Biofrontera Inc. 10-Q

Item 1. Financial Statements BIOFRONTERA INC. CONDENSED CONSOLIDATED BALANCE SHEETS ( In thousands, except par value and share amounts ) June 30, 2025 December 31, 2024 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 7,239 $ 5,905 Investment, related party 9 7 Accounts receivable, net 3,955 5,315 Inventories, net 4,028 6,646 Prepaid expenses and other current assets 331 527 Asset held for sale 2,300 2,300 Other assets, related party 953 - Total current assets 18,815 20,700 Property and equipment, net 37 80 Operating lease right-of-use assets 729 903 Intangible assets, net 26 35 Other assets 535 383 Total assets $ 20,142 $ 22,101 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable 4,268 1,856 Accounts payable, related parties, net 670 5,344 Accounts payable 670 5,344 Operating lease liabilities 443 548 Advance from Stockholders 8,500 - Accrued expenses and other current liabilities 5,806 4,273 Total current liabilities 19,687 12,021 Long-term liabilities: Convertible notes payable, net 4,338 4,098 Warrant liabilities 548 1,250 Operating lease liabilities, non-current 223 276 Other liabilities 14 23 Total liabilities 24,810 17,668 Commitments and contingencies (see Note 16) - - Stockholders’ (deficit) equity: Preferred Stock $ 0.001 par value; 20,000,000 shares authorized; no Series B-1 issued; 2,641 and 3,366 Series B-2; 6,593 and 6,763 Series B-3 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively - - Common Stock $ 0.001 par value; 70,000,000 shares authorized; 10,138,567 and 8,873,932 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively 9 9 Additional paid-in capital 122,259 121,833 Accumulated deficit ( 126,936 ) ( 117,409 ) Total stockholders’ (deficit) equity ( 4,668 ) 4,433 Total liabilities and stockholders’ equity $ 20,142 $ 22,101 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 BIOFRONTERA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ( In thousands, except per share amounts and number of shares ) (Unaudited) 2025 2024 2025 2024 Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Product revenues, net $ 9,030 $ 7,831 $ 17,617 $ 15,732 Revenues, related party - 8 - 18 Total revenues, net 9,030 7,839 17,617 15,750 Operating expenses Cost of revenues, related party 2,380 4,092 5,455 8,038 Cost of revenues, other 262 250 455 421 Cost of revenues 262 250 455 421 Selling, general and administrative 10,528 7,915 19,183 17,163 Selling, general and administrative, related party 69 32 76 29 Research and development 870 621 2,077 637 Total operating expenses 14,109 12,910 27,246 26,288 Loss from operations ( 5,079 ) ( 5,071 ) ( 9,629 ) ( 10,538 ) Other income (expense) Change in fair value of warrants 153 5,438 702 2,009 Change in fair value of investment, related party 2 ( 14 ) 2 ( 11 ) Loss on debt extinguishment - - - ( 316 ) Interest expense, net ( 115 ) ( 596 ) ( 220 ) ( 2,003 ) Other income, net ( 264 ) 6 ( 363 ) 186 Total other income (expense) ( 224 ) 4,834 121 ( 135 ) Loss before income taxes ( 5,303 ) ( 237 ) ( 9,508 ) ( 10,673 ) Income tax expense 21 20 19 21 Net loss $ ( 5,324 ) $ ( 257 ) $ ( 9,527 ) $ ( 10,694 ) Loss per common share: Basic and diluted $ ( 0.57 ) $ ( 0.05 ) $ ( 1.05 ) $ ( 2.45 ) Weighted-average common shares outstanding: Basic and diluted 9,351,557 5,091,353 9,108,091 4,357,474 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 BIOFRONTERA INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) (Unaudited) Shares Amount Shares Amount Capital Deficit Total Three and Six Months Ended June 30, 2025 Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance, April 1, 2025 10,129 - 8,873,932 9 122,072 ( 121,612 ) 469 Conversion of Series B-2 Preferred into Common ( 725 ) - 1,024,425 - - - Conversion of Series B-3 Preferred into Common ( 170 ) - 240,210 - - - Stock based compensation - 187 187 Net loss - - - ( 5,324 ) ( 5,324 ) Balance, June 30, 2025 9,234 - 10,138,567 9 122,259 ( 126,936 ) ( 4,668 ) Balance, January 1, 2025 10,129 - 8,873,932 9 121,833 ( 117,409 ) 4,433 Conversion of Series B-2 Preferred into Common ( 725 ) - 1,024,425 - - - - Conversion of Series B-3 Preferred into Common ( 170 ) - 240,210 - - - - Stock based compensation - - - 426 - 426 Net loss - - - - ( 9,527 ) ( 9,527 ) Balance, June 30, 2025 9,234 - 10,138,567 9 122,259 ( 126,936 ) ( 4,668 ) Three and Six Months Ended June 30, 2024 Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance, April 1, 2024 - $ - 5,089,413 $ 5 $ 104,666 $ ( 110,087 ) $ ( 5,416 ) Conversion of Series B-1 Preferred into Series B-2 Preferred 4,806 - - - 3,570 - 3,570 Issuance of Series B-3 upon exercise of warrants 7,998 - - - 12,810 - 12,810 Issuance of RSUs - - 4,771 - - - - Stock based compensation - - - - 204 - 204 Net loss - - - - - ( 257 ) ( 257 ) Balance, June 30, 2024 12,804 $ - 5,094,184 $ 5 $ 121,250 $ ( 110,344 ) $ 10,911 Balance, January 1, 2024 - $ - 1,517,628 $ 2 $ 104,441 $ ( 99,650 ) $ 4,793 Balance - $ - 1,517,628 $ 2 $ 104,441 $ ( 99,650 ) $ 4,793 Exercise of pre-funded warrants - - 1,055,000 1 ( 1 ) - - Conversion of Series B-1 Preferred into Series B-2 Preferred and common stock 4,806 - 2,516,785 2 3,568 - 3,570 Issuance of Series B-3 upon exercise of warrants 7,998 - - - 12,810 - 12,810 Issuance of RSUs - - 4,771 - - - - Stock based compensation - - - - 432 - 432 Net loss - - - - - ( 10,694 ) ( 10,694 ) Balance, June 30, 2024 12,804 $ - 5,094,184 $ 5 $ 121,250 $ ( 110,344 ) $ 10,911 Balance 12,804 $ - 5,094,184 $ 5 $ 121,250 $ ( 110,344 ) $ 10,911 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 BIOFRONTERA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) 2025 2024 Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 9,527 ) $ ( 10,694 ) Adjustments to reconcile net loss to cash flows used in operations: Depreciation 47 42 Amortization of right-of-use assets 386 358 Amortization of acquired intangible assets 8 216 Realized/unrealized (gain)/ loss in investment, related party ( 2 ) 11 Change in fair value of warrant liabilities ( 702 ) ( 2,009 ) Stock-based compensation 426 432 Allowance for credit losses ( 57 ) 77 Loss on debt extinguishment - 316 Non-cash interest expense 240 246 Changes in operating assets and liabilities: Accounts receivable 1,418 1,581 Other receivables, related party - 3 Prepaid expenses and other assets 45 ( 28 ) Other assets, related party ( 953 ) Inventories 2,618 6,961 Accounts payable 2,412 ( 894 ) Accounts payable, related party, net ( 4,674 ) ( 3,436 ) Operating lease liabilities ( 371 ) ( 334 ) Accrued expenses and other liabilities 1,524 ( 893 ) Cash flows used in operating activities ( 7,162 ) ( 8,045 ) Cash flows from investing activities Sales of equity investment, related party - 57 Purchase of intangible assets - ( 50 ) Purchases of property and equipment ( 4 ) ( 9 ) Cash flows used in investing activities ( 4 ) ( 2 ) Cash flows from financing activities Proceeds from stockholder advances 8,500 - Proceeds from issuance of series B-1 preferred stock and warrants to purchase series B-3 preferred stock, net of issuance costs - 7,662 Proceeds from issuance of series B-3 from exercise of warrants - 7,438 Payment to extinguish line of credit - ( 357 ) Payment of principal short-term debt - ( 3,660 ) Cash flows provided by financing activities 8,500 11,083 Net increase in cash and cash equivalents 1,334 3,036 Cash, cash equivalents and restricted cash, at the beginning of the period 6,105 1,543 Cash, cash equivalents and restricted cash, at the end of the period $ 7,439 $ 4,579 Supplemental disclosure of cash flow information Interest paid $ 3 $ 1,701 Income taxes paid, net $ 21 $ 21 Supplemental non-cash financing activities Addition of right-of-use assets in exchange for operating lease liabilities $ 98 $ - Conversion of warrant liability to equity $ - $ 5,372 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Biofrontera Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Business Overview Biofrontera Inc., a Delaware Corporation (the “Company,” “we,” “us,” “our,” or “Biofrontera”), is a United States-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”). The Company’s primary licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions. The Company includes its wholly owned subsidiary Biofrontera Discovery GmbH (“Discovery”), a limited liability company organized under the laws of Germany, formed on February 9, 2022, as a German presence to facilitate our relationship with Biofrontera Pharma GmbH (“Biofrontera Pharma”) and Biofrontera Bioscience GmbH (“Biofrontera Bioscience” and together with Biofrontera Pharma, the “Ameluz Licensor”) and manage our clinical trial work. Our principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with the RhodoLED ® Lamps, for PDT (when used together, “Ameluz ® PDT”). In the United States, the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp. We are currently selling Ameluz ® for this indication in the United States under an exclusive license and supply agreement (as amended, the “Second A&R Ameluz LSA”) with the Ameluz Licensor, both of which are related parties. 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. Strategic Transaction with Biofrontera AG On 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 U.S. 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. See Note 12. Related Party Transactions for additional information. In 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. See Note 12.Related Party Transactions, Note 18. Commitments and Contingencies and N ote 20. Subsequent Events for additional information. Pursuant 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. There were no shares of Series D Convertible Preferred Stock issued as of June 30, 2025. See Note 18. Subsequent Events for additional information. 7 Private Placement of Series C Preferred Stock On 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 1, 2025. 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. The 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 transfer of costs associated with the Strategic Transaction and other general corporate purposes. See Note 9. Advance from Stockholders for additional information. Liquidity and Going Concern These 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. Since 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. The 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 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. 8 2. Summary of Significant Accounting Policies Basis for Preparation of the Financial Statements The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2025, the Company’s operating results for the three and six months ended June 30, 2025 and 2024, and the Company’s cash flows for the six months ended June 30, 2025 and 2024. The accompanying financial information as of December 31, 2024 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20, 2025. All amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages and per share and share amounts. With the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Form 10-K for the year ended December 31, 2024. Reclassification of Prior Year Presentation Certain prior period amounts have been reclassified for consistency with the current period presentation. The reclassification was limited to the condensed consolidated statements of cash flow and had no impact on the reported results of operations. Specifically, for prior year presentation, accounts payable-related parties of $ 3.4 million was reclassed from accounts payable to accounts payable, related party, net. The Nasdaq Stock Market, LLC (“Nasdaq”) Compliance On 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. In 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. On 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). 9 The Notice has no immediate effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market. The Company 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. Use of Estimates The preparation of the consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions by management that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, as reported on the balance sheet date, and the reported amounts of revenues and expenses arising during the reporting period. The main areas in which assumptions, estimates and the exercising of judgment are appropriate relate to realization and valuation of receivables and inventory, valuation of warrant liabilities, impairment assessment of intangibles and other long-lived assets, share-based payments, deferred tax asset valuations, and contingent liability recognition. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures . The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. ASU 202-09 did not have any impact on the interim disclosures in 2025. We are evaluating the effect that this guidance will have on our annual consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, I ncome Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense . The new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The new standard permits early adoption and can be applied prospectively or retrospectively. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20); Induced Conversions of Convertible Debt. This ASU clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. It is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures. 3. Fair Value Measurements The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: Schedule of Fair Value Hierarchy Valuation Inputs (in thousands) Level June 30, 2025 December 31, 2024 Assets: Investment, related party 1 $ 9 $ 7 Liabilities: Warrant liability – 2023 Purchase Warrants 3 $ 452 $ 1,030 Warrant liability - 2022 Purchase Warrants 3 $ 43 $ 98 Warrant liability – 2022 Inducement Warrants 3 $ 53 $ 122 Total Liabilities $ 548 $ 1,250 10 Investment, related party A s of June 30, 2025 and December 31, 2024, the Company owned 3,019 common shares of Biofrontera AG. The fair value of this investment was determined with Level 1 inputs through references to quoted market prices. Warrant Liabilities The warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of the Company’s Common Stock originally issued in a private placement on May 16, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the “2022 Purchase Warrants”); (ii) warrants to purchase 214,286 shares of Common Stock issued on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the “2022 Inducement Warrants”); and (iii) warrants to purchase 1,807,500 shares of Common Stock issued on November 2, 2023 expiring five years following the date of issuance and with an exercise price of $ 3.55 per share ( the “2023 Purchase Warrants”). See Note 13. Stockholders’ Equity for additional details. The 2023 Purchase Warrants and 2022 Purchase Warrants, as well as the 2022 Inducement Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statement of operations. The Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered a Level 3 fair value measurement. Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liabilities which could also result in material non-cash gain or loss being reported in our consolidated statement of operations. The fair value of these warrants was determined using the BSM model based on the following range of assumptions for the three and six months ended June 30, 2025: fair value of the underlying common stock of $ 0.71 to $ 0.80 , expected volatility of 100 %, risk free rate of 3.66 % to 3.87 %, remaining contractual term of 3.34 to 3.59 years and a dividend yield of 0 %. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The following table presents the changes in the Level 3 warrant liabilities measured at fair value (in thousands): Schedule of Changes in Fair Value Warrant Liabilities 2025 2024 Six Months Ended June 30, 2025 2024 Fair value at beginning of period $ 1,250 $ 4,210 Issuance of new warrants - 4,092 Exercise of warrants - ( 5,372 ) Change in fair value of warrant liabilities ( 702 ) ( 2,009 ) Fair value at end of period $ 548 $ 921 11 4. Revenue We generate revenue primarily through the sales of our licensed products, Ameluz ® and BF-RhodoLED ® lamps. Traditional PDT treatments using a lamp are usually performed more frequently during the winter. As such our revenue is subject to some seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters. 5. Cash Balances and Statement of Cash Flows Reconciliation The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). At June 30, 2025, approximately $ 6.9 million of the Company’s cash balances were in excess of FDIC limits. The Company has not experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks with respect to these accounts. Restricted cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards. Long-term restricted cash was recorded in other assets in the condensed consolidated balance sheet. The following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the statements of cash flows: Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash (in thousands) June 30, 2025 December 31, 2024 Cash and cash equivalents $ 7,239 $ 5,905 Long-term restricted cash 200 200 Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows $ 7,439 $ 6,105 Long-term restricted cash was recorded in other assets in the condensed consolidated balance sheet. 6. Accounts Receivable, net Accounts receivables are mainly attributable to the sale of Ameluz ® . It is expected that all trade receivables will be settled within twelve months of the balance sheet date. Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience and current information. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending primarily on delinquency status, and fixed reserve percentages are established for each pool of trade accounts receivables. In determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain customers, regulatory and legal environments and other relevant current and future forecasted macroeconomic factors. If we become aware of any customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. The allowance for credit losses was $ 0.1 million and $ 0.2 million as of June 30, 2025 and December 31, 2024, respectively. 12 7. Inventories Inventories consist of finished goods of Ameluz ® and the RhodoLED ® lamps. There was no provision for obsolescence recorded for the six months ended June 30, 2025 and a negligible amount for the year ended December 31, 2024. 8. Asset Held for Sale Asset held for sale consists of the following: Schedule of Assets Held for Sale (in thousands) June 30, 2025 December 31, 2024 Xepi® license $ 4,600 $ 4,600 Less: Accumulated amortization ( 2,300 ) ( 2,300 ) Asset held for sale $ 2,300 $ 2,300 The Xepi product line has been held for sale since the third quarter of 2024, when the Company determined that the intangible asset met the criteria to be classified as held for sale in accordance with ASC 360-10-45-9. The Company is working with a potential purchaser and expects to complete a sale within the third quarter and, as such, has classified the asset as held for sale under current assets in the condensed consolidated balance sheets. The carrying amount of the asset at the time of classification was $ 2.3 million, which was the lower of its carrying value or estimated fair value less cost to sell. No gain or loss was recognized in the Condensed Statement of Operations upon classification as an asset held for sale and the related revenue and expenses associated with the asset were de-minimus. There have been no subsequent changes to fair value as of June 30, 2025 and the date of this report. This divestiture does not represent a strategic shift that will have a major effect on our consolidated results of operations and therefore is not being reported as discontinued operations. The Xepi ® license intangible asset was recorded at acquisition date fair value of $ 4.6 million and was amortized on a straight-line basis over the useful life of 11 years. 