What changed in this filing

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Item 1. Financial Statements

2026-08-13 compared with 2026-05-14 · 500 added, 424 removed, 455 unchanged (67% of the section changed)

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Stockholders’ equity:

Convertible Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1;

2,050 Series B-2;

6,593 Series B-3;

10,719 Series C and 3,019 Series D shares issued and outstanding as of March 31, 2026 and December 31, 2025

Preferred stock, value

Convertible Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized;

no Series B-1;

1,850 and 2,050 Series B-2;

6,498 and 6,593 Series B-3;

9,707 and 10,719 Series C;

and 3,019 Series D shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively

Common stock, $ 0.001 par value, 70,000,000 shares authorized;

11,873,323 and 11,648,323 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively

14,206,126 and 11,648,323 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively

Additional paid-in capital

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thousands, except per share amounts and number of shares )

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Product revenues, net

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Change in fair value of warrant liabilities

Change in fair value of investment, related party

Interest expense, net

Other expense, net

Other income (expense), net

Total other income (expense)

Loss before income taxes

Income tax benefit

Income tax expense

Loss per common share:

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thousands, except number of shares)

Months Ended March 31, 2026 and 2025

Three and Six Months Ended June 30, 2026

Preferred Stock

Additional Paid-

Additional Paid-in

Balance, April 1, 2026

$ ( 132,697 )

Conversion of Series B-2 Preferred into Common

Conversion of Series B-3 Preferred into Common

Conversion of Series C Preferred into Common

Conversion of convertible notes into Common

Stock-based compensation

Balance, June 30, 2026

Balance, January 1, 2026

$ ( 127,945 )

Conversion of Series B-2 Preferred into Common

Conversion of Series B-3 Preferred into Common

Conversion of Series C Preferred into Common

Conversion of convertible notes into Common

Issuance of shares for restricted stock units

Stock-based compensation

Balance, March 31, 2026

Balance, June 30, 2026

$ ( 133,301 )

Three and Six Months Ended June 30, 2025

Preferred Stock

Additional Paid-

Additional Paid-in

Balance, April 1, 2025

Conversion of Series B-2 Preferred into Common

Conversion of Series B-3 Preferred into Common

Stock based compensation

Balance, June 30, 2025

Balance, January 1, 2025

$ ( 117,409 )

Conversion of Series B-2 Preferred into Common

Conversion of Series B-3 Preferred into Common

Stock based compensation

Balance, March 31, 2025

$ ( 121,612 )

Balance, June 30, 2025

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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Change in fair value of warrant liabilities

Realized/unrealized (gain)/ loss in investment, related party

Loss from termination of operating leases

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Cash flows used in investing activities

Net decrease in cash and cash equivalents

Cash flows from financing activities

Proceeds from stockholder advances

Cash flows provided by financing activities

Net change in cash, cash equivalents

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

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Supplemental disclosure of cash flow information

Interest paid

Income taxes paid, net

Supplemental non-cash financing activities

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

Conversion of convertible note payable and PIK interest into common stock

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

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generate revenue by selling our products directly to dermatology offices and groups.

June 1, 2024, we assumed control of all clinical trials relating to Ameluz in the United States through Biofrontera Discovery GmbH (“Discovery”),

conduct all clinical trials relating to Ameluz ® in the United States through Biofrontera Discovery GmbH (“Discovery”),

our wholly owned subsidiary organized under the laws of Germany and formed in February 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.

October 20, 2025, the Company 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 acquired all rights in the United States (the “U.S.

Rights”) to Ameluz and RhodoLED

(the “Strategic Transaction”).

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.

October 20, 2025, the Company 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 acquired all rights in the United States (the “U.S.

to Ameluz ® and RhodoLED ® (the “Strategic Transaction”).

In exchange for the U.S.

Rights, and in addition to a monthly earnout payable to the Biofrontera

Group and the Company’s assumption of 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 Strategic Transaction was funded through

an $ 11.0 million investment by existing investors.

Related Party Transactions for additional

in addition to a monthly earnout payable to the Biofrontera Group and the Company’s assumption of all costs associated with the

business, Biofrontera AG received 3,019

shares of Series D Convertible Preferred Stock, par value $ 0.001

per share (the “Series D Preferred Stock”).

Strategic Transaction was funded through an $ 11.0

million investment by existing investors.

Party Transactions for additional information.

November 6, 2025, the Company completed the sale of the long-lived intangible asset relating to its Xepi product line.

received fixed consideration in the amount of $ 3.0 million and may receive up to $ 7.0 million of variable consideration

contingent upon the buyer’s future activities See Note 10.

Asset Held for Sale in the Company’s Annual Report on Form

10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) for additional information.

received fixed consideration in the amount of $ 3.0 million

and may receive up to $ 7.0 million

of variable consideration contingent upon the buyer’s future activities.

Asset Held for Sale , to our

consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) for additional

May 6, 2026, the U.S.

International Trade Commission (the “Commission”) issued a Limited Exclusion Order (“LEO”)

and cease and desist order (“CDO”) prohibiting the Company from importing and/or selling the RhodoLED ® XL in

the United States and restricting the Company from selling Ameluz ® for use with the RhodoLED ® XL (the “ITC

Commitments and Contingencies for additional information.

and Going Concern

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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.

incurred net cash outflows from operations of $ 1.7 million and $ 7.2 million for the six months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, the Company’s accumulated deficit was $ 133.3 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 June 30, 2026, we had cash and cash

equivalents of $ 4.7 million, compared to $ 6.4 million as of December 31, 2025.

discussed above and in Note 17.

Commitments and Contingencies, in connection with the ITC Matter, the Company has recorded an

estimated remediation cost of $0.5 million and expects related cash disbursements to occur over the twelve months following July 6, 2026;

these disbursements are reflected in the Company's cash flow forecasts used in this assessment.

Based on currently available information,

management does not expect this matter to materially impair the Company's core Ameluz ® revenue base.

