.

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

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

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

and Development Expenses

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

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

June 1, 2024.

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

Nine Months Ended September 30,

Superficial basal cell carcinoma

general and administrative expenses for the three months ended March 31, 2026 were $11.0 million, an increase of $2.3 million, or

27.1%, compared to the three months ended March 31, 2025.

Selling and marketing expenses increased $0.8 million, reflecting the full

deployment of the direct sales team and higher sales activity levels, including sales meetings, conferences, and exhibits, in

support of improved commercial performance.

General and administrative expenses increased $0.8 million, primarily due to legal

expenses associated with ongoing patent-related claims.

Further, in connection with the Strategic Transaction, the Company

assumed responsibility for manufacturing operations beginning in the fourth quarter of 2025.

Because we were in the process of

securing approvals and licenses to commence manufacturing later in 2026, manufacturing-related costs of $0.6 million are reflected

in selling, general and administrative expenses for the three months ended March 31, 2026.

Patent Remediation Expense

During the three months ended March 31, 2026, we recognized

a total charge of approximately $0.4 million reflecting the estimated cost to remediate the affected units of our RhodoLED XL Lamps in

response to ITC Matter.

The total charge comprises (i) an inventory write-down of approximately $0.1 million

to reduce the carrying value of affected finished goods inventory and obsolete components in raw materials to net realizable

value in accordance with ASC 330-10-35, which were charged to cost of revenues, other, and (ii) an accrued remediation liability

of approximately $0.4 million for the future cost activities charged to patent remediation expense.

We expect to incur the cash component of these costs

over the twelve months following the 60-day Presidential Review period, concluding on July 6, 2026, as remediation activities are

In addition, the remediation is expected to result in a modest, recurring increase in our per-unit cost of revenues

for affected products;

this prospective impact is reflected in our cost of revenues as

units implementing the remediation are produced and sold.

We do not expect the recurring per-unit cost increase to be material

to our overall cost of revenues.

and Development Expense

and development expenses for the three months ended March 31, 2026 decreased $0.3 million compared to the three months ended March 31,

The decrease was primarily attributable to certain clinical trials reaching substantial completion ahead of their originally planned

timelines, resulting in lower trial-related expenditures in the current year period.

following table summarizes the major categories of our R&D expenses for the three months ended March 31, 2026 and 2025:

Actinic keratosis

Moderate to severe acne

Superficial basal cell carcinoma

Lamp Development

Personnel-related costs

1 unchanged sentence

in Fair Value of Warrant Liabilities

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

for the nine months ended September 30, 2024.

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

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

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

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

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

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

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

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

our operations specifically described below.

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

Our definition

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

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

Adjusted EBITDA should not be considered as an

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

derived in accordance with U.S.

GAAP as measures of operating performance or liquidity.

Adjusted EBITDA has limitations as an

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

on debt extinguishment:

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

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

We exclude the impact of

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

which is considered non-cash.

change in fair value of warrant liabilities was ($0.2) million for three months ended March 31, 2026, as compared to $0.5 million for

the three months ended March 31, 2025.

The increase in the fair value of warrant liabilities for the three months ended March 31, 2026

was driven primarily by an increase in the underlying value of the Company’s common stock while the decrease for the three months

ended March 31, 2025 was driven by a decrease in the underlying value of the Company’s common stock.

Loss to Adjusted EBITDA Reconciliation for the Three Months Ended March 31, 2026 and 2025

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

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

specifically described below.

Adjusted EBITDA is not a presentation made in accordance with GAAP.

Our definition of adjusted EBITDA

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

and differences due to items subject to interpretation.

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

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

as measures of operating performance or liquidity.

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

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

in fair value of warrant liabilities:

The warrants issued in conjunction with our private placement offerings and registered public

offerings are accounted for as liabilities in accordance with ASC 815-40.

offerings were accounted for as liabilities in accordance with ASC 815-40.

The warrant liabilities are measured at fair value at inception

2 unchanged sentences

of the change in fair value of warrant liabilities as this is non-cash.

in fair value of investment, related party:

The Company accounts for its investment, related party in accordance with ASC 321, Investments

— Equity Securities .

Equity securities, which are comprised of investments in common stock, are initially recorded at cost,

plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and losses reported in

the Company’s consolidated statement of operations.

For the investments held in foreign currencies, the change in fair value attributable

to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations.

We exclude the impact

of the realized gain as this is non-recurring and the unrealized change in fair value of investments is excluded as this is non-cash.

Compensation :

5 unchanged sentences

on the timing, size and nature of awards granted.

issuance costs:

To measure operating performance, we exclude the portion of issuance costs allocated to our warrant liabilities.

We do not expect to incur this type of expense on a recurring basis and believe the exclusion of these costs allows management and the

viewers of the financial statements to better understand our financial results.

Patent Remediation

During the three months ended March 31, 2026, we recognized a total charge of approximately $0.4 million reflecting the

estimated cost to remediate the affected units of our RhodoLED XL Lamps in response to the ITC Matter.

The total charge comprises (i) an inventory write-down of approximately $0.1 million to reduce the carrying value of affected

finished goods inventory and obsolete components in raw materials to net realizable value in accordance with ASC

330-10-35, and (ii) an accrued remediation liability of approximately $0.4 million for the future cost activities required to

complete the remediation.

We exclude these charges because they relate to a discrete adverse legal and regulatory matter that is

not indicative of the Company’s ongoing operating performance.

EBITDA margin is adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.

1 unchanged sentence

to adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides

useful information to investors regarding financial and business trends related to our results of operations and that when non-U.S.

financial information is viewed with U.S.