9. Advance from Stockholders On June 27, 2025, the Company entered the Purchase Agreement with certain accredited investors to issue and sell, in a private placement up to 11,000 shares of Series C Preferred Stock at a price of $ 1,000 per share for an aggregate offering price of $ 11.0 million. The first tranche closed on July 1, 2025, providing gross proceeds of $ 8.5 million, 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. The 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 to fund the Company’s continued operations and satisfy certain financial obligations to Biofrontera AG which originated from the LSA and survived under the terms of the Strategic Transaction. See Note 1. Organization and Business Overview for additional information. At June 30, 2025, the proceeds of $ 8.5 million received for the Series C Preferred Stock were recorded as an advance from stockholders, as the stock was not issued until July 1, 2025. See Note 13. Stockholders’ Equity , for additional details. 13 10. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: Schedule of Accrued Expenses and Other Current Liabilities (in thousands) June 30, 2025 December 31, 2024 Employee compensation and benefits 2,412 2,428 Professional fees 1,976 632 Research and development 735 542 Other 683 671 Total $ 5,806 $ 4,273 11. Debt Convertible Notes Payable On November 22, 2024, the Company issued $ 4.2 million in an aggregate principal amount of the Company’s 10.0 % Senior Secured Convertible Notes (the “Notes”) pursuant to a securities purchase agreement entered into on November 21, 2024 with its principal stockholders. The Notes bear interest at 10.0 % per annum, payable in-kind (“PIK interest”) through the issuance of additional principal on a quarterly basis. In the Event of Default (as defined in the Notes), the interest will increase to 15 % per annum from the date of written notice from the holder. The Notes may be converted at any time into shares of the Company’s Common Stock at a conversion price of $ 0.78 per share subject to customary adjustments for stock splits, stock dividends and recapitalizations, as described in the Notes. The Notes mature on November 22, 2027, unless earlier converted or repurchased. The Company may not redeem the Notes at its option prior to maturity. Upon maturity, the Company will pay to the holders of the Notes an amount in cash representing all of the outstanding aggregate principal amount of the Notes, together with any accrued and unpaid interest. Alternatively, the entire amount of the note will be automatically converted to shares of Common Stock if the 10-day volume weighted average price of a share of the Company’s Common Stock on Nasdaq is greater than 250% of the conversion price, and certain other conditions are met. The Notes provide for customary events of default and contain conversion limitations, providing that no conversion may be made if the aggregate number of shares of Common Stock beneficially owned by the holder would exceed 9.99 % immediately after conversion. There were no events of default at June 30, 2025. The Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts. The Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815. Based on the Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability. During the three and six months ended June 30, 2025 the Company recognized interest expense of approximately $ 0.1 million and $ 0.2 million, respectively, and minimal discount amortization. As of June 30, 2025 and December 31, 2024, the outstanding balance of the Notes was $ 4.3 million and $ 4.1 million, respectively, which is shown net of the remaining unamortized issuance cost of $ 0.1 million. 14 12. Related Party Transactions We consider Biofrontera AG and its consolidated subsidiaries to be a related party, as we rely on the Biofrontera Group as the sole supplier of Ameluz ® and the RhodoLED ® Lamps. Strategic Transaction with Biofrontera Group On June 30, 2025, the Company signed a binding Term Sheet with the Biofrontera Group pursuant to which the Company will acquire all rights in the United States to Ameluz ® and RhodoLED ® . 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 U.S. 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. In 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, the Biofrontera Group will receive 3,019 shares of Series D Convertible Preferred Stock, par value $ 0.001 per share, which represents a 10% post-money equity stake in the Company. See N ote 18. Subsequent Events for additional information. Pursuant to 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, 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. There were no shares of Series D Convertible Preferred Stock issued, purchases of inventory or sales of inventory under the new terms of the Strategic Transaction as of June 30, 2025 . See Note 18. Subsequent Events for additional information. As a condition precedent to the Strategic Transaction, the Company paid $ 3.1 million for the settlement of costs which included the payment of all outstanding invoices due to the Biofrontera Group under the current Second A&R Ameluz LSA as of June 16, 2025, payment of outstanding invoices due to component suppliers for the Lamps as of such date, and payments for RhodoLED® lamps and the production cost of two batches of Ameluz produced prior to June 30, 2025 (which were delivered during the first week of July 2025). As of June 30, 2025, the Company accrued approximately $ 0.4 million of expenses related to the Strategic Transaction, primarily for legal expenses and some salaries and wages, which were recorded in accounts payable, related parties net of applicable accounts receivable in the condensed consolidated balance sheets. As of June 30, 2025, the Company also recorded $ 1.0 million in other assets, related party for prepaid amounts for inventory-related purchases in accordance with the Strategic Transaction. License and Supply Agreement Under the Second A&R Ameluz LSA (applicable for any tubes purchased through May 31, 2025), the Company had an exclusive, non-transferable license to market and sell its licensed products, Ameluz ® and RhodoLED ® Lamps, in the United States and was required to purchase the licensed products