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

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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, 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.

things, continuing to expand the commercialization of Ameluz ® in the United States while controlling expenses;

on a working capital line of credit;

pursuing the realization of an additional $ 1.0

million in milestone payments from the sale of the Xepi intangible

asset expected in December 2026;

and, if necessary, securing additional capital through equity or debt financings to support commercial

expansion and R&D programs.

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,

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(“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the Company’s opinion, the

unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature,

necessary to present fairly the Company’s financial position as of March 31, 2026, the Company’s operating results for the

three months ended March 31, 2026 and 2025, and the Company’s cash flows for the three months ended March 31, 2026 and 2025.

accompanying financial information as of December 31, 2025 is derived from audited financial statements.

Interim results are not necessarily

indicative of results for a full year.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with

the Company’s 2025 Form 10-K.

In the Company’s opinion, the unaudited

condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary

to present fairly the Company’s financial position as of June 30, 2026, the Company’s operating results for the three and

six months ended June 30, 2026 and 2025, and the Company’s cash flows for the six months ended June 30, 2026 and 2025.

The accompanying

financial information as of December 31, 2025 is derived from audited financial statements.

Interim results are not necessarily indicative

of results for a full year.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the 2025 Form 10-K.

amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages

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the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed

in the Company’s 2025 Form 10-K.

in the 2025 Form 10-K.

Reclassification

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

Depreciation expense and

amortization expense previously presented separately in the condensed consolidated statements of cash flows have been combined into

a single line item.

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

reported results of operations.

Depreciation expense and amortization

expense previously presented separately in the condensed consolidated statements of cash flows have been combined into a single line

The reclassification was limited to the condensed consolidated statements of cash flows and had no impact on the reported results

of operations.

Nasdaq Stock Market, LLC (“Nasdaq”) Compliance

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less than $ 1.00 per share for the previous 34 consecutive business days.

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

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

the Company had a period of 180 calendar days, or until June 30, 2026, to regain compliance with the rule referred to in this paragraph.

The Company has since then regained compliance with Listing Rule 5550(a)(2).

See Note 18 .

Subsequent Events for additional

preparation of the condensed consolidated financial statements in accordance with 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, deferred tax asset valuations, and contingent liability recognition.

Estimates are

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

They are continuously

reviewed but may vary from the actual values.

The notice had no impact on the listing or trading of the Company’s

securities on Nasdaq.

Under Nasdaq Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days, or until June 30, 2026,

to regain compliance with the rule referred to in this paragraph.

May 6, 2026, we received written notification from Nasdaq, with confirmation that for the last 10 consecutive business days, from April

22, 2026 to May 6, 2026, the closing bid price of the Company’s Common Stock had been at $ 1.00 per share or greater.

the Company 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.

preparation of the condensed consolidated financial statements in accordance with GAAP requires the use of estimates and assumptions

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

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

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

and inventory, valuation of warrant liabilities, impairment assessment of intangibles and other long-lived assets, share-based payments,

deferred tax asset valuations, and contingent liability recognition.

Estimates are based on historical experience and other assumptions

that are considered appropriate in the circumstances.

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

Adopted or Issued Accounting Pronouncements

evaluate Accounting Standard Updates (“ASUs”) issued by the Financial Accounting Standards Board (“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.

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.

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

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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.

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.

Company adopted this ASU on January 1, 2026, and the adoption did not have a material impact on its condensed consolidated financial

statements and related disclosures.

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

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

Disaggregation of Income Statement

The new guidance requires disaggregated information about certain income

statement expense line items on an annual and interim basis.

This ASU is effective for public business

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

November 2024, the FASB issued ASU

2024-03, I ncome Statement—Reporting Comprehensive Income—Expense Disaggregation

Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expense .

new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis.

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.

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

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

606) , which provides updates to refine the scope of the guidance on derivatives in Accounting Standards Codification

(“ASC”) 815 and clarify the guidance on share-based

noncash payments from customers in ASC 606.

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

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

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

on debt instruments.

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

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

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

November 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements , which clarifies interim

disclosure requirements.

The guidance is effective for the Company’s interim reporting periods within annual reporting periods

beginning after December 15, 2027.

Early adoption is permitted.

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

financial statements and related disclosures.

December 2025, the FASB issued ASU 2025-12, Codification Improvements , 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.

606) , which provides updates to refine the scope of the guidance on derivatives in Accounting

Standards Codification (“ASC”) 815 and clarify the guidance on share-based noncash payments from customers in ASC

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.

December 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.

in both interim and annual periods in which financial statements have not yet been issued or made available for issuance.

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.

We are evaluating the effect that this guidance will have on

our consolidated financial statements and related disclosures.

December 2025, the FASB issued ASU 2025-12, Codification Improvements , 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

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.

We are currently evaluating the effect of adopting

ASU 2025-12 on our consolidated financial statements and related disclosures.

Fair Value Measurements

following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31,

2026 and December 31, 2025 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair

Schedule of Fair Value Hierarchy Valuation Inputs

following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring

basis at June 30, 2026 and December 31, 2025 and indicates the fair value hierarchy of the valuation inputs the Company utilized to

determine such fair value:

Schedule of Assets Measured at Fair Value On Recurring Basis

(in thousands)

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related party

of March 31, 2026 and December 31, 2025, 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.

of June 30, 2026 and December 31, 2025, the Company owned 3,019 common shares of Biofrontera AG.

The fair value of this investment was

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

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

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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

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

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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 condensed consolidated statement of operations.

change in fair value is recognized in the Company’s condensed consolidated statements 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 condensed consolidated

statement of operations.

statements of operations.

Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered

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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 condensed consolidated statement of operations.

fair value for the Level 3 warrants at March 31, 2026 was estimated using a BSM model based on the following assumptions

being reported in our condensed consolidated statements of operations.

fair value for the Level 3 warrants at June 30, 2026 and December 31, 2025 was estimated using a BSM model based on the following assumptions

at each measurement date:

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

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

Expiration term (in years)

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following table presents the changes in the Level 3 warrant liabilities measured at fair value (in thousands):

Schedule of Changes in Fair Value Warrant Liabilities

Three Months Ended

of Changes in Fair Value of Warrant Liabilities

Six Months Ended

Fair value at beginning of period

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Fair value at end of period

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

generate revenue primarily through the sales of our products, Ameluz ® and the RhodoLED ® Lamps.

PDT treatments using a lamp are performed more frequently during the winter.

As such our revenue is subject to some seasonality and has

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

Cash Balances and Statement of Cash Flows Reconciliation

As such, our revenue is subject to some seasonality and

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

Cash Balances and Statements of Cash Flows Reconciliation

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

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

allowance for credit losses was $ 0.1 million as of March 31, 2026 and December 31, 2025.

allowance for credit losses was $ 0.2 million and $ 0.1 million as of June 30, 2026 and December 31, 2025, respectively.

are comprised of the following:

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Finished product

Work in process

Raw materials

Total inventory, short-term

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long-term inventory balance relates to the RhodoLED ® Lamps.

During the three months ended March 31, 2026, the Company recognized an

inventory write-down of $ 0.1 million in connection with the U.S.

International Trade Commission’s May 6, 2026 Notice of Final

Determination (See Note 16.

During the six months ended June 30, 2026, the Company

recognized an inventory write-down of $ 0.1

million in connection with the U.S.

International Trade Commission’s May 6, 2026 Notice of Final Determination (See Note

Commitments and Contingencies ).

The write-down was recognized to reduce the carrying value of the

affected inventory to its net realizable value in accordance with ASC 330-10-35 and is presented within cost of revenue-other in the

condensed consolidated statements of operations.

inventory write-downs or obsolescence reserves were recognized during the three months ended March 31, 2025 that were material to

the condensed consolidated financial statements.

The write-down was recognized to reduce the carrying value of the affected inventory to its

net realizable value in accordance with ASC 330-10-35 and is presented within cost of revenues, other in the condensed consolidated

statements of operations.

Other than the write-down noted above, no

inventory write-downs or obsolescence reserves were recognized during the three and six months ended June 30, 2026 and 2025 that

were material to the condensed consolidated financial statements.

Prepaid Expenses and Other Current Assets

expenses and other current assets consist of the following:

Schedule of Prepaid Expenses and Other Current Assets

(in thousands)

Value-added tax receivable

Clinical trials

Property and Equipment, Net

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Manufacturing equipment

Machinery & equipment

Computer equipment

Furniture & fixtures

Machinery & equipment

Leasehold Improvements

Property and equipment, gross

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Property and equipment, net

expense was no t

material to the condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025 and was recorded

in the condensed consolidated statement of operations within cost of revenues or selling, general and administrative expense,

depending on the nature and use of the underlying asset.

As of March 31, 2026 and December 31, 2025, approximately $ 1.8 million of

manufacturing equipment acquired in connection with the Strategic Transaction had not yet been placed in service and is therefore

expense was no t material to the condensed consolidated statements of operations for the three and six months ended June 30, 2026 and

2025 and was recorded in the condensed consolidated statements of operations within cost of revenues or selling, general and administrative

expense, depending on the nature and use of the underlying asset.

As of June 30, 2026 and December 31, 2025, $ 1.8 million

of manufacturing equipment acquired in connection with the Strategic Transaction had not yet been placed in service and is therefore

not being depreciated.

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Intellectual property

Intangible assets, gross

Accumulated amortization

Intellectual property, net

Intangible assets

Accumulated amortization

Software, net

Intangible assets, net

assets consist primarily of intellectual property acquired in the Strategic Transaction, which was recorded at an acquisition-date

fair value of $ 2.7

million and is being amortized on a straight-line

basis over an estimated useful life of 18

Internal use software is amortized over three years.

expense was negligible for the three months ended March 31, 2026 and 2025.

Amortization expense is recorded in the condensed

consolidated statement of operations within cost of revenues or selling, general and administrative expense depending on the nature

and use of the underlying intangible asset.

No impairment

losses were recognized for intangible assets during the three months ended March 31, 2026 and 2025.

future amortization expense as of March 31, 2026 is as follows:

assets consist primarily of intellectual property acquired in the Strategic Transaction, which was recorded at an acquisition-date fair

value of $ 2.7 million and is being amortized on a straight-line basis over an estimated useful life of 18 years.

Internal use software

is amortized over three years .

expense was negligible and $ 0.1 million for the three and six months ended June 30, 2026, respectively, and negligible for the three and six months

ended June 30, 2025.

Amortization expense is recorded in the condensed consolidated statements of operations within cost of revenues

or selling, general and administrative expense depending on the nature and use of the underlying intangible asset.

No impairment losses

were recognized for intangible assets during the three and six months ended June 30, 2026 and 2025.

future amortization expense as of June 30, 2026 is as follows:

Schedule of Estimated Future Amortization Expense

Year (in thousands)

Remainder of 2026

(in thousands)

– December 2026

Accrued Expenses and Other Current Liabilities

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Professional fees

Patent remediation expense

Patent remediation expense (See Note 17.

Commitments and Contingencies – Legal Proceedings)

Research and development

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Notes (the “Notes”) pursuant to a Securities Purchase Agreement entered into on November 21, 2024 with its principal stockholders.

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

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

a quarterly basis.

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There were no events

of default at March 31, 2026.

of default at June 30, 2026.

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

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connection with the issuance of the Notes, the Company incurred $ 0.2 million of debt issuance costs, consisting of legal fees.

the three months ended March 31, 2026, the Company recognized interest expense of approximately $ 0.1

million and minimal discount amortization.

As of March 31, 2026 and December 31, 2025, the outstanding balance of the Notes was

million and $ 4.6 million,

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

May 11, 2026, one of the Note holders exercised its right to convert its $ 0.2 million aggregate principal amount of Notes, together with

a negligible amount of accrued PIK interest, into 296,505 shares of the Company’s common stock at the conversion price of $ 0.78

The carrying value of the converted Notes, net of allocable unamortized debt issuance costs, was reclassified to stockholders’

equity, and no gain or loss was recognized on the conversion in accordance with ASC 470.

No other conversions have occurred since issuance.

the three and six months ended June 30, 2026, the Company recognized interest expense of $ 0.1

million and $ 0.2

million, respectively, and minimal discount amortization.

During the three and six months ended June 30, 2025 the Company recognized

interest expense of $ 0.1 million and $ 0.2 million, respectively, and minimal discount amortization.

As of June 30, 2026

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

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

Related Party Transactions

consider 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.

supplier of Ameluz ® and the RhodoLED ® Lamps, and following the Strategic Transaction, it holds all 3,019

shares of our Series D Preferred Stock.

and Supply Agreement

the Second Amended and Restated License and Supply Agreement (“Second A&R Ameluz LSA”), which was applicable for any

tubes purchased through May 31, 2025, the Company had an exclusive, non-transferable license to market and sell its previously

licensed products, Ameluz and RhodoLED Lamps, in the United States and was required to purchase the previously

tubes purchased through May 31, 2025, the Company had an exclusive, non-transferable license to market and sell its previously licensed

products, Ameluz ® and RhodoLED ® Lamps, in the United States and was required to purchase the previously

licensed products exclusively from Biofrontera Pharma GmbH (the “Former Ameluz Licensor”).

Pursuant to the Second

A&R Ameluz LSA, the price paid was set at twenty-five percent of the anticipated net selling price per unit through 2025 (the

“Transfer Price”) that covered the cost of goods, royalties on sales, and services, including all regulatory efforts,

agency fees, pharmacovigilance, and patent administration.

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.

Pursuant to the Second A&R

Ameluz LSA, the price paid was set at twenty-five percent of the anticipated net selling price per unit through 2025 (the “Transfer

Price”), which covered the cost of goods, royalties on sales, and services, including all regulatory efforts, agency fees, pharmacovigilance,

and patent administration.

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

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

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Transaction with Biofrontera Group

The Company entered into the Strategic Transaction

on October 20, 2025.

Company entered into the Strategic Transaction on October 20, 2025.

Organization and Business Overview for more information.

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.

The earnout replaces a transfer pricing model under the now terminated

Second A&R Ameluz LSA.

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

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.

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 ® .

The earnout replaces a transfer pricing model under the now terminated Second A&R Ameluz LSA.

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.

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

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are disclosed in Note 17.

Commitments and Contingencies – Legal Claims.

Commitments and Contingencies – Legal Proceedings.

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

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Due and Payable

due and payable to Biofrontera Group as of March 31, 2026 and December 31, 2025 were $ 1.3 million and $ 4.8 million, respectively, and

were recorded in accounts payable, related parties and when applicable, net of accounts receivable, in the condensed consolidated balance

Amounts due from the Biofrontera Group as of March 31, 2026 and December 31, 2025 were $ 0.7 million and $ 0.7 million, respectively,

and recorded as other assets, related party.

due and payable to the Biofrontera Group as of June 30, 2026 and December 31, 2025 were $ 1.0 million and $ 4.8 million, respectively,

and were recorded in accounts payable, related parties and when applicable, net of accounts receivable, in the condensed consolidated

balance sheets.

Amounts due from the Biofrontera Group as of June 30, 2026 and December 31, 2025 were $ 0.2 million and $ 0.7 million,

respectively, and recorded as other assets, related party.

from the Biofrontera Group of the previously licensed products (inclusive of estimated and actual purchase price adjustments) were $ 0.4

million and $ 3.0 million during the three months ended March 31, 2026 and 2025, respectively.

These purchases were recorded in inventories

in the condensed consolidated balance sheets, and, when sold, in cost of revenues, related party in the condensed consolidated statements

million and $ 0.8 million during the three and six months ended June 30, 2026, respectively.

There were no inventory purchases from the

Biofrontera Group for the three months ended June 30, 2025 and purchases of $ 3.0 million were made during the six months

ended June 30, 2025.

These purchases were recorded in inventories in the condensed consolidated balance sheets, and, when sold, in cost

of revenues, related party in the condensed consolidated statements of operations.

the three and six months ended June 30, 2026, the Company expensed $ 1.4 million and $ 2.6 million, respectively, in earnouts in connection

with the Strategic Transaction.

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

of operations.

the three months ended March 31, 2026, the Company expensed $ 1.2 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 condensed

consolidated statements of operations.

There were no earnout payments for the three months ended March 31, 2025.

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

Debt-Convertible

Notes Payable .

As of March 31, 2026 and December 31, 2025, the outstanding balance of the Notes was $ 4.7 million and $ 4.6 million,

respectively.

There were no earnout payments for the three and six months ended June 30, 2025.

November 2024, the Company issued $ 4.2 million in aggregate principal amount of Notes to certain stockholders.

For each of the periods

ended June 30, 2026 and December 31, 2025, the outstanding balance of the Notes was $ 4.6 million, including PIK interest.

Debt-Convertible Notes Payable .

Stockholders’ Equity

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

The rights and preferences of the Company’s common stock and preferred stock are described in Note 17 of the Company’s 2025 Form 10-K and are unchanged as of March 31, 2026.

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

The rights and preferences of the Company’s common stock and preferred stock are described in Note 17.

Stockholders’ Equity , to our consolidated financial statements included in Item 8.

Financial Statements and

Supplementary Data of the Company’s 2025 Form 10-K and are unchanged as of June 30, 2026.

holders of common stock are entitled to one vote for each share held.

The Company has not declared any dividends since inception.