GAAP financial information, investors are provided with a more meaningful understanding of

useful information to investors regarding financial and business trends related to our results of operations and that when non GAAP

financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of

our ongoing operating performance.

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

below table presents a reconciliation from net loss to Adjusted EBITDA for the three months ended March 31, 2026 and 2025:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Interest (income) expense, net

Income tax expenses

Interest expense, net

Income tax benefit

Depreciation and amortization

Loss on debt extinguishment

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Patent Remediation - Inventory Write-down

Patent Remediation Expense

Stock-based compensation

Expensed issuance costs

Adjusted EBITDA

Adjusted EBITDA margin

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

ended September 30, 2025.

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

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

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

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

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

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

EBITDA increased from ($4.4) million for the three months ended March 31, 2025 to ($3.6) million for the three months ended March 31,

2026, an improvement of approximately $0.8 million.

The improvement was primarily driven by a $2.7 million increase in gross profit,

reflecting higher Ameluz unit volume and a significantly lower cost structure as described above.

This improvement was partially offset

by a $2.3 million increase in selling, general and administrative expenses.

Refer to the section above entitled “ Selling, General

and Administrative Expenses ” for additional details.

and Capital Resources

consolidated financial statements have been prepared in accordance with U,S.

generally accepted accounting principles (“U.S.

assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction

of liabilities in the normal course of business.

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

The Company incurred net cash outflows from operations of $11.0

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

The Company had an accumulated deficit

as of September 30, 2025 of $133.6 million.

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

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

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

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

These factors raise substantial

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

of this report.

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

of liabilities in the ordinary course of business.

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

incurred net cash outflows from operations of $0.1 million and $4.1 million for the three months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026, the Company’s accumulated deficit was $133 million.

The Company’s primary sources of liquidity are

its cash collected from the sales of its products and cash flows from financing transactions.

As of March 31, 2026, we had cash and cash

equivalents of $6.3 million, compared to $6.4 million as of December 31, 2025.

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 issuance date of this Quarterly Report on Form 10-Q.

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

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

line on November 6, 2025.

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

terms, if at all.

If the Company is unable to raise additional capital when needed, it will not have sufficient cash resources and liquidity

to fund its business operations and may be forced to delay or reduce continued commercialization efforts or R&D programs which could

have a material adverse effect on the Company and its financial statements.

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

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

things, continuing to expand the commercialization of Ameluz in the United States while controlling expenses, pursuing the 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.

condensed 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.

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

Nine Months Ended September 30,

Three Months Ended

(in thousands)

Net cash used in operating activities

Net cash provided by (used) in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and restricted cash

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

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

of $0.6 million, non-cash interest expense of $0.4 million, and net cash used by changes in our operating assets and liabilities of $4.0

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

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

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

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

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

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

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

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

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

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

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

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

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

Stockholders’ Equity , for additional

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

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

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

$0.2 million to extinguish our line of credit.

Net cash used in investing activities

Net (decrease) in cash and restricted cash

the three months ended March 31, 2026, operating activities used $0.1 million of cash, primarily resulting from our loss from operations

of $4.3 million, offset by changes in our operating assets and liabilities of $3.4 million.

The net decrease in operating accounts was

attributable to the decrease in accounts receivable reflective of the seasonal sales of PDT procedures, with higher sales in the fourth

quarter, and collection in the first quarter of receivables outstanding at year-end.

the three months ended March 31, 2025, operating activities used $4.1 million of cash, primarily resulting from our loss from operations

of $4.2 million, plus the change in fair value of warrant liabilities of $0.5 million adjusted for non-cash expense of stock-based compensation

of $0.2 million, non-cash interest expense of $0.1 million, depreciation and amortization in the aggregate of $0.2 million, and net cash

used by changes in our operating assets and liabilities of $0.1 million.

the three months ended March 31, 2026 and 2025, net cash used in investing activities consisted of negligible fixed asset purchases.

Policies and Significant Judgments and Estimates

management’s discussion and analysis of our financial condition and results of operations are based on our financial statements,

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

The preparation of the financial statements

in accordance with U.S.

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

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

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

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

Estimates are based on historical experience

and other assumptions that are considered appropriate in the circumstances.

They are continuously reviewed but may vary from the actual

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

our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data in our Form 10-K.

which have been prepared in accordance with generally accepted accounting principles of the United States, or GAAP.

The preparation of

the financial statements in accordance with GAAP requires the use of estimates and assumptions by management that affect the value

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

arising during the reporting period.

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

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

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

They are continuously

reviewed but may vary from the actual values.

significant accounting policies are described in more detail in Note 2.

Summary of Significant Accounting Policies , to our

consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data in the 2025 Form

Accounting Estimates

summary of our critical accounting estimates is discussed in the section entitled “Critical Accounting Estimates” in Item

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.

There were no material

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2025

There were no material changes to our critical accounting estimates for the three months ended March 31, 2026 , other than as noted below .

Loss Contingency

for ITC Matter

With respect to the ITC Matter, our estimate of the loss is based on a

bottoms-up cost model encompassing component procurement, field service travel and labor, return-to-base rework, regulatory and quality

activities, and other costs.

The estimate is sensitive to a number of assumptions that may change as remediation activities progress,

including, in particular, (a) the labor and the associated travel and lodging costs, (b) the unit cost of the remediation and

the foreign exchange rate at which it is procured, (c) the regulatory pathway determined for the remediation and (d) the timing

and outcome of the suspended limited exclusion order and cease and desist order as to the ‘028 patent.

A change in any of these assumptions could result in a material

change in the recorded accrual, which would be recognized prospectively as a change in estimate in accordance with ASC 250-10-45-17.

Sheet Arrangements

13 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis