What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2024-11-14 · 690 added, 737 removed, 160 unchanged (90% of the section changed)

Financial Statements

CONSOLIDATED BALANCE SHEETS

thousands, except par value and share amounts )

September 30,

BIOFRONTERA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

( In thousands, except par value and share amounts )

Current assets:

4 unchanged sentences

Prepaid expenses and other current assets

Assets held for sale

Other assets, related party

Asset held for sale

Total current assets

1 unchanged sentence

Operating lease right-of-use assets

Intangible asset, net

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable

Accounts payable, related parties

Accounts payable, related parties, net

Accounts payable

1 unchanged sentence

Accrued expenses and other current liabilities

Short term debt

Total current liabilities

Long-term liabilities:

Convertible notes payable, net

Warrant liabilities

2 unchanged sentences

Total liabilities

Commitments and contingencies (Note 17)

Commitments and contingencies (see Note 16)

Stockholders’ equity:

Series B Convertible Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1, 4,695 Series B-2 and 7,093 Series B-3 shares issued and outstanding as of September 30, 2024 and no shares issued and outstanding as of December 31, 2023

Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, no Series B-1, 3,366 Series B-2 and 6,763 Series B-3 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common Stock, $ 0.001 par value, 35,000,000 shares authorized;

6,529,792 and 1,517,628 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

8,873,932 and 1,517,628 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Additional paid-in capital

2 unchanged sentences

Total liabilities and stockholders’ equity

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

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except per share amounts and number of shares )

Three Months Ended

September 30,

Nine Months Ended

September 30,

The accompanying notes are an integral part of these

condensed consolidated financial statements.

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

( In thousands, except per share amounts and number

Three Months Ended March 31,

Product revenues, net

8 unchanged sentences

Research and development

Change in fair value of contingent consideration

Total operating expenses

1 unchanged sentence

Other income (expense)

Change in fair value of warrants

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Loss on debt extinguishment

Interest income (expense), net

Interest expense, net

Other income (expense), net

Total other expense

Total other income (expense)

Loss before income taxes

4 unchanged sentences

Basic and diluted

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

thousands, except number of shares)

Three and Nine Months Ended September 30, 2024

The accompanying notes are an integral part of these

consolidated financial statements.

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE AND

STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

Three Months Ended March 31, 2025 and 2024

Preferred Stock

Balance, July 1, 2024

$ ( 110,344 )

Conversion of Series B Preferred into Common

Stock based compensation

Balance, September 30, 2024

$ ( 116,013 )

Additional Paid-

Balance, January 1, 2025

Exercise of pre-funded warrants

Conversion of Series B-1 Preferred into Series B-2 Preferred and common stock

Issuance of Series B-3 upon exercise of warrants

Issuance of RSUs

Stock based compensation

Balance, September 30, 2024

$ ( 117,409 )

Three and Nine Months Ended September 30, 2023

Balance, July 1, 2023

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

Stock based compensation

Balance, September 30, 2023

Balance, March 31, 2025

$ ( 121,612 )

Stockholders’ Equity

Preferred Stock

Additional Paid-

Balance, January 1, 2024

Issuance of shares for vested restricted stock units

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

Exercise of pre-funded warrants

Issuance of Series B Preferred Stock and Warrants

Conversion of Series B-1 Preferred into common stock

Stock based compensation

Balance, September 30, 2023

$ ( 103,176 )

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Balance, March 31, 2024

The accompanying notes are an integral part of these

condensed consolidated financial statements.

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Amortization of acquired intangible assets

Realized/unrealized loss in investment, related party

Change in fair value of contingent consideration

Realized/unrealized gain in investment, related party

Change in fair value of warrant liabilities

5 unchanged sentences

Accounts receivable

Other receivables, related party

Prepaid expenses and other assets

Other assets, related party

Accounts payable and related party payables

Accounts payable

Accounts payable, related parties, net

Operating lease liabilities

3 unchanged sentences

Sales of equity investment, related party

Purchase of intangible assets

Purchases of property and equipment

Cash flows provided by (used) in investing activities

Cash flows used in investing activities

Cash flows from financing activities

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

Proceeds from issuance of series B-3 from exercise of warrants

Proceeds from line of credit

Repayment of line of credit

Proceeds from issuance of series B-1 preferred stock and warrants to purchase series B-3 preferred stock in a private placement, net of issuance costs

Payment of principal short-term debt

Payments to extinguish line of credit

Cash flows provided by financing activities

4 unchanged sentences

Interest paid

Interest paid, related party

Income taxes paid, net

Supplemental non-cash financing activities

Conversion of warrant liability to equity

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

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

to Condensed Consolidated Financial Statements

The accompanying notes are an integral part of these

condensed consolidated financial statements.

Biofrontera Inc.

Notes to Condensed Consolidated Financial Statements

Organization and Business Overview

Inc., a Delaware Corporation (the “Company” or “Biofrontera”), is a U.S.-based biopharmaceutical company commercializing

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

and topical antibiotics.

The Company’s licensed products are used for the treatment of actinic keratoses (“AKs”), which

are pre-cancerous skin lesions as well as impetigo, a bacterial skin infection.

Company includes its wholly owned subsidiary, Biofrontera Discovery GmbH (“Discovery”), formerly known as Bio-FRI GmbH, a

limited liability company organized under the laws of Germany, formed on February 9, 2022, as a German presence that manages our clinical

trial work and facilitates our relationship with Biofrontera Pharma GmbH (“Biofrontera Pharma”) and Biofrontera

Bioscience GmbH (“Biofrontera Bioscience,” and, together with Biofrontera Pharma, the “Ameluz Licensor”), both

of which are related parties as they are wholly owned subsidiaries of Biofrontera AG, a company holding more than five percent of the

Company’s common stock.

principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with PDT (when

used together, “Ameluz ® PDT”) using the BF-RhodoLED ® and the RhodoLED ® XL

lamps (the “RhodoLED ® Lamps”).

In the United States, the PDT treatment is used for the lesion-directed

and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.

We are currently selling

Ameluz ® for this indication in the U.S.

under an exclusive license and supply agreement, the Second Amended and

Restated License and Supply Agreement, effective February 13, 2024 (the “Second A&R Ameluz LSA”), with the Ameluz

second prescription drug licensed product is Xepi ® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that

inhibits bacterial growth.

Currently, no antibiotic resistance against Xepi ® is known and it has been specifically

approved by the Food and Drug Administration (the “FDA”) for the treatment of impetigo, a common skin infection, due to

Staphylococcus aureus or Streptococcus pyogenes.

It is approved for use in the United States in adults and children 2 months and

Our exclusive license and supply agreement, as amended (“Xepi LSA”) with Ferrer Internacional S.A.

(“Ferrer”), assumed by the Company on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.

(“Cutanea”), enables the Company to market and sell this product in the United States.

The Company has generated limited

revenue from sales of Xepi due to third-party manufacturing delays that have hampered our commercialization of the product.

is now in the process of qualifying a new contract manufacturer.

If the new contract manufacturer is qualified, we believe that it

will be able to supply enough of the Xepi ® product line to meet market demand for as long as we maintain it.

in the third quarter of 2024, the Company reached the decision to divest its Xepi product line and determined that it met the held

for sale accounting criteria.

The Company has entered into a letter of intent

and expects to complete the sale within the next six to twelve months.

The related intangible asset is presented as held for sale

under current assets in the Condensed Consolidated Balance Sheets.

Assets Held for Sale , for additional

and Going Concern

to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are

conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going

concern for one year from the date the consolidated financial statements are issued.

This evaluation does not take into consideration

the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company

as of the date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether

the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will

be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans,

when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue

as a going concern within one year after the date that the consolidated financial statements are issued.

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

We incurred net cash outflows from operations of $ 9.3

million and $ 16.0

million for the nine months ended September 30, 2024 and 2023, respectively.

The Company had an accumulated deficit as of September

30, 2024 of $ 116.0

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 September 30, 2024, we had cash and cash equivalents of $ 2.9

Biofrontera Inc., a Delaware Corporation (the “Company,”

“we,” “us,” “our,” or “Biofrontera”), is a United States-based biopharmaceutical company

commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy

The Company’s primary licensed products are used for the treatment of actinic keratoses,

which are pre-cancerous skin lesions.

The Company includes its wholly owned subsidiary Biofrontera

Discovery GmbH (“Discovery”), a limited liability company organized under the laws of Germany, formed on February 9, 2022,

as a German presence to facilitate our relationship with Biofrontera Pharma and Biofrontera Bioscience (the “Ameluz Licensor”) and manage our clinical trial work.

Our principal licensed product is Ameluz ® ,

which is a prescription drug approved for use in combination with the RhodoLED ® Lamps, for PDT (when used together, “Ameluz ®

In the United States, the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses

of mild-to-moderate severity on the face and scalp.

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

States under an exclusive license and supply agreement (as amended, the “Second A&R Ameluz LSA”) with Biofrontera Pharma

(“Pharma”) GmbH and Biofrontera Bioscience GmbH (“Biofrontera Bioscience,” and, together with Pharma, the “Ameluz

Licensor”), both of which are related parties.

Liquidity and Going Concern

The accompanying financial statements have been

prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary

course of business.

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

The Company incurred net cash

outflows from operations of $ 4.1 million

and $ 3.3 million

for the three months ended March 31, 2025 and 2024, respectively.

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, 2025, we had cash and cash

equivalents of $ 1.8

million, compared to $ 5.9

million as of December 31, 2024.

As a result of our losses and projected cash needs,

the Company’s management has determined that substantial doubt exists about our ability to continue as a going concern for at least

twelve months from the issuance date of these financial statements.

The Company’s ability to continue as a going concern is contingent

upon successful execution of management’s plans over the next twelve months to improve the Company’s liquidity and

profitability, which includes without limitation:

· Expanding the commercialization of Ameluz ® in the United

States while decreasing discretionary expenses.

· Actively pursuing additional capital through the issuance of equity securities,

debt or the sale of assets.

· Controlling expenses and limiting capital expenditures.

· Realizing the benefit of the reduced cost of inventory in line with the

terms of the Second A&R Ameluz LSA.

believes that the implementation of such plans will provide the opportunity for the Company to continue as a going concern.

no assurance can be given that the Company will be successful in these efforts and the substantial doubt will be alleviated.

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

satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to

the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result

from the outcome of the uncertainties described above.

The current cash and liquidity projections are not

adequate to continue operating and maintaining the business strategy for a period of twelve months from the issuance date of this

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 report.

Management’s plans to mitigate

the conditions that raise substantial doubt about the Company’s ability to continue as a going concern include expanding

the commercialization of Ameluz ® in the United States while controlling expenses and limiting capital expenditures,

as well as capitalizing on the reduced cost of inventory in line with the terms of the Second A&R Ameluz LSA.

The Company also plans

to secure additional capital through equity or debt financings, or the sale of assets to carry out the Company’s planned commercial

and development activities.

However, there can be no assurance that the Company will be successful in executing the aforementioned commercial

strategies and/or obtaining sufficient funding on acceptable terms, if at all, and that the substantial doubt will be alleviated.

Company is unable to raise capital when needed, it will not have sufficient cash resources and liquidity to fund its business operations

and may be forced to delay or reduce continued commercialization efforts or R&D programs which could have a material adverse effect

on the Company and its financial statements.

The accompanying financial statements have been

prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary

course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of

recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties

described above.

Such adjustments may be necessary should the Company be unable to continue as a going concern.

Summary of Significant Accounting Policies

for Preparation of the Financial Statements

accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and

regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information and footnote

disclosures normally included in the annual financial statements prepared in accordance with U.S.

generally accepted accounting principles

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 September 30, 2024, the Company’s operating results for

the three and nine months ended September 30, 2024 and 2023, and the Company’s cash flows for the nine months ended September 30,

2024 and 2023.

The accompanying financial information as of December 31, 2023 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 Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March

Company has one reportable segment.

All amounts shown in these financial statements and tables are in thousands and amounts in the

notes are in millions, except percentages and per share and share amounts.

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 Form 10-K for the year ended December 31, 2023.

Held for Sale

Company generally considers assets to be held for sale when the following criteria are met:

(i) management commits to a plan to sell

the assets, (ii) the assets are available for sale immediately, (iii) management has initiated an active program to locate a buyer

or buyers and other actions required to complete the plan to sell the assets, (iv) the sale of the assets within one year is

considered probable, (v) the assets are actively being marketed for sale at a price that is reasonable in relation to their current fair

value and (vi) significant changes to the plan to sell are not expected.

Assets classified as held for sale are no longer depreciated

and are reported at the lower of their carrying value or fair value less estimated costs to sell in accordance with ASC

360, Property, Plant and Equipment-Impairment or Disposal of Long-Lived Assets.

and Development Costs

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

expenses, the cost of services provided by outside contractors, including services related to the Company’s clinical trials, facilities,

depreciation, and other direct and allocated expenses.

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

trial costs are a significant component of our research and development expenses and include costs associated with third-party contractors.

The Company outsources a substantial portion of its clinical trial activities, utilizing external entities such as Clinical Research

Organizations, independent clinical investigators, and other third-party service providers to assist the Company

with the execution of its clinical trials.

We record accruals for estimated costs under these contracts.

When evaluating the adequacy

of the accrued liabilities, we analyze the progress of the studies or clinical trials, including the phase or completion of events, invoices

received, contracted costs and purchase orders.

Significant judgments and estimates are made in determining the accrued balances at the

end of any reporting period based on the facts and circumstances known at that time.

Although we do not expect the estimates to be materially

different from the amounts actually incurred, if the estimates of the status and timing of services performed differs from the actual

status and timing of services performed, we may report amounts that are too high or too low in any particular period.

Actual results

could differ from our estimates.

If actual results in the future vary from the Company’s estimates, the Company will adjust these

estimates and record any necessary adjustments in the period such variances become known.

Payments made under these arrangements in advance of the receipt of the

related services are recorded as prepaid expenses until the services are rendered.

preparation of the financial statements in accordance with U.S.

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, valuation allowances for receivables and inventory, and warrant liabilities, realization of intangible and other long-lived assets, product sales allowances and

reserves, share-based payments, accrual of research and development expenses and income taxes including deferred tax assets and liabilities.

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.

Issued Accounting Pronouncements

November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures .

This standard update requires additional

interim and annual disclosures about a reportable segment’s expenses, even for companies with only one reportable segment.

Company is required to adopt the guidance for its 2024 annual report filed on Form 10-K, though early adoption is permitted.

is currently evaluating the impact of these amendments on its disclosures, but this standard update will not impact the Company’s

results of operations or financial position.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures .

The ASU requires

that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling

items that meet a quantitative threshold.

Further, the ASU requires certain disclosures of state versus federal income tax expense and

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption

is permitted and the amendments should be applied on a prospective basis.

We are currently evaluating the effect of adopting the ASU

on our disclosures.

Basis for Preparation of the Financial Statements

The accompanying unaudited interim condensed consolidated

financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission

(“SEC”) for interim financial reporting.

Certain information and footnote disclosures normally included in the annual financial

statements prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

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, 2025, the Company’s operating results for the three months ended March 31, 2025 and 2024, and the Company’s

cash flows for the three months ended March 31, 2025 and 2024.

The accompanying financial information as of December 31, 2024 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 Annual Report on Form 10-K for the year ended

December 31, 2024, filed with the SEC on March 20, 2024.

All amounts shown in these financial statements and

tables are in thousands and amounts in the notes are in millions, except percentages and per share and share amounts.

With 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

Form 10-K for the year ended December 31, 2024.

Mezzanine equity

Where ordinary or preferred shares are determined

to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the issuer, and upon such

event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary

The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in

a demand for cash, securities or other assets of the entity in the future.

Reclassification of Prior Year Presentation

Certain prior period amounts have been reclassified

for consistency with the current period presentation.

The reclassification was limited to the condensed consolidated statements of cash

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

Specifically, for prior year presentation, accounts payable-related parties

of $ 1.6 million was reclassed from accounts payable to accounts payable, related party, net along with other receivables, related party

of $ 0.2 million.

Nasdaq Compliance

Nasdaq requires issuers to comply with certain

standards in order to remain listed on its exchange.

The Company’s stockholders’ equity as reported in the accompanying

balance sheet for the period ended March 31, 2025 was $ 0.5

Therefore, the Company is no longer in compliance with the continued listing requirement under Nasdaq Listing

Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2.5 million.

Additionally, as of the date of this Report, the Company did not meet either of the alternative requirements of maintaining a market

value of listed securities of $35 million or achieving a net income from continuing operations of $0.5 million in the most recently

completed fiscal year or in two of the last three most recently completed fiscal years.

As a result, as of the date of this Report,

the Company does not satisfy Nasdaq Listing Rule 5550(b).

Further, the Company is not in compliance with Nasdaq Listing Rule

5550(a)(2) for continued listing on The Nasdaq Capital Market, as further discussed in the Current Report on Form 8-K filed by the

Company with the SEC on May 14, 2025.

The Company is in the process of creating a plan to regain

compliance with the Nasdaq rules.

Use of Estimates

The preparation of the consolidated financial statements

in accordance with United States GAAP requires the use of estimates and assumptions by management that affect the reported amounts of

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

amounts of revenues and expenses arising during the reporting period.

The main areas in which assumptions, estimates and the exercising

of judgment are appropriate relate to realization and valuation of receivables and inventory, valuation of warrant liabilities, impairment

assessment of intangibles and other long-lived assets, share-based payments, 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.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income

Taxes (Topic 740) – Improvements to Income Tax Disclosures .

The ASU requires that an entity disclose specific categories

in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold.

Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid.

amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption is permitted and

the amendments should be applied on a prospective basis.

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

financial statements and related disclosures.

2024, the FASB issued ASU 2024-03, I ncome Statement—Reporting Comprehensive Income—Expense

Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expense .

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

This ASU is effective for public business entities for annual reporting periods beginning after

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

The new standard permits early adoption and can be

applied prospectively or retrospectively.

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

and related disclosures.

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

Induced Conversions of Convertible Debt.