exclusively from Biofrontera Pharma, pursuant to which the price paid per unit was based on certain percentages of the anticipated net selling price (the “Transfer Price”) that covered the cost of goods, royalties on sales, and services, including all regulatory efforts, agency fees, pharmacovigilance, and patent administration, as follows: ● Twenty-five percent of the anticipated net selling price per unit through 2025; ● Thirty percent of the anticipated net selling price per unit for 2026 to 2028; ● Thirty-two percent of the anticipated net selling price per unit for 2029 to 2031; ● Thirty-five percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit; and ● The Transfer Price for sales related to acne, another indication currently in development, will remain at twenty-five percent of the anticipated net selling price per unit indefinitely. The Second A&R Ameluz LSA also provided for the transfer of responsibilities for clinical trials relating to Ameluz ® in the US on June 1, 2024, including the Company assuming related contracts and transferring key personnel from the Ameluz Licensor to the Company. 15 The Company entered into a Release of Claims with the Ameluz Licensor, dated February 13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and liabilities arising out of or relating to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials for which the Company assumed responsibility. There were no purchases of the licensed products for the three months ended June 30, 2025. Purchases of the licensed products (inclusive of estimated and actual purchase price adjustments) were $ 0 and $ 3.0 million during the three and six months ended June 30, 2025, respectively, and $ 0.8 million and $ 1.1 million during the three and six months ended June 30, 2024, respectively. These purchases were recorded in inventories in the condensed consolidated balance sheets, and, when sold, in cost of revenues, related party in the consolidated statements of operations. Amounts due and payable to Biofrontera Pharma as of June 30, 2025 and December 31, 2024 were $ 0.4 million and $ 5.3 million, respectively, and were recorded in accounts payable, related parties net of applicable accounts receivable in the condensed consolidated balance sheets. Transactions with Biofrontera Bioscience Total expenses paid to Biofrontera Bioscience for clinical trial costs as well as rent expense for the three and six months ended June 30, 2025 were $ 0.1 million and $ 0.2 million, respectively. There were no amounts due from or payable to Biofrontera Bioscience as of June 30, 2025. Other Effective as of the date of the Strategic Transaction and for the following three years, as long as Biofrontera AG holds any shares of Series D Convertible Preferred Stock (or shares of Common Stock that were converted from Series D Convertible Preferred Stock), Biofrontera AG shall have the right to appoint (i) if the board consists of seven or fewer members, one individual to the Company’s board of directors ; or (ii) if the board consists of eight or more directors the right to appoint two individuals . No appointments have been made through the filing date. 13. Stockholders’ Equity Under the Company’s Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation (“Certificate”), filed June 16, 2025, the Company is authorized to issue 70,000,000 shares of Common Stock, and 20,000,000 shares of preferred stock, par value $ 0.001 per share (“Preferred Stock”). Common Stock: The holders of Common Stock are entitled to one vote for each share held. Holders of Common Stock are not entitled to receive dividends, unless declared by the Company’s board of directors (“Board”). The Company has not declared dividends since inception. In the event of liquidation of the Company, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. The outstanding shares of Common Stock are fully paid and non-assessable. As of June 30, 2025, there were 10,138,567 shares of Common Stock outstanding. As of June 30, 2025 we had outstanding warrants to purchase an aggregate of 2,269,356 shares of Common Stock with an exercise price range of $ 3.55 to $ 100.00 per share. These warrants have expiration dates ranging from November 2026 to November 2028. A summary of the warrants outstanding as of June 30, 2025 is presented below. Schedule of Warrants Outstanding Warrants Number of Shares Exercise Price Expiration Date Liability classified (See Note 3. Fair Value Measurements ) 2,192,736 $ 3.55 11/02/2028 Equity classified 76,620 100.00 11/02/2026 Series B Preferred Stock: On February 19, 2024, the Company entered into a securities purchase agreement (the “Preferred Purchase Agreement”), with certain accredited investors, pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”), (i) 6,586 shares of Series B-1 Convertible Preferred Stock, par value $ 0.001 per share (the “Series B-1 Preferred Stock”), and (ii) warrants to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ 0.001 per share (the “Series B-3 Preferred Stock”) for an aggregate offering price of $ 8.0 million (the “2024 Preferred Warrants”). The conversion price of Series B-1 Preferred Stock and Series B-3 Preferred Stock is $ 0.7074 per share of Common Stock, such that each Series B share is convertible into 1,413 shares of the Common Stock. All of the 2024 Preferred Warrants were exercised for Series B-3 Preferred Stock during the second quarter of 2024. As of June 30, 2025, there were 2,641 shares of Series B-2 Preferred Stock and 6,593 shares of Series B-3 Preferred Stock issued and outstanding (convertible into 13,047,642 shares of Common Stock). Pursuant to the Preferred Purchase Agreement, the Company may be compelled to appoint two independent directors designated by Rosalind Advisors, Inc. to the Company’s Board. No such appointment has been made as of June 30, 2025. See rights and preferences of the Series B Preferred Stock as previously disclosed in the Company’s Form 10-K for the year ended December 31, 2024. Series C Preferred Stock In connection with entering into the Purchase Agreement, on June 30, 2025, the Company filed the Series C Certificate of Designation with the Delaware Secretary of State designating 11,000 shares of its authorized and unissued preferred stock as Series C Preferred Stock, each with a stated value of $ 1,000 per share. The Series C Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series C Preferred Stock. There were no shares of Series C Preferred Stock issued and outstanding as of June 30, 2025. 