UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40943

Biofrontera Inc.

(Exact name of registrant as specified in its charter)

Delaware		47-3765675
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

120 Presidential Way, Suite 330, Woburn, Massachusetts		01801
(Address of principal executive offices)		(Zip Code)

(781) 245-1325

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	BFRI	The Nasdaq Stock Market LLC
Preferred Stock Purchase Rights	true	The Nasdaq Stock Market LLC
Warrants to purchase common stock	BFRIW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 13, 2025 there were 9,446,197 shares outstanding of the registrant’s common stock, par value $0.001 per share.

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 (unaudited) and 2024 (unaudited)	4
	Condensed Consolidated Statements of Mezzanine and Stockholders’ Equity for the three months ended March 31, 2025 (unaudited) and 2024 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 (unaudited) and 2024 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4.	Controls and Procedures	28

	PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	29
ITEM 1A.	Risk Factors	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
ITEM 3.	Defaults Upon Senior Securities	29
ITEM 4.	Mine Safety Disclosures	29
ITEM 5.	Other Information	29
ITEM 6.	Exhibits	29
Signatures		30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BIOFRONTERA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	March 31, 2025			December 31, 2024
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,785		$	5,905
Investment, related party		7			7
Accounts receivable, net		4,031			5,315
Inventories, net		6,527			6,646
Prepaid expenses and other current assets		682			527
Asset held for sale		2,300			2,300

Total current assets		15,332			20,700

Property and equipment, net		59			80
Operating lease right-of-use assets		713			903
Intangible assets, net		31			35
Other assets		453			383

Total assets	$	16,588		$	22,101

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		3,300			1,856
Accounts payable, related parties, net		2,650			5,344
Accounts payable		2,650			5,344
Operating lease liabilities		426			548
Accrued expenses and other current liabilities		4,583			4,273

Total current liabilities		10,959			12,021

Long-term liabilities:
Convertible notes payable, net		4,217			4,098
Warrant liabilities		702			1,250
Operating lease liabilities, non-current		220			276
Other liabilities		21			23

Total liabilities		16,119			17,668

Commitments and contingencies (see Note 16)		-

Stockholders’ equity:
Preferred Stock, $0.001 par value, 20,000,000 shares authorized, no Series B-1, 3,366 Series B-2 and 6,763 Series B-3 shares issued and outstanding as of March 31, 2025 and December 31, 2024		-			-
Common Stock, $0.001 par value, 35,000,000 shares authorized; 8,873,932 and 1,517,628 shares issued and outstanding as of March 31, 2025 and December 31, 2024		9			9
Additional paid-in capital		122,072			121,833
Accumulated deficit		(121,612	)		(117,409	)

Total stockholders’ equity		469			4,433

Total liabilities and stockholders’ equity	$	16,588		$	22,101

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts and number of shares)

(Unaudited)

	2025			2024
	Three Months Ended March 31,
	2025			2024

Product revenues, net	$	8,588		$	7,901
Revenues, related party		-			11

Total revenues, net		8,588			7,912

Operating expenses
Cost of revenues, related party		3,075			3,946
Cost of revenues, other		193			170
Cost of revenues		193			170
Selling, general and administrative		8,653			9,250
Selling, general and administrative, related party		7			(4	)
Research and development		1,207			17

Total operating expenses		13,135			13,379

Loss from operations		(4,547	)		(5,467	)

Other income (expense)
Change in fair value of warrant liabilities		548			(3,429	)
Change in fair value of investment, related party		-			3
Loss on debt extinguishment		-			(316	)
Interest expense, net		(106	)		(1,407	)
Other income (expense), net		(99	)		180

Total other income (expense)		343			(4,969	)

Loss before income taxes		(4,204	)		(10,436	)
Income tax expense		(1	)		1

Net loss	$	(4,203	)	$	(10,437	)

Loss per common share:
Basic and diluted	$	(0.47	)	$	(2.88	)

Weighted-average common shares outstanding:
Basic and diluted		8,873,932			3,623,593

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

Three Months Ended March 31, 2025 and 2024


	Preferred Stock					Common Stock				Additional Paid-		Accumulated
	Shares		Amount			Shares		Amount		In Capital		Deficit			Total
Balance, January 1, 2025		10,129	$	-	-		8,873,932	$	9	$	121,833	$	(117,409	)	$	4,433
Stock based compensation		-		-			-		-		239		-			239
Net loss		-		-	-		-		-		-		(4,203	)		(4,203	)
Balance, March 31, 2025		10,129	$	-	-		8,873,932	$	9	$	122,072	$	(121,612	)	$	469