During the three months ended March 31, 2026, the Company issued 225,000

shares of common stock upon the vesting and release of restricted stock units (“RSUs”) under the 2021 Omnibus Incentive

Plan (“2021 Plan”) (see Note 14.

the six months ended June 30, 2026, the Company issued 225,000

shares of common stock upon the vesting of restricted stock units (“RSUs”) under the 2021 Omnibus Incentive Plan

(“2021 Plan”) (see Note 15.

Equity Incentive Plans and Share-Based Payments ).

No shares of common stock were

issued during the three months ended March 31, 2026 upon the conversion of any series of preferred stock, the exercise of any

warrants, or the conversion of any convertible debt.

of March 31, 2026, the Company had outstanding warrants to purchase an aggregate of 2,269,356 shares of common stock with an exercise

issued for RSUs during the three months ended June 30, 2026.

the three months ended June 30, 2026, the Company issued an aggregate of 2,332,803

shares of common stock in connection with conversions of outstanding securities, consisting of

(i) 282,600 shares issued upon the conversion of 200 shares of Series B-2 Convertible Preferred Stock, par value $0.001 per share

(the “Series B-2 Preferred Stock”) at a conversion ratio of 1,413-to-one, (ii) 134,235 shares issued upon the conversion

of 95 shares of Series B-3 Convertible Preferred Stock, par value $0.001 per share (the “Series B-3 Preferred Stock”) at

a conversion ratio of 1,413-to-one, (iii) 1,619,463 shares issued upon the conversion of 1,012 shares of Series C Convertible

Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) at a conversion ratio of 1,600.26-to-one,

and (iv) 296,505

shares issued upon the conversion of $231,274 aggregate principal amount and accrued PIK interest of the Company’s Notes

(consisting of $200,000 of principal and $31,274 of accrued PIK interest) at a conversion price of $ 0.78

No shares of common stock were issued upon the exercise of warrants during the three or six months ended June 30,

of June 30, 2026, the Company 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 and expiration dates ranging from November 2026 to November 2028.

No warrants were issued,

exercised, expired, forfeited or otherwise modified during the three months ended March 31, 2026.

The Company’s outstanding warrants

as of March 31, 2026 were as follows:

exercised, expired, forfeited or otherwise modified during the three or six months ended June 30, 2026.

The Company’s outstanding

warrants as of June 30, 2026 were as follows:

Schedule of Warrants Outstanding

Exercise Price

Liability classified (See Note 3.

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liability-classified warrants are remeasured to fair value at each reporting date, with changes in fair value recognized in the condensed

consolidated statement of operations.

Fair Value Measurements for the change in fair value recognized during the three

months ended March 31, 2026.

There were no changes in any series of preferred stock during the three

months ended March 31, 2026.

Shares of preferred stock issued and outstanding at March 31, 2026 and December 31, 2025 were as follows:

consolidated statements of operations.

Fair Value Measurements for the change in fair value recognized during the

six months ended June 30, 2026.

the three months ended June 30, 2026, 200 shares of Series B-2 Preferred Stock, 95 shares of Series B-3 Preferred Stock and 1,012 shares

of Series C Preferred Stock were converted into shares of common stock as described above under Common Stock.

There were no other changes

in any series of preferred stock during the three and six months ended June 30, 2026.

of preferred stock issued and outstanding at June 30, 2026 and December 31, 2025 were as follows:

Schedule of Preferred Stock Issued and Outstanding

December 31, 2025

Series B-2 Convertible Preferred Stock

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Series D Convertible Preferred Stock

series of preferred stock outstanding as of March 31, 2026 are classified as permanent equity on the Company’s condensed consolidated

series of preferred stock outstanding as of June 30, 2026 are classified as permanent equity on the Company’s condensed consolidated

balance sheets.

The Series C Convertible Preferred Stock and Series D Preferred Stock were reclassified from mezzanine equity to permanent

equity following the Company’s September 16, 2025 special meeting of stockholders, in accordance with the limited exception under ASC

The Series C Preferred Stock and Series D Preferred Stock were reclassified from mezzanine equity to permanent equity

following the Company’s September 16, 2025 special meeting of stockholders, in accordance with the limited exception under ASC

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

Notes issued in November 2024, which allow for up to 5,384,615 shares of common stock to be issued upon conversion of principal

plus additional shares for PIK interest, remain outstanding as of March 31, 2026.

No conversions occurred during the three months ended

March 31, 2026.

Debt - Convertible Notes Payable , for additional details.

Notes issued in November 2024 originally allowed for up to 5,384,615 shares

of common stock to be issued upon conversion of principal, plus additional shares issuable upon conversion of accrued PIK interest.

During the three and six months ended June 30, 2026, a portion of the Notes representing $ 0.2

million of aggregate principal amount and accrued

PIK interest was converted into 296,505 shares

of common stock at a conversion price of $ 0.78 per

No other conversions have occurred since issuance.

As of June 30, 2026, the remaining $ 4.0

million of principal was convertible into 5,128,205

shares of common stock, exclusive of additional shares issuable upon conversion of accrued and unpaid PIK interest.

The remaining

unconverted portion of the Notes outstanding as of June 30, 2026, is detailed in Note 12.

Debt – Convertible Notes

Equity Incentive Plans and Share-Based Payments

Omnibus Incentive Plan

2021, the Board adopted, and our stockholders approved, the 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.

March 31, 2026, there were 159,951 shares available for future awards under the amended 2021 Plan.

July 2021, the Board adopted, and our stockholders approved, the 2021 Plan, under which the maximum contractual term for stock

options is 10

In June 2026, our stockholders approved the amendment and restatement of the 2021 Plan,

including to increase the total number of shares of common stock authorized from 3,750,000

to 8,750,000 .

As of June 30, 2026, there were 5,178,852

shares available for future awards under the amended 2021 Plan.

Non-qualified

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requisite service period.