16 Series D Preferred Stock In connection with the Strategic Transaction, on June 30, 2025, the Company filed the Series D Certificate of Designation with the Delaware Secretary of State designating 3,019 shares of its authorized and unissued preferred stock as Series D Preferred Stock (the “Series D Preferred Stock”), each with a stated value of $ 1,000 per share. The Series D Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series D Preferred Stock. There were no shares of Series D Preferred Stock issued and outstanding as of June 30, 2025. Convertible Debt On November 22, 2024, the Company issued $ 4.2 million in an aggregate principal amount of the Notes. The Notes allow for up to 5,384,615 shares of Common Stock to be issued upon conversion for principal plus additional shares for PIK interest. See Note 11. Debt - Convertible Notes Payable , for additional details. 14. Equity Incentive Plans and Share-Based Payments 2021 Omnibus Incentive Plan In 2021, the Board adopted, and our stockholders approved, the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum contractual term is 10 years for stock options issued. On June 12, 2024, the stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990 shares to 3,750,000 shares. As of June 30, 2025, there were 1,983,641 shares available for future awards under the amended 2021 Plan. Non-qualified stock options The Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the requisite service period. The fair value of stock options is estimated at the time of grant using the BSM model, which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield. The Company elects to account for forfeitures as they occur. The fair value of each option is estimated on the date of the grant using the BSM option pricing model. There were no equity grants during the three and six months ended June 30, 2025. Share-based compensation expense related to stock options of approximately $ 0.1 million and $ 0.3 million was recorded in selling, general and administrative expenses, with a negligible amount recorded as research and development on the accompanying consolidated statement of operations, for the three and six months ended June 30, 2025, respectively. Share-based compensation expense related to stock options of $ 0.2 million and $ 0.3 million was recorded in selling, general and administrative expenses, with a negligible amount recorded as research and development, for the three and six months ended June 30, 2024, respectively. Options outstanding and exercisable under the employee share option plan as of June 30, 2025, and a summary of option activity during the six months then ended is presented below. Schedule of Stock Option Activity Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1) Outstanding at December 31, 2024 1,358,718 3.88 9.36 5 Granted - Exercised - Canceled or forfeited ( 68,039 ) 2.51 Outstanding at June 30, 2025 1,290,679 3.95 8.93 - Exercisable at June 30, 2025 134,057 25.32 8.00 - (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the Common Stock for the options that were in the money at June 30, 2025 and December 31, 2024. As of June 30, 2025, there was $ 0.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.02 years. Share-Based Compensation (RSUs) Restricted Stock Units (“RSUs”) will vest annually over two years, subject to the recipient’s continued service with the Company through the applicable vesting dates. The fair value of each RSU is determined based on the closing market price of the Company’s Common Stock on the grant date. Share-based compensation expense for the RSUs was $ 0.1 million for both the three and six months ended June 30, 2025, and was negligible and $ 0.1 million for the three and six months ended June 30, 2024, respectively, and was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations. As of June 30, 2025, there was $ 0.2 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a period of approximately 1.03 years. 17 The following table summarizes the activity for RSUs during the six months ended June 30, 2025: Schedule of Restricted Stock Units Shares Weighted Average Remaining Contractual Term Weighted Average Grant Date Fair Value Outstanding at December 31, 2024 450,000 $ 1.06 Awarded - - Vested - - Canceled or forfeited - - Outstanding at June 30, 2025 450,000 0.53 $ 1.06 15. Net Loss per Share Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is calculated by dividing net loss by the diluted weighted average number of common shares outstanding during the period. The diluted shares include the dilutive effect of stock-based awards based on the treasury stock method. In periods where a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be anti-dilutive. The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data): Schedule of Basic and Diluted Net Loss per Share Attributable to Common Stockholders 2025 2024 2025 2024 Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Net loss $ ( 5,324 ) $ ( 257 ) $ ( 9,527 ) $ ( 10,694 ) Weighted average common shares outstanding, basic and diluted 9,351,557 5,091,353 9,108,091 4,357,474 Net loss per share, basic and diluted $ ( 0.57 ) $ ( 0.05 ) $ ( 1.05 ) $ ( 2.45 ) The following table sets forth the securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute EPS in the future: Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share June 30, 2025 2024 Common stock warrants 2,269,356 2,269,356 Common stock options and RSUs 1,740,679 87,532 Unit Purchase Options 20,182 20,182 Shares related to Series B-2 convertible preferred stock 3,731,733 6,793,893 Shares related to Series B-3 convertible preferred stock 9,315,909 11,306,191 Convertible Notes 5,716,926 - Total 22,794,785 20,477,154 Anti-dilutive securities 22,794,785 20,477,154 18 Common Stock warrants include the 2022 Purchase Warrants, 2023 Purchase Warrants, 2022 Inducement Warrants and warrants issued in the Company’s initial public offering. 