What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-05-14 · 345 added, 242 removed, 196 unchanged (75% 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 quarter of 2026 compares with prior-year periods.

performance and financial condition, and how our performance during the second 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.

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

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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.

the trademarks and trade names in this Form 10-Q may be 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 law.

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

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:

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:

ability to achieve and sustain profitability;

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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

and security holders to read those documents free of charge at the SEC’s web site at www.sec.gov.

We do not undertake to publicly

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

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

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.”

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 and security holders to read those documents free of charge at the SEC’s web site

at www.sec.gov.

We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future

events or otherwise, except as required by law.

is a United States-based biopharmaceutical company engaging in the development, manufacturing, and commercialization of pharmaceutical

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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.

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.

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 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.

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.

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 and six months ended June 30, 2026 reflect

this revised cost structure, while the results of operations for the three and six months ended June 30, 2025 reflect the prior transfer-pricing

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.

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.

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 “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

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

standards in the future.

Summary of Significant Accounting Policies – The Nasdaq Stock Market, LLC Compliance

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

On May 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.

Patent Trial and Appeal Board.

Commitments and Contingencies for additional information

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

The key elements

of our strategy include the following:

The key elements of

our strategy include the following:

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

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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

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;

strategically

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.

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”;

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.

devote a substantial portion of our cash resources to the commercialization of Ameluz ® and the RhodoLED ®

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 (“Adjusted 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.

is sales of Ameluz ® and the 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

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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.

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:

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of Revenues, Related Party

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, related party, relating to inventory purchased from the Biofrontera Group 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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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.

Master Contract Services Agreement entered into in December 2021.

Remediation Expense

estimated remediation cost with respect to the ITC Matter 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.

Commitments and Contingencies for additional

information regarding the ITC Matter.

and Development

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 R&D are expensed as incurred.

conduct all clinical trials for Ameluz ® in the United States through Biofrontera Discovery GmbH, 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 R&D are expensed

in Fair Value of Warrant Liabilities

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of Operations

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:

of the Three Months Ended June 30, 2026 and 2025

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

( in thousands)

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Selling, general and administrative, related party

Research and development

Total operating expenses

Loss from operations

Other income (expense):

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Interest expense, net

Other income (expense), net

Total other income (expense)

Loss before income taxes

Income tax expense

Revenues, net

product revenue for the three months ended June 30, 2026 was $12.0 million, an increase of $3.0 million, or 32.9%, compared to the three

months ended June 30, 2025.

The increase was primarily attributable to higher Ameluz ® net sales, reflecting $2.6 million

or 30.0% growth in unit volume.

Of the $2.6 million volume-driven revenue increase, approximately $1.9 million is attributable to accelerated

order timing from certain customer accounts in anticipation of supply restrictions resulting from the ITC Matter, with the remainder

reflecting improved sales execution and strategic sales team management.

Additionally, a price increase implemented in the fourth quarter

of 2025 contributed $0.3 million revenue increase.

of Revenues, Related Party

of revenues, related party for the three months ended June 30, 2026 was $2.2 million, a decrease of $0.2 million, or 8.2%, compared to

the three months ended June 30, 2025.

The decrease was primarily driven by a reduction in the purchase price of Ameluz ®

resulting from the Strategic Transaction, which transitioned the Company 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 net revenue.

General and Administrative Expenses

general and administrative expenses for the three months ended June 30, 2026 were $9.6 million, compared to $10.5 million for the three

months ended June 30, 2025.

The decrease of $0.9 million was primarily driven by a $2.1 million reduction in general and administrative

expenses, mainly from lower litigation-related legal fees as legal activity levels that peaked in the three months ended June 30, 2025

did not recur.

This was partially offset by planned increases in direct sales of $0.4 million and sales support of $0.2 million, reflecting

the Company’s continued investment in its commercial operations to support the 30% growth in Ameluz ® sales volume

achieved in the three months ended June 30, 2026, compared to the three months ended June 30, 2025, as well as $0.5 million of costs

from manufacturing, regulatory and product affairs, activities that were new in 2026.

and Development Expense

and development expenses for the three months ended June 30, 2026 were $0.4 million, a decrease of $0.4 million compared to the

three months ended June 30, 2025.

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.

In connection

with the winding-down of our moderate to severe acne clinical trial, we reversed previously recorded accruals during the three

months ended June 30, 2026, reflecting actual costs incurred upon substantial completion of the trial that were lower than

previously estimated.

This reversal is reflected as a credit within the moderate to severe acne category in the table

following table summarizes the major categories of our R&D expenses for the three months ended June 30:

(in thousands)

Actinic keratosis

Moderate to severe acne

Superficial basal cell carcinoma

Personnel-related costs

Other research and development

of the Six Months ended June 30, 2026 and 2025

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

Patent remediation expense

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Change in fair value of warrant liabilities

Change in fair value of investment, related party

Interest expense, net

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Loss before income taxes

Income tax benefit

Income tax expense

Revenues, net

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.

product revenue for the six months ended June 30, 2026 was $22.1 million, an increase of $4.5 million, or 25.4%, compared to the six

months ended June 30, 2025.

The increase was primarily attributable to higher Ameluz ® net sales, driven by growth in unit

volume reflecting improved sales execution and strategic sales team management contributing approximately $2.1 million to revenue growth,

as well as accelerated order timing from certain customer accounts in anticipation of supply restrictions resulting from the ITC Matter

contributing approximately $1.9 million to revenue growth.

Additionally, a higher average effective selling price following a list price

adjustment implemented in the fourth quarter of 2025 contributed $0.4 million to revenue growth.

of Revenues, Related Party

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.

of revenues, related party for the six months ended June 30, 2026 was $4.0 million, a decrease of $1.4 million, or 26.4%, compared to

the six months ended June 30, 2025.