	Shares			Amount		Shares		Amount		In Capital			Deficit			Total
	Mezzanine Equity					Stockholders’ Equity
	Series B-1 Preferred Stock					Common Stock				Additional Paid-			Accumulated
	Shares			Amount		Shares		Amount		In Capital			Deficit			Total
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	)		-			-
Issuance of Series B Preferred Stock and Warrants		6,586			3,570		-		-		-			-			-
Conversion of Series B-1 Preferred into common stock		(1,780	)		-		2,516,785		2		(2	)		-			-
Stock based compensation		-			-		-		-		228			-			228
Net loss		-			-		-		-		-			(10,437	)		(10,437	)
Balance, March 31, 2024		4,806		$	3,570		5,089,413	$	5	$	104,666		$	(110,087	)	$	(5,416	)
Balance		4,806		$	3,570		5,089,413	$	5	$	104,666		$	(110,087	)	$	(5,416	)

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	2025			2024
	Three Months Ended March 31,
	2025			2024
Cash flows from operating activities:

Net loss	$	(4,203	)	$	(10,437	)

Adjustments to reconcile net loss to cash flows used in operations:

Depreciation		25			21
Amortization of right-of-use assets		190			179
Amortization of acquired intangible assets		4			107
Realized/unrealized gain in investment, related party		-			(3	)
Change in fair value of warrant liabilities		(548	)		3,429
Stock-based compensation		239			228
Allowance for credit losses		(46	)		66
Loss on debt extinguishment		-			316
Non-cash interest expense		119			151

Changes in operating assets and liabilities:
Accounts receivable		1,330			1,576
Prepaid expenses and other assets		(224	)		(119	)
Inventories		119			4,003
Accounts payable		1,444			(590	)
Accounts payable, related parties, net		(2,694	)		(1,825	)
Operating lease liabilities		(179	)		(166	)
Accrued expenses and other liabilities		307			(261	)

Cash flows used in operating activities		(4,117	)		(3,325	)

Cash flows from investing activities
Sales of equity investment, related party		-			57
Purchases of property and equipment		(3	)		(57	)

Cash flows used in investing activities		(3	)		-

Cash flows from financing activities
Proceeds from issuance of series B-1 preferred stock and warrants to purchase series B-3 preferred stock in a private placement, net of issuance costs		-			7,662
Payment of principal short-term debt		-			(1,506	)
Payments to extinguish line of credit		-			(357	)

Cash flows provided by financing activities		-			5,799

Net increase (decrease) in cash and cash equivalents		(4,120	)		2,474
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	$	1,985		$	4,017

Supplemental disclosure of cash flow information
Interest paid	$	-		$	1,173

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

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 and Biofrontera Bioscience (the “Ameluz Licensor”) and manage our clinical trial work.

Our principal licensed product is Ameluz^®, which is a prescription drug approved for use in combination with the RhodoLED^®Lamps, for PDT (when used together, “Ameluz^® 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 Biofrontera Pharma (“Pharma”) GmbH and Biofrontera Bioscience GmbH (“Biofrontera Bioscience,” and, together with Pharma, the “Ameluz Licensor”), both of which are related parties.

Liquidity and Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Since we commenced operations in 2015, we have generated significant losses. The Company incurred net cash outflows from operations of $4.1 million and $3.3 million for the three months ended March 31, 2025 and 2024, respectively. The Company’s primary sources of liquidity are its cash collected from the sales of its products and cash flows from financing transactions. As of March 31, 2025, we had cash and cash equivalents of $1.8 million, compared to $5.9 million as of December 31, 2024. The current cash and liquidity projections are not adequate to continue operating and maintaining the business strategy for a period of twelve months from the issuance date of this report. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the issuance date of this report.

Management’s plans to mitigate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern include expanding the commercialization of Ameluz^®in the United States while controlling expenses and limiting capital expenditures, as well as capitalizing on the reduced cost of inventory in line with the terms of the Second A&R Ameluz LSA. The Company also plans to secure additional capital through equity or debt financings, or the sale of assets to carry out the Company’s planned commercial and development activities. However, there can be no assurance that the Company will be successful in executing the aforementioned commercial strategies and/or obtaining sufficient funding on acceptable terms, if at all, and that the substantial doubt will be alleviated. If the Company is unable to raise capital when needed, it will not have sufficient cash resources and liquidity to fund its business operations and may be forced to delay or reduce continued commercialization efforts or R&D programs which could have a material adverse effect on the Company and its financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. Such adjustments may be necessary should the Company be unable to continue as a going concern.

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. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of March 31, 2025, the Company’s operating results for the three months ended March 31, 2025 and 2024, and the Company’s cash flows for the three months ended March 31, 2025 and 2024. The accompanying financial information as of December 31, 2024 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20, 2024.

All amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages and per share and share amounts.

With the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Form 10-K for the year ended December 31, 2024.

Mezzanine equity

Where ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as ‘mezzanine equity’ (temporary equity). The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.

