What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-14 · 491 added, 609 removed, 30 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

discussion and analysis (“MD&A”) provides supplemental information, which sets forth the major factors that have affected

our financial condition and results of operations and should be read in conjunction with the Condensed Consolidated Financial Statements

and related notes.

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

performance and financial condition, and how our performance during the first quarter of 2024 compares with prior-year periods.

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

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

Forward-Looking

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

Certain statements

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

Such statements include estimates of our expenses, future revenue,

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

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

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

The words “intends,” “may,” “will,”

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

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

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Management’s discussion and analysis (“MD&A”)

provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operations

and should be read in conjunction with the Condensed Consolidated Financial Statements and related notes.

The following information should

provide a better understanding of the major factors and trends that affect our earnings performance and financial condition, and how our

performance during the first quarter of 2025 compares with prior-year periods.

Throughout this section, Biofrontera Inc., including its

wholly owned subsidiary, Biofrontera Discovery GmbH (“Discovery” or “subsidiary”), is referred to as “Company,”

“we,” “us,” or “our.” References to “ Licensors ” refer collectively to Biofrontera Pharma, Biofrontera Bioscience and

References to “ Ameluz Licensor” refer collectively to Biofrontera Pharma and Biofrontera Bioscience.

Forward-Looking Statements

The Private Securities Litigation

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

Certain statements in this Form 10-Q constitute

“forward-looking statements”.

Such statements include estimates of our expenses, future revenue, capital requirements, our

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

and strategy for bringing licensed products to market, the timeline for regulatory review and approval of our licensed products, and other

statements that are not historical facts.

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

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

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

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

2 unchanged sentences

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

While we have based these

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

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

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

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

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

the success of our principal licensed product Ameluz ® ;

reliance on sales of products we license from other companies as our sole source of revenue;

the ability of Biofrontera Pharma

GmbH (“Biofrontera Pharma”), Biofrontera Bioscience GmbH (“Biofrontera Bioscience”) and Ferrer Internacional S.A.

(“Ferrer”) , referred to collectively as our (“Licensors”) to establish and maintain relationships with

contract manufacturers that are able to supply us with enough of the licensed products to meet our demand;

the ability of our Licensors or our Licensors’

manufacturing partners, as applicable, to supply Ameluz ® , RhodoLED ® Lamps, Xepi ® or other

licensed products that we market in sufficient quantities and at acceptable quality and cost levels, and to fully comply with current

good manufacturing practice or other applicable manufacturing regulations;

the ability of our Licensors to successfully defend

or enforce patents related to our licensed products;

the impact of legislative and regulatory changes;

ability to obtain additional financing as needed to implement our growth strategy;

our success in achieving profitability;

our ability to retain and recruit key personnel;

our ability to effectively manage and control costs

associated with our clinical trial operations

success of our competitors in developing generic topical dermatological products that successfully compete with our licensed products;

availability of insurance coverage and medical expense reimbursement for our licensed products;

competition from other pharmaceutical and medical device companies and

existing treatments, such as simple curettage and cryotherapy;

other risks identified in Item 1A.

Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023

(as filed with the Securities and Exchange Commission (“SEC”) on March 15, 2024, the “Form 10-K”), Item 1A

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

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

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

We urge investors

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

We do not undertake to publicly

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

are 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.

Our subsidiary, Discovery, was formed on February 9, 2022, as a German presence that manages our clinical trial work

and facilitates our relationship with Biofrontera Pharma and Biofrontera Bioscience (together, the “Ameluz Licensor”),

both of which are related parties as they are wholly owned subsidiaries of Biofrontera AG.

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

AKs are premalignant lesions of the skin

that can potentially develop into skin cancer (squamous cell carcinoma) if left untreated.

International treatment guidelines list

PDT as the “gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin.

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 as of February 13, 2024 with the Ameluz Licensor (the

“Second A&R Ameluz LSA”).

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

cost management and direct oversight of trial efficiency.

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

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

Lamps to better fulfill the needs of dermatologists.

Our goal is to improve the effectiveness of our commercial team by allowing sales

representatives to carry approved devices with them allowing for easier product demonstrations and evaluations.

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 healthcare professionals greater flexibility in addressing larger or

multiple treatment areas for patients undergoing PDT for AK on the face and scalp, leading to greater convenience for both healthcare

providers and their patients.

In combination with the RhodoLED ® XL Lamp, providers can now treat a patient’s

face more efficiently.

Additionally, the change to the label and the RhodoLED ® XL are both foundational to support trunk

and extremities which we expect to add to the label in the next couple years.

Also, in October 2024, the Company received results

in its Phase III trial evaluating its drug-device therapy, Ameluz ® with the BF-RhodoLED lamp, as a treatment for

superficial basal cell carcinoma (“sBCC”).

The primary endpoint was a composite of complete clinical and histological

clearance of one preselected “main target” BCC lesion per patient 12 weeks after the start of the last PDT cycle.

According to the phase III ALA-BCC-CT013 study, Ameluz®-PDT achieved 65.5% success, compared to 4.8% success achieved with

Complete histological clearance was seen in 75.9% of these lesions in the Ameluz® arm, compared to 19.0% with

Complete clinical clearance was achieved in 83.4% of patients treated with Ameluz® compared to 21.4% with placebo.

with the Second A&R Ameluz LSA, the price we pay per unit, based on certain percentages of the anticipated net selling price, (the

“Transfer Price”) of Ameluz ® was reduced from 50% to 25% for all purchases through 2025.

Starting on January

1, 2026, until 2032 there will be stepwise increases in the Transfer Price from 25% to 35% for sales related to AK and, if approved by

the Food and Drug Administration (the “FDA”), basal cell carcinoma and squamous cell carcinoma.