This ASU clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible

debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted

for as an induced conversion.

It is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim

reporting periods within those annual reporting periods.

Early adoption is permitted.

We are currently evaluating the effect that this

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

Fair Value Measurements

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

30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such

The following

table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2025 and

December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Schedule of Fair Value Hierarchy Valuation Inputs

(in thousands)

September 30,

Investment, related party

Warrant liability – 2023 Purchase Warrants

Warrant liability - 2022 Inducement Warrants

Warrant liability - 2022 Purchase Warrants

Warrant liability

Warrant liability – 2022 Inducement Warrants

Total Liabilities

related party

of September 30, 2024 and December 31, 2023, the Company held as an investment, 3,019 (as adjusted for a reverse stock split on May 14,

2024) and 177,465 , respectively, common shares of Biofrontera, AG, a company who holds a greater than five percent of our Common Stock

and is traded on the Frankfurt Stock Exchange.

The fair values of these investments were determined with Level 1 inputs through references

to quoted market prices.

warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of Common Stock originally issued in a private

placement on May 16, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise

price to $ 3.55 per share (the “2022 Purchase Warrants”), (ii) warrants to purchase 214,286 shares of Common Stock issued

on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to

$ 3.55 per share (the “2022 Inducement Warrants”), and (iii) warrants to purchase 1,807,500 shares of Common Stock issued

on November 2, 2023 expiring five years following the date of issuance and with an exercise price of $ 3.55 per share ( the “2023

Purchase Warrants”).

2022 Purchase Warrants, the 2022 Inducement Warrants and the 2023 Purchase Warrants were accounted for as liabilities as these warrants

provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under

The warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in

fair value is recognized in the Company’s consolidated statement of operations.

fair value for the Level 3 2022 Purchase Warrants, 2022 Inducement Warrants and the 2023 Purchase Warrants was estimated using a Black-Scholes-Merton

(“BSM”) model.

Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside

of the Company’s control.

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

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

in our consolidated statement of operations.

The fair value of these warrants was determined using the BSM option pricing model based

on the following assumptions for the three and nine months ended September 30, 2024:

fair value of the underlying common stock of $ 0.90

to $ 1.54 , expected volatility of 95 % to 100 %, risk free rate of 3.55 % to 4.35 %, remaining contractual term of 4.09 to 4.59 years and

a dividend yield of 0 %.

The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

warrants to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ 0.001 per share (the “2024 Preferred Warrants”),

were also accounted for as liabilities, as they were redeemable in the event of a change in control, which was not solely within the

control of the Company (see Note 12.

Stockholders’ Equity ).

The 2024 Preferred Warrants were issued in the first quarter

of 2024 and exercised prior to the end of the second quarter of 2024.

The fair value for the Level 3 2024 Preferred Warrants was estimated

utilizing a probability weighted average approach, which incorporated two scenarios.

In scenario one, the warrant value was based on

the underlying value of the convertible preferred stock, using an option-pricing model backsolve that solved for the value of our publicly

traded equity on the valuation date to obtain the valuation date fair value of the Series B-3 Convertible Preferred Stock, then applied

the Series B-3 Convertible Preferred Stock value into the BSM model equation to determine the value of the Series B-3 convertible warrants.

In scenario two, the warrant value was based on the underlying value of the publicly traded common equity value.

Scenario two assumes

the preferred stock will be converted into Common Stock prior to a liquidity event.

A simple BSM model was utilized to value the warrant

under scenario two, using the closing price of our Common Stock as an input to the model.

BSM model used the following range of inputs and assumptions for the 2024 Preferred Warrants at the issuance date of February 22, 2024,

for the three months ended March 31, 2024 and at the exercise date of May 13, 2024:

(i) expected stock price volatility of 79.3 % to 105 %;

(ii) risk-free interest rate of 5.39 %;

(iii) expected life of the warrants of 0.003 to 0.21 years;

and (iv) dividend yield

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

Nine Months Ended

September 30,

Investment, related party

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

The fair value of this investment was

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

Warrant Liabilities

The warrant liabilities are comprised of (i) outstanding

warrants to purchase 170,950 shares of the Company’s common stock, $ 0.001 par value (“Common Stock”) originally issued in a private placement on May 16, 2022, as amended on November 2,

2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the “2022 Purchase Warrants”);

(ii) warrants to purchase 214,286 shares of Common Stock issued on July 26, 2022, as amended on November 2, 2023 to extend the expiration

date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the “2022 Inducement Warrants”);

and (iii) warrants

to purchase 1,807,500 shares of Common Stock issued on November 2, 2023 expiring five years following the date of issuance and with an

exercise price of $ 3.55 per share ( the “2023 Purchase Warrants”).

Mezzanine Equity and Stockholders’

Equity for additional details.

The 2023 Purchase Warrants, the 2022 Inducement Warrants

and the 2022 Purchase Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental

transaction which fails the requirement of the indexation guidance under ASC 815-40.

The resulting warrant liabilities are re-measured

at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated

statement of operations.

The Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered a Level 3 fair value measurement.

Certain inputs utilized

in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s control.

A significant

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

warrant liabilities which could also result in material non-cash gain or loss being reported in our consolidated statement of operations.

The fair value for the Level 3 warrants at March 31,

2025 was estimated using a BSM model based on the following assumptions:

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

Expiration term (in years)

Risk-free Rate

Dividend yield

The following

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

of Changes in Fair Value Warrant Liabilities

Three Months Ended

Fair value at beginning of period

Issuance of new warrants

Exercise of warrants

Change in fair value of warrant liabilities

Fair value at end of period

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

from the sales of our lamps are relatively insignificant compared with the revenues generated through our sales of Ameluz ® .

party revenue relates to an agreement with Biofrontera Bioscience for BF-RhodoLED ® leasing and installation service associated

with the clinical lamps, which, due to the Second A&R Ameluz LSA is no longer effective as of September 30, 2024.

Refer to Note

11, Related Party Transactions .

analysis of the changes in product revenue allowances and reserves is summarized as follows:

Schedule of Revenue Allowance and Accrual Activities

The warrants issued on February 22, 2024 to purchase

shares of Series B-3 Convertible Preferred Stock, par value $ 0.001

per share (the “2024 Preferred Warrants”), were also accounted for as liabilities, as they were redeemable in the

event of a change in control, which was not solely within the control of the Company (see Note 1 2.

Mezzanine Equity and Stockholders’

The 2024 Preferred Warrants were issued in the first quarter of 2024 and exercised prior to the end of the second quarter

The fair value for the Level 3 2024 Preferred Warrants was estimated utilizing a probability weighted average approach, which

incorporated two scenarios.

In scenario one, the warrant value was based on the underlying value of the convertible preferred stock,

using an option-pricing model backsolve that solved for the value of our publicly traded equity on the valuation date to obtain the valuation

date fair value of the Series B-3 Convertible Preferred Stock, then applied the Series B-3 Convertible Preferred Stock value into the

BSM model equation to determine the value of the Series B-3 convertible warrants.

In scenario two, the warrant value was based on the

underlying value of the publicly traded common equity value.

Scenario two assumes the preferred stock will be converted into Common Stock

prior to a liquidity event.

A simple BSM model was utilized to value the warrant under scenario two, using the closing price of our Common

Stock as an input to the model.

The BSM model used the following range of inputs and assumptions for the 2024 Preferred Warrants at the

issuance date of February 22, 2024, for the three months ended March 31, 2024 and at the exercise date of May 13, 2024:

stock price volatility of 79.3 %

(ii) risk-free interest rate of 5.39 %;

(iii) expected life of the warrants of 0.003 to 0.21 years;

and (iv) dividend yield of 0.0 %.

The fair value of the 2024 Preferred Warrants was $ 4.1

million at issuance and $ 5.4

million at the exercise date.

We generate revenue primarily through the sales of

our licensed products, Ameluz ® and BF-RhodoLED ® lamps.

Traditional 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

The Company maintains its

cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).

2025, approximately $ 1.3 million of the Company’s cash balances were in excess of FDIC limits.

The Company has not experienced any

losses on these accounts and management does not believe that the Company is exposed to any significant risks with respect to these accounts.

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

Long-term restricted

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

The following table provides a reconciliation of cash,

cash equivalents, and restricted cash that sum to the total shown in the statements of cash flows:

Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

(in thousands)

assistance program

pay discounts

and payor rebates

Balance at December 31, 2022

Provision related to current period sales

Credit or payments made during the period

Balance at September 30, 2023

Balance at December 31, 2023

Provision related to current period sales

Credit or payments made during the period

Balance at September 30, 2024

Cash and cash equivalents

Long-term restricted cash

Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows

Long-term restricted cash was recorded in other assets

in the condensed consolidated balance sheet.

Accounts Receivable, net

receivables are mainly attributable to the sale of Ameluz ® .

It is expected that all trade receivables will

be settled within twelve months of the balance sheet date.

Accounts receivables are mainly attributable to the

sale of Ameluz ® .

It is expected that all trade receivables will be settled within twelve months of the balance sheet date.

Trade accounts receivable are stated at their net realizable value.

The allowance

for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience

and current information.