Reclassification of Prior Year Presentation

Certain prior period amounts have been reclassified for consistency with the current period presentation. The reclassification was limited to the condensed consolidated statements of cash flow and had no impact on the reported results of operations. Specifically, for prior year presentation, accounts payable-related parties of $1.6 million was reclassed from accounts payable to accounts payable, related party, net along with other receivables, related party of $0.2 million.

Nasdaq Compliance

Nasdaq requires issuers to comply with certain standards in order to remain listed on its exchange. The Company’s stockholders’ equity as reported in the accompanying balance sheet for the period ended March 31, 2025 was $0.5 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.

Use of Estimates

The preparation of the consolidated financial statements in accordance with United States GAAP requires the use of estimates and assumptions by management that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, as reported on the balance sheet date, and the reported amounts of revenues and expenses arising during the reporting period. The main areas in which assumptions, estimates and the exercising of judgment are appropriate relate to realization and valuation of receivables and inventory, valuation of warrant liabilities, impairment assessment of intangibles and other long-lived assets, share-based payments, deferred tax asset valuations, and contingent liability recognition. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. We are 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, Income 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 March 31, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

(in thousands)	Level		March 31, 2025		December 31, 2024
Assets:
Investment, related party		1	$	7	$	7
Liabilities:
Warrant liability – 2023 Purchase Warrants		3	$	578	$	1,030
Warrant liability - 2022 Purchase Warrants		3	$	55	$	98
Warrant liability – 2022 Inducement Warrants		3	$	69	$	122
Total Liabilities			$	702	$	1,250

Investment, related party

As of March 31, 2025 and December 31, 2024, the Company owned 3,019 common shares of Biofrontera AG. The fair value of this investment was determined with Level 1 inputs through references to quoted market prices.

Warrant Liabilities

The warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of the Company’s common stock, $0.001 par value (“Common Stock”) originally issued in a private placement on May 16, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $3.55 per share (the “2022 Purchase Warrants”); (ii) warrants to purchase 214,286 shares of Common Stock issued on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $3.55 per share (the “2022 Inducement Warrants”); and (iii) warrants to purchase 1,807,500 shares of Common Stock issued on November 2, 2023 expiring five years following the date of issuance and with an exercise price of $3.55 per share ( the “2023 Purchase Warrants”). See Note 12. Mezzanine Equity and Stockholders’ Equity for additional details.

The 2023 Purchase Warrants, the 2022 Inducement Warrants and the 2022 Purchase Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statement of operations.

The Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered a Level 3 fair value measurement. Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liabilities which could also result in material non-cash gain or loss being reported in our consolidated statement of operations.

The fair value for the Level 3 warrants at March 31, 2025 was estimated using a BSM model based on the following assumptions:

	March 31, 2025
Stock price	$	0.80
Expiration term (in years)		3.59
Volatility		100.0	%
Risk-free Rate		3.87	%
Dividend yield		0.0	%

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

	2025			2024
	Three Months Ended March 31,
	2025			2024
Fair value at beginning of period	$	1,250		$	4,210
Issuance of new warrants		-			4,092
Change in fair value of warrant liabilities		(548	)		3,429
Fair value at end of period	$	702		$	11,731

The warrants issued on February 22, 2024 to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $0.001 per share (the “2024 Preferred Warrants”), were also accounted for as liabilities, as they were redeemable in the event of a change in control, which was not solely within the control of the Company (see Note 12. Mezzanine Equity and Stockholders’ Equity). The 2024 Preferred Warrants were issued in the first quarter of 2024 and exercised prior to the end of the second quarter of 2024. The fair value for the Level 3 2024 Preferred Warrants was estimated utilizing a probability weighted average approach, which incorporated two scenarios. In scenario one, the warrant value was based on the underlying value of the convertible preferred stock, using an option-pricing model backsolve that solved for the value of our publicly traded equity on the valuation date to obtain the valuation date fair value of the Series B-3 Convertible Preferred Stock, then applied the Series B-3 Convertible Preferred Stock value into the BSM model equation to determine the value of the Series B-3 convertible warrants. In scenario two, the warrant value was based on the underlying value of the publicly traded common equity value. Scenario two assumes the preferred stock will be converted into Common Stock prior to a liquidity event. A simple BSM model was utilized to value the warrant under scenario two, using the closing price of our Common Stock as an input to the model. The BSM model used the following range of inputs and assumptions for the 2024 Preferred Warrants at the issuance date of February 22, 2024, for the three months ended March 31, 2024 and at the exercise date of May 13, 2024: (i) expected stock price volatility of 79.3% to 105%; (ii) risk-free interest rate of 5.39%; to 5.54%; (iii) expected life of the warrants of 0.003 to 0.21 years; and (iv) dividend yield of 0.0%. The fair value of the 2024 Preferred Warrants was $4.1 million at issuance and $5.4 million at the exercise date.

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 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 March 31, 2025, approximately $1.3 million of the Company’s cash balances were in excess of FDIC limits. The Company has not experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks with respect to these accounts.