While we have based these forward-looking

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

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

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

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

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

our ability to achieve and sustain profitability;

our ability to compete effectively in selling our licensed products;

our ability to expand, manage and maintain our direct sales and marketing organizations, including our ability to obtain the financing to develop our marketing strategy, if needed;

changes in our relationship with our Licensors;

our Licensors’ ability to manufacture our licensed products;

our Licensors’ ability to adequately protect their intellectual property and operate their business without infringing upon the intellectual property rights of others;

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

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

the willingness of healthcare providers to purchase our licensed products if coverage, reimbursement and pricing from third-party payors for our products, or procedures using our products significantly declines;

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

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

our ability to comply with The Nasdaq Stock Market, LLC (“Nasdaq”) continued listing standards (discussed in more detail

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

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

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

such other risks identified in Item 1A.

Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (as filed with the Securities and Exchange Commission (“SEC”) on March 20, 2025, the “Form 10-K”), Item 1A of Part II of this Quarterly Report on Form 10-Q and any other filings with the SEC.

More detailed information about us and the risk factors

that may affect the realization of forward-looking statements, including the forward-looking statements in this Quarterly Report on Form

10-Q, is set forth in our filings with the SEC, including our Form 10-K.

We urge investors and security holders to read those documents

free of charge at the SEC’s web site at www.sec.gov.

We do not undertake to publicly update or revise our forward-looking statements

as a result of new information, future events or otherwise, except as required by law.

Biofrontera Inc.

(the “Company” or “Biofrontera”)

is a United States based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological

conditions with a focus on photodynamic therapy (“PDT”).

The Company’s primary licensed products, which include Ameluz ®

as well as the BF-RhodoLED ® and RhodoLED ® XL lamps (the “RhodoLED ® Lamps”), are

used for the treatment of actinic keratoses, which are pre-cancerous skin lesions.

With our national commercial team, we generate revenue

by selling our licensed products directly to dermatology offices and groups.

We are currently selling Ameluz ® in

the United States under a n exclusive license and supply agreement, the Second Amended and

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

The Second A&R Ameluz LSA reduced the price we pay per unit, based on certain percentages of the anticipated net selling price, (“Transfer Price”) of Ameluz ® from 50% to 25% which covers the cost of goods, royalties

on sales, and services including all regulatory efforts, agency fees, pharmacovigilance and patent administration for all purchases in

2024 and 2025.

Starting on January 1, 2026, until 2032 there will be stepwise increases in the Transfer Price from 25% to 35% for sales

related to actinic keratosis and, if approved by the FDA, basal cell carcinoma and squamous cell carcinoma.

The Transfer Price for sales

related to acne, another indication currently in development, will remain at 25% indefinitely.

The Transfer Price covers the cost of

goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance, and patent administration.

The reduced LSA Transfer Price will allow the Company to finance the R&D activities assumed as of June 1, 2024, and continue our

commercial growth trajectory.

second prescription drug licensed product in our portfolio 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 FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes.

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

Our exclusive license and supply agreement, as amended

(“Xepi LSA”), with Ferrer that we assumed on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.

enables us 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.

Ferrer 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 information.

RN, Stockfleth E, Connolly SM, et al.

Evidence- and consensus-based (S3) Guidelines for the Treatment of Actinic Keratosis - International

League of Dermatological Societies in cooperation with the European Dermatology Forum - Short version.

Effective June 1, 2024, we assumed control of all

clinical trials relating to Ameluz ® in the United States, allowing for more effective cost management and direct oversight

of trial efficiency.

Our research and development (“R&D”) program is focused on label expansion for Ameluz ®

as well as supporting PDT growth by improving the capabilities of our RhodoLED ® Lamps to better fulfill the needs of dermatologists.

The reduced Transfer Price will allow the Company to finance such R&D activities and continue our commercial growth trajectory.

In the third quarter of 2024, the Company

reached the decision to divest its Xepi product line and the related intangible asset is currently held for sale.

Xepi ® (ozenoxacin cream, 1%), is a topical non-fluorinated quinolone that inhibits bacterial growth.

no antibiotic resistance against Xepi ® is known and it has been specifically approved by the FDA for the

treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes.

Our exclusive license and

supply agreement (as amended, the “Xepi LSA”) with Ferrer Internacional S.A.

(“Ferrer”) enables us to market

and sell this product in the United Sates.

However, the Company has not had sales of Xepi since 2023 due to third-party

manufacturing delays that have impacted our commercialization of the product.

Ferrer 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.

Nevertheless, the Company is working

with a potential purchaser and expects to complete a sale of the asset within the next one to five months.

The related intangible

asset is presented as held for sale under current assets in the consolidated balance sheets.

Asset Held for

Sale , for additional information.

Compliance with Nasdaq Listing

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 million .

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.

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

listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could

materially adversely affect our stockholders:

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

the market price of our common stock;

our ability to obtain financing for the continuation of our operations;

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

the number of market makers in our common stock;

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

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

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

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

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

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

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

from, investing in our common stock.

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

Geopolitical Uncertainty

Recent actions by the U.S., including the imposition of significant tariffs

on imports from certain countries, have heightened uncertainty in the global trade environment.

These tariffs, along with potential retaliatory

measures by other countries, may increase inflationary pressure and raise the costs of our products, which are exclusively imported from

While several tariff announcements have been followed by announcements of limited exemptions and temporary pauses, these actions

have caused substantial uncertainty and volatility in financial markets, and may result in further retaliatory measures.

We may be unable

to fully offset the impacts of tariffs by adjusting the pricing of our products.

Our principal objective is to improve patient outcomes

through adoption and use of our licensed products in the United States.

The key elements of our strategy include the following:

expanding our sales in the United States of Ameluz ® in combination with the RhodoLED ® Lamps for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be the standard of care in the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base;

leveraging the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the United States market with respect to Ameluz ® and furthering the clinical development of this product after taking over responsibility for certain ongoing clinical trials since June 1, 2024, pursuant to the Second A&R Ameluz LSA;

strategically managing our licensed portfolio, including opportunistically adding complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure and customer relationships.