In developing the estimate for expected credit losses, trade accounts receivable are segmented into pools of

assets depending primarily on delinquency status, and fixed reserve percentages are established for each pool of trade accounts receivables.

determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain

customers, regulatory and legal environments and other relevant current and future forecasted macroeconomic factors.

If we become aware

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

allowance for credit losses was $ 0.3 million and $ 0.2 million as of September 30, 2024 and December 31, 2023, respectively.

are comprised of Ameluz ® and RhodoLED ® Lamps.

was a negligible provision for obsolescence recorded for the three and nine months ended September 30, 2024 and 2023.

As of December 31,

2023, in connection with the voluntary recall by the Ameluz Licensor, we recorded an inventory write-off of $ 5.2 million with a corresponding

asset for the anticipated replacement from the licensor to other assets, related party, as the recalled lots of Ameluz ®

products were to be replaced by the Ameluz Licensor at no additional cost in accordance with the Ameluz License and Supply Agreement

(the “Ameluz LSA”).

As of July 23, 2024, we have received the full amount of the replacement inventory for the recalled Ameluz ® .

Assets Held for Sale

held for sale consists of the following:

The allowance for credit losses reflects our best estimate of expected

credit losses of the receivables determined on the basis of historical experience and current information.

In developing the estimate

for expected credit losses, trade accounts receivable are segmented into pools of assets depending primarily on delinquency status, and

reserve percentages are established for each pool of trade accounts receivable.

In determining the reserve percentages for each pool

of trade accounts receivable, we considered our historical experience with certain customers, regulatory and legal environments and other

relevant current and future forecasted macroeconomic factors.

If we become aware of any customer-specific factors that impact credit risk,

specific allowances for these known troubled accounts are recorded.

The allowance for credit losses was $ 0.1 million and

$ 0.2 million as of March 31, 2025 and December 31, 2024, respectively.

Inventories are comprised of Ameluz ®

and the RhodoLED ® lamps.

provision for obsolescence recorded for the three months ended March 31, 2025 and a negligible amount for the year ended

December 31, 2024.

Asset Held for Sale

Asset held for sale consists of the following:

of Assets Held for Sale

(in thousands)

September 30,

Xepi® license

Accumulated amortization

Assets held for sale

Xepi ® license intangible asset was recorded at acquisition-date fair value of $ 4.6 million and was amortized on a straight-line

basis over the useful life of 11 years.

Amortization expense was $ 0.1 million for each of the three-month periods ended September 30,

2024 and 2023 and $ 0.3 million for the nine months ended September 30, 2024 and 2023.

the third quarter of 2024, the Company committed to a plan to sell its Xepi product line and determined that the intangible asset

meets the criteria to be classified as held for sale in accordance with ASC 360-10-45-9.

The Company has entered into a letter

of intent and expects to complete the sale within the next six to twelve months and as such has classified the asset as held

for sale under current assets in the Condensed Consolidated Balance Sheets.

The carrying amount of the asset at the time of

classification was $ 2.3

Intangible asset, net

The Xepi product line has been held for sale

since the third quarter of 2024, when the Company determined that the intangible asset met the criteria to be classified as held for

sale in accordance with ASC 360-10-45-9.

The Company is working with a potential purchaser and expects to complete a sale within the

next one to five months and, as such, has classified the asset as held for sale under current assets in the condensed consolidated

balance sheets.

The carrying amount of the asset at the time of classification was $ 2.3

million, which was the lower of its carrying value or estimated fair value less cost to sell.

No gain or loss was recognized in the

No gain or loss was recognized in the Condensed

Statement of Operations upon classification as an asset held for sale and the related revenue and expenses associated with the asset

1 unchanged sentence

This divestiture does not represent a strategic shift that will have a major effect on our consolidated results of

operations and therefore is not being reported as

discontinued operations.

Cash Balances and Statement of Cash Flows Reconciliation

Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).

At September 30, 2024, approximately $ 2.5 million of the Company’s cash balances were in excess of FDIC limits.

The Company has

not experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks with

respect to these accounts.

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

Long-term restricted

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

following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the statements

of cash flows:

Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

September 30,

and cash equivalents

restricted cash

cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows

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

operations and therefore is not being reported as discontinued operations.

The Xepi ® license intangible asset

was recorded at acquisition date fair value of $ 4.6

million and was amortized on a straight-line basis over the useful life of 11

Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consist of the following:

Accrued expenses and other current liabilities consist

of the following:

Schedule of Accrued Expenses and Other Current Liabilities

(in thousands)

September 30,

Employee compensation and benefits

1 unchanged sentence

Research and Development

Product revenue reserves

Distribution and Storage

Legal settlement

as of January 4, 2024, we voluntarily terminated the Loan and Security Agreement with Midcap Business Credit LLC (the “Loan Agreement”),

paying a total of approximately $ 0.4 million, consisting of (1) the outstanding principal of and interest balance due under the Loan

Agreement, aggregating approximately $ 0.2 million, and (2) early termination fees of approximately $ 0.2 million.

a result of the termination of the Loan Agreement, the Company recognized a $ 0.3 million loss related to prepayment fees and the write-off

of deferred financing costs, in the accompanying consolidated statement of operations for the nine months ended September 30, 2024.

December 21, 2023, we entered into credit facilities with two different lenders (the “Loans”), each pursuant to a

Business Loan and Security Agreement providing for a term loan in the principal amount of $ 2,000,000 .

Each of the Loans was evidenced by a Secured Promissory Note, effective as of December 21, 2023 and required the Company to make

weekly payments of principal and interest in the amount of approximately $ 102,857

5, 2024 , the maturity date.

There were approximately $ 0.3

million related issuance costs, recognized as a debt discount (contra liability against the debt balance), that were amortized as

interest expense over the life of the loan using the effective interest method.

The Company recognized minimal discount amortization

and interest expense during the three months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company

recognized discount amortization and interest expense of $ 0.3

million and $ 1.7

million, respectively.

As of September 30, 2024 the Company had repaid both Loans.

expense was recognized using the effective interest method, such that a constant effective interest rate was applied to the carrying

amount of the debt at the beginning of each period until maturity.

Product revenue allowances and reserves

Convertible Notes Payable

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

in an aggregate principal amount of the Company’s 10.0 % Senior Secured Convertible Notes (the “Notes”) pursuant to a

Securities Purchase Agreement entered into on November 21, 2024 with its principal stockholders.

The Notes bear interest at 10.0 % per annum, payable

in-kind (“PIK interest”) through the issuance of additional principal on a quarterly basis.

In the Event of Default (as defined

in the Notes), the interest will increase to 15 % per annum from the date of written notice from the holder.

The Notes may be converted

at any time into shares of the Company’s Common Stock at a conversion price of $ 0.78 per share subject to customary adjustments

for stock splits, stock dividends and recapitalizations, as described in the Notes.

The Notes mature on November 22, 2027, unless earlier

converted or repurchased.

The Company may not redeem the Notes at its option prior to maturity.

Upon maturity, the Company will pay to

the holders of the Notes an amount in cash representing all of the outstanding aggregate principal amount of the Notes, together with

any accrued and unpaid interest.

Alternatively, the entire amount of the note will be automatically converted to shares of Common Stock

if the 10-day volume weighted average price of a share of the Company’s Common Stock on Nasdaq is greater than 250% of the conversion

price, and certain other conditions are met.

The Notes provide for customary events of default

and contain conversion limitations, providing that no conversion may be made if the aggregate number of shares of Common Stock beneficially

owned by the holder would exceed 9.99 % immediately after conversion.

There were no events of default at March 31, 2025.

The Notes are secured by substantially all property

of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts.

The Notes were accounted for as a liability under

ASC 470 and the embedded conversion option has been assessed under ASC 815.

Based on the Company’s evaluation, there were no embedded

features that required bifurcation as a derivative liability.

During the three months ended

March 31, 2025 the Company recognized interest expense of approximately $ 0.1 million and minimal discount amortization.

As of March 31,

2025, the outstanding balance of the Notes was $ 4.2 million, which is shown net of the remaining unamortized issuance cost of $ 0.1 million.

Related Party Transactions

and Supply Agreement

the Ameluz LSA, the Company obtained an exclusive, non-transferable license to use Biofrontera Pharma’s technology to market and

sell the licensed products, Ameluz ® and RhodoLED ® Lamps and must purchase the licensed products exclusively

from Biofrontera Pharma.

The Second A&R Ameluz LSA, among other things, amended the Ameluz LSA to:

update the price we pay per unit, based on certain percentages of the anticipated net selling price, (the “Transfer Price”)

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

patent administration, as follows:

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

percent of the anticipated net selling price per unit for 2026 to 2028;

percent of the anticipated net selling price per unit for 2029 to 2031;

percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit;

Transfer Price for sales related to acne, another indication currently in development, will remain at twenty-five percent of the

anticipated net selling price per unit indefinitely.

provide for the transfer of responsibilities for clinical trials relating to Ameluz ® in the US on or before June 1, 2024,

including the Company assuming related contracts and transferring key personnel from the Ameluz Licensor to the Company.

in connection with the Second A&R Ameluz LSA, the Company entered into a Release of Claims, with the Ameluz Licensor, dated February

13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and liabilities arising out of or relating

to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials

for which the Company assumed responsibility under the Second A&R Ameluz LSA.

of the licensed products during the three and nine months ended September 30, 2024 were $ 2.2 million and $ 3.3 million, respectively,

and $ 5.1 million and $ 18.8 million for the three and nine months ended September 30, 2023, respectively.

Amounts due and payable to

Biofrontera Pharma as of September 30, 2024 and December 31, 2023 were $ 3.6 million and $ 8.5 million, respectively, which were recorded

net in accounts payable, related parties in the consolidated balance sheets.

Company receives expense reimbursement from Biofrontera AG and Biofrontera Bioscience on a quarterly basis for costs incurred on behalf

of these entities, which are netted against expenses incurred within selling, general and administrative expenses.

Total expense reimbursements

were negligible and $ 0.3 million for the three and nine months ended September 30, 2024 respectively.

Total expense reimbursements for

the three and nine months ended September 30, 2023 were $ 0.1 million and $ 0.2 million, respectively.

Stockholders’ Equity

the Company’s Certificate of Second Amendment to the Amended and Restated Certificate of Incorporation (“Certificate”),

effective April 25, 2024, the Company is authorized to issue 35,000,000 shares of Common Stock and 20,000,000 shares of preferred stock,

par value $ .001 per share.

February 19, 2024, the Company entered into the Preferred Purchase Agreement, pursuant to which the Company agreed to issue and sell,

in a private placement (the “Offering”), (i) 6,586 shares of Series B-1 Convertible Preferred Stock, par value $ 0.001 per

share (the “Series B-1 Preferred Stock”), and (ii) the 2024 Preferred Warrants to purchase 8,000 shares of Series B-3 Convertible

Preferred Stock, par value $ 0.001 per share (the “Series B-3 Preferred Stock”) for an aggregate offering price of $ 8.0 million.

Each share of Series B-1 Preferred Stock was sold for $ 1,000 per share and the consideration for each 2024 Preferred Warrant was $ 0.125

per share of common stock that each share of Series B-3 Preferred Stock may be converted into (or 11,309,019 common stock shares).

conversion price of Series B Preferred Stock is $ 0.7074 per share of Common Stock, such that each Series B share is convertible into

1,413.6 shares of the Common Stock.

The net proceeds received were approximately $ 7.3 million, after deducting fees paid to the placement

agent and other offering expenses payable by the Company.

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

Stock, the Company issued 2,516,785 shares of common stock.

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

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

of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock (as a conversion to common stock would have caused

the holders to exceed their respective beneficial ownership limitations), with 6,793,893 shares of common stock issuable upon conversion

of the Series B-2 Preferred Stock.

Also, following the Stockholder Approval, upon any liquidation event, the assets of the Company available

for distribution to its stockholders will be distributed among the holders of the shares of Series B Preferred Stock and Common Stock,

pro rata, based on the number of shares held by each such holder, treating for this purpose, all shares of Series B Preferred Stock as

if they had been converted to Common Stock.

With the removal of the liquidation preference to Series B Preferred, the requirement for

mezzanine classification was eliminated and the Series B Preferred Stock is classified as permanent equity as of September 30, 2024.

Redeemable Preferred Stock.

May 13 and 14, 2024, of the 8,000

2024 Preferred Warrants, 7,998

were exercised to purchase shares of the Company’s Series B-3 Convertible Preferred stock, par value $ 0.001

per share, for net proceeds of $ 7.4

million, net of fees paid to the placement agent, while two warrants expired due to non-issuance of fractional shares.

Preferred Warrants issued in the Offering have now been exercised or expired, with 11,306,192

shares of common stock issuable upon conversion of the 7,998

shares of Series B-3 Convertible Preferred Stock.

As of September 30, 2024 following the conversion of 111 shares of Series B-2 Preferred Stock and 905 shares of Series

B-3 Preferred Stock into Common Stock, there were 11,788 shares of Series B Preferred issued and outstanding.

to the Preferred Purchase Agreement, the Company is entitled to appoint two independent directors designated by Rosalind Advisors, Inc

to the Company’s Board.

to Articles of Incorporation – Series B Preferred Stock

to the terms of the Preferred Purchase Agreement, on February 20, 2024, the Company filed the Certificate of Designation with the Delaware

Secretary of State designating 6,586 shares of its authorized and unissued preferred stock as Series B-1 Preferred Stock, 6,586 shares

as Series B-2 Preferred Stock and 8,000 shares as Series B-3 Convertible Preferred Stock, with a par value of $ 0.001 per share (collectively

the “Series B Preferred Stock”).

B Preferred Stock Rights:

Subject to certain limitations described in the Certificate of Designation, the Series B Preferred Stock is voting stock.

Holders of the Series B Preferred Stock are entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock basis.

Holders of Common Stock are entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.

Accordingly, holders of Series B Preferred Stock will be entitled to one vote for each whole share of Common Stock into which their Series

B Preferred Stock is then convertible on all matters submitted to a vote of stockholders.

Subject to certain beneficial ownership limitations, at the option of the Holder, each share of Series B Preferred Stock is convertible

into shares of Common Stock at the applicable Conversion Price, rounded down to the nearest whole share.

The conversion price for the

Series B Preferred Stock is $ 0.7074 per share of Common Stock, subject to adjustment in the event of any stock dividend, stock split,

combination or other similar recapitalization.

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

converted into either Common Stock or, to the extent the conversion would cause a holder to exceed its beneficial ownership limitation,

shares of Series B-2 Preferred Stock.

Liquidation .

Following the Stockholder Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company,

including a change of control transaction, or Deemed Liquidation Event, as defined in the Certificate of Designation (any such event,

a “ Liquidation ”), the assets of the Company available for distribution to its stockholders shall be distributed among

the holders of the shares of Series B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder,

treating for this purpose all shares of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the terms

of the Certificate of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth in

the Certificate of Designation or otherwise.

Participation

For a period of one year following the closing of the Offering, the purchasers will have the right to participate as an

investor in any securities offering consummated by the Company.

holders of Common Stock are entitled to one vote for each share held.

Common Stockholders are not entitled to receive dividends, unless

declared by the Board.

We consider Biofrontera AG and its consolidated subsidiaries,

(the “Biofrontera Group”) to be a related party.

The Biofrontera Group held more than 5 % of the outstanding shares of our

common stock until December 10, 2024, and we continue to rely on the Biofrontera Group as the sole supplier of Ameluz ® and

the RhodoLED ® Lamps.

License and Supply Agreement

Under the Second A&R Ameluz LSA, the Company has

an exclusive, non-transferable license to market and sell its licensed products, Ameluz ® and RhodoLED ® Lamps,

in the United States and must purchase the licensed products exclusively from Biofrontera Pharma.

The Second A&R Ameluz LSA, among

other things, amended the original license and supply agreement with the Ameluz Licensor to:

(i) update the price we pay per unit, based on certain

percentages of the anticipated net selling price, (the “Transfer Price”) that covers the cost of goods, royalties on sales,

and services, including all regulatory efforts, agency fees, pharmacovigilance, and patent administration, as follows:

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

Thirty percent of the anticipated net selling price per unit for 2026 to 2028;

Thirty-two percent of the anticipated net selling price per unit for 2029 to 2031;

Thirty-five percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit;

The Transfer Price for sales related to acne, another indication currently in development, will remain at twenty-five percent of the anticipated net selling price per unit indefinitely.

(ii) provide for the transfer of responsibilities

for clinical trials relating to Ameluz ® in the US on June 1, 2024, including the Company assuming related contracts and

transferring key personnel from the Ameluz Licensor to the Company.

The Company entered into a Release of Claims with

the Ameluz Licensor, dated February 13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and

liabilities arising out of or relating to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz

LSA with respect to clinical trials for which the Company assumed responsibility.

Purchases of the licensed products (inclusive of

estimated and actual purchase price adjustments) during the three months ended March 31, 2025 and 2024 were $ 3.0

million and $ 0.3

million, respectively, and were recorded in inventories in the condensed consolidated balance sheets, and, when sold, in cost of

revenues, related party in the consolidated statements of operations.

Amounts due and payable to Biofrontera Pharma as of March 31,

2025 and December 31, 2024 were $ 2.6

million and $ 5.3

million, respectively, and were recorded in accounts payable, related parties net of applicable accounts receivable in the condensed

consolidated balance sheets.

Mezzanine Equity and Stockholders’ Equity

Under the Company’s Certificate of Second Amendment

to the Amended and Restated Certificate of Incorporation (“Certificate”), effective April 25, 2024, the Company is authorized

to issue 35,000,000 shares of Common Stock, and 20,000,000 shares of preferred stock,

par value $ 0.001 per share (“Preferred

Common Stock:

The holders of Common Stock are entitled to one vote

for each share held.

Holders of Common Stock are not entitled to receive dividends, unless declared by the Company’s board of directors

The Company has not declared dividends since inception.

5 unchanged sentences

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

As of September 30, 2024, there were 6,529,792

As of March 31, 2025, there were 8,873,932

shares of Common Stock outstanding.

of Common Stock Pursuant to the Exercise of 2023 Pre-Funded Warrants and Conversion of Series B-1 Preferred Stock

January 8, 2024 and February 2, 2024, an investor exercised 167,000 and 888,000 pre-funded warrants to purchase the Company’s common

stock, par value $ 0.001 per share (the “Pre-Funded Warrants”), respectively, and purchased a total of 1,055,000 shares of

common stock at an exercise price of $ .0001 per share, resulting in negligible net proceeds.

Redeemable Preferred Stock

to the Stockholder Approval, Series B-1 Preferred Stock was redeemable at the option of the holder and Series B-2 and B-3 Preferred Stock

were redeemable in the event of a change in control.

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

268”) requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if

they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii)

upon the occurrence of an event that is not solely within the control of the issuer.

Preferred securities that are mandatorily redeemable

are required to be classified by the issuer as liabilities whereas under ASR 268, an issuer should classify a preferred security whose

redemption is contingent on an event not entirely in control of the issuer as mezzanine equity.

The Series B-1 Preferred Stock was redeemable

at the option of the holder, B-2 and B-3 were redeemable, upon a change in control that was not solely within control of the Company.

Prior to the Stockholder Approval, the Series B Preferred Stock was considered senior to the Common Stock and all other series of the

Company with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the Company.

As such, the Company determined that mezzanine treatment was appropriate for the Series

B Preferred Stock at issuance in February 2024 and as of March 31, 2024, and the Series B Preferred Stock was presented as such in our

consolidated balance sheets and consolidated statements of changes in stockholders’ equity and mezzanine equity for periods prior

to the Stockholder Approval.

The Series B Preferred Stock was not considered mandatorily redeemable.

the Stockholder Approval, each share of Series B-1 Preferred Stock automatically converted into either Common Stock or, to the extent

the conversion would cause a holder to exceed its beneficial ownership limitation, shares of Series B-2 Preferred Stock, thereby removing

the redemption feature at the option of the holder (which was only present for Series B-1) and eliminating one of the requirements for

classification as mezzanine equity.

the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders will be

distributed among the holders of the shares of Series B Preferred Stock and Common Stock, pro rata based on the number of shares held

by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to Common Stock pursuant

to the terms of the Certificate of Designation filed on February 20, 2024.

Accordingly, the Series B Preferred stock is classified as

permanent equity on our consolidated balance sheets and consolidated statements of change in stockholders’ equity as of September

30, 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).

As of March 31, 2025 we had outstanding warrants to

purchase an aggregate of 2,269,356 shares of Common Stock with an exercise price range of $ 3.55 to $ 100.00 per share.

These warrants have

expiration dates ranging from November 2026 to November 2028.

A summary of the warrants outstanding as of March 31, 2025 is presented

of Warrants Outstanding

Number of Shares

Exercise Price

Expiration Date

Liability classified (See Note 3.

Fair Value Measurements )

Equity classified

Series B Preferred Stock:

On February 19, 2024, the Company entered into a

securities purchase agreement (the “Preferred Purchase Agreement”), with certain accredited investors, pursuant to which

the Company agreed to issue and sell, in a private placement (the “Offering”), (i) 6,586

shares of Series B-1 Convertible Preferred Stock, par value $ 0.001

per share (the “Series B-1 Preferred Stock”), and (ii) the 2024 Preferred Warrants to purchase 8,000

shares of Series B-3 Convertible Preferred Stock, par value $ 0.001

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

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

per share of Common Stock, such that each Series B share is convertible into 1,413.6

shares of the Common Stock.

All of the 2024 Preferred Warrants were exercised for Series B-3 Preferred Stock during the second

quarter of 2024.

As of March 31, 2025, there were 3,366

shares of Series B-2 Preferred Stock issued and outstanding and 6,763 shares of Series B-3 (convertible into 14,318,632

shares of Common Stock).

Pursuant to the Preferred Purchase Agreement, the Company may be compelled to appoint two independent

directors designated by Rosalind Advisors, Inc to the Company’s Board.

No such appointment has been made as of March 31,

Mezzanine Classification

Prior to the May 2024 approval by the

Company’s stockholders of an increase in the authorized shares of Common Stock (the “Stockholder Approval”),

Series B-1 Preferred Stock was redeemable at the option of the holder and Series B-2 and B-3 Preferred Stock, (collectively the

(“Series B Preferred Stock”), were redeemable in the event of a change in control.

ASC 480-10-S99-3A(2) of the

SEC’s Accounting Series Release No.

268 (“ASR 268”) requires preferred securities that are redeemable for cash or

other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or

determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control

of the issuer.

Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities

whereas under ASR 268, an issuer should classify a preferred security whose redemption is contingent on an event not entirely in

control of the issuer as mezzanine equity.

The Series B-1 Preferred Stock was redeemable at the option of the holder, Series B-2

Preferred Stock and Series B-3 Preferred Stock were redeemable, upon a change in control that was not solely within control of the

Prior to the Stockholder Approval, the Series B Preferred Stock was considered senior to the Common Stock and all other

series of the Company’s capital stock with respect to dividend rights and rights on the distribution of assets on any

voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

As such, the Company determined that

mezzanine treatment was appropriate for the Series B Preferred Stock at issuance in February 2024 and as of March 31, 2024, and the

Series B Preferred Stock was presented as such in our consolidated balance sheets and consolidated statements of changes in

stockholders’ equity and mezzanine equity for periods prior to the Stockholder Approval.

The Series B Preferred Stock was not

considered mandatorily redeemable.

Upon the Stockholder Approval, each share of Series

B-1 Preferred Stock automatically converted into either Common Stock or, to the extent the conversion would cause a holder to exceed its

beneficial ownership limitation, shares of Series B-2 Preferred Stock, thereby removing the redemption feature at the option of the holder

(which was only present for Series B-1) and eliminating one of the requirements for classification as mezzanine equity.

Following the Stockholder Approval, upon any liquidation,

the assets of the Corporation available for distribution to its stockholders will be distributed among the holders of the shares of Series

B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares

of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the terms of the Certificate of Designation filed

on February 20, 2024.

Accordingly, the Series B Preferred stock is classified as permanent equity on our consolidated balance sheets and

consolidated statements of change in stockholders’ equity as of March 31, 2025, due to the limited exception under ASC 480-10-S99-3A(3)(f).

Convertible Debt

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

in an aggregate principal amount of the Notes.

The Notes allow for up to 5,384,615 shares of Common Stock to be issued upon conversion

for principal plus additional shares for PIK interest.

Debt - Convertible Notes Payable , for additional details.

Equity Incentive Plans and Share-Based Payments

2021 Omnibus Incentive Plan

2021, our Board adopted, and our shareholders approved, the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum

contractual term is 10 years for stock options issued.

On June 12, 2024, the stockholders of the Company approved an amendment to the

Biofrontera Inc.

2021 Omnibus Incentive Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990

shares to 3,750,000 shares.

As of September 30, 2024, there were 1,948,876 shares available for future awards under the amended 2021

Non-qualified

stock options

maintain the 2021 Plan for the benefit of our officers, directors and employees.

Employee stock options granted under the 2021 Plan generally

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

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

of the date of grant.

All stock options are exercisable at a price as set by the Company at the time of the grant but shall not be less

than the market value of the common shares underlying the option on the grant date.

Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the

requisite service period.

The fair value of stock options is estimated at the time of grant using the BSM option pricing model, which

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

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

In 2021, the Board adopted, and our shareholders approved,

the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum contractual term is 10 years for stock options issued.

On June 12, 2024, the stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares authorized for

issuance by 3,483,010 shares, from 266,990 shares to 3,750,000 shares.

As of March 31, 2025, there were 1,937,489 shares available for

future awards under the amended 2021 Plan.

Non-qualified stock options

The Company recognizes the grant-date fair value of

share-based awards granted as compensation expense on a straight-line basis over the requisite service period.

The fair value of stock

options is estimated at the time of grant using the BSM model, which requires the use of inputs and assumptions such as

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

dividend yield.

The Company elects to account for forfeitures as they occur.

the three months ended September 30, 2024, the Company granted 1,242,722 options.

The fair value of each option was estimated

on the grant date of July 12, 2024 using the BSM option pricing model with the following assumptions:

fair value of the underlying unit

of $ 1.06 , expected volatility of 100.0 %, risk free rate of 4.20 %, term ranging from 5.24 years to 6 years, and a dividend yield of zero.

compensation expense for stock options for the three and nine months ended September 30, 2024 was approximately $ 0.2 million and $ 0.6

million, respectively, and was recorded in selling, general and administrative expenses, with a negligible amount recorded as research

and development on the accompanying consolidated statement of operations.

For the three and nine months ended September 30, 2023, share-based

compensation expense of $ 0.1 million and $ 0.5 million, respectively, was recorded in selling, general and administrative expenses.

outstanding and exercisable under the employee share option plan as of September 30, 2024, and a summary of option activity during the

nine months then ended is presented below.

The fair value of each option is estimated on the

date of the grant using the BSM model.

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

Share-based compensation expense related to stock

options of approximately $ 0.1 million was recorded in selling, general and administrative expenses on the accompanying consolidated

statement of operations for each of the three months ended March 31, 2025 and 2024.