The decrease was primarily driven by a reduction in the Ameluz ® unit cost of $3.8

million resulting from the Strategic Transaction, as explained above.

This decrease was partially offset by $2.6 million of earnout expense

recognized under the royalty arrangement effective in the second half of 2025, with no comparable charge in the prior year period.

General and Administrative Expenses

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.

general and administrative expenses for the six months ended June 30, 2026 were $20.6 million, an increase of $1.4 million, or 7.5%,

compared to the six months ended June 30, 2025.

The increase was primarily driven by $0.7 million of higher direct sales expenses and

$0.6 million of higher sales support expenses, reflecting headcount growth and increased commercial activity in support of Ameluz ®

sales volume growth, as well as $1.1 million of combined costs from manufacturing and regulatory and product affairs.

These increases

were partially offset by a $1.3 million decrease in general and administrative expenses, driven by lower litigation-related legal fees.

Remediation Expense

the six months ended June 30, 2026, we recognized a total charge of $0.5 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 $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 $0.4 million for the future cost activities charged to patent remediation expense.

expect to incur the cash component of these costs over the twelve months following the 60-day Presidential Review period, which concluded

on July 6, 2026, as remediation activities are executed.

In addition, the remediation is expected to result in a small, 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:

and development expenses for the six months ended June 30, 2026 were $1.3 million, a decrease of $0.7 million compared to the six months

ended June 30, 2025.

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 six months ended June 30:

(in thousands)

Actinic keratosis

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in Fair Value of Warrant Liabilities

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

change in fair value of warrant liabilities resulted in a loss of $0.2 million for the six months ended June 30, 2026, compared to a

gain of $0.7 million for the six months ended June 30, 2025.

The loss recognized during the six months ended June 30, 2026 was primarily

attributable to the increase in our stock price at June 30, 2026 as compared to the stock price on December 31, 2025, which increased

the fair value of the warrant liabilities.

gain recognized during the six months ended June 30, 2025 was primarily attributable to the decrease in our stock price at June 30, 2025

as compared to the stock price on December 31, 2024, which decreased the fair value of the warrant liabilities.

Loss to Adjusted EBITDA Reconciliation for the Three and Six Months Ended June 30, 2026 and 2025

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

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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

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.

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 :

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The warrant liabilities are measured at fair value at inception

and on a recurring basis, with changes in fair value presented within the consolidated statement of operations.

and on a recurring basis, with changes in fair value presented within the consolidated statements of operations.

We exclude the impact

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 statements 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 statements of operations.

We exclude the impact of the realized and unrealized change in fair value of investments as

this is non-cash.

Compensation :

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on the timing, size and nature of awards granted.

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.

Remediation Expense :

During the six months ended June 30, 2026, we recognized a total charge of $0.5 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 $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 $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.

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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 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 months ended March 31, 2026 and 2025:

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

below table presents a reconciliation from net loss to Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025:

Three Months Ended

Six Months Ended

Interest expense, net

Income tax benefit

Income tax expense

Depreciation and amortization

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Patent remediation – inventory write-down

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Adjusted EBITDA margin

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.

EBITDA increased from ($5.1) million for the three months ended June 30, 2025 to ($0.2) million for the three months ended June 30, 2026,

an improvement of $5.0 million.

The improvement was primarily driven by a $3.2 million increase in gross profit, reflecting significantly

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

The decrease of $0.9 million in selling, general

and administrative expenses and decrease of $0.4 million in research and development cost further increased adjusted EBITDA.

the section above entitled “Selling, General and Administrative Expenses” for additional details.

EBITDA increased from ($9.5) million for the six months ended June 30, 2025 to ($3.7) million for the six months ended June 30, 2026,

an improvement of $5.8 million.

The improvement was primarily driven by a $5.9 million increase in gross profit, reflecting higher Ameluz ®

unit volume and a lower cost structure as described above.

and Capital Resources

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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.

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 March 31, 2026, we had cash and cash

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.

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.

As discussed in Note 17.

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

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, 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.

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

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,

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:

Three Months Ended

Six Months Ended

(in thousands)

Net cash used in operating activities

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.

Net cash provided by (used) in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and restricted cash

the six months ended June 30, 2026, operating activities used $1.7 million of cash, primarily resulting from our loss from operations

of $5.4 million, adjusted for net cash used by changes in our operating assets and liabilities of $2.2 million, non-cash expense of stock-based

compensation of $0.6 million, reduction of right-of-use assets of $0.3 million, non-cash interest expense of $0.3 million, change in

warrant valuation of $0.2 million, and depreciation and amortization in the aggregate of $0.1 million.

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

of $9.5 million, adjusted for non-cash expense of stock-based compensation of $0.4 million, depreciation and amortization in the aggregate

of $0.4 million, non-cash interest expense of $0.2 million, and net cash used by changes in our operating assets and liabilities of $2.0

million, partially offset by the change in fair value of warrant liabilities of $0.7 million.

the six months ended June 30, 2026 and 2025, net cash used in investing activities consisted of negligible fixed asset purchases.

were no financing activities during the six months ended June 30, 2026.

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

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

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

Stockholders’ Equity , for additional details.

Policies and Significant Judgments and Estimates

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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

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.

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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

Summary of Significant Accounting Policies , to our consolidated

financial statements included in Item 8.

Financial Statements and Supplementary Data in the 2025 Form 10-K.

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 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2025 Form 10-K.

There were no material

changes to our critical accounting estimates for the six months ended June 30, 2026, other than as noted below.

Contingency for ITC Matter

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

than those items reflected in Note 17.

Commitments and Contingencies we did not have during the periods presented, and we do not

currently have, any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Commitments and Contingencies , we did not have during the periods presented, and we do

not currently have, any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Growth Company Status

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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