By executing these strategic objectives, we will fuel

company growth, deepen our trusted relationships in the dermatology community, and above all, help patients live healthier, more fulfilling

We devote a substantial portion of our cash resources

to the commercialization of our licensed products, Ameluz ® and the BF-RhodoLED ® Lamps.

We have financed

our operating and capital expenditures through cash proceeds generated from our product sales, short-term debt and proceeds received from

convertible notes and equity financings.

We believe that important measures of our results

of operations include product revenue, operating income (loss) and adjusted EBITDA (a non-GAAP measure as defined below).

Our sole source

of product revenue is sales of products that we license from certain related and unrelated companies.

Our long-term financial objectives

include consistent revenue growth and expanding operating margins.

Accordingly, we are focused on licensed product sales expansion to

drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage, and

overhead cost management.

Key factors affecting our performance

As a result of a number of factors, our historical

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

comparable from period to period.

Set forth below is a brief discussion of the key factors impacting our results of operations.

1 Werner RN, Stockfleth E, Connolly SM,

Evidence- and consensus-based (S3) Guidelines for the Treatment of Actinic Keratosis - International League of Dermatological Societies

in cooperation with the European Dermatology Forum - Short version.

J Eur Acad Dermatol Venereol.

1 unchanged sentence

doi:10.1111/jdv.13180.

principal objective is to increase the sales of our licensed products in the United States.

The key elements of our strategy include

the following:

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

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

United States by growing our dedicated sales and marketing infrastructure in the United States;

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

market through

the license and supply agreements with our Licensors;

opportunistically

adding complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure

and customer relationships.

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

RhodoLED ® Lamps.

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

sales, our line of credit, short-term debt and proceeds received in equity financings.

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

non-U.S GAAP measure as defined below).

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

and unrelated companies.

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

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

utilization, information technology leverage, and overhead cost management.

factors affecting our performance

a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods,

and our results of operations may not be directly comparable from period to period.

Set forth below is a brief discussion of the key

factors impacting our results of operations.

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

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

our Licensors take reasonable precautions to ensure the successful production of our commercially licensed products, their contract

manufacturers may experience a myriad of business difficulties (i.e., workforce instability, supply chain issues, erosion of

customer base, etc.) that could impact their financial solvency.

We have historically experienced delays in delivery times of our

RhodoLED ® Lamps due to supply chain issues and there is a possibility that there may be additional supply chain

challenges, or our orders are fulfilled at a slower rate than expected.

Despite these historic and possible future delays, we expect

total revenues will not be significantly impacted (i.e., we experience less growth than expected vs.

declining sales) since the

majority of our revenues are from sales of Ameluz ® and we have RhodoLED ® Lamps on hand and on order.

We continue to monitor the impacts of the supply chain on our business and are focused on ensuring the stability of the supply

chains for Ameluz ® and RhodoLED ® Lamps.

of Our Results of Operations

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

and to a much lesser extent Xepi ® covered by our exclusive license and supply agreements with our Licensors .

from product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances, product returns,

government rebates, and other incentives such as patient co-pay assistance.

Revenue from the sales of our RhodoLED ® Lamps

and Xepi ® are relatively insignificant compared with revenues generated through our sales of Ameluz ® .

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

level of orders generated by our sales force;

level of prescriptions and institutional demand for our licensed products;

sales prices.

Party Revenues

to June 1, 2024, the date on which we took over clinical trials, we generated insignificant related party revenue in connection with

an agreement with Biofrontera Bioscience to provide BF-RhodoLED ® lamps and associated services for the clinical trials

performed by Biofrontera Bioscience.

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

services for clinical trials.

of Revenues, Related Party

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

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

Transfer Price we paid for inventory purchased through February 12, 2024, was based on the Ameluz LSA as amended on October 8, 2021,

under which the price paid per unit was based upon our sales history.

The purchase price we paid the Ameluz Licensor for Ameluz ®

was determined in the following manner:

percent of the anticipated net selling price per unit until we generate $30 million in revenue from sales of the products we license

from the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA);

percent of the anticipated net selling price per unit for all revenues we generate between $30 million and $50 million from sales

of the products we license from the Ameluz Licensor;

percent of the anticipated net selling price per unit for all revenues we generate above $50 million from sales of the products we

license from the Ameluz Licensor.

February 12, 2024, the Second A&R Ameluz LSA, among other things, was amended to change the Transfer Price to 25% of the anticipated

net selling price per unit through 2025 and then increasing over time pursuant to the schedule set forth in the Second A&R Ameluz

LSA to a maximum of 35% of the anticipated net selling price starting in 2032, subject to a minimum dollar amount per unit.

to see an impact from the change in the transfer pricing under the Second A&R Ameluz LSA in the fourth quarter as we receive

product under the new pricing.

of Revenues, Other

of revenues, other, is comprised of purchase costs of our licensed product, Xepi ® , third-party logistics and distribution

costs including packaging, freight, transportation, shipping and handling costs, and inventory adjustment due to expiring Xepi ®

General and Administrative Expense

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

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

Other selling, general and administrative expenses

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

fees for legal, consulting and accounting services.

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

intangible assets and our legal settlement expenses.

General and Administrative Expenses, Related Party

general and administrative expenses, related party, relate to the services provided by our significant stockholder, Biofrontera AG, primarily

for regulatory support and pharmacovigilance.

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

Amended and Restated Master Contact Services Agreement entered into on December 2021 (the “2021 Services Agreement”).

2021 Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically

provided to us, including regulatory and pharmacovigilance support for as long as we deem necessary.

We currently have statements of

work in place regarding regulatory affairs, medical affairs, pharmacovigilance, and investor relations services, and are continuously

assessing the other services historically provided to us by Biofrontera AG to determine (i) if they will be needed, and (ii) whether

they can or should be obtained from other third-party providers.

and Development

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

management and direct oversight of trial efficiency.

Our R&D expenses include costs directly attributable to the clinical development

of Ameluz ® , including personnel-related expenses, the cost of services provided by outside contractors, including services

related to the Company’s clinical trials, facilities, depreciation, and other direct and allocated expenses.

Along with our Ameluz ®

clinical trials, our R&D program also aims to improve the capabilities of our RhodoLED ® Lamps to better fulfill

the needs of dermatologists and improve the effectiveness of our commercial team by letting sales representatives carry approved devices

with them, allowing for easier product demonstrations and evaluations.

All costs associated with research and development are expensed

in Fair Value of Warrant Liabilities

warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records

changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations until the warrants are exercised,

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

in Fair Value of Investment, Related Party

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

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

statement of operations.

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

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

on Debt Extinguishment

May 8, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with MidCap Business Credit LLC,

providing us with a revolving line of credit in the aggregate principal amount of up to $6.5 million.

Effective as of January 4, 2024,

we voluntarily terminated the Loan Agreement and recognized a $0.3 million loss on debt extinguishment upon the early termination related

to prepayment fees and the write-off of deferred financing costs.

Income (Expense), net

expense, net, primarily consists of interest on our debt instruments, offset by immaterial amounts of interest income earned on our cash

balances at financial institutions and financing of customer purchases of BF-RhodoLED ® lamps.

Income (Expense), net

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

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

during such periods.

Income tax expense incurred relates to state income taxes.

of Operations

of the Three Months ended September 30, 2024 and 2023

following table summarizes our results of operations for the three months ended September 30, 2024 and 2023:

revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

and development

in fair value of contingent consideration

Because traditional photodynamic therapy treatments

using a lamp are performed more frequently during the winter, our revenue is subject to some seasonality and has historically been higher

during the first and fourth quarters than during the second and third quarters.

Components of Our Results of Operations

Product Revenues, Net

We generate product revenues through the third-party

sales of our licensed products, Ameluz ® and RhodoLED ® Lamps .

Revenues from product sales are recorded

net of trade discounts and allowances and government rebates.

The primary factors that determine our revenue derived

from our licensed products are:

the level of orders generated by our sales force;

the level of prescriptions and institutional demand for our licensed products;

unit sales prices.

Revenues, Related Party

Prior to our taking over clinical trials on June 1,

2024, we generated insignificant related party revenue in connection with an agreement with Biofrontera Bioscience to provide RhodoLED ®

Lamps and associated services for the clinical trials performed by Biofrontera Bioscience.

In the future, we do not expect to receive

related party revenue regarding RhodoLED ® Lamps and associated services for clinical trials.

Cost of Revenues, Related

Cost of revenues, related party, is comprised of purchase

costs of our licensed products, Ameluz ® and RhodoLED ® Lamps from Biofrontera Pharma GmbH and insignificant

inventory adjustments due to scrapped, expiring and excess products.

Effective February 12, 2024, the Second A&R Ameluz

LSA, among other things, was amended to change the Transfer Price from 50% to 25% of the anticipated net selling price per unit through

2025 and then increasing over time pursuant to the schedule set forth in the Second A&R Ameluz LSA to a maximum of 35% of the anticipated

net selling price starting in 2032, subject to a minimum dollar amount per unit.

Cost of Revenues, Other

Cost of revenues, other, is comprised of third-party

logistics and distribution costs including packaging, freight, transportation, shipping and handling costs.

Selling, General and Administrative Expense

Selling, general and administrative expenses consist

principally of costs associated with our sales force, commercial support personnel, personnel in executive and other administrative functions,

and medical affairs professionals.

Other selling, general and administrative expenses include marketing, trade, and other commercial costs

necessary to support the commercial operation of our licensed products and professional fees for legal, consulting and accounting services.

Selling, general and administrative expenses also include the amortization of our intangible assets and our legal settlement expenses.

Selling, General and Administrative Expenses, Related

Selling, general and administrative expenses,

related party, relate to the services provided by Biofrontera AG, primarily for regulatory support and pharmacovigilance.

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

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

The 2021 Services Agreement enables us to continue relying on Biofrontera AG and its

subsidiaries for various services it has historically provided to us, including regulatory and pharmacovigilance support for as long

as we deem necessary.

We currently have statements of work in place regarding regulatory affairs, medical affairs, and

pharmacovigilance, and are continuously assessing the other services historically provided to us by Biofrontera AG to determine (i)

if they will be needed, and (ii) whether they can or should be obtained from other third-party providers.

Research and Development

Effective June 1, 2024, we took control of all clinical

trials for Ameluz ® in the Unites States, allowing for more effective cost management and direct oversight of trial efficiency.

Our R&D expenses include costs directly attributable to the clinical development of Ameluz ® , including personnel-related

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

depreciation, and other direct and allocated expenses.

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

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

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

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

Change in Fair Value of Warrant Liabilities

For warrants that are classified as liabilities, the

Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash

gain or loss in the consolidated statements of operations until the warrants are exercised, expire or other facts and circumstances lead

the warrant liabilities to be reclassified to stockholders’ equity or deficit.

Change in Fair Value of Investment, Related Party

Our investments are comprised of equity securities

in shares of Biofrontera AG, which are initially recorded at cost, plus transaction costs, and subsequently measured at fair value, based

on quoted market prices, with the gains and losses reported in the Company’s consolidated statement of operations.

For the investments

held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses

in the consolidated statement of operations.

Loss on Debt Extinguishment

Effective January 4, 2024, we voluntarily terminated

the Loan and Security Agreement with MidCap Business Credit LLC, for our revolving line of credit and recognized a $0.3 million loss on

debt extinguishment upon the early termination related to prepayment fees and the write-off of deferred financing costs.

Interest Expense, net

Interest expense, net, primarily consists of interest

on our convertible notes and short-term debt, including amortization of deferred costs.

Other Income (Expense), net

Other income (expense), net primarily includes (i)

gain (loss) on return of leased assets and (ii) gain (loss) on foreign currency transactions.

As a result of the net losses we have incurred in

each fiscal year since inception, we have recorded no provision for federal income taxes during such periods.

Income tax expense incurred

relates to state income taxes.

Results of Operations

Comparison of the Three Months ended March 31,

2025 and 2024

The following table summarizes our results of operations

for the three months ended March 31, 2025 and 2024:

( in thousands)

Product revenues, net

Related party revenues

Total revenues, net

Operating expenses:

from operations

in fair value of warrant liabilities

in fair value of investment, related party

income (expense), net

before income taxes

product revenue for the three months ended September 30, 2024 increased by $0.1 million, or 1.5% as compared to the three months ended

September 30, 2023.

This increase was driven by $0.6 million increase from sales of devices, specifically RhodoLED ® XL

Lamp, since its launch in June 2024, offset by net decrease in sales of Ameluz of $0.5 million.

The decrease of Ameluz sales in units

in the three months ended September 30, 2024 was impacted by the delayed shipment of about 4,600 units at the end of September 2024 due

to Hurricane Milton, which forced office closures and shipping delays through the Southeast.

All shipments were delivered, and revenue for

these sales have been recognized in October 2024.

of Revenues, Related Party

of revenues, related party for the three months ended September 30, 2024 increased by $0.3 million, or 6.8% as compared to the three

months ended September 30, 2023.

This was driven by an increase of $0.5 million due to the increase in RhodoLED ® XL product

revenue, partially offset by a decrease of $0.2 million, due to decrease in sales of Ameluz ® .

We expect to see an impact

from the change in the transfer pricing under the Second A&R Ameluz LSA in the fourth quarter as we are receiving product under the

General and Administrative Expenses

general and administrative expenses for the three months ended September 30, 2024 decreased by $0.2 million, or 2.3% as compared to the

three months ended September 30, 2023.

The decrease was primarily driven by a $0.5 million decrease in general business administration

expenses, as well as a decrease of non-personnel sales and marketing expenses of $0.2 million, and a $0.3 million decrease in personnel

costs due to change in headcount and reduced severance, which was offset by a $0.8 million increase in legal expenses related to the

complaints filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD (collectively

“SUN”) with the International Trade Commission (“ITC”) and the US District Court for the district of Massachusetts.

and Development Expenses

expenses for the three months ended September 30, 2024 increased by $0.6 million as compared to the three months ended September 30,

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

effective June 1, 2024, allowing for more effective cost management and direct oversight of trial efficiency.

This increase to R&D

expenses should be offset by a reduction in the Transfer Price of Ameluz ® from 50% to 25% for all future purchases made

in 2024 and 2025.

No such inventory purchases were made as of September 30, 2024.

The following table summarizes our research and development

Months Ended September 30,

to severe acne

basal cell carcinoma

Portable devices

Personnel-related

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was ($0.7) million for the three months ended September 30, 2024, as compared to $0.6 million

for the three months ended September 30, 2023.

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

quoted market price of the common stock.

From June 30, 2024 to September 30, 2024, the underlying value of the Company’s Common

Stock increased, leading to a corresponding increase in the value of warrant liabilities and additional expense recognized on the statements

of operations.

From June 30, 2023 to September 30, 2023, the market price decreased, causing a decrease in the value of warrant liabilities,

and a gain in in the statement of operations.

in Fair Value of Investment, Related Party

of December 31, 2023, the Company had transferred substantially all of its investment in Biofrontera AG to Maruho in exchange for the

release of certain obligations, in accordance with the Settlement Agreement and Mutual Release (the “Release”), dated December

As a result, during the third quarter of 2024, the net balance of our investment in Biofrontera AG was minimal as was the related

change in fair value.

of the Nine Months ended September 30, 2024 and 2023

following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

revenues, net

party revenues

of revenues, related party

of revenues, other

general and administrative

general and administrative, related party

and development

in fair value of contingent consideration

Total operating expenses

Loss from operations

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Loss on debt extinguishment

Interest expense, net

Other income (expense), net

Loss before income taxes

Income tax expenses

Product Revenues, net

Net product revenue for the three months ended March

31, 2025 increased by $0.7 million, or 8.7% as compared to the three months ended March 31, 2024.

The increase was driven by a $0.5 million

increase in Ameluz® sales due to an increased unit price and the launch of our RhodoLED ® XL Lamp, which resulted

in sales of RhodoLED ® XL Lamps of $0.2 million.

Operating Expenses

from operations

in fair value of warrant liabilities

in fair value of investment, related party

on debt extinguishment

income (expense), net

before income taxes

product revenue for the nine months ended September 30, 2024 increased by $1.3 million, or 5.6% as compared to the nine months ended

September 30, 2023.

This increase was mainly driven by a $1.1 million increase in the average sale price of Ameluz for the nine

months ended September 30, 2024, as well as an increase in

device sales of $0.6 million due to the launch of the RhodoLED ® XL Lamp in June 2024.

This was offset by a sales

volume decrease of approximately $0.5 million of Ameluz ® driven by the office closures and shipping delays associated

with Hurricane Milton.

As mentioned above, these delayed shipments have been delivered and revenue recognized in the fourth

of Revenues, Related Party

of revenues, related party for the nine months ended September 30, 2024 increased by $1.0 million, or 8.7% as compared to the nine months

ended September 30, 2023.

This was driven by the increase in both Ameluz ® and RhodoLED ® XL Lamp product

General and Administrative Expenses

general and administrative expenses for the nine months ended September 30, 2024 decreased by $4.3 million, or 14.3% as compared to

the nine months ended September 30, 2023.