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:

(in thousands)	March 31, 2025		December 31, 2024
Cash and cash equivalents	$	1,785	$	5,905
Long-term restricted cash		200		200
Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows	$	1,985	$	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 receivable are segmented into pools of assets depending primarily on delinquency status, and reserve percentages are established for each pool of trade accounts receivable.

In determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain customers, regulatory and legal environments and other relevant current and future forecasted macroeconomic factors. If we become aware of any customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded.

The allowance for credit losses was $0.1 million and $0.2 million as of March 31, 2025 and December 31, 2024, respectively.

7. Inventories

Inventories are comprised of Ameluz^® and the RhodoLED^® lamps.

There was no provision for obsolescence recorded for the three months ended March 31, 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)	March 31, 2025			December 31, 2024
Xepi® license	$	4,600		$	4,600
Less: Accumulated amortization		(2,300	)		(2,300	)
Intangible asset, net	$	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 next one to five months and, as such, has classified the asset as held for sale under current assets in the condensed consolidated balance sheets. The carrying amount of the asset at the time of classification was $2.3 million, which was the lower of its carrying value or estimated fair value less cost to sell. No gain or loss was recognized in the 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. 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. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

(in thousands)	March 31, 2025		December 31, 2024
Employee compensation and benefits	$	2,494	$	2,428
Professional fees		596		632
Research and Development		857		542
Product revenue allowances and reserves		36		58
Other		600		613
Total	$	4,583	$	4,273

10. 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 March 31, 2025.

The Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts.

The Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815. Based on the Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability.

During the three months ended March 31, 2025 the Company recognized interest expense of approximately $0.1 million and minimal discount amortization. As of March 31, 2025, the outstanding balance of the Notes was $4.2 million, which is shown net of the remaining unamortized issuance cost of $0.1 million.

11. Related Party Transactions

We consider Biofrontera AG and its consolidated subsidiaries, (the “Biofrontera Group”) to be a related party. The Biofrontera Group held more than 5% of the outstanding shares of our common stock until December 10, 2024, and we continue to rely on the Biofrontera Group as the sole supplier of Ameluz^®and the RhodoLED^®Lamps.

License and Supply Agreement

Under the Second A&R Ameluz LSA, the Company has an exclusive, non-transferable license to market and sell its licensed products, Ameluz^®and RhodoLED^® Lamps, in the United States and must purchase the licensed products exclusively from Biofrontera Pharma. The Second A&R Ameluz LSA, among other things, amended the original license and supply agreement with the Ameluz Licensor to:

(i) update the price we pay per unit, based on certain percentages of the anticipated net selling price, (the “Transfer Price”) that covers the cost of goods, royalties on sales, and services, including all regulatory efforts, agency fees, pharmacovigilance, and patent administration, as follows:

	●	Twenty-five percent of the anticipated net selling price per unit through 2025;
	●	Thirty percent of the anticipated net selling price per unit for 2026 to 2028;
	●	Thirty-two percent of the anticipated net selling price per unit for 2029 to 2031;
	●	Thirty-five percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit; 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.

(ii) provide for the transfer of responsibilities for clinical trials relating to Ameluz^® in the US on June 1, 2024, including the Company assuming related contracts and transferring key personnel from the Ameluz Licensor to the Company.

The Company entered into a Release of Claims with the Ameluz Licensor, dated February 13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and liabilities arising out of or relating to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials for which the Company assumed responsibility.

Purchases of the licensed products (inclusive of estimated and actual purchase price adjustments) during the three months ended March 31, 2025 and 2024 were $3.0 million and $0.3 million, respectively, and were recorded in inventories in the condensed consolidated balance sheets, and, when sold, in cost of revenues, related party in the consolidated statements of operations. Amounts due and payable to Biofrontera Pharma as of March 31, 2025 and December 31, 2024 were $2.6 million and $5.3 million, respectively, and were recorded in accounts payable, related parties net of applicable accounts receivable in the condensed consolidated balance sheets.

12. Mezzanine Equity and Stockholders’ Equity

Under the Company’s Certificate of Second Amendment to the Amended and Restated Certificate of Incorporation (“Certificate”), effective April 25, 2024, the Company is authorized to issue 35,000,000 shares of Common Stock, and 20,000,000 shares of preferred stock, par value $0.001 per share (“Preferred 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 March 31, 2025, there were 8,873,932 shares of Common Stock outstanding.

As of March 31, 2025 we had outstanding warrants to purchase an aggregate of 2,269,356 shares of Common Stock with an exercise price range of $3.55 to $100.00 per share. These warrants have expiration dates ranging from November 2026 to November 2028. A summary of the warrants outstanding as of March 31, 2025 is presented 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) the 2024 Preferred Warrants to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $0.001 per share (the “Series B-3 Preferred Stock”) for an aggregate offering price of $8.0 million. The conversion price of Series B-1 Preferred Stock and Series B-3 Preferred Stock is $0.7074 per share of Common Stock, such that each Series B share is convertible into 1,413.6 shares of the Common Stock. All of the 2024 Preferred Warrants were exercised for Series B-3 Preferred Stock during the second quarter of 2024. As of March 31, 2025, there were 3,366 shares of Series B-2 Preferred Stock issued and outstanding and 6,763 shares of Series B-3 (convertible into 14,318,632 shares of Common Stock). Pursuant to the Preferred Purchase Agreement, the Company may be compelled to appoint two independent directors designated by Rosalind Advisors, Inc to the Company’s Board. No such appointment has been made as of March 31, 2025

Mezzanine Classification

Prior to the May 2024 approval by the Company’s stockholders of an increase in the authorized shares of Common Stock (the “Stockholder Approval”), Series B-1 Preferred Stock was redeemable at the option of the holder and Series B-2 and B-3 Preferred Stock, (collectively the (“Series B Preferred Stock”), were redeemable in the event of a change in control. ASC 480-10-S99-3A(2) of the SEC’s Accounting Series Release No. 268 (“ASR 268”) requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, an issuer should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series B-1 Preferred Stock was redeemable at the option of the holder, Series B-2 Preferred Stock and Series B-3 Preferred Stock were redeemable, upon a change in control that was not solely within control of the Company. Prior to the Stockholder Approval, the Series B Preferred Stock was considered senior to the Common Stock and all other series of the Company’s capital stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. As such, the Company determined that mezzanine treatment was appropriate for the Series B Preferred Stock at issuance in February 2024 and as of March 31, 2024, and the Series B Preferred Stock was presented as such in our consolidated balance sheets and consolidated statements of changes in stockholders’ equity and mezzanine equity for periods prior to the Stockholder Approval. The Series B Preferred Stock was not considered mandatorily redeemable.

Upon the Stockholder Approval, each share of Series B-1 Preferred Stock automatically converted into either Common Stock or, to the extent the conversion would cause a holder to exceed its beneficial ownership limitation, shares of Series B-2 Preferred Stock, thereby removing the redemption feature at the option of the holder (which was only present for Series B-1) and eliminating one of the requirements for classification as mezzanine equity.

Following the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders will be distributed among the holders of the shares of Series B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the terms of the Certificate of Designation filed on February 20, 2024. Accordingly, the Series B Preferred stock is classified as permanent equity on our consolidated balance sheets and consolidated statements of change in stockholders’ equity as of March 31, 2025, due to the limited exception under ASC 480-10-S99-3A(3)(f).

Convertible Debt

On November 22, 2024, the Company issued $4.2 million in an aggregate principal amount of the Notes. The Notes allow for up to 5,384,615 shares of Common Stock to be issued upon conversion for principal plus additional shares for PIK interest. See Note 10. Debt - Convertible Notes Payable, for additional details.

13. Equity Incentive Plans and Share-Based Payments

2021 Omnibus Incentive Plan

In 2021, the Board adopted, and our shareholders approved, the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum contractual term is 10 years for stock options issued. On June 12, 2024, the stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares authorized for issuance by 3,483,010 shares, from 266,990 shares to 3,750,000 shares. As of March 31, 2025, there were 1,937,489 shares available for future awards under the amended 2021 Plan.

Non-qualified stock options

The Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the requisite service period. The fair value of stock options is estimated at the time of grant using the BSM model, which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield. The Company elects to account for forfeitures as they occur.

The fair value of each option is estimated on the date of the grant using the BSM model. There were no equity grants during the three months ended March 31, 2025.

Share-based compensation expense related to stock options of approximately $0.1 million was recorded in selling, general and administrative expenses on the accompanying consolidated statement of operations for each of the three months ended March 31, 2025 and 2024.

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

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		-		-
Granted		-		$	-		-		-
Exercised		-		$	-		-		-
Canceled or forfeited		(21,887	)	$	2.18		-		-
Outstanding at March 31, 2025		1,336,831		$	3.91		9.19	$	-
Exercisable at March 31, 2025		104,642		$	28.14		8.23	$	-

(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 March 31, 2025.

As of March 31, 2025, there was $0.9 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.22 years.

Share-Based Compensation (RSUs)

Share-based compensation expense was $0.1 million for the RSUs for each of the three-month periods ended March 31, 2025 and 2024, and was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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 March 31, 2025		450,000		0.78	$	1.06

As of March 31, 2025, there was $0.3 million of unrecognized compensation related to unvested RSUs, which is expected to be recognized over a period of approximately 1.28 years.

14. Interest Expense, net

Interest expense, net consists of the following:

Schedule of Interest Expense, Net

(in thousands)	2025			2024
	Three Months Ended March 31,
(in thousands)	2025			2024

Interest expense	$	(120	)	$	(1,421	)
Interest income		14			14
Interest expense, net	$	(106	)	$	(1,407	)

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

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

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):

	2025			2024
	Three Months Ended March 31,
	2025			2024
Net loss	$	(4,203	)	$	(10,437	)
Weighted average common shares outstanding, basic and diluted		8,873,932			3,623,593
Net loss per share, basic and diluted	$	(0.47	)	$	(2.88	)

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:

March 31,	2025		2024
Common stock warrants		2,269,356		2,269,356
Common stock options and RSUs		1,786,831		94,181
Unit Purchase Options		20,182		20,182
Series B convertible preferred stock		14,318,632		6,793,892
Convertible notes		5,577,487		-
Total		23,972,488		9,177,611
Anti-dilutive securities		23,972,488		9,177,611

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 January 2028.

Future lease payments under non-cancelable leases as of March 31, 2025 were as follows (in thousands):

Years ending December 31,	Future lease commitments
Remainder of 2025	$	396
2026		246
2027		45
2028		1
2029		-
Thereafter		-
Total future minimum lease payments	$	688
Less imputed interest		(42	)
Total lease liability	$	646

Schedule of Operating Lease Liability

Reported as:
Operating lease liability, current	$	426
Operating lease liability, non-current		220
Total	$	646

Ameluz LSA Sales Commitment

Second A&R Ameluz LSA Sales Commitment

The Second A&R Ameluz LSA will remain in effect for 15 years from its effective date and shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and lamps equal to or greater than $150 million over the preceding five years. If we fail to earn $150 million in revenues from Ameluz^®and the RhodoLED^® Lamps over the preceding five (5) year period prior to the Second A&R Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Second A&R Ameluz LSA by providing one (1) year written notice.

In addition, effective in 2025, under the Second A&R Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of Ameluz^®per year as set forth in the Second A&R Ameluz LSA or (ii) 75% of the annual average of audited Ameluz^® tubes sold during the preceding four (4) full calendar years. If we fail to achieve the respective minimum for any calendar year, such failure will constitute a termination event, unless waived by the Ameluz Licensor.

Ameluz Minimum Research and Development Costs

During the years 2025 through 2030, we will be required to fund minimum R&D Costs in an amount that is at least 85% of the difference between (i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous version of the license and supply agreement with the Ameluz Licensor, dated October 8, 2021. If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion.

Licensing Agreement with Optical Tools

On December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”). The Agreement allowed for the transfer of the assigned patents and trademarks, and upon notification by the Company to Optical Tools, the research and development of certain prototypes. The Company paid a licensing fee of $0.2 million which was expensed during the year ended December 31, 2022.

On May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy lamp prototypes (“PDT Device”) using the technology in the assigned patents. The PDT Device provides illumination, based on different light profiles, to the external skin surface of the human body. The Company is to reimburse Optical Tools for all reasonable out-of-pocket, material and labor costs per the 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 months ended March 31, 2025 or 2024.

Milestone payments with Ferrer Internacional S.A.

Under the Xepi license and supply agreement, we are obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay Ferrer i) $2,000,000 upon the first occasion when annual net sales of Xepi^® under the Xepi LSA exceed $25,000,000, and ii) $4,000,000 upon the first occasion annual net sales of Xepi^®under the Xepi LSA exceed $50,000,000. No payments or accruals were made during the three months ended March 31, 2025 or 2024 related to Xepi^® milestones.

Legal proceedings

At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic 450, Contingencies. The Company expenses as incurred the legal costs related to such legal proceedings.

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 is scheduled to be held in front of an administrative law judge on June 30, 2025, with an Initial Determination expected by October 1, 2025. The Commission’s Final Determination is expected by February 2, 2026.

The Company denies Sun’s patent claims and intends to defend them vigorously in the above-referenced matters. In addition, Biofrontera has challenged the validity of the Sun Patents by filing separate petitions for inter partes review at the United States Patent Trial and Appeal Board (“PTAB”) for each of the Sun Patents. One such petition was instituted by the PTAB on February 24, 2025, and an institution decision on the other petition is anticipated to be received from the PTAB in June, 2025.

Based on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as the uncertainty of litigation, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from either action. Money damages are not available to Sun through the case before the ITC, and an adverse ruling could result in an exclusion order being imposed on the allegedly infringing product. 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 months ended March 31, 2025 and 2024:

Schedule of Operating Segment

(in thousands)	March 31, 2025			March 31, 2024

Revenues, net		8,588			7,912

Operating expenses:
Cost of revenues		3,268			4,116
Direct Sales		1,802			2,123
Sales Support		2,096			2,540
General and administrative		4,547			4,159
Research and development		1,207			17
Other operating expenses		215			424
Total operating expenses		13,135			13,379
Loss from operations		(4,547	)		(5,467	)
Other income (expense), net		343			(4,969	)
Loss before income taxes		(4,204	)		(10,436	)
Income tax expenses		(1	)		1
Net loss	$	(4,203	)	$	(10,437	)

18. Subsequent Events

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

On May 8, 2025, the Company received a notice from the Listing Qualifications Department of Nasdaq notifying the Company that the listing of its common stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market, as the closing bid price of the Company’s common stock was less than $1.00 per share for the previous 33 consecutive business days. The Company is in the process of creating a plan to regain compliance with the Nasdaq rules. See Note 2. Summary of Significant Accounting Policies – Nasdaq Compliance for additional information and the Current Report on Form 8-K filed by the Company with the SEC on May 14, 2025.

Item 2. 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 Ferrer. References to “Ameluz Licensor” refer collectively to Biofrontera Pharma and Biofrontera Bioscience.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain statements in this Form 10-Q constitute “forward-looking statements”. Such statements include estimates of our expenses, future revenue, capital requirements, our need for additional financing, statements regarding the efficacy and intended use of our technologies under development, the timelines and strategy for bringing licensed products to market, the timeline for regulatory review and approval of our licensed products, and other statements that are not historical facts. The words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential”, “target”, “goal”, “assume”, “would”, “could” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. You should read this Form 10-Q and the documents that we have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we expect. While we have based these forward-looking statements on our current expectations and projections about future events, we may not actually achieve the plans, intentions or expectations disclosed in or implied by our forward-looking statements, and you should not place undue reliance on our forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions about us and accordingly, actual results or events could differ materially from the plans, intentions and expectations disclosed in or implied by the forward-looking statements we make.

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

	●	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 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 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.

Overview

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 an exclusive license and supply agreement, the Second Amended and Restated License and Supply Agreement, effective as of February 13, 2024 with the Ameluz Licensor (the “Second A&R Ameluz LSA”). 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. Xepi^® (ozenoxacin cream, 1%), is a topical non-fluorinated quinolone that inhibits bacterial growth. Currently, no antibiotic resistance against Xepi^® is known and it has been specifically approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes. 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. See Note 6. Asset Held for Sale, for additional information.

Compliance with Nasdaq Listing Standards

If, for any reason, Nasdaq should delist our common stock from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders:

●	the liquidity and marketability of our common stock and/or publicly-traded warrants;
●	the market price of our common stock;
●	our ability to obtain financing for the continuation of our operations;
●	the number of institutional and general investors that will consider investing in our common stock;
●	the number of market makers in our common stock;
●	the availability of information concerning the trading prices and volume of our common stock; and
●	the number of broker-dealers willing to execute trades in shares of our common stock.

In addition, if we fail to regain compliance to be eligible to trade on Nasdaq or obtain listing on another reputable national securities exchange, we may have to pursue trading on a less recognized or accepted market, such as the over the counter markets, our stock may be traded as a “penny stock” which would make transactions in our stock more difficult and cumbersome, and we may be unable to access capital on favorable terms or at all, as companies trading on alternative markets may be viewed as less attractive investments with higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from, investing in our common stock. This may also cause the market price of our common stock to further decline.

Geopolitical Uncertainty and Tariffs

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 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.

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; and

●	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 lives.

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.

¹Werner RN, Stockfleth E, Connolly SM, et al. Evidence- and consensus-based (S3) Guidelines for the Treatment of Actinic Keratosis - International League of Dermatological Societies in cooperation with the European Dermatology Forum - Short version. J Eur Acad Dermatol Venereol. 2015;29(11):2069-2079. doi:10.1111/jdv.13180.

Seasonality

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; and

●	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 Party

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 Party

Selling, 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.

Research and Development

Effective June 1, 2024, we took control of all clinical trials for Ameluz^® in the Unites States, allowing for more effective cost management and direct oversight of trial efficiency. Our R&D expenses include costs directly attributable to the clinical development of Ameluz^®, including personnel-related expenses, the cost of services provided by outside contractors, including services related to the Company’s clinical trials, facilities, depreciation, and other direct and allocated expenses. Along with our Ameluz^®clinical trials, our R&D program also aims to improve the capabilities of our RhodoLED^® Lamps to better fulfill the needs of dermatologists and improve the effectiveness of our commercial team by letting sales representatives carry approved devices with them, allowing for easier product demonstrations and evaluations. All costs associated with research and development are expensed as incurred.

Change in Fair Value of Warrant Liabilities

For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liabilities to be reclassified to stockholders’ equity or deficit.

Change in Fair Value of Investment, Related Party

Our investments are comprised of equity securities in shares of Biofrontera AG, which are initially recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and losses reported in the Company’s consolidated statement of operations. For the investments held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations.