16. Commitments and Contingencies Leases The Company leases its corporate headquarters under an operating lease that expires in November 2025. The Company has the option to extend the term of the lease for a five (5)-year period upon written notice to the landlord. The extension period has not been included in the determination of the ROU asset or the lease liability as the Company concluded that it is not reasonably certain that it would exercise this option. The Company provided the landlord with a security deposit in the amount of $ 0.1 million, which was recorded as other assets in the consolidated balance sheets. The Company has also entered into a master lease agreement for its vehicles. After an initial non-cancelable twelve-month period, each vehicle is leased on a month-to-month basis. Based on historical retention experience of approximately three years, the vehicles have varying expiration dates through August 2028. Future lease payments under non-cancellable leases as of June 30, 2025 were as follows (in thousands): Schedule of Future Commitments and Sublease Income Years ending December 31, Future lease commitments Remainder of 2025 $ 338 2026 277 2027 75 2028 20 Thereafter - Total future minimum lease payments $ 710 Less imputed interest ( 44 ) Total lease liability $ 666 Schedule of Operating Lease Liability Reported as: Operating lease liability, current $ 443 Operating lease liability, non-current 223 Total $ 666 19 Second A&R Ameluz LSA and Term Sheet Sales Commitments The Second A&R Ameluz LSA, as amended by the Term Sheet, shall be terminated, replaced, or amended (to the extent necessary) in connection with the Strategic Transaction. As it currently stands, t he Second A&R Ameluz LSA, is to remain in effect for 15 years from its effective date and shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and lamps equal to or greater than $ 150 million over the preceding five years. If we fail to earn $ 150 million in revenues from Ameluz ® and the RhodoLED ® Lamps over the preceding five (5) year period prior to the Second A&R Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Second A&R Ameluz LSA by providing one (1) year written notice. In addition, effective in 2025, under the Second A&R Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of Ameluz ® per year as set forth in the Second A&R Ameluz LSA or (ii) 75% of the annual average of audited Ameluz ® tubes sold during the preceding four (4) full calendar years. If we fail to achieve the respective minimum for any calendar year, such failure will constitute a termination event, unless waived by the Ameluz Licensor. As agreed to in connection with the Strategic Transaction and pursuant to the Term Sheet, until the earlier to occur of (i) the total cumulative Royalty paid to Sellers from June 1, 2025 to May 31, 2031 exceeds $50 million, or (ii) the expiration of patent protection on the Products allows for generic competition with the Products in the United States (collectively, the “Minimum Royalty Term”), we are subject to a minimum annual Ameluz sales volume of 80,000 tubes. If such minimum annual volume is not met during the Minimum Royalty Term and the Company does not otherwise pay minimum annual royalties of 12% of the net revenues of 80,000 tubes of Ameluz, the Biofrontera Group shall be entitled to minimum annual royalties of 12% of the net revenues of 80,000 tubes of Ameluz plus annual interest of 4%. Except in the case of certain limited exceptions, our failure to achieve this sales volume during this timeframe for two consecutive years will constitute a termination event, unless waived by the Ameluz Licensor. Ameluz Minimum Research and Development Costs As it currently stands, the Second A&R Ameluz LSA provides that, during the years 2025 through 2030, we will be required to fund minimum R&D costs in an amount that is at least 85% of the difference between (i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous version of the license and supply agreement with the Ameluz Licensor, dated October 8, 2021. If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion. It is anticipated that this requirement to fund minimum R&D costs will no longer apply once the Second A&R Ameluz LSA is terminated, replaced, or amended (to the extent necessary) in connection with the Strategic Transaction. Licensing Agreement with Optical Tools On December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”). The Agreement allowed for the transfer of the assigned patents and trademarks, and upon notification by the Company to Optical Tools, the research and development of certain prototypes. The Company paid a licensing fee of $ 0.2 million which was expensed during the year ended December 31, 2022. On May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy lamp prototypes (“PDT Device”) using the technology in the assigned patents. The PDT Device provides illumination, based on different light profiles, to the external skin surface of the human body. The Company is to reimburse Optical Tools for all reasonable out-of-pocket, material and labor costs per the Agreement. As part of the Agreement, Optical Tools will be eligible to receive regulatory and sales milestone payments totaling up to $ 1.0 million, and royalties of up to 3 % of net revenue of certain products developed under this Agreement. The Company did not make any milestone or royalty payments or accruals for such payments during the three and six months ended June 30, 2025 or 2024. Milestone payments with Ferrer Internacional S.A. Under the license and supply agreement (as amended, the “Xepi LSA”) with Ferrer Internacional S.A. (“Ferrer”), we are obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay Ferrer (i) $ 2,000,000 upon the first occasion when annual net sales of Xepi ® under the Xepi LSA exceed $ 25,000,000 , and (ii) $ 4,000,000 upon the first occasion annual net sales of Xepi ® under the Xepi LSA exceed $ 50,000,000 . No payments or accruals for such payments were made during the three and six months ended June 30, 2025 or 2024 related to Xepi ® milestones. 20 Legal proceedings At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic 450, Contingencies . The Company expenses as incurred the legal costs related to such legal proceedings. Legal Claims On September 13, 2023, Biofrontera was served with a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc. (“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham Act, and iii) unfair trade practices under Massachusetts law. All claims stem from allegations that Biofrontera has promoted its Ameluz ® product in a manner that is inconsistent with its approved FDA labeling. Though this complaint was originally filed in the United States District Court for the District of Massachusetts, this matter has been transferred by agreement of the parties to the United States District Court for the District of New Jersey. In March of 2024, Biofrontera Company filed a partial motion to dismiss the Lanham Act and Massachusetts statutory claims, which was denied on October 15, 2024. Biofrontera subsequently answered Sun’s complaint and filed counterclaims on October 30, 2024 alleging