Options outstanding and exercisable under the employee

share option plan as of March 31, 2025 and a summary of option activity during the three months then ended is presented below.

of Stock Option Activity

Contractual Term

Outstanding at December 31, 2024

Canceled or forfeited

Outstanding at September 30, 2024

Exercisable at September 30, 2024

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 September 30, 2024.

of September 30, 2024, there was $ 1.3 million of unrecognized compensation cost related to unvested stock options, which is expected

to be recognized over a weighted-average period of approximately 2.63 years.

Compensation (RSUs)

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

through the applicable vesting dates.

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

Common Stock on the grant date.

compensation expense for the RSUs was $ 0.1 million for the three and nine months ended September 30, 2024, and $ 0.1 million and $ 0.3

million for the three and nine months ended September 30, 2023, respectively, and was recorded in selling, general and administrative

Outstanding at March 31, 2025

Exercisable at March 31, 2025

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the Common Stock for the options that were in the money at March 31, 2025.

As of March 31, 2025, there was $ 0.9 million of unrecognized

compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately

Share-Based Compensation (RSUs)

Share-based compensation expense was $ 0.1 million

for the RSUs for each of the three-month periods ended March 31, 2025 and 2024, and was recorded in selling, general and administrative

expenses in the accompanying consolidated statements of operations.

of Restricted Stock Units

Weighted Average

Contractual Term

Outstanding at December 31, 2024

Canceled or forfeited

Outstanding at September 30, 2024

of September 30, 2024, there was $ 0.4 million unrecognized compensation cost related to RSUs, which is expected to be recognized over

a weighted-average period of approximately 1.78 years.

Outstanding at March 31, 2025

As of March 31, 2025, there was $ 0.3 million of unrecognized

compensation related to unvested RSUs, which is expected to be recognized over a period of approximately 1.28 years.

Interest Expense, net

expense, net consists of the following:

Interest expense, net consists of the following:

of Interest Expense, Net

(in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Interest expense

Interest expense, related party

Interest expense

Contract asset interest expense

Interest income

Interest income (expense), net

expense is comprised primarily of interest on our short-term loans and line of credit, including amortization of deferred costs.

asset interest expense related to a $ 1.7 million contract asset in connection with a $ 7.3 million start-up cost financing received from

Maruho Co., Ltd.

(“Maruho”) under a share purchase agreement.

The contract asset was amortized on a straight-line basis using

a 6 % interest rate over the financing arrangement contract term, which ended on December 31, 2023 .

income relates primarily to interest earned on funds deposited in our bank accounts.

Net Earnings (Loss) per Share

Company uses the two-class method to calculate net income (loss) per share.

No dividends were declared or paid for the three and nine

months ended September 30, 2024 and 2023.

Undistributed earnings for each period are allocated equally to common shareholders and participating

securities based on the contractual participation rights of the security to share in the current earnings as if all current period earnings

had been distributed.

Under the two-class method, the undistributed losses will be allocated entirely to the common stock shareholders.

Basic net earnings (loss) per common share are calculated by dividing net income by the weighted average number of common shares outstanding

during the period.

Diluted net earnings per common share are calculated by dividing net income (loss) by the diluted weighted average

number of common shares outstanding during the period.

The diluted shares include the dilutive effect of stock-based awards based on

the treasury stock method.

periods where a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be anti-dilutive.

following table sets forth the computation of the Company’s basic and diluted net earnings (loss) per share attributable to common

stockholders (in thousands, except share and per share data):

Interest expense, net

Interest expense is comprised primarily of interest

on our convertible notes, short-term loans and line of credit, including amortization of deferred costs.

Interest income relates primarily to interest earned

on funds deposited in our bank accounts.

Net Loss per Share

Basic net loss per common share is calculated by dividing

net loss by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share is calculated

by dividing net loss by the diluted weighted average number of common shares outstanding during the period.

The diluted shares include

the dilutive effect of stock-based awards based on the treasury stock method.

In periods where a net loss is recorded, no effect is given

to potentially dilutive securities, since the effect would be anti-dilutive.

The following table sets

forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders (in thousands, except

share and per share data):

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

Three Months Ended

Nine Months Ended

September 30,

Weighted average common shares outstanding, basic and diluted

Net loss per share, basic and diluted

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

dilute EPS in the future:

The following table sets forth the securities that

were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute EPS in the future:

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

September 30,

Common stock warrants

1 unchanged sentence

Unit Purchase Options

Shares related to Series B-2 convertible preferred stock

Shares related to Series B-3 convertible preferred stock

Series B convertible preferred stock

Convertible notes

Anti-dilutive securities

Stock warrants include Purchase Warrants, Inducement Warrants and warrants issued in the Company’s initial public offering.

Commitments and Contingencies

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

The Company has the option

to extend the term of the lease for a five-year period upon written notice to the landlord.

The extension period has not

been included in the determination of the ROU asset or the lease liability as the Company concluded that it is not reasonably

certain that it would exercise this option.

The Company provided the landlord with a security deposit in the amount of $ 0.1

million, which was recorded as other assets in the consolidated balance sheets.

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

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

is leased on a month-to-month basis.

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

expiration dates through October 2027.

the nine months ended September 30, 2024, the Company recorded lease expense of $ 0.6 million under selling, general and administrative

expenses in the consolidated statements of operations.

Future lease payments under non-cancelable leases as of September 30, 2024 were

as follows (in thousands):

of Future Commitments and Sublease Income

The Company leases its corporate headquarters under

an operating lease that expires in November 2025.

The Company has the option to extend the term of the lease for a five (5)-year period

upon written notice to the landlord.

The extension period has not been included in the determination of the ROU asset or the lease liability

as the Company concluded that it is not reasonably certain that it would exercise this option.

The Company provided the landlord with

a security deposit in the amount of $ 0.1 million, which was recorded as other assets in the consolidated balance sheets.

The Company has also entered into a master lease agreement

for its vehicles.

After an initial non-cancelable twelve-month period, each vehicle is leased on a month-to-month basis.

Based on historical

retention experience of approximately three years, the vehicles have varying expiration dates through January 2028.

Future lease payments under non-cancelable leases

as of March 31, 2025 were as follows (in thousands):

Schedule of Future Commitments and Sublease Income

Years ending December 31,

Future lease commitments

Remainder of 2025

5 unchanged sentences

Operating lease liability, non-current

LSA Sales Commitment

term shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and

lamps equal to or greater than $ 150 million over the preceding five years.

If we fail to earn $ 150 million in revenues from Ameluz ®

and the RhodoLED ® Lamps over the preceding five (5) year period prior to the Ameluz LSA’s termination date,

Biofrontera Pharma has the right to terminate the Ameluz LSA by providing one (1) year written notice.

addition, starting in 2025, under the Second A&R Ameluz LSA, we agree to purchase the higher of a minimum quantity of tubes of Ameluz ®

per year or at least a minimum 75% of the annual average of audited Ameluz ® tubes sold during the preceding four

(4) full calendar years (“Annual Minimum Sales”).

If we fail to achieve the respective Annual Minimum Sales for any calendar

year, such failure will constitute a termination event, unless waived by the Ameluz Licensor.

Minimum Research and Development Costs (“Minimum R&D Costs”)

the years 2025 through 2030, we will be required to fund Minimum R&D Costs in an amount that is at least 85% of the difference between

(i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined

under the previous Ameluz LSA, dated October 8, 2021.

If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera

Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion.

Agreement with Optical Tools

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

Tobin and Paul Sowyrda (the “Agreement”).

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

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

The Company paid a licensing

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

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

lamp prototypes (“PDT Device”) using the technology in the assigned patents.

The PDT Device provides illumination, based

on different light profiles, to the external skin surface of the human body.

The Company is to reimburse Optical Tools for all reasonable

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

part of the Agreement, Optical Tools will be eligible to receive regulatory and sales milestone payments totaling up to $ 1.0 million,

and royalties of up to 3 % of net revenue of certain products developed under this Agreement.

Company did not make any milestone or royalty payments or accruals for such payments during the three and nine months ended September

30, 2024 or 2023.

payments with Ferrer Internacional S.A.

the Xepi LSA, we are obligated to make payments to Ferrer upon the occurrence of certain milestones.

Specifically, we must pay Ferrer

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

$ 4,000,000 upon the first occasion annual net sales of Xepi ® under the Xepi LSA exceed $ 50,000,000 .

No payments or accruals

for such payments were made during the three and nine months ended September 30, 2024 or 2023 related to Xepi ® milestones.

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

estimable under the provisions of FASB ASC Topic 450, Contingencies .

The Company expenses as incurred the legal costs related

to such legal proceedings.

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

(“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham

Act, and iii) unfair trade practices under Massachusetts law.

All claims stem from allegations that Biofrontera has promoted its Ameluz ®

product in a manner that is inconsistent with its approved FDA labeling.

Though this complaint was originally filed in the U.S.

District Court for the District of Massachusetts, this matter has been transferred by agreement of the parties to the U.S.

Court for the District of New Jersey.

In March of 2024, Biofrontera Company filed a partial motion to dismiss

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

Biofrontera subsequently answered Sun’s

complaint and filed counterclaims alleging i) violation of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade

libel/product disparagement.

on June 26, 2024 and June 27, 2024, Sun filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and

Biofrontera Bioscience with the United States District Court for the District of Massachusetts and the International Trade

Commission, respectively, both alleging infringement of two patents held by Sun.

The complaint filed in the United States District Court for the District of Massachusetts has been held in abeyance

pending the completion of the case before the International Trade Commission.

is ongoing in the above-referenced matters.

Ameluz LSA Sales Commitment

Second A&R Ameluz LSA Sales Commitment

The Second A&R Ameluz LSA will remain in effect

for 15 years from its effective date and shall renew automatically for a period of five years, in perpetuity, so long as we have earned

revenues from Ameluz product and lamps equal to or greater than $ 150 million over the preceding five years.

If we fail to earn $ 150 million

in revenues from Ameluz ® and the RhodoLED ® Lamps over the preceding five (5) year period prior to the Second

A&R Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Second A&R Ameluz LSA by providing

one (1) year written notice.

In addition, effective in 2025, under the Second A&R

Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of Ameluz ® per year as set forth

in the Second A&R Ameluz LSA or (ii) 75% of the annual average of audited Ameluz ® tubes sold during the preceding four

(4) full calendar years.

If we fail to achieve the respective minimum for any calendar year, such failure will

constitute a termination event, unless waived by the Ameluz Licensor.

Ameluz Minimum Research and Development Costs

During the years 2025 through 2030, we will be required

to fund minimum R&D Costs in an amount that is at least 85% of the difference between (i) the Transfer Price for product,

effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous version of the

license and supply agreement with the Ameluz Licensor, dated October 8, 2021.

If we fail to meet the minimum requirement, the difference

shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion.

Licensing Agreement with Optical Tools

On December 2, 2022, the Company entered into the

technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”).

The Agreement allowed for the transfer of the assigned patents and trademarks, and upon notification by the Company to Optical Tools,

the research and development of certain prototypes.

The Company paid a licensing fee of $ 0.2 million which was expensed during the year

ended December 31, 2022.

On May 28, 2023, the Company authorized Optical Tools

to design, develop, manufacture, and deliver at least two portable photodynamic therapy lamp prototypes (“PDT Device”) using

the technology in the assigned patents.

The PDT Device provides illumination, based on different light profiles, to the external skin

surface of the human body.

The Company is to reimburse Optical Tools for all reasonable out-of-pocket, material and labor costs per the

As part of the Agreement, Optical Tools will be eligible

to receive regulatory and sales milestone payments totaling up to $ 1.0 million, and royalties of up to 3 % of net revenue of certain products

developed under this Agreement.

The Company did not make any milestone or royalty

payments or accruals for such payments during the three months ended March 31, 2025 or 2024.

Milestone payments with Ferrer Internacional S.A.

Under the Xepi license and supply agreement, we are

obligated to make payments to Ferrer upon the occurrence of certain milestones.

Specifically, we must pay Ferrer i) $ 2,000,000 upon the

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

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

No payments or accruals were made during the

three months ended March 31, 2025 or 2024 related to Xepi ® milestones.

Legal proceedings

At each reporting date, the Company evaluates whether

or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic

450, Contingencies .

The Company expenses as incurred the legal costs related to such legal proceedings.

On September 13, 2023, Biofrontera was served with

a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc.

(“Sun”), and Sun Pharmaceutical Industries

LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham Act, and iii) unfair trade practices under Massachusetts

All claims stem from allegations that Biofrontera has promoted its Ameluz ® product in a manner that is inconsistent

with its approved FDA labeling.

Though this complaint was originally filed in the United States District Court for the District of Massachusetts,

this matter has been transferred by agreement of the parties to the United States District Court for the District of New Jersey.

of 2024, Biofrontera Company filed a partial motion to dismiss the Lanham Act and Massachusetts statutory claims, which was denied on

October 15, 2024.

Biofrontera subsequently answered Sun’s complaint and filed counterclaims on October 30, 2024 alleging i) violation

of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade libel/product disparagement, which Sun answered on

December 17, 2024.

On March 11, 2025, Biofrontera received an additional notice alleging breach of contract through unlawful marketing

practices which makes reference to similar previous communications sent by Sun to Biofrontera on February 4, 2022 and September 9, 2022.

Discovery is ongoing in the above-referenced matters.

The Company denies the claims brought by Sun and intends to defend them vigorously.

Based on the Company’s assessment of the facts underlying the above claims, the uncertainty of litigation and the

preliminary stage of the case, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that

may result from either action.

If the final resolution of the matter is adverse to the Company, it could have a material impact on

the Company’s financial position, results of operations, or cash flows.

Based on the Company’s assessment of the facts

underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate the possibility

of a material loss, nor the potential range of loss that may result from this action.

If the final resolution of the matter is adverse

to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows.

Separately, on June 26, 2024 and June 27, 2024, Sun

filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District

Court for the District of Massachusetts and the International Trade Commission (“ITC”), both alleging infringement of two

patents held by Sun (the “Sun Patents”).

The complaint filed in the United States District Court for the District of Massachusetts

has been held in abeyance pending the completion of the case before the ITC.

A hearing is scheduled to be held in front of an administrative

law judge on June 30, 2025, with an Initial Determination expected by October 1, 2025.

The Commission’s Final Determination is expected

by February 2, 2026.

The Company denies Sun’s patent claims and intends

to defend them vigorously in the above-referenced matters.

In addition, Biofrontera has challenged the validity of the Sun Patents by

filing separate petitions for inter partes review at the United States Patent Trial and Appeal Board (“PTAB”) for each of

the Sun Patents.

One such petition was instituted by the PTAB on February 24, 2025, and an institution decision on the other petition

is anticipated to be received from the PTAB in June, 2025.

Based on the Company’s assessment of the facts

underlying the above-referenced patent matters, as well as the uncertainty of litigation, the Company cannot estimate the possibility

of a material loss, nor the potential range of loss that may result from either action.

Money damages are not available to Sun through

the case before the ITC, and an adverse ruling could result in an exclusion order being imposed on the allegedly infringing product.

the final resolution of the case before the United States District Court for the District of Massachusetts is adverse to the Company,

it could have a material impact on the Company’s financial position, results of operations, or cash flows.

Segment Reporting

The Company operates as one

operating segment that derives revenue primarily from our principal licensed product, Ameluz ® .

We are currently

selling Ameluz ® for this indication in the United States under an exclusive license and supply agreement.

(including the RhodoLED® Lamps) accounts for approximately 100% of our revenue.

The Company’s CODM is its Chief Executive Officer,

who reviews financial information presented on a consolidated basis.

The CODM uses consolidated net income to allocate resources and assesses

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

The following table presents selected financial information

with respect to the Company’s single operating segment for the three months ended March 31, 2025 and 2024 :

of Operating Segment

( in thousands)

Revenues, net

Operating expenses:

Cost of revenues

Sales Support

General and administrative

Research and development

Other operating expenses

Total operating expenses

Loss from operations

Other income (expense), net

Loss before income taxes

Income tax expenses

Subsequent Events

have completed an evaluation of subsequent events after the balance sheet date of September 30, 2024 through the date this Quarterly

Report on Form 10-Q was submitted to the SEC, and determined that the following material subsequent event required disclosure.

In October 2024,

the FDA approved the Company’s Supplemental New Drug Application to increase the maximally approved dosage of Ameluz ®

from one to three tubes per treatment.

This approval allows for larger field treatment of AK on face and scalp with Ameluz®-PDT

using the BF-RhodoLED ® or the RhodoLED ® XL lamp.

November 2024, 863 shares of Series B Convertible Preferred were converted into 1,219,419 shares of common stock.

November 11, 2024, the Company entered into an amended and restated employment agreement with Hermann Luebbert, its Chief Executive Officer

and Chairman.

The amended and restated agreement (a) requires that Mr.

Luebbert deliver a waiver and release of claims in a form reasonably

acceptable to the Company prior to Mr.

Luebbert receiving any severance payment;

and (b) increases the amount of severance payment payable

Luebbert if his employment is terminated within 3 months prior to or 12 months after a “Change in Control” (as defined

foregoing description of the amended and restated employment agreements does not purport to be complete and is qualified in its entirety

by reference to the copy of the amended and restated employment agreement filed as Exhibit 10.1 to this report and incorporated herein

by reference.

We have completed an evaluation of subsequent events

after the balance sheet date of March 31, 2025 through the date this Quarterly Report on Form 10-Q was submitted to the SEC and determined that the following material subsequent event required disclosure.

On May 8, 2025, the Company received a notice from the Listing Qualifications Department of Nasdaq notifying the

Company that the listing of its common stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq

Capital Market, as the closing bid price of the Company’s common stock was less than $1.00 per share for the previous 33 consecutive

business days.

The Company is in the process of creating a plan

to regain compliance with the Nasdaq rules.

Summary of Significant Accounting Policies – Nasdaq Compliance for

additional information and the Current Report on Form 8-K filed by the Company with the SEC on May 14, 2025.

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