The decrease was primarily driven by a $1.7 million decrease in legal costs due to the

settlement with Biofrontera AG in April 2023, a $1.3 million decrease of non-personnel sales and marketing expenses due to a lower

level of marketing activities in general, a $0.6 million decrease in general business administration, and a net

decrease of $0.6 million in personnel expenses, partially offset by costs relating to the complaints filed by SUN.

and Development Expenses

expenses for the nine months ended September 30, 2024 increased by $1.3 million as compared to the nine months ended September 30, 2023.

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

June 1, 2024.

The following table summarizes our research and development expenses:

Months Ended September 30,

to severe acne

basal cell carcinoma

Cost of Revenues, Related

Cost of revenues, related

party for the three months ended March 31, 2025 decreased by $0.9 million, or 22.1% as compared to the three months ended March 31, 2024.

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

Selling, General and Administrative

Selling, general and

administrative expenses for the three months ended March 31, 2025 decreased by $0.6 million, or 6.5% as compared to the three months

ended March 31, 2024.

Selling and marketing expenses decreased $0.8 million with a $0.3 million decrease coming from direct sales

team personnel expenses due to head count fluctuation and a $0.5 million decrease driven by savings in general marketing activity

and conference spending.

These decreases were partially offset by an increase of legal expenses of $1.2 million due to patent

claims, which was partially offset by savings of $0.8 million in personnel and financing expenses.

Research and Development Expense

R&D expenses for the three months ended March

31, 2025 increased $1.2 million as compared to the three months ended March 31, 2024.

The increase was attributed to our assumption of

all clinical trial activities for Ameluz ® in the United States effective June 1, 2024, allowing for more effective cost

management and direct oversight of trial efficiency.

This increase in R&D expense was and will continue to be offset by a reduction

in the Transfer Price of Ameluz ® from 50% to 25% for inventory purchases made through 2025.

The following table summarizes the major categories

of our R&D expenses for the three months ended March 31, 2025 and 2024:

Actinic keratosis

Moderate to severe acne

Superficial basal cell carcinoma

Portable devices

Personnel-related

research and development

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $1.3 million for nine months ended September 30, 2024, as compared to $2.0 million for

the nine months ended September 30, 2023.

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

value of the Company’s Common Stock paired with a higher population of warrants outstanding for the nine months ended September

30, 2024 as compared to the nine months ended September 30, 2023.

in Fair Value of Investment, Related Party

of December 31, 2023, the Company had transferred substantially all of its investment in Biofrontera AG to Maruho in exchange for the

release of certain obligations, in accordance with the Release.

As a result, during the third quarter of 2024, the net balance of our

investment in Biofrontera AG was minimal as was the related change in fair value.

on Debt Extinguishment

as of January 4, 2024, we voluntarily terminated the Loan Agreement with Midcap Business Credit LLC.

The Company recognized a $0.3 million

loss on debt extinguishment upon the early termination of the Loan Agreement related to prepayment fees and the write-off of deferred

financing costs.

income (expense), net

increase of interest expense of $1.7 million was driven by the interest and debt discount recognized on the loans issued on December

21, 2023, for an aggregate principal balance of $4.0 million.

The loans required the Company to make weekly payments of principal and

interest in the amount of approximately $0.2 million through July 5, 2024, the maturity date.

Interest expense was recognized using the

effective interest method, such that a constant effective interest rate was applied to the carrying amount of the debt at the beginning

of each period until maturity.

Loss to Adjusted EBITDA Reconciliation for the Three and Nine Months Ended September 30, 2024 and 2023

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

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

specifically described below.

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

Our definition of adjusted EBITDA

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

and differences due to items subject to interpretation.

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

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

as measures of operating performance or liquidity.

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

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

on debt extinguishment:

Effective as of January 4, 2024, we voluntarily terminated the Loan Agreement and recognized a $0.3 million

loss on debt extinguishment upon the early termination of the loan.

We exclude the impact of this loss as it is attributed to the prepayment

fee, which is considered non-recurring, and the write-off of deferred financing costs, which is considered non-cash.

in fair value of contingent consideration:

Pursuant to a share purchase agreement with Maruho, the profits from the sale of Cutanea

products were to be shared equally between Maruho and Biofrontera until 2030.

The fair value of the contingent consideration was determined

to be $6.5 million on the acquisition date and was re-measured at each reporting date.

We exclude the historical impact of the change

in fair value of contingent consideration as this is non-cash.

We were relieved of our obligations relating to the contingent consideration

under the Release.

As such, our results of operations for the three and nine months ended September 30, 2024 were not impacted by the

change in fair value.

in fair value of warrant liabilities:

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

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

The warrant liabilities are measured at fair value at inception

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

We exclude the impact

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

in fair value of investment, related party:

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

— Equity Securities .

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

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

the Company’s consolidated statement of operations.

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

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

We exclude the impact

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

settlement expenses :

To measure operating performance, we exclude legal settlement expenses.

We do not expect to incur these types

of legal expenses on a recurring basis and believe the exclusion of such amounts allows management and the users of the financial statements

Personnel-related costs

Other research and development

Change in Fair Value of

Warrant Liabilities

The change in fair value

of warrant liabilities was $0.5 million for three months ended March 31, 2025, as compared to ($3.4) million for the three months ended

March 31, 2024.

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

Company’s Common Stock coupled with a decrease in the population of outstanding warrants.

Interest expense, net

The decrease in interest expense of $1.3 million is

due to the maturity of approximately $4.0 million of term loans as of July 5, 2024 that were issued at a higher interest rate as compared

to the convertible notes of $4.2 million issued in November of 2024.

Net Loss to Adjusted EBITDA

Reconciliation for the Three Months Ended March 31, 2025 and 2024

We define adjusted EBITDA as net income or loss before

interest income and expense, income taxes, depreciation and amortization, and other non-operating items from our statements of operations

as well as certain other items considered outside the normal course of our operations specifically described below.