Loss on Debt Extinguishment

Effective January 4, 2024, we voluntarily terminated the Loan and Security Agreement with MidCap Business Credit LLC, for our revolving line of credit and recognized a $0.3 million loss on debt extinguishment upon the early termination related to prepayment fees and the write-off of deferred financing costs.

Interest Expense, net

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

Other Income (Expense), net

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

Income Taxes

As a result of the net losses we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes during such periods. Income tax expense incurred relates to state income taxes.

Results of Operations

Comparison of the Three Months ended March 31, 2025 and 2024

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:

(in thousands)	2025			2024			Change

Product revenues, net	$	8,588		$	7,901		$	687
Related party revenues		-			11			(11	)
Total revenues, net	$	8,588		$	7,912		$	676

Operating expenses:
Cost of revenues, related party		3,075			3,946			(871	)
Cost of revenues, other		193			170			23
Selling, general and administrative		8,653			9,250			(597	)
Selling, general and administrative, related party		7			(4	)		11
Research and development		1,207			17			1,190
Total operating expenses		13,135			13,379			(244	)
Loss from operations		(4,547	)		(5,467	)		920
Change in fair value of warrant liabilities		548			(3,429	)		3,977
Change in fair value of investment, related party		-			3			(3	)
Loss on debt extinguishment		-			(316	)		316
Interest expense, net		(106	)		(1,407	)		1,301
Other income (expense), net		(99	)		180			(279	)
Loss before income taxes		(4,204	)		(10,436	)		6,232
Income tax expenses		(1	)		1			(2	)
Net loss	$	(4,203	)	$	(10,437	)	$	6,234

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 Party

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 Expenses

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:

	2025		2024
Actinic keratosis	$	554	$	-
Moderate to severe acne		141		-
Superficial basal cell carcinoma		127		-
Portable devices		-		17
Personnel-related costs		379		-
Other research and development		6
	$	1,207	$	17

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. GAAP. Our definition of adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation 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 under U.S. GAAP.

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. The Company recognized a $0.3 million loss on debt extinguishment upon the early termination of the loan and security agreement. We exclude the impact of this loss as it is attributed to the prepayment fee, which is considered non-recurring, and the write-off of deferred financing costs, which is considered non-cash.

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 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.

Stock-Based 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.

Expensed 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.

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

We use adjusted EBITDA to measure our performance from period to period and to compare our results to those of our competitors. In addition to adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-U.S. GAAP financial information is viewed with U.S. GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.

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

	Three Months Ended March 31,
	2025			2024
Net loss	$	(4,203	)	$	(10,437	)
Interest expense, net		106			1,407
Income tax expenses		(1	)		1
Depreciation and amortization		29			128
EBITDA		(4,069	)		(8,901	)

Loss on debt extinguishment		-			316
Change in fair value of warrant liabilities		(548	)		3,429
Change in fair value of investment, related party		-			(3	)
Stock based compensation		239			228
Expensed issuance costs		-			354
Adjusted EBITDA	$	(4,378	)	$	(4,577	)
Adjusted EBITDA margin		-51.0	%		-57.9	%

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. If the Company is unable to raise capital when needed, it will not have sufficient cash resources and liquidity to fund its business operations and may be forced to delay or reduce continued commercialization efforts or R&D programs which could have a material adverse effect on the Company and its financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. Such adjustments may be necessary should the Company be unable to continue as a going concern.

Cash Flows

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

	Three Months Ended March 31,
(in thousands)	2025			2024
Net cash used in operating activities	$	(4,117	)	$	(3,325	)
Net cash used in investing activities		(3	)		-
Net cash provided by financing activities		-			5,799
Net increase (decrease) in cash and restricted cash	$	(4,120	)	$	2,474

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 Estimates

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. 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.

Our 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

A summary of our critical accounting estimates is discussed in the section entitled “Critical Accounting Estimates” in Item 7. 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 three months ended March 31, 2025.

Off-balance Sheet Arrangements

Other than those items reflected in Note 17. Commitments and Contingencies we did not have during the periods presented, and we do not currently have, any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings in which we are involved, (see Note 16. Commitments and Contingencies under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Item 1A. Risk Factors

As a smaller reporting company, we are not required to provide disclosure pursuant to this item in this Form 10-Q. As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed under “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on March 20, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

See the section entitled “Compliance with Nasdaq Listing Standards” in Item 2 of Part I of this Quarterly Report on Form 10-Q for details regarding our noncompliance with the Nasdaq listing rules.

Item 6. Exhibits

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the SEC.

Exhibit No.

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.1*		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2*		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BIOFRONTERA INC.

Date: May 15, 2025	By:	/s/ Hermann Luebbert
	Name:	Hermann Luebbert
	Title:	Chief Executive Officer & Chairman (Principal Executive Officer)

Date: May 15, 2025	By:	/s/ E. Fred Leffler III
	Name:	E. Fred Leffler, III
	Title:	Chief Financial Officer (Principal Financial Officer)