The fair value of stock options is estimated at the time of grant using either a binomial lattice pricing 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.

elects to account for forfeitures as they occur.

assumptions and key inputs used in the BSM model for the stock options granted during the three months ended March 31, 2026 were as follows:

The fair value of stock options is estimated at the time of grant using either a binomial lattice pricing 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.

assumptions and key inputs used in the BSM model for the stock options granted during the six months ended June 30, 2026 were as follows:

exercise price of $ 0.78 to $ 0.90 , risk-free rate of 3.7 % to 3.8 %, volatility of 100 %, a dividend yield of 0.0 % and expected term of 5.27

years to 6 years.

There were no equity grants awarded during the three months ended March 31, 2025.

compensation expense of approximately $ 0.2 million and $ 0.1 million was recorded in selling, general and administrative expenses,

with a negligible amount recorded as research and development on the accompanying condensed consolidated statement of operations, for

the three months ended March 31, 2026 and 2025, respectively.

outstanding and exercisable under the employee share option plan as of March 31, 2026 and a summary of option activity during the three

There were no equity grants awarded during the six months ended June 30, 2025.

compensation expense of $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2026, respectively, and $ 0.1 million

and $ 0.3 million for the three and six months ended June 30, 2025, respectively, was recorded in selling, general and administrative

expenses, with a negligible amount recorded in research and development in the accompanying condensed consolidated statements of operations.

outstanding and exercisable under the employee share option plan as of June 30, 2026 and a summary of option activity during the six

months then ended is presented below.

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Canceled or forfeited

Outstanding at March 31, 2026

Exercisable at March 31, 2026

Outstanding at June 30, 2026

Exercisable at June 30, 2026

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 March 31, 2026.

of March 31, 2026, there was $ 1.1 million of unrecognized compensation cost related to unvested stock options, which is expected to be

recognized over a weighted-average period of approximately 1.53 years.

of the common stock for the options that were in the money at June 30, 2026.

of June 30, 2026, there was $ 0.8

million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a

weighted-average period of 1.30

Compensation (RSUs)

compensation expense was $ 0.1

million for the RSUs for each of the three-month periods ended March 31, 2026 and 2025, and was recorded in selling, general and

administrative expenses in the accompanying condensed consolidated statements of operations.

RSU-related share-based compensation expense of $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2026, respectively,

and $ 0.1 million for both the three and six months ended June 30, 2025 was recorded in selling, general and administrative expenses in

the accompanying condensed consolidated statements of operations.

Schedule of Restricted Stock Units

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Unvested balance at December 31, 2025

Unvested balance at March 31, 2026

of March 31, 2026, there was $ 0.3 million of unrecognized compensation related to unvested RSUs, which is expected to be recognized over

a period of approximately 1.66 years.

Unvested balance at June 30, 2026

of June 30, 2026, there was $ 0.3

million of unrecognized compensation related to unvested RSUs, which is expected to be recognized over a period of 1.41

Net Loss per Share

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Three Months Ended

Six Months Ended

Weighted average common shares outstanding, basic and diluted

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

Three Months Ended

Common stock warrants

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Company also leases office and warehouse space at Hemmelrather Weg 201, 51377 Leverkusen, Germany under an operating lease agreement

commencing on January 1, 2026, with a lease term of 10 years with automatic twelve-month renewal periods thereafter unless

terminated by either party upon twelve months’ prior written notice.

The new lease arrangement resulted in $ 1.3 million of

right-of-use-assets obtained in exchange for new operating lease liabilities.

The lease includes an initial rent-free period of

three months, with the base rent subject to adjustment if the German consumer price index moves by ten percent or more from the

lease commencement date or most recent adjustment.

In connection with the lease, the Company is to provide a security deposit in

the amount of $ 0.1

Company leases vehicles under a master agreement, pursuant to which each vehicle is leased for an initial non-cancelable term of twelve months, and thereafter on a month-to-month

Based on historical retention experience of approximately three years, the vehicles have varying expiration dates through July

lease cost for the three months ended March 31, 2026 and 2025 was $ 0.2 million.

The weighted-average remaining lease term and weighted-average

discount rate for the Company’s operating leases at March 31, 2026 were 6.7 years and 9.9 %, respectively.

lease payments under non-cancelable leases as of March 31, 2026 were as follows (in thousands):

commencing on January 1, 2026, with a lease term of 10 years with automatic twelve-month renewal periods thereafter unless terminated

by either party upon twelve months’ prior written notice.

The Company has not included any of the automatic twelve-month renewal

periods in the lease term used to measure the operating lease liability, as the Company is not reasonably certain to exercise these renewal

options at lease commencement.

The new lease arrangement resulted in $ 1.3 million of right-of-use-assets obtained in exchange for new

operating lease liabilities.

The lease includes an initial rent-free period of three months, with the base rent subject to adjustment

if the German consumer price index moves by ten percent or more from the lease commencement date or most recent adjustment.

In connection

with the lease, the Company provided a security deposit in the amount of $ 0.1 million.

Company leases vehicles under a master agreement, pursuant to which each vehicle is leased for an initial non-cancelable term of twelve

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

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

have varying expiration dates through August 2029.

lease cost was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2026, respectively, and $ 0.2 million and $ 0.4

million for the three and six months ended June 30, 2025, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities

was $ 0.3 million and $ 0.4 million for the six months ended June 30, 2026 and 2025, respectively.

At June 30, 2026, the weighted-average

remaining lease term for the Company’s operating leases was 6.5 years and the weighted-average discount rate was 9.9 %.

lease payments under non-cancelable leases as of June 30, 2026 were as follows (in thousands):

Schedule of Future Commitments and Sublease Income

Years ending March 31,

April – December 2026

Years ending December 31,

July – December 2026

Total future minimum lease payments

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Sales or Minimum Order

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

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

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

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

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

Among other things, the Supply Agreement provides that Midas will supply Discovery or its contract

manufacturers, in the aggregate, 100 kg of the active pharmaceutical ingredient (“API”) 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) month 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.

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”).

The Company is on track to meet the annual Minimum Order Amount by the end of the year.

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 Discovery or its contract manufacturers, in the aggregate, 100

kg of the active pharmaceutical ingredient (“API”) 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) month 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.

Agreement with Optical Tools

December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”),

Stephen Tobin and Paul Sowyrda (the “OT Agreement”).

The OT 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.

Company paid a licensing fee of $ 0.2

million which was expensed during the year ended December 31, 2022.

December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen

Tobin and Paul Sowyrda (the “OT Agreement”).

The OT Agreement allowed for the transfer of the assigned patents and trademarks,

and upon notification by the Company to Optical Tools, the research and development of certain prototypes.

The Company paid a licensing

fee of $ 0.2 million which was expensed during the year ended December 31, 2022.

May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy

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out-of-pocket, material and labor costs per the OT Agreement.

part of the OT 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 the OT Agreement.

Company did not make any milestone or royalty payments or accruals for such payments during the three months ended March 31, 2026 or

part of the OT 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 the OT Agreement.

Company did not make any milestone or royalty payments or accruals for such payments during the three and six months ended June 30,

2026 or 2025.

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 ASC Topic 450, Contingencies .

The Company expenses as incurred the legal costs related

to such legal proceedings.

estimable under the provisions of ASC 450, Contingencies .

The Company expenses as incurred the legal costs related to such

legal proceedings.

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

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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 2024, Biofrontera filed a partial motion to dismiss the Lanham

Act and Massachusetts statutory claims, which was denied on October 15, 2024.

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 2024, Biofrontera 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

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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 (individually, the “‘028 Patent” and the “‘512 Patent”,

and collectively 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 and any subsequent appeals.

In the Commission proceeding, 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 infringed, and that importation of

Biofrontera’s RhodoLED XL violates Section 337 of the Tariff Act of 1930.

Following review by the Commission (during which

time the ID had no immediate effect), on May 6, 2026, the Commission adopted the ID in its Final Determination (“FD”)

and issued a Limited Exclusion Order (“LEO”) and corresponding cease and desist order (“CDO”), prohibiting

the Company from importing and/or selling the RhodoLED-XL in the United States and restricting the Company from selling Ameluz for

use with the RhodoLED-XL.

The LEO and CDO are both subject to a 60-day Presidential Review period (which concludes on

July 6, 2026), during which time the Company may continue to import and sell the RhodoLED XL (and Ameluz for use with the RhodoLED-XL).

Following the Presidential Review period, the Company may appeal the Commission’s determination to the U.S.

Court”) and the Commission, both alleging that the RhodoLED ® XL infringes either/both of two patents held

by SUN (individually, the “‘028 Patent” and the “‘512 Patent,” and collectively the “SUN

The complaint filed in the Massaschusetts District Court has been held in abeyance

pending the completion of the investigation before the Commission and any subsequent appeals.

the Commission proceeding, 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

infringed, and that importation of Biofrontera’s RhodoLED ® XL violates Section 337 of the Tariff Act of 1930.

review by the Commission (during which time the ID had no immediate effect), on May 6, 2026, the Commission adopted the ID in its Final

Determination (“FD”) and issued a LEO and corresponding cease and desist order (“CDO”), prohibiting the Company

from importing and/or selling the RhodoLED ® XL in the United States and restricting the Company from importing or selling

Ameluz ® for use with the RhodoLED ® XL.

Importation and sale of Ameluz for use with the BF-RhodoLED is not

The LEO and CDO were both subject to a 60-day Presidential Review period that concluded on July 6, 2026, prior to which time

the Company was permitted to continue to import and sell the RhodoLED ® XL (and Ameluz ® for use with the

RhodoLED ® XL) and after which the Company has implemented measures to comply with the CDO and LEO, including but not limited

to ceasing importation and sales of the RhodoLED ® XL (and Ameluz ® for use with the RhodoLED ®

Separately, Biofrontera challenged the validity of the SUN Patents by filing separate petitions for inter partes

review (“IPR”) at the United States Patent Trial and Appeal Board (“PTAB”) for each of the SUN Patents.

filed in relation to the ‘512 Patent was discretionarily denied by the PTAB on July 2, 2025 for administrative reasons.

the IPR filed in relation to the ‘028 Patent was instituted in February 2025, and the PTAB issued a final written decision on February

23, 2026 (the “FWD”) finding all challenged claims in the ‘028 Patent to be unpatentable.

On March 25, 2026, SUN requested

that the Director of the United States Patent and Trademark Office (“USPTO”) review the FWD and either reverse and vacate

the PTAB’s FWD, or vacate the PTAB’s FWD and de-institute the IPR, which the Company opposed.

On July 29, 2026, the USPTO

Director granted SUN’s request, vacating the PTAB’s FWD and dismissing the IPR concerning the ‘028 Patent.

Company may appeal both the Commission’s determination and the USPTO Director’s decision to the U.S.

Court of Appeals

for the Federal Circuit.

The Company evaluated this matter

in accordance with ASC 450-20, Loss Contingencies, and concluded that a loss is probable and reasonably estimable as of the balance sheet

The FD was treated as a recognized subsequent event under ASC 855-10-25-1.

The total estimated remediation cost of approximately

$ 0.5 million, representing management’s best estimate within a range of approximately $ 0.4 million to $ 0.6 million, has been recognized

as a $ 0.4 million charge to operating expenses within patent remediation expense and a $ 0.1 million charge to cost of revenues, other

on the condensed consolidated statements of operations for the three months ended March 31, 2026, offset with an inventory write-down

of approximately $ 0.1 million, presented as a reduction of inventories on the condensed consolidated balance sheets, in accordance with

ASC 330-10-35;

and an accrued remediation liability of approximately $ 0.4 million, presented within accrued expenses and other current

liabilities on the condensed consolidated balance sheets.

Separately, Biofrontera has challenged the validity

of the SUN Patents by filing separate petitions for inter partes review (“IPR”) at the United States Patent Trial and Appeal

Board (“PTAB”) for each of the SUN Patents.

The IPR filed in relation to the ‘512 Patent was discretionarily denied

by the PTAB on July 2, 2025 on administrative reasons.

However, the IPR filed in relation to the ‘028 Patent was instituted in February

2025, and the PTAB issued a final written decision on February 23, 2026 (the “FWD”) finding all challenged claims in the ‘028

Patent to be unpatentable.

On March 25, 2026, SUN requested that the Director of the United States Patent and Trademark Office (“USPTO”)

to review the FWD and either reverse and vacate the PTAB’s FWD, or vacate the PTAB’s FWD and de-institute the IPR.

Company has opposed Sun’s Director Review request, and maintains that the Director should affirm the PTAB’s decision.

This request is currently pending before the USPTO Director.

The Company denies SUN’s patent claims and intends

to defend them vigorously in the above-referenced matters.

Based on the Company’s assessment of the facts underlying the above-referenced

patent matters, as well as the uncertainty of litigation, except as stated above, 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.

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.

In addition, on June 4, 2026, the Company submitted a ruling request to U.S.

Customs and Border Protection regarding a redesigned version of the RhodoLED ® XL that the Company contends falls outside the purview

of the LEO and CDO.

No ruling has been issued and a response is expected in September or October 2026.

Company evaluated this matter and concluded that a loss is probable and reasonably estimable as of the balance sheet date.

total estimated remediation cost of $ 0.5 million, representing management’s best estimate within a range of $ 0.4 million to $ 0.6 million, has been recognized as a $ 0.4 million charge to operating expenses within patent remediation expense and

a $ 0.1 million charge to cost of revenues, other on the condensed consolidated statements of operations for the six months

ended June 30, 2026, offset with an inventory write-down of $ 0.1 million, presented as a reduction of inventories on the

condensed consolidated balance sheets, in accordance with ASC 330-10-35;

and an accrued remediation liability of $ 0.4 million,

presented within accrued expenses and other current liabilities on the condensed consolidated balance sheets.

The Company continues to deny SUN's infringement allegations and disagrees with the Commission's Final Determination.

The Company is complying, and intends to continue to comply, with the LEO and CDO for so long as they remain in effect.

While there can

be no assurance that any appeal will be successful or that the orders will be modified, rescinded, or stayed, the Company intends to continue

to defend the remaining above-referenced matters vigorously.

on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as the uncertainty of

litigation, except as stated above, 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 based on the ruling by the Commission or any related appeals.

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.

Segment Reporting

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.

currently selling Ameluz for this indication in the United States.

Ameluz (including the RhodoLED Lamps) accounts for substantially

all of our revenue .

Company’s chief operating decision maker (“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.

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

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

Ameluz ® (including the

RhodoLED ® Lamps) accounts for substantially all of our revenue.

Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information

presented on a consolidated basis.

The CODM uses consolidated net loss to allocate resources and assesses financial performance by

comparing actual results to historical results and previously forecasted financial information.

following table presents selected financial information with respect to the Company’s single operating segment :

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Three Months Ended

Six Months Ended

(in thousands)

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Manufacturing related

Regulatory and product affairs

Patent remediation expense

Research and development

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Loss before income taxes

Income tax benefit

Income tax expense

Subsequent Events

We have completed an evaluation of subsequent events after the balance sheet

date of March 31, 2026 through the date this Quarterly Report on Form 10-Q was submitted to the Securities and Exchange Commission and

determined that the following material subsequent event required disclosure.

On May 6, 2026, the Commission issued a Notice

of Final Determination finding a violation of Section 337 with respect to certain of the Company’s PDT components.

The Commission issued

a LEO and CDO in connection with that determination.

The Company has accounted for this matter as a recognized subsequent event under

ASC 855-10-25 and has reflected an accrued liability and corresponding charge of approximately $ 0.5 million in its condensed consolidated

balance sheet as of March 31, 2026 and its condensed consolidated statements of operations for the three months then ended, respectively.

Commitments and Contingencies for additional information, including regarding the Company’s accounting analysis, the components

of the estimated remediation cost, and the range of reasonably possible losses.

On December 31, 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) (the “Minimum Bid Price Requirement”) as the closing bid

price of the Common Stock was less than $ 1.00 per

share for the previous 34 consecutive business days.

The notice had no impact on the listing or trading of the Company’s securities

Under Nasdaq Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days, or until June 30, 2026, to regain

compliance with the rule referred to in this paragraph.

On May 6, 2026, we received written notification from Nasdaq, with confirmation

that for the last 10 consecutive business days, from April 22, 2026 to May 6, 2026, the closing bid price of the Company’s Common

Stock had been at $ 1.00 per

share or greater.

Accordingly, the Company 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.

Common Share Conversions .

to March 31, 2026 and through the date these condensed consolidated financial statements were issued, the Company issued an aggregate

of 930,021 shares of its common stock in connection with conversions of outstanding securities, consisting of (i) 134,235 shares issued upon the conversion of 95 shares of Series B-3 Convertible Preferred Stock at a conversion ratio of 1,413-to-one, (ii) 499,281 shares

issued upon the conversion of 312 shares of Series C Convertible Preferred Stock at a conversion ratio of 1,600.26-to-one, and (iii) 296,505 shares issued upon the conversion of $ 231,274 aggregate principal amount and accrued payment-in-kind

interest of the Company’s Notes at a conversion price of $ 0.78 per share.

have completed an evaluation of subsequent events after the balance sheet date of June 30, 2026 through the date this Quarterly Report

on Form 10-Q was submitted to the Securities and Exchange Commission and identified the following material subsequent event.

On July 8, 2026 391 shares of Series B-2 Convertible Preferred Stock were converted into 552,483 shares of the Company's

common stock, at the 1,413-to-one conversion ratio described in Note 13.

Stockholders' Equity .

The conversion did not involve the payment or receipt of cash, and no gain or loss was recognized.

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 1. Financial Statements