Adjusted EBITDA is

not a presentation made in accordance with U.S.

Our definition of adjusted EBITDA may vary from the use of similarly-titled measures

by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

Adjusted EBITDA should not be considered as an alternative to net income or loss, operating income/(loss), cash flows from operating activities

or any other performance measures derived in accordance with U.S.

GAAP as measures of operating performance or liquidity.

Adjusted EBITDA

has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported

Loss on debt extinguishment:

Effective as of January 4, 2024, we voluntarily terminated the loan and security agreement with MidCap Business Credit LLC, which

had provided us with a revolving line of credit in the aggregate principal amount of up to $6.5 million.

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

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

financing costs, which is considered non-cash.

Change in fair value of warrant liabilities:

The warrants issued in conjunction with our private placement offerings and registered public offerings were accounted for as liabilities

in accordance with ASC 815-40.

The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes

in fair value presented within the consolidated statement of operations.

We exclude the impact of the change in fair value of warrant

liabilities as this is non-cash.

Change in fair value of investment, related

The Company accounts for its investment, related party in accordance with ASC 321, Investments — Equity Securities .

Equity securities, which are comprised of investments in common stock, are initially recorded at cost, plus transaction costs, and subsequently

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

of operations.

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

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

We exclude the impact of the realized gain as this is non-recurring

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

Stock-Based Compensation :

operating performance, we exclude the impact of costs relating to share-based compensation.

Due to the subjective assumptions and the

variety of award types, we believe that the exclusion of share-based compensation expense, which is non-cash, allows for more meaningful

comparisons of our operating results to peer companies.

Share-based compensation expense can vary significantly based on the timing, size

and nature of awards granted.

Expensed issuance costs:

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

We do not expect to incur this type

of expense on a recurring basis and believe the exclusion of these costs allows management and the viewers of the financial statements

to better understand our financial results.

Compensation :

To measure operating performance, we exclude the impact of costs relating to share-based compensation.

Due to the subjective

assumptions and the variety of award types, we believe that the exclusion of share-based compensation expense, which is non-cash, allows

for more meaningful comparisons of our operating results to peer companies.

Share-based compensation expense can vary significantly based

on the timing, size and nature of awards granted.

issuance costs:

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

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

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

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

use adjusted EBITDA to measure our performance from period to period and to compare our results to those of our competitors.

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

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

financial information is viewed with U.S.

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

our ongoing operating performance.

table below presents a reconciliation from net loss to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Adjusted EBITDA margin is adjusted EBITDA for a particular

period expressed as a percentage of revenues for that period.

We use adjusted EBITDA to measure our performance

from period to period and to compare our results to those of our competitors.

In addition to adjusted EBITDA being a significant measure

of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial

and business trends related to our results of operations and that when non-U.S.

GAAP financial information is viewed with U.S.

GAAP financial

information, investors are provided with a more meaningful understanding of our ongoing operating performance.

The below table presents

a reconciliation from net loss to Adjusted EBITDA for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Interest expense, net

2 unchanged sentences

Loss on debt extinguishment

Change in fair value of contingent consideration

Change in fair value of warrant liabilities

Change in fair value of investment, related party

Legal settlement expenses

Stock based compensation

2 unchanged sentences

Adjusted EBITDA margin

EBITDA decreased from ($3.9) million for the three months ended September 30, 2023 to ($4.6) million for the three months ended September

The decrease was primarily driven by an increase in R&D expenses of $0.6 million.

EBITDA increased from ($15.8) million during the nine months ended September 30, 2023 to ($13.9) million for the nine months ended September

The increase in Adjusted EBITDA was primarily driven by a decrease in selling, general and administrative expenses of $3.2

million, due primarily to a decreased level of marketing activities and savings in legal expenses.

This is partially offset by an increase

in R&D expense of $1.3 million.

and Capital Resources

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

Adjusted EBITDA

Adjusted EBITDA increased from ($4.6) million for

the three months ended March 31, 2025 to ($4.4) million for the three months ended March 31, 2024.

The increase was driven by an increase

in gross profit of $1.5 million and offset by a $1.2 million increase in R&D expenses.

These changes were

driven by the reduced cost structure under the Second A&R Ameluz LSA and assumption of all clinical trial activities for Ameluz ® .

Liquidity and Capital Resources

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 had an accumulated deficit as of March 31, 2025

of $121.6 million.

We 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 September 30, 2024, we had cash and cash equivalents of $2.9 million, compared to $1.3

million as of December 31, 2023.

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 intended plan over the next twelve

months to improve the Company’s liquidity and profitability, which includes without limitation:

the commercialization of Ameluz ® in the United States while decreasing discretionary

pursuing additional capital through the issuance of equity securities, debt or the sale of

● Controlling

expenses and limiting capital expenditures.

the benefit of the reduced cost of inventory in line with the terms of the Second A&R

The company believes that the implementation of such plans will provide

the opportunity for the Company to continue as a going concern.

However, no assurance can be given that the Company will be successful

in these efforts and will depend on several factors, including executing

on its sales plan and planned cost reductions within the time period needed, as well as other possible challenges and unforeseen circumstances.

A lack of execution or unforeseen circumstances may require the Company to raise additional capital or debt which may not be available

on acceptable terms, or at all, which could result in a material adverse effect on the Company, as well as its business, financial condition,

results of operations, growth prospects and financial statements.

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.

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

Months Ended September 30,

cash used in operating activities

cash provided by (used) in investing activities

cash provided by financing activities

increase (decrease) in cash and restricted cash

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

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

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

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

the nine months ended September 30, 2023, operating activities used $16.0 million of cash, primarily resulting from our loss from operations

of $23.7 million, adjusted for non-cash expense of stock-based compensation of $0.8 million, non-cash interest expense of $0.3 million,

depreciation and amortization in the aggregate of $0.8 million, net cash used by changes in our operating assets and liabilities of $0.9

million, the change in fair value of contingent consideration of $0.1 million and the change in fair value of investment, related party

of $6.6 million;

partially offset by the change in fair value of warrant liabilities of $2.0 million.