i) violation of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade libel/product disparagement, which Sun answered on December 17, 2024. On March 11, 2025, Biofrontera received an additional notice alleging breach of contract through unlawful marketing practices which makes reference to similar previous communications sent by Sun to Biofrontera on February 4, 2022 and September 9, 2022. Discovery is ongoing in the above-referenced matters. The Company denies the claims brought by Sun and intends to defend them vigorously. Based on the Company’s assessment of the facts underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from this action. If the final resolution of the matter is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows. Separately, on June 26, 2024 and June 27, 2024, Sun filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District Court for the District of Massachusetts and the International Trade Commission (“ITC”), both alleging infringement of two patents held by Sun (the “Sun Patents”). The complaint filed in the United States District Court for the District of Massachusetts has been held in abeyance pending the completion of the case before the ITC. A hearing was held in front of an administrative law judge between June 30, 2025 and July 3, 2025. The ITC’s Initial Determination is expected by October 1, 2025 and a Final Determination is expected by February 2, 2026. The Company denies Sun’s patent claims and intends to defend them vigorously in the above-referenced matters. In addition, Biofrontera has challenged the validity of the Sun Patents by filing separate petitions for inter partes review at the United States Patent Trial and Appeal Board (“PTAB”) for each of the Sun Patents. One such petition was instituted by the PTAB on February 24, 2025, while the PTAB issued a discretionary denial of the other petition on July 2, 2025. 21 Based on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as the uncertainty of litigation, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from either action. Money damages are not available to Sun through the case before the ITC, and an adverse ruling could result in an exclusion order being imposed on the allegedly infringing product. If the final resolution of the case before the United States District Court for the District of Massachusetts is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows. 17. Segment Reporting The Company operates as one operating segment that derives revenue primarily from our principal licensed product, Ameluz ® . We are currently selling Ameluz ® for this indication in the United States under an exclusive license and supply agreement. Ameluz ® (including the RhodoLED® Lamps) accounts for approximately 100% of our revenue. The Company’s CODM is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income to allocate resources and assesses financial performance by comparing actual results to historical results and previously forecasted financial information. The following table presents selected financial information with respect to the Company’s single operating segment for the three and six months ended June 30, 2025 and 2024 : Schedule of Operating Segment (in thousands) 2025 2024 2025 2024 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Revenues, net $ 9,030 $ 7,839 $ 17,617 $ 15,750 Operating expenses: Cost of revenues 2,642 4,342 5,910 8,459 Direct sales 1,774 2,185 3,576 4,308 Sales support 2,100 2,102 4,196 4,646 General and administrative 6,464 3,285 11,011 7,444 Research and development 870 621 2,077 637 Other operating expenses 259 375 476 794 Total operating expenses 14,109 12,910 27,246 26,288 Loss from operations ( 5,079 ) ( 5,071 ) ( 9,629 ) ( 10,538 ) Other income (expense), net ( 224 ) 4,834 121 ( 135 ) Loss before income taxes ( 5,303 ) ( 237 ) ( 9,508 ) ( 10,673 ) Income tax expense 21 20 19 21 Net loss $ ( 5,324 ) $ ( 257 ) $ ( 9,527 ) $ ( 10,694 ) 18. Subsequent Events We have completed an evaluation of subsequent events after the balance sheet date of June 30, 2025 through the date this Quarterly Report on Form 10-Q was submitted to the SEC, and determined that the following material subsequent events required disclosure. Series C Preferred Stock On July 1, 2025, pursuant to Purchase Agreement, the Company issued 8,500 Shares of Series C Preferred Stock, par value $ 0.001 per share, each at a price of $ 1,000 per Series C Preferred. The Series C Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series C Preferred Stock. See Note 1. Organization and Business Overview and Note 13. Stockholders’ Equity for additional information . Strategic Transaction The Company signed a binding Term Sheet with its former parent company pursuant to which the Company will acquire all the U.S. Rights to Ameluz® and RhodoLED® . 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. In exchange for the U.S. Rights, o n July 2, 2025, the Company issued 3,019 shares of Series D Preferred Stock, par value $ 0.001 per share, each at a price of $ 1,000 per Series D Preferred. Pursuant to the terms of the Term Sheet, for a period of twelve months following the date of issuance of the Series D Preferred Stock, the Company shall not issue any additional equity securities or any debt convertible into equity. The Series D Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series D Preferred Stock. See Note 1. Organization and Business Overview and Note 12. Related Party Transactions for additional information . Office Lease On July 30, 2025, the Company entered into a new lease for office space in Woburn, MA in place of the current office lease which terminates November 2025. The term of the new lease shall commence upon substantial completion of tenant improvements, but no later than December 1, 2025. The term of the lease is 63 months from the commencement date. The monthly lease payments are initially $ 19,479 , with annual rent increases culminating in monthly lease payments of $ 29,402 . Appointment of Chief Commercial Officer The Company has entered into an employment agreement with George Jones to serve as the Chief Commercial Officer, starting on August 25, 2025. Mr. Jones is an experienced commercial executive with more than 25 years of commercial leadership experience in the pharmaceutical and biotech sectors. Prior to joining the Company, Mr. Jones recently served as Chief Operating Officer at UpScriptHealth since 2021. Prior to UpScriptHealth, Mr. Jones held senior commercial roles at Currax Pharmaceuticals since 2015. 22