What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-05-15 · 550 added, 463 removed, 58 unchanged (95% of the section changed)

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”,

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 and second quarters of 2025 compare 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 Ferrer.

References to “ Ameluz

Licensor” refer collectively to Biofrontera Pharma and Biofrontera Bioscience.

Forward-Looking

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

Certain statements

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

Such statements include estimates of our expenses, future revenue,

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

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

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

The words “intends,” “may,” “will,”

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

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

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

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 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.

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.

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:

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

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 below);

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

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

Securities and Exchange Commission (“SEC”) on March 20, 2025, the “Form 10-K”), Item 1A of Part II of this

Quarterly Report on Form 10-Q and any other filings with the SEC.

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

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

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.

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

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

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

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

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

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.

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

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

cost management and direct oversight of trial efficiency.

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

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

Lamps to better fulfill the needs of dermatologists.

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

activities and continue our commercial growth trajectory.

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.

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

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 three months.

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;

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

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.

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 lives.

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

BF-RhodoLED ® Lamps.

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

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

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

GAAP measure as defined below).

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

related and unrelated companies.

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

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

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

Key Developments

with Nasdaq Listing Standards

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

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

previous 33 consecutive business days.

The notice has no present

impact on the listing or trading of the Company’s securities on The Nasdaq Capital Market.

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

the Company has a period of 180 calendar days, or until November 5, 2025, to regain compliance with the rule referred to in this paragraph.

To regain compliance, during this 180-day compliance period, the closing bid price of the Company’s common stock must be at least

$1.00 per share for a minimum of 10 consecutive business days.

the event that the Company does not regain compliance with the Nasdaq Listing Rules prior to the expiration of the 180-day compliance

period ending on November 5, 2025, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule

5810(c)(3)(A)(ii) by meeting the continued listing requirement for market value of publicly held shares and all other applicable standards

for initial listing on The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and providing written notice

to Nasdaq of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or if the Company does not meet other listing

standards, Nasdaq could provide notice that the Company’s securities will be subject to delisting.

At such time, the Company may

appeal the delisting determination to a Hearings Panel.

The Company intends to actively monitor the closing bid price of its common

stock and, as appropriate, will consider available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules.

There can be no assurance that the Company will be able to regain compliance with Rule 5550(a)(2) or maintain compliance with the other

listing requirements of the Nasdaq Capital Market.

May 21, 2025, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the

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

million, the Company 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 the Notice or as of

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

$35 million or achieving a net income from continuing operations of $0.5 million in the most recently completed fiscal year or in two

of the last three most recently completed fiscal years.

As a result, as of the date of this Report, the Company does not satisfy Nasdaq

Marketplace Rule 5550(b).

Notice has no immediate effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market.

submitted a plan to regain compliance with the Nasdaq Listing Rule 5550(b)(1) to Nasdaq and on July 24, 2025 was granted an

extension of time to regain compliance with this rule on or before October 10, 2025.

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;

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.

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.

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.

2015;29(11):2069-2079.

doi:10.1111/jdv.13180.

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;

Transaction with Biofrontera AG

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

Biofrontera Pharma, and Biofrontera Bioscience (together, the “Biofrontera Group”) pursuant to which the Company will

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

Rights”) to Ameluz ® and RhodoLED ® (the

“Strategic Transaction”).

In connection with the Strategic Transaction, additional agreements are to be executed, and

the transfer of the U.S.

Rights is expected to be completed by September 30, 2025.

Under the Term Sheet, and continuing once the

Rights are transferred, the Company will pay a royalty of 12% (and 15% in years where Ameluz ® revenue in the

United States exceeds $65.0 million).

The royalty will replace the transfer pricing model under the Company’s Second A&R

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

Related Party

Transactions for additional information.

exchange for the U.S.

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

business, Biofrontera AG will receive 3,019 shares of Series D Convertible Preferred Stock, par value $0.001 per share.

Related Party Transactions, Note 18.

Commitments and Contingencies and Note 20.

Subsequent Events for additional information.

to the Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “Series

D Certificate of Designation”), each share of Series D Convertible Preferred Stock is, subject to certain limitations specified

in the Series D Certification of Designation, immediately convertible at the option of the holders thereof into shares of the Company’s

common stock, par value $0.001 per share (the “Common Stock”) and has voting rights on an as-converted basis.

no shares of Series D Convertible Preferred Stock issued as of June 30, 2025.

Subsequent Events for additional information.

Placement of Series C Preferred Stock

June 27, 2025, as a condition to the Strategic Transaction, the Company entered into a securities purchase agreement (the “Purchase

Agreement”) with certain accredited investors to issue and sell, in a private placement, up to 11,000 shares of Series C Convertible

Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) at a price of $1,000 per share for an aggregate

offering price of $11.0 million.

The Series C Preferred Stock offering consisted of two tranches with the first tranche closing on July

Gross proceeds of $8.5 million from the first tranche were received on June 30, 2025, in advance of the first tranche closing

(before deducting estimated offering expenses payable by the Company).

The second tranche is expected to close after the Company enters

into definitive documentation to consummate the Strategic Transaction, which is expected to occur on or before September 30, 2025.

gross proceeds from the second tranche are expected to be $2.5 million, before deducting estimated offering expenses payable by the Company.

The Company intends to use the net proceeds from the Series C Preferred Stock offering to fund the acquisition and transfer costs associated

with the Strategic Transaction and other general corporate purposes.

Advance from Stockholders for additional

Uncertainty and Tariffs

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

the global trade environment.

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

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

While several tariff announcements have been

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

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

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

the pricing of our products.

affecting our performance

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 due to seasonality.

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

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

of Our Results of Operations

Revenues, Net

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

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

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

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

Related Party

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

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

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

services for clinical trials.

of Revenues, Related Party

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

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

of Revenues, Other

of revenues, other, is comprised of third-party logistics and distribution costs including packaging, freight, transportation, shipping

and handling costs.

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 Biofrontera AG, primarily for regulatory support

and pharmacovigilance.

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

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

The 2021 Services Agreement enables

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

and pharmacovigilance support for as long as we deem necessary.

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

medical affairs, and pharmacovigilance, and are continuously assessing the other services historically provided to us by Biofrontera

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

and Development

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

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

1 unchanged sentence

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

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

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

and evaluations.

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

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

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.

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

Income (Expense), Net

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

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 June 30, 2025 and 2024

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

( in thousands)

Product revenues, net

Related party revenues

Revenues, net

Operating expenses:

Cost of revenues, related party

Cost of revenues, other

Selling, general and administrative

Selling, general and administrative, related party

Research and development

Total operating expenses

Loss from operations

Change in fair value of warrant liabilities

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:

Other income, net

Total other expense

Loss before income taxes

Income tax expenses

product revenue for the three months ended June 30, 2025 increased by $1.2 million, or 15.3% as compared to the three months ended June

This increase was driven by both a 5% higher unit sale price and 9.5% increase in sales volume of Ameluz ® in

the second quarter of 2025.

The higher sales volume of Ameluz ® was due to improvements in direct sales team efficiency.

of Revenues, Related Party

of revenues, related party for the three months ended June 30, 2025 decreased by $1.7 million, or 41.8% as compared to the three months

ended June 30, 2024.

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

See N ote 12.

Party Transactions.

General and Administrative Expenses

general and administrative expenses for the three months ended June 30, 2025 increased by $2.6 million, or 33.0% as compared to the three

months ended June 30, 2024.

The increase was primarily driven by a $3.4 million increase in legal costs due to patent claims, which was

partially offset by $0.5 million in personnel savings within both the direct sales team and general and administrative staff due to headcount

fluctuation, and $0.3 million decrease in miscellaneous general and administrative expenses.

and Development Expenses

expenses for the three months ended June 30, 2025 increased by $0.2 million as compared to the three months ended June 30, 2024.

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.

The following table summarizes

our R&D expenses by indication:

Three Months Ended June 30,

Superficial basal cell carcinoma

Actinic keratosis

Moderate to severe acne

Personnel-related costs

Other research and development

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $0.2 million for the three months ended June 30, 2025, as compared to $5.4 million for

the three months ended June 30, 2024.

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

of outstanding warrant liabilities due to exercise of warrants for preferred shares in May 2024 (of the 2024 change, $4.3 million was

attributable to the warrants for preferred stock), coupled with a drop in the underlying value of the Company’s Common Stock during

the second quarter of 2025 as compared to the second quarter of 2024.

expense decreased by $0.5 million due to the lower interest rate applicable to the outstanding convertible notes of $4.2 million issued

by the Company in November 2024, as compared to the interest rate applicable to the Company’s $4.0 million term loan that matured

on July 5, 2024.

of the Six Months ended June 30, 2025 and 2024

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

( in thousands)

1 unchanged sentence

Related party revenues

Total revenues, net

Revenues, net

Operating expenses:

11 unchanged sentences

Other income (expense), net

Total other income (expense)

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

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:

Revenues, Net

product revenue for the six months ended June 30, 2025 increased by $1.9 million, or 12.0% as compared to the six months ended June 30,

This increase was driven by a higher unit sales price contributing $0.6 million and increased sales volume of Ameluz ®

contributing $1.0 million, as well as a $0.3 million increase in sales of the RhodoLED ® Lamps.

The higher sales

volume of Ameluz ® was due to improvements in direct sales team efficiency.

of Revenues, Related Party

of revenues, related party for the six months ended June 30, 2025 decreased by $2.6 million, or 32.1% as compared to the six months ended

June 30, 2024.

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

General and Administrative Expenses

general and administrative expenses for the six months ended June 30, 2025 increased by $2.0 million, or 11.8% as compared to the six

months ended June 30, 2024.

The increase was primarily attributable to a $4.4 million increase in legal expenses driven by patent claim

related legal costs.

The increased legal expenses were partially offset by savings in personnel expenses of $0.9 million due to headcount

fluctuations in our direct sales and administrative teams, as well as a decrease of $0.5 million in expenses relating to sales support

functions and a decrease of $0.4 million in issuance costs.

and Development Expenses

expenses for the six months ended June 30, 2025 increased by $1.4 million as compared to the six months ended June 30, 2024.

was attributable to our assumption of all clinical trial activities for Ameluz ® in the United States effective June 1,

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

Six Months Ended June 30,

Superficial basal cell carcinoma

Actinic keratosis

Moderate to severe acne

Superficial basal cell carcinoma

Portable devices

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.

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:

in Fair Value of Warrant Liabilities

change in fair value of warrant liabilities was $0.7 million for the six months ended June 30, 2025, as compared to $2.0 million for

the six months ended June 30, 2024.

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

of the Company’s Common Stock for each of the six months ended June 30, 2025 and June 30, 2024.

expense decreased by $1.8 million due to the decrease in the interest rate applicable to the outstanding convertible notes of $4.2 million

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

Loss to Adjusted EBITDA Reconciliation for the Three and Six Months Ended June 30, 2025 and 2024

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

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

specifically described below.

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

Our definition of adjusted EBITDA

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

and differences due to items subject to interpretation.

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

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

as measures of operating performance or liquidity.

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

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

on debt extinguishment:

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

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

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 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.

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.

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

Three Months Ended

Six Months Ended

Interest expense, net

8 unchanged sentences

Adjusted EBITDA margin

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 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

EBITDA decreased $0.4 million from ($4.7) million for the three months ended June 30, 2024 to ($5.1) million for the three months

ended June 30, 2025.

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

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

EBITDA for the six months ended June 30, 2025 decreased $0.2 million from ($9.3) million for the six months ended June 30, 2024

to ($9.5) million for the six months ended June 30, 2025.

This decrease is mainly due to the increase in legal expense, partially offset

by savings in other selling, general and administrative expenses and the increase in gross profit, including the sales revenue increase

of $1.9 million and cost of revenue decrease of $2.6 million.

and Capital Resources

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

generally accepted accounting principles (“U.S.

GAAP”) assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and

satisfaction of liabilities in the normal course of business.

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

The Company incurred net cash outflows from operations of $7.2

million and $8.0 million for the six months ended June 30, 2025 and 2024, respectively.

The Company had an accumulated deficit as of

June 30, 2025 of $126.9 million.

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

and cash flows from financing transactions, including $8.5 million received in a private placement of Series C Preferred Stock, with

a second tranche to be received on or before September 30, 2025.

As of June 30, 2025, we had cash and cash equivalents of $7.2 million,

compared to $5.9 million as of December 31, 2024.

However, substantial doubt exists about the Company’s ability to continue as

a going concern for a period of at least twelve months from the issuance date of this report.

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

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

Xepi product line within the next one to three months.

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

obtaining sufficient funding on acceptable terms, if at all, or close the Xepi disposition as intended.

If the Company is unable to

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

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

on the Company and its financial statements.

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

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

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

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

Six Months Ended June 30,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (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

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

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

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

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

the six months ended June 30, 2024, operating activities used $8.0 million of cash, primarily resulting from our loss from operations

of $10.7 million, adjusted for non-cash expense of stock-based compensation of $0.4 million, non-cash interest expense of $0.2 million,

loss on debt extinguishment of $0.3 million, depreciation and amortization in the aggregate of $0.6 million, and net cash used by changes

in our operating assets and liabilities of $3.0 million, partially offset by the change in fair value of warrant liabilities of $2.0

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

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

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

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

Stockholders’ Equity , for additional details.

the six months ended June 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, partially

offset by repayments of $3.7 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 11 Debt.

Policies and Significant Judgments and Estimates

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

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

The preparation of

the financial statements in accordance with U.S.

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

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

arising during the reporting period.

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

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

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

They are continuously

reviewed but may vary from the actual values.

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

our consolidated financial statements included in Item 8.

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

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.

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 six months ended June 30, 2025.

Sheet Arrangements

than those items reflected in Note 18.

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.

Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company,” we are

not required to provide the information required by this Item.

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