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

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

the nine months ended September 30, 2023, net cash provided by investing activities of $0.5 million consisted of the proceeds from the

sales of equity investments of $0.6 million, partially offset by the purchase of machinery and computer equipment.

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

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

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

$0.2 million to extinguish our line of credit.

See Note 10 Debt.

the nine months ended September 30, 2023, net cash from financing activities consisted of a net $1.7 million of proceeds from our line

Policies and Significant Judgments and Estimates

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

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

The preparation

of the financial statements in accordance with U.S.

GAAP requires the use of estimates and assumptions by management that affect the

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

expenses arising during the reporting period.

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

are appropriate relate to contingent consideration, fair value measurements, valuation of intangible assets and impairment assessment,

and stock compensation.

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

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

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

our consolidated financial statements included in Item 8.

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.

The Company cannot provide assurance that it will ultimately achieve profitable operations and become operating

cash flow positive or raise additional debt or equity capital.

Additionally, the current capital resources are not adequate to continue

operating and maintaining the business strategy for a period of twelve months from the issuance date of this report.

Management believes

that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months

from the issuance date of this report.

Management’s plans that are intended 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.

The following table summarizes our cash provided by

and (used in) operating, investing and financing activities:

Three Months Ended

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and restricted cash

Operating Activities

During the three months ended

March 31, 2025, operating activities used $4.1 million of cash, primarily resulting from our loss from operations of $4.2 million, plus

the change in fair value of warrant liabilities of $0.5 million adjusted for non-cash expense of stock-based compensation of $0.2 million,

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

in our operating assets and liabilities of $0.1 million.

During the three months ended

March 31, 2024, operating activities used $3.3 million of cash, primarily resulting from our loss from operations of $10.4 million, adjusted

for the change in fair value of warrant liabilities of $3.4 million, non-cash expense of stock-based compensation of $0.2 million, non-cash

interest expense of $0.2 million, loss on debt extinguishment of $0.3 million, depreciation and amortization in the aggregate of $0.3

million, and net cash used by changes in our operating assets and liabilities of $2.6 million.

Investing Activities

During the three months ended March 31, 2025, net

cash used in investing activities consisted of negligible fixed asset purchases.

During the three months ended March 31, 2024, net

cash provided by investing activities consisted of $0.1 million of proceeds from the sales of equity investments, which were offset by

the purchase of capitalized software.

Financing Activities

There were no financing activities during the three

months ended March 31, 2025.

During the three months ended March 31, 2024, net

cash from financing activities consisted of proceeds of $7.7 million, net of capitalized issuance costs, from the issuance of preferred

stock and warrants, offset by repayments of $1.5 million on our short-term loan, repayments of $0.2 million on our line of credit and

prepayment fees of $0.2 million to extinguish our line of credit.

Accounting Policies and Significant Judgments and

Our management’s discussion and analysis of

our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally

accepted accounting principles of the United States, or GAAP.

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

requires the use of estimates and assumptions by management that affect the value of assets and liabilities, as well as contingent assets

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

The main areas

in which assumptions, estimates and the exercising of a degree of judgment are appropriate relate to contingent consideration, fair value

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

Estimates are based on historical experience

and other assumptions that are considered appropriate in the circumstances.

They are continuously reviewed but may vary from the actual

Our significant accounting policies are described

in more detail in Note 2 – Summary of Significant Accounting Policies , to our consolidated financial statements included

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

Accounting Estimates

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

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

There were no material

changes to our critical accounting estimates for the nine months ended September 30, 2024, except for the following:

warrants for convertible preferred stock issued in conjunction with our private placement offering conducted pursuant to the securities

purchase agreements entered into on February 19, 2024 with institutional investors were accounted for as liabilities in accordance with

ASC 815-40 and are presented within warrant liabilities in the accompanying consolidated balance sheet.

The warrant liabilities are measured

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

Due to the uncertainty of the how the convertible preferred warrants would ultimately settle, the Company used a probability-weighted

approach along with a Black-Scholes-Merton (“BSM”) model equation to estimate the fair value of the preferred warrants under

different scenarios.

While we believe these assumptions were reasonable, the manner or timeframe in which the warrants ultimately settle

The BSM model also considers several variables and assumptions in estimating the fair value of financial instruments, including

the per-share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected stock price

volatility over the expected term, and expected annual dividend yield.

Certain inputs utilized in our BSM pricing 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 have caused a significant change to the fair value of our warrant liability which could

also have resulted in material non-cash gain or loss being reported in our consolidated statement of operations.

Sheet Arrangements

than those items reflected in Note 17.

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

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

Growth Company Status

Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended

transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise

apply to private companies.

We have elected to take advantage of such extended transition period, which means that when an accounting

standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised

standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably

elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

Critical Accounting Estimates

our critical accounting estimates is discussed in the section entitled “Critical Accounting Estimates” in Item 7.

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

There were no material changes to our critical

accounting estimates for the three months ended March 31, 2025.

Off-balance Sheet Arrangements

Other than those items reflected in Note 17.

and Contingencies we did not have during the periods presented, and we do not currently have, any other off-balance sheet arrangements,

as defined in the rules and regulations of the SEC.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits

an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting

standards applicable to public companies until those standards would otherwise apply to private companies.

We have elected to take advantage

of such extended transition period, which means that when an accounting standard is issued or revised and it has different application

dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised

standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period

or (ii) no longer qualify as an emerging growth company.

Quantitative and Qualitative Disclosures About Market Risk

a “smaller reporting company,” we are not required to provide the information required by this Item.

As a “smaller reporting company,” we are

not required to provide the information required by this Item.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis