UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| 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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(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 | ||
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.
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).
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 | ☐ |
| ☒ | 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 August 12, 2025 there were shares outstanding of the registrant’s common stock, par value $ per share.
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BIOFRONTERA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
| June 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment, related party | ||||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Asset held for sale | ||||||||
| Other assets, related party | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accounts payable, related parties, net | ||||||||
| Operating lease liabilities | ||||||||
| Advance from Stockholders | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Convertible notes payable, net | ||||||||
| Warrant liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (see Note 16) | ||||||||
| Stockholders’ (deficit) equity: | ||||||||
| Preferred Stock $ par value; shares authorized; Series B-1 issued; and Series B-2; and Series B-3 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | ||||||||
| Common Stock $ par value; shares authorized; and shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ (deficit) equity | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
BIOFRONTERA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and number of shares)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Product revenues, net | $ | $ | $ | $ | ||||||||||||
| Revenues, related party | ||||||||||||||||
| Total revenues, net | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of revenues, related party | ||||||||||||||||
| Cost of revenues, other | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Selling, general and administrative, related party | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Change in fair value of warrants | ||||||||||||||||
| Change in fair value of investment, related party | ( | ) | ( | ) | ||||||||||||
| Loss on debt extinguishment | ( | ) | ||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
BIOFRONTERA INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except number of shares)
(Unaudited)
| Three and Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance, April 1, 2025 | | ( | ) | |||||||||||||||||||||||||
| Conversion of Series B-2 Preferred into Common | ( | ) | ||||||||||||||||||||||||||
| Conversion of Series B-3 Preferred into Common | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, June 30, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, January 1, 2025 | ( | ) | ||||||||||||||||||||||||||
| Conversion of Series B-2 Preferred into Common | ( | ) | ||||||||||||||||||||||||||
| Conversion of Series B-3 Preferred into Common | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Three and Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance, April 1, 2024 | $ | $ | | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Conversion of Series B-1 Preferred into Series B-2 Preferred | - | |||||||||||||||||||||||||||
| Issuance of Series B-3 upon exercise of warrants | - | |||||||||||||||||||||||||||
| Issuance of RSUs | - | |||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Exercise of pre-funded warrants | - | ( | ) | |||||||||||||||||||||||||
| Conversion of Series B-1 Preferred into Series B-2 Preferred and common stock | ||||||||||||||||||||||||||||
| Issuance of Series B-3 upon exercise of warrants | - | |||||||||||||||||||||||||||
| Issuance of RSUs | - | |||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
BIOFRONTERA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash flows used in operations: | ||||||||
| Depreciation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Amortization of acquired intangible assets | ||||||||
| Realized/unrealized (gain)/ loss in investment, related party | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Stock-based compensation | ||||||||
| Allowance for credit losses | ( | ) | ||||||
| Loss on debt extinguishment | ||||||||
| Non-cash interest expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Other receivables, related party | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Other assets, related party | ( | ) | ||||||
| Inventories | ||||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable, related party, net | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other liabilities | ( | ) | ||||||
| Cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Sales of equity investment, related party | ||||||||
| Purchase of intangible assets | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Cash flows used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from stockholder advances | ||||||||
| Proceeds from issuance of series B-1 preferred stock and warrants to purchase series B-3 preferred stock, net of issuance costs | ||||||||
| Proceeds from issuance of series B-3 from exercise of warrants | ||||||||
| Payment to extinguish line of credit | ( | ) | ||||||
| Payment of principal short-term debt | ( | ) | ||||||
| Cash flows provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash, cash equivalents and restricted cash, at the beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash, at the end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid, net | $ | $ | ||||||
| Supplemental non-cash financing activities | ||||||||
| Addition of right-of-use assets in exchange for operating lease liabilities | $ | $ | ||||||
| Conversion of warrant liability to equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
Biofrontera Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Business Overview
Biofrontera Inc., a Delaware Corporation (the “Company,” “we,” “us,” “our,” or “Biofrontera”), is a United States-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”). The Company’s primary licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions.
The Company includes its wholly owned subsidiary Biofrontera Discovery GmbH (“Discovery”), a limited liability company organized under the laws of Germany, formed on February 9, 2022, as a German presence to facilitate our relationship with Biofrontera Pharma GmbH (“Biofrontera Pharma”) and Biofrontera Bioscience GmbH (“Biofrontera Bioscience” and together with Biofrontera Pharma, the “Ameluz Licensor”) and manage our clinical trial work.
Our principal licensed product is Ameluz®, which is a prescription drug approved for use in combination with the RhodoLED® Lamps, for PDT (when used together, “Ameluz® PDT”). In the United States, the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp. We are currently selling Ameluz® for this indication in the United States under an exclusive license and supply agreement (as amended, the “Second A&R Ameluz LSA”) with the Ameluz Licensor, both of which are related parties.
Effective June 1, 2024, we assumed control of all clinical trials relating to Ameluz® in the United States, allowing for more effective cost management and direct oversight of trial efficiency. Our research and development (“R&D”) program is focused on label expansion for Ameluz® as well as supporting PDT growth by improving the capabilities of our RhodoLED® Lamps to better fulfill the needs of dermatologists.
Strategic Transaction with Biofrontera AG
On
June 30, 2025, the Company signed a binding agreement (the “Term Sheet”) with its former parent company Biofrontera AG,
Biofrontera Pharma, and Biofrontera Bioscience (together, the “Biofrontera Group”) pursuant to which the Company will
acquire all rights in the United States (the “U.S. Rights”) to Ameluz® and RhodoLED® (the
“Strategic Transaction”). In connection with the Strategic Transaction, additional agreements are to be executed, and
the transfer of the U.S. Rights is expected to be completed by September 30, 2025. Under the Term Sheet, and continuing once the
U.S. Rights are transferred, the Company will pay a royalty of
In exchange for the U.S. Rights, in addition to the aforementioned royalty and an agreement to transfer all costs associated with the U.S. business, Biofrontera AG will receive shares of Series D Convertible Preferred Stock, par value $ per share. See Note 12.Related Party Transactions, Note 18. Commitments and Contingencies and Note 20. Subsequent Events for additional information.
Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “Series D Certificate of Designation”), each share of Series D Convertible Preferred Stock is, subject to certain limitations specified in the Series D Certification of Designation, immediately convertible at the option of the holders thereof into shares of the Company’s common stock, par value $ per share (the “Common Stock”) and has voting rights on an as-converted basis. There were no shares of Series D Convertible Preferred Stock issued as of June 30, 2025. See Note 18. Subsequent Events for additional information.
| 7 |
Private Placement of Series C Preferred Stock
On
June 27, 2025, as a condition to the Strategic Transaction, the Company entered into a securities purchase agreement (the “Purchase
Agreement”) with certain accredited investors to issue and sell, in a private placement, up to shares of Series C Convertible
Preferred Stock, par value $ per share (the “Series C Preferred Stock”) at a price of $ per share for an aggregate
offering price of $
Liquidity and Going Concern
These consolidated financial statements have been prepared in accordance with U,S. generally accepted accounting principles (“U.S. GAAP”) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Since
we commenced operations in 2015, we have generated significant losses. The Company incurred net cash outflows from operations of $
The Company plans to address the conditions that raise substantial doubt regarding its ability to continue as a going concern by, among other things, utilizing external financing options, including a short-term line of credit, as well as finalizing the sale of its Xepi product line within the next one to three months. However, there can be no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, or close the Xepi disposition as intended. If the Company is unable to raise additional capital when needed, it will not have sufficient cash resources and liquidity to fund its business operations and may be forced to delay or reduce continued commercialization efforts or R&D programs which could have a material adverse effect on the Company and its financial statements.
The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
| 8 |
2. Summary of Significant Accounting Policies
Basis for Preparation of the Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2025, the Company’s operating results for the three and six months ended June 30, 2025 and 2024, and the Company’s cash flows for the six months ended June 30, 2025 and 2024. The accompanying financial information as of December 31, 2024 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20, 2025.
All amounts shown in these financial statements and tables are in thousands and amounts in the notes are in millions, except percentages and per share and share amounts.
With the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Form 10-K for the year ended December 31, 2024.
Reclassification of Prior Year Presentation
Certain
prior period amounts have been reclassified for consistency with the current period presentation. The reclassification was limited to
the condensed consolidated statements of cash flow and had no impact on the reported results of operations. Specifically, for prior year
presentation, accounts payable-related parties of $
The Nasdaq Stock Market, LLC (“Nasdaq”) Compliance
On May 8, 2025, the Company received a letter from Nasdaq notifying the Company that the listing of the Common Stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) as the closing bid price of the Common Stock was less than $ per share for the previous 33 consecutive business days.
The notice has no present impact on the listing or trading of the Company’s securities on The Nasdaq Capital Market. Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until November 5, 2025, to regain compliance with the rule referred to in this paragraph. To regain compliance, during this 180-day compliance period, the closing bid price of the Company’s common stock must be at least $ per share for a minimum of 10 consecutive business days.
In the event that the Company does not regain compliance with the Nasdaq Listing Rules prior to the expiration of the 180-day compliance period ending on November 5, 2025, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii) by meeting the continued listing requirement for market value of publicly held shares and all other applicable standards for initial listing on The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and providing written notice to Nasdaq of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or if the Company does not meet other listing standards, Nasdaq could provide notice that the Company’s securities will be subject to delisting. At such time, the Company may appeal the delisting determination to a Hearings Panel.
The Company intends to actively monitor the closing bid price of its common stock and, as appropriate, will consider available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules. There can be no assurance that the Company will be able to regain compliance with Rule 5550(a)(2) or maintain compliance with the other listing requirements of the Nasdaq Capital Market.
On
May 21, 2025, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the
Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended March 31, 2025 was $
| 9 |
The Notice has no immediate effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market. The Company submitted a plan to regain compliance with the Nasdaq Listing Rule 5550(b)(1) to Nasdaq and on July 24, 2025 was granted an extension of time to regain compliance with this rule on or before October 10, 2025.
Use of Estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions by management that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities, as reported on the balance sheet date, and the reported amounts of revenues and expenses arising during the reporting period. The main areas in which assumptions, estimates and the exercising of judgment are appropriate relate to realization and valuation of receivables and inventory, valuation of warrant liabilities, impairment assessment of intangibles and other long-lived assets, share-based payments, deferred tax asset valuations, and contingent liability recognition. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values.
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. ASU 202-09 did not have any impact on the interim disclosures in 2025. We are evaluating the effect that this guidance will have on our annual consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, 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 June 30, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| (in thousands) | Level | June 30, 2025 | December 31, 2024 | |||||||||
| Assets: | ||||||||||||
| Investment, related party | 1 | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Warrant liability – 2023 Purchase Warrants | 3 | $ | $ | |||||||||
| Warrant liability - 2022 Purchase Warrants | 3 | $ | $ | |||||||||
| Warrant liability – 2022 Inducement Warrants | 3 | $ | $ | |||||||||
| Total Liabilities | $ | $ | ||||||||||
| 10 |
Investment, related party
As of June 30, 2025 and December 31, 2024, the Company owned 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
The 2023 Purchase Warrants and 2022 Purchase Warrants, as well as the 2022 Inducement Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statement of operations.
The
Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered
a Level 3 fair value measurement. Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are
outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value
may cause a significant change to the fair value of our warrant liabilities which could also result in material non-cash gain or loss
being reported in our consolidated statement of operations. The fair value of these warrants was
determined using the BSM model based on the following range of assumptions for the three and six months ended June 30, 2025: fair value
of the underlying common stock of $ to $, expected volatility of
The following table presents the changes in the Level 3 warrant liabilities measured at fair value (in thousands):
Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Fair value at beginning of period | $ | $ | ||||||
| Issuance of new warrants | ||||||||
| Exercise of warrants | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Fair value at end of period | $ | $ | ||||||
| 11 |
4. Revenue
We generate revenue primarily through the sales of our licensed products, Ameluz® and BF-RhodoLED® lamps.
Traditional PDT treatments using a lamp are usually performed more frequently during the winter. As such our revenue is subject to some seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.
5. Cash Balances and Statement of Cash Flows Reconciliation
The
Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).
At June 30, 2025, approximately $
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) | June 30, 2025 | December 31, 2024 | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Long-term restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows | $ | $ | ||||||
Long-term restricted cash was recorded in other assets in the condensed consolidated balance sheet.
6. Accounts Receivable, net
Accounts receivables are mainly attributable to the sale of Ameluz®. It is expected that all trade receivables will be settled within twelve months of the balance sheet date. Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of historical experience and current information. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending primarily on delinquency status, and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivable, we considered our historical experience with certain customers, regulatory and legal environments and other relevant current and future forecasted macroeconomic factors. If we become aware of any customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded.
The
allowance for credit losses was $
| 12 |
7. Inventories
Inventories consist of finished goods of Ameluz® and the RhodoLED® lamps.
There
was
8. Asset Held for Sale
Asset held for sale consists of the following:
| (in thousands) | June 30, 2025 | December 31, 2024 | ||||||
| Xepi® license | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Asset held for sale | $ | $ | ||||||
The
Xepi product line has been held for sale since the third quarter of 2024, when the Company determined that the intangible asset met the
criteria to be classified as held for sale in accordance with ASC 360-10-45-9. The Company is working with a potential purchaser and
expects to complete a sale within the third quarter and, as such, has classified the asset as held for sale under current assets in the
condensed consolidated balance sheets. The carrying amount of the asset at the time of classification was $
The
Xepi® license intangible asset was recorded at acquisition date fair value of $
9. Advance from Stockholders
On
June 27, 2025, the Company entered the Purchase Agreement with certain accredited investors to issue and sell, in a private placement
up to shares of Series C Preferred Stock at a price of $ per share for an aggregate offering price of $
At
June 30, 2025, the proceeds of $
| 13 |
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
| (in thousands) | June 30, 2025 | December 31, 2024 | ||||||
| Employee compensation and benefits | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
11. Debt
Convertible Notes Payable
On
November 22, 2024, the Company issued $
The
Notes bear interest at
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
The Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts.
The Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815. Based on the Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability.
During
the three and six months ended June 30, 2025 the Company recognized interest expense of approximately $
| 14 |
12. Related Party Transactions
We consider Biofrontera AG and its consolidated subsidiaries to be a related party, as we rely on the Biofrontera Group as the sole supplier of Ameluz® and the RhodoLED® Lamps.
Strategic Transaction with Biofrontera Group
On
June 30, 2025, the Company signed a binding Term Sheet with the Biofrontera Group pursuant to which the Company will acquire all
rights in the United States to Ameluz® and RhodoLED®. In connection with the Strategic Transaction,
additional agreements are to be executed, and the transfer of the U.S. Rights is expected to be completed by September 30, 2025.
Under the Term Sheet, and continuing once the U.S. Rights are transferred, the Company will pay a royalty of
In exchange for the U.S. Rights, in addition to the aforementioned royalty and an agreement to transfer all costs associated with the U.S. business, the Biofrontera Group will receive shares of Series D Convertible Preferred Stock, par value $ per share, which represents a 10% post-money equity stake in the Company. See Note 18. Subsequent Events for additional information.
Pursuant
to the Series
D Certificate of Designation each share of Series D Convertible Preferred Stock is, subject to certain limitations specified
in the Series D Certification of Designation,
As
a condition precedent to the Strategic Transaction, the Company paid $
License and Supply Agreement
Under the Second A&R Ameluz LSA (applicable for any tubes purchased through May 31, 2025), the Company had an exclusive, non-transferable license to market and sell its licensed products, Ameluz® and RhodoLED® Lamps, in the United States and was required to purchase the licensed products exclusively from Biofrontera Pharma, pursuant to which the price paid per unit was based on certain percentages of the anticipated net selling price (the “Transfer Price”) that covered the cost of goods, royalties on sales, and services, including all regulatory efforts, agency fees, pharmacovigilance, and patent administration, as follows:
| ● | Twenty-five percent of the anticipated net selling price per unit through 2025; | |
| ● | Thirty percent of the anticipated net selling price per unit for 2026 to 2028; | |
| ● | Thirty-two percent of the anticipated net selling price per unit for 2029 to 2031; | |
| ● | Thirty-five percent of the anticipated net selling price per unit for 2032 and beyond, subject to a minimum dollar amount per unit; and | |
| ● | The Transfer Price for sales related to acne, another indication currently in development, will remain at twenty-five percent of the anticipated net selling price per unit indefinitely. |
The Second A&R Ameluz LSA also provided for the transfer of responsibilities for clinical trials relating to Ameluz® in the US on June 1, 2024, including the Company assuming related contracts and transferring key personnel from the Ameluz Licensor to the Company.
| 15 |
The Company entered into a Release of Claims with the Ameluz Licensor, dated February 13, 2024, pursuant to which the Company agreed to release the Ameluz Licensor from all claims and liabilities arising out of or relating to any failure by the Ameluz Licensor to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials for which the Company assumed responsibility.
There
were no purchases of the licensed products for the three months ended June 30, 2025. Purchases of the licensed products (inclusive of
estimated and actual purchase price adjustments) were $
Transactions with Biofrontera Bioscience
Total
expenses paid to Biofrontera Bioscience for clinical trial costs as well as rent expense for the three and six months ended June 30,
2025 were $
Other
Effective as of the date of the Strategic Transaction and for the following three years, as long as Biofrontera AG holds any shares of Series D Convertible Preferred Stock (or shares of Common Stock that were converted from Series D Convertible Preferred Stock), Biofrontera AG shall have the right to appoint (i) if the board consists of seven or fewer members, one individual to the Company’s board of directors ; or (ii) if the board consists of eight or more directors the right to appoint two individuals . No appointments have been made through the filing date.
13. Stockholders’ Equity
Under the Company’s Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation (“Certificate”), filed June 16, 2025, the Company is authorized to issue shares of Common Stock, and shares of preferred stock, par value $ per share (“Preferred Stock”).
Common Stock:
The holders of Common Stock are entitled to one vote for each share held. Holders of Common Stock are not entitled to receive dividends, unless declared by the Company’s board of directors (“Board”). The Company has not declared dividends since inception. In the event of liquidation of the Company, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. The outstanding shares of Common Stock are fully paid and non-assessable. As of June 30, 2025, there were shares of Common Stock outstanding.
As
of June 30, 2025 we had outstanding warrants to purchase an aggregate of
| Warrants | Number of Shares | Exercise Price | Expiration Date | |||||||
| Liability classified (See Note 3. Fair Value Measurements) | $ | |||||||||
| Equity classified | ||||||||||
Series B Preferred Stock:
On
February 19, 2024, the Company entered into a securities purchase agreement (the “Preferred Purchase Agreement”), with certain
accredited investors, pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”), (i)
shares of Series B-1 Convertible Preferred Stock, par value
$
per share (the “Series B-1 Preferred Stock”), and
(ii) warrants to purchase
Series C Preferred Stock
In connection with entering into the Purchase Agreement, on June 30, 2025, the Company filed the Series C Certificate of Designation with the Delaware Secretary of State designating shares of its authorized and unissued preferred stock as Series C Preferred Stock, each with a stated value of $ per share. The Series C Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series C Preferred Stock.
There were shares of Series C Preferred Stock issued and outstanding as of June 30, 2025.
| 16 |
Series D Preferred Stock
In connection with the Strategic Transaction, on June 30, 2025, the Company filed the Series D Certificate of Designation with the Delaware Secretary of State designating shares of its authorized and unissued preferred stock as Series D Preferred Stock (the “Series D Preferred Stock”), each with a stated value of $ per share. The Series D Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series D Preferred Stock.
There were shares of Series D Preferred Stock issued and outstanding as of June 30, 2025.
Convertible Debt
On
November 22, 2024, the Company issued $
2021 Omnibus Incentive Plan
In 2021, the Board adopted, and our stockholders approved, the 2021 Omnibus Incentive Plan (“2021 Plan”), under which the maximum contractual term is 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 shares, from shares to shares. As of June 30, 2025, there were shares available for future awards under the amended 2021 Plan.
Non-qualified stock options
The Company recognizes the grant-date fair value of share-based awards granted as compensation expense on a straight-line basis over the requisite service period. The fair value of stock options is estimated at the time of grant using the BSM model, which requires the use of inputs and assumptions such as the fair value of the underlying stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield. The Company elects to account for forfeitures as they occur.
The fair value of each option is estimated on the date of the grant using the BSM option pricing model. There were no equity grants during the three and six months ended June 30, 2025.
Share-based compensation expense related to stock options of approximately $ million and $ million was recorded in selling, general and administrative expenses, with a negligible amount recorded as research and development on the accompanying consolidated statement of operations, for the three and six months ended June 30, 2025, respectively. Share-based compensation expense related to stock options of $ million and $ million was recorded in selling, general and administrative expenses, with a negligible amount recorded as research and development, for the three and six months ended June 30, 2024, respectively.
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (1) | |||||||||||||
| Outstanding at December 31, 2024 | | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Canceled or forfeited | ( | ) | ||||||||||||||
| Outstanding at June 30, 2025 | ||||||||||||||||
| Exercisable at June 30, 2025 | ||||||||||||||||
| (1) |
As of June 30, 2025, there was $ million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately years.
Share-Based Compensation (RSUs)
Restricted Stock Units (“RSUs”) will vest annually over two years, subject to the recipient’s continued service with the Company through the applicable vesting dates. The fair value of each RSU is determined based on the closing market price of the Company’s Common Stock on the grant date.
Share-based compensation expense for the RSUs was $ million for both the three and six months ended June 30, 2025, and was negligible and $ million for the three and six months ended June 30, 2024, respectively, and was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.
As of June 30, 2025, there was $ million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a period of approximately years.
| 17 |
| Shares | Weighted Average Remaining Contractual Term | Weighted Average Grant Date Fair Value | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Awarded | - | |||||||||||
| Vested | - | |||||||||||
| Canceled or forfeited | - | |||||||||||
| Outstanding at June 30, 2025 | $ | |||||||||||
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.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding, basic and diluted | ||||||||||||||||
| Net loss per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| June 30, | 2025 | 2024 | ||||||
| Common stock warrants | ||||||||
| Common stock options and RSUs | ||||||||
| Unit Purchase Options | ||||||||
| Shares related to Series B-2 convertible preferred stock | ||||||||
| Shares related to Series B-3 convertible preferred stock | ||||||||
| Convertible Notes | ||||||||
| Total | ||||||||
| 18 |
Common Stock warrants include the 2022 Purchase Warrants, 2023 Purchase Warrants, 2022 Inducement Warrants and warrants issued in the Company’s initial public offering.
16. Commitments and Contingencies
Leases
The
Company leases its corporate headquarters under an operating lease that expires in November 2025. The Company has the
The Company has also entered into a master lease agreement for its vehicles. After an initial non-cancelable twelve-month period, each vehicle is leased on a month-to-month basis. Based on historical retention experience of approximately three years, the vehicles have varying expiration dates through August 2028.
Future lease payments under non-cancellable leases as of June 30, 2025 were as follows (in thousands):
| Years ending December 31, | Future lease commitments | |||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future minimum lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Total lease liability | $ | |||
| Reported as: | ||||
| Operating lease liability, current | $ | |||
| Operating lease liability, non-current | ||||
| Total | $ | |||
| 19 |
Second A&R Ameluz LSA and Term Sheet Sales Commitments
The Second A&R Ameluz LSA, as amended by the Term Sheet, shall be terminated, replaced, or amended (to the extent necessary) in connection with the Strategic Transaction.
As it currently stands, the
Second A&R Ameluz LSA, is to remain in effect for 15 years
from its effective date and shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from
Ameluz product and lamps equal to or greater than $
In addition, effective in 2025, under the Second A&R Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of Ameluz® per year as set forth in the Second A&R Ameluz LSA or (ii) 75% of the annual average of audited Ameluz® tubes sold during the preceding four (4) full calendar years. If we fail to achieve the respective minimum for any calendar year, such failure will constitute a termination event, unless waived by the Ameluz Licensor.
As
agreed to in connection with the Strategic Transaction and pursuant to the Term Sheet, until the earlier to occur of
Ameluz Minimum Research and Development Costs
As it currently stands, the Second A&R Ameluz LSA provides that, during the years 2025 through 2030, we will be required to fund minimum R&D costs in an amount that is at least 85% of the difference between (i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous version of the license and supply agreement with the Ameluz Licensor, dated October 8, 2021. If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion. It is anticipated that this requirement to fund minimum R&D costs will no longer apply once the Second A&R Ameluz LSA is terminated, replaced, or amended (to the extent necessary) in connection with the Strategic Transaction.
Licensing Agreement with Optical Tools
On
December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen
Tobin and Paul Sowyrda (the “Agreement”). The Agreement allowed for the transfer of the assigned patents and trademarks,
and upon notification by the Company to Optical Tools, the research and development of certain prototypes. The Company paid a licensing
fee of $
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 $
The Company did not make any milestone or royalty payments or accruals for such payments during the three and six months ended June 30, 2025 or 2024.
Milestone payments with Ferrer Internacional S.A.
Under
the license and supply agreement (as amended, the “Xepi LSA”) with Ferrer Internacional S.A. (“Ferrer”), we are
obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay Ferrer (i) $
| 20 |
Legal proceedings
At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of FASB ASC Topic 450, Contingencies. The Company expenses as incurred the legal costs related to such legal proceedings.
Legal Claims
On September 13, 2023, Biofrontera was served with a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc. (“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham Act, and iii) unfair trade practices under Massachusetts law. All claims stem from allegations that Biofrontera has promoted its Ameluz® product in a manner that is inconsistent with its approved FDA labeling. Though this complaint was originally filed in the United States District Court for the District of Massachusetts, this matter has been transferred by agreement of the parties to the United States District Court for the District of New Jersey. In March of 2024, Biofrontera Company filed a partial motion to dismiss the Lanham Act and Massachusetts statutory claims, which was denied on October 15, 2024. Biofrontera subsequently answered Sun’s complaint and filed counterclaims on October 30, 2024 alleging i) violation of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade libel/product disparagement, which Sun answered on December 17, 2024. On March 11, 2025, Biofrontera received an additional notice alleging breach of contract through unlawful marketing practices which makes reference to similar previous communications sent by Sun to Biofrontera on February 4, 2022 and September 9, 2022.
Discovery is ongoing in the above-referenced matters. The Company denies the claims brought by Sun and intends to defend them vigorously. Based on the Company’s assessment of the facts underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from this action. If the final resolution of the matter is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows.
Separately, on June 26, 2024 and June 27, 2024, Sun filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District Court for the District of Massachusetts and the International Trade Commission (“ITC”), both alleging infringement of two patents held by Sun (the “Sun Patents”). The complaint filed in the United States District Court for the District of Massachusetts has been held in abeyance pending the completion of the case before the ITC. A hearing was held in front of an administrative law judge between June 30, 2025 and July 3, 2025. The ITC’s Initial Determination is expected by October 1, 2025 and a Final Determination is expected by February 2, 2026.
The Company denies Sun’s patent claims and intends to defend them vigorously in the above-referenced matters. In addition, Biofrontera has challenged the validity of the Sun Patents by filing separate petitions for inter partes review at the United States Patent Trial and Appeal Board (“PTAB”) for each of the Sun Patents. One such petition was instituted by the PTAB on February 24, 2025, while the PTAB issued a discretionary denial of the other petition on July 2, 2025.
| 21 |
Based on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as the uncertainty of litigation, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from either action. Money damages are not available to Sun through the case before the ITC, and an adverse ruling could result in an exclusion order being imposed on the allegedly infringing product. If the final resolution of the case before the United States District Court for the District of Massachusetts is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows.
17. Segment Reporting
The
Company operates as
The Company’s CODM is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income to allocate resources and assesses financial performance by comparing actual results to historical results and previously forecasted financial information.
The following table presents selected financial information with respect to the Company’s single operating segment for the three and six months ended June 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Revenues, net | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Direct sales | ||||||||||||||||
| Sales support | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Other operating expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
18. Subsequent Events
We have completed an evaluation of subsequent events after the balance sheet date of June 30, 2025 through the date this Quarterly Report on Form 10-Q was submitted to the SEC, and determined that the following material subsequent events required disclosure.
Series C Preferred Stock
On July 1, 2025, pursuant to Purchase Agreement, the Company issued Shares of Series C Preferred Stock, par value $ per share, each at a price of $ per Series C Preferred. The Series C Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series C Preferred Stock. See Note 1. Organization and Business Overview and Note 13. Stockholders’ Equity for additional information.
Strategic Transaction
The Company signed a binding Term Sheet with its former parent company pursuant to which the Company will acquire all the U.S. Rights to Ameluz® and RhodoLED® . In connection with the Strategic Transaction, additional agreements are to be executed, and the transfer of the U.S. Rights is expected to be completed by September 30, 2025. In exchange for the U.S. Rights, on July 2, 2025, the Company issued shares of Series D Preferred Stock, par value $ per share, each at a price of $ per Series D Preferred. Pursuant to the terms of the Term Sheet, for a period of twelve months following the date of issuance of the Series D Preferred Stock, the Company shall not issue any additional equity securities or any debt convertible into equity. The Series D Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series D Preferred Stock. See Note 1. Organization and Business Overview and Note 12. Related Party Transactions for additional information.
Office Lease
On
July 30, 2025, the Company entered into a new lease for office space in Woburn, MA in place of the current office lease which terminates
November 2025. The term of the new lease shall commence upon substantial completion of tenant improvements, but no later than December
1, 2025. The term of the lease is
Appointment of Chief Commercial Officer
The Company has entered into an employment agreement with George Jones to serve as the Chief Commercial Officer, starting on August 25, 2025. Mr. Jones is an experienced commercial executive with more than 25 years of commercial leadership experience in the pharmaceutical and biotech sectors. Prior to joining the Company, Mr. Jones recently served as Chief Operating Officer at UpScriptHealth since 2021. Prior to UpScriptHealth, Mr. Jones held senior commercial roles at Currax Pharmaceuticals since 2015.
| 22 |
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 and second quarters of 2025 compare with prior-year periods. Throughout this section, Biofrontera Inc., including its wholly owned subsidiary, Biofrontera Discovery GmbH (“Discovery” or “subsidiary”), is referred to as “Company,” “we,” “us,” or “our.” References to “Licensors” refer collectively to Biofrontera Pharma, Biofrontera Bioscience and Ferrer. References to “Ameluz Licensor” refer collectively to Biofrontera Pharma and Biofrontera Bioscience.
Forward-Looking 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. |
| 23 |
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 is expected to 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 with Ferrer Internacional S.A. (“Ferrer”) enables us to market and sell this product in the United Sates. However, the Company has not had sales of Xepi since 2023 due to third-party manufacturing delays that have impacted our commercialization of the product. Ferrer is now in the process of qualifying a new contract manufacturer. If the new contract manufacturer is qualified, we believe that it will be able to supply enough of the Xepi® product line to meet market demand for as long as we maintain it. Nevertheless, the Company is working with a potential purchaser and expects to complete a sale of the asset within the next three months. The related intangible asset is presented as held for sale under current assets in the consolidated balance sheets. See Note 8. Asset Held for Sale, for additional information.
Our Strategy
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.
| 24 |
We believe that important measures of our results of operations include product revenue, operating income (loss) and adjusted EBITDA (a non-U.S. GAAP measure as defined below). Our sole source of product revenue is sales of products that we license from certain related and unrelated companies. Our long-term financial objectives include consistent revenue growth and expanding operating margins. 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.
Recent Key Developments
Compliance with Nasdaq Listing Standards
On May 8, 2025, the Company received a letter from Nasdaq notifying the Company that the listing of the Common Stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) as the closing bid price of the Common Stock was less than $1.00 per share for the previous 33 consecutive business days.
The notice has no present impact on the listing or trading of the Company’s securities on The Nasdaq Capital Market. Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until November 5, 2025, to regain compliance with the rule referred to in this paragraph. To regain compliance, during this 180-day compliance period, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days.
In the event that the Company does not regain compliance with the Nasdaq Listing Rules prior to the expiration of the 180-day compliance period ending on November 5, 2025, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii) by meeting the continued listing requirement for market value of publicly held shares and all other applicable standards for initial listing on The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and providing written notice to Nasdaq of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. Should the Nasdaq staff conclude that the Company will not be able to cure the deficiency, or if the Company does not meet other listing standards, Nasdaq could provide notice that the Company’s securities will be subject to delisting. At such time, the Company may appeal the delisting determination to a Hearings Panel.
The Company intends to actively monitor the closing bid price of its common stock and, as appropriate, will consider available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules. There can be no assurance that the Company will be able to regain compliance with Rule 5550(a)(2) or maintain compliance with the other listing requirements of the Nasdaq Capital Market.
On May 21, 2025, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended March 31, 2025 was $0.5 million, the Company is no longer in compliance with the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2.5 million. Additionally, as of the date of the Notice or as of June 30, 2025, the Company did not meet either of the alternative requirements of maintaining a market value of listed securities of $35 million or achieving a net income from continuing operations of $0.5 million in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. As a result, as of the date of this Report, the Company does not satisfy Nasdaq Marketplace Rule 5550(b).
The Notice has no immediate effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market. The Company submitted a plan to regain compliance with the Nasdaq Listing Rule 5550(b)(1) to Nasdaq and on July 24, 2025 was granted an extension of time to regain compliance with this rule on or before October 10, 2025.
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; |
| 25 |
| ● | 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.
Strategic Transaction with Biofrontera AG
On June 30, 2025, the Company signed a binding agreement (the “Term Sheet”) with its former parent company Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience (together, the “Biofrontera Group”) pursuant to which the Company will acquire all rights in the United States (the “U.S. Rights”) to Ameluz® and RhodoLED® (the “Strategic Transaction”). In connection with the Strategic Transaction, additional agreements are to be executed, and the transfer of the U.S. Rights is expected to be completed by September 30, 2025. Under the Term Sheet, and continuing once the U.S. Rights are transferred, the Company will pay a royalty of 12% (and 15% in years where Ameluz® revenue in the United States exceeds $65.0 million). The royalty will replace the transfer pricing model under the Company’s Second A&R Ameluz LSA effective as of February 13, 2024 by and among the Company, and the Biofrontera Group. See Note 12. Related Party Transactions for additional information.
In exchange for the U.S. Rights, in addition to the aforementioned royalty and an agreement to transfer all costs associated with the U.S. business, Biofrontera AG will receive 3,019 shares of Series D Convertible Preferred Stock, par value $0.001 per share. See Note 12. Related Party Transactions, Note 18. Commitments and Contingencies and Note 20. Subsequent Events for additional information.
Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “Series D Certificate of Designation”), each share of Series D Convertible Preferred Stock is, subject to certain limitations specified in the Series D Certification of Designation, immediately convertible at the option of the holders thereof into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and has voting rights on an as-converted basis. There were no shares of Series D Convertible Preferred Stock issued as of June 30, 2025. See Note 18. Subsequent Events for additional information.
Private Placement of Series C Preferred Stock
On June 27, 2025, as a condition to the Strategic Transaction, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors to issue and sell, in a private placement, up to 11,000 shares of Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) at a price of $1,000 per share for an aggregate offering price of $11.0 million. The Series C Preferred Stock offering consisted of two tranches with the first tranche closing on July 1, 2025. Gross proceeds of $8.5 million from the first tranche were received on June 30, 2025, in advance of the first tranche closing (before deducting estimated offering expenses payable by the Company). The second tranche is expected to close after the Company enters into definitive documentation to consummate the Strategic Transaction, which is expected to occur on or before September 30, 2025. The gross proceeds from the second tranche are expected to be $2.5 million, before deducting estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the Series C Preferred Stock offering to fund the acquisition and transfer costs associated with the Strategic Transaction and other general corporate purposes. See Note 9. Advance from Stockholders for additional information.
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.
| 26 |
Key factor affecting our performance
Our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period due to seasonality.
Traditional photodynamic therapy treatments using a lamp are performed more frequently during the winter, as a result our revenue is subject to some seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.
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.
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.
| 27 |
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
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.
| 28 |
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 June 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended June 30:
| (in thousands) | 2025 | 2024 | Change | |||||||||
| Product revenues, net | $ | 9,030 | $ | 7,831 | $ | 1,199 | ||||||
| Related party revenues | - | 8 | (8 | ) | ||||||||
| Revenues, net | $ | 9,030 | $ | 7,839 | $ | 1,191 | ||||||
| Operating expenses: | ||||||||||||
| Cost of revenues, related party | 2,380 | 4,092 | (1,712 | ) | ||||||||
| Cost of revenues, other | 262 | 250 | 12 | |||||||||
| Selling, general and administrative | 10,528 | 7,915 | 2,613 | |||||||||
| Selling, general and administrative, related party | 69 | 32 | 37 | |||||||||
| Research and development | 870 | 621 | 249 | |||||||||
| Total operating expenses | 14,109 | 12,910 | 1,199 | |||||||||
| Loss from operations | (5,079 | ) | (5,071 | ) | (8 | ) | ||||||
| Change in fair value of warrant liabilities | 153 | 5,438 | (5,285 | ) | ||||||||
| Change in fair value of investment, related party | 2 | (14 | ) | 16 | ||||||||
| Interest expense, net | (115 | ) | (596 | ) | 481 | |||||||
| Other income, net | (264 | ) | 6 | (270 | ) | |||||||
| Total other expense | (224 | ) | 4,834 | (5,058 | ) | |||||||
| Loss before income taxes | (5,303 | ) | (237 | ) | (5,066 | ) | ||||||
| Income tax expenses | 21 | 20 | 1 | |||||||||
| Net loss | $ | (5,324 | ) | $ | (257 | ) | $ | (5,067 | ) | |||
Product Revenue, net
Net product revenue for the three months ended June 30, 2025 increased by $1.2 million, or 15.3% as compared to the three months ended June 30, 2024. This increase was driven by both a 5% higher unit sale price and 9.5% increase in sales volume of Ameluz® in the second quarter of 2025. The higher sales volume of Ameluz® was due to improvements in direct sales team efficiency.
| 29 |
Operating Expenses
Cost of Revenues, Related Party
Cost of revenues, related party for the three months ended June 30, 2025 decreased by $1.7 million, or 41.8% as compared to the three months ended June 30, 2024. This was primarily due to the reduced cost structure under the Second A&R Ameluz LSA. See Note 12. Related Party Transactions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended June 30, 2025 increased by $2.6 million, or 33.0% as compared to the three months ended June 30, 2024. The increase was primarily driven by a $3.4 million increase in legal costs due to patent claims, which was partially offset by $0.5 million in personnel savings within both the direct sales team and general and administrative staff due to headcount fluctuation, and $0.3 million decrease in miscellaneous general and administrative expenses.
Research and Development Expenses
R&D expenses for the three months ended June 30, 2025 increased by $0.2 million as compared to the three months ended June 30, 2024. The increase was attributable to our assumption of all clinical trial activities for Ameluz® in the United States effective June 1, 2024, allowing for more effective cost management and direct oversight of trial efficiency. The following table summarizes our R&D expenses by indication:
| Three Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Superficial basal cell carcinoma | $ | 279 | $ | 108 | ||||
| Actinic keratosis | 90 | 133 | ||||||
| Moderate to severe acne | 91 | 93 | ||||||
| Personnel-related costs | 402 | 254 | ||||||
| Other research and development | 8 | 33 | ||||||
| $ | 870 | $ | 621 | |||||
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities was $0.2 million for the three months ended June 30, 2025, as compared to $5.4 million for the three months ended June 30, 2024. The change in fair value of warrant liabilities was driven primarily by a mix of a decreased population of outstanding warrant liabilities due to exercise of warrants for preferred shares in May 2024 (of the 2024 change, $4.3 million was attributable to the warrants for preferred stock), coupled with a drop in the underlying value of the Company’s Common Stock during the second quarter of 2025 as compared to the second quarter of 2024.
| 30 |
Interest expense, net
Interest expense decreased by $0.5 million due to the lower interest rate applicable to the outstanding convertible notes of $4.2 million issued by the Company in November 2024, as compared to the interest rate applicable to the Company’s $4.0 million term loan that matured on July 5, 2024.
Comparison of the Six Months ended June 30, 2025 and 2024
The following table summarizes our results of operations for the six months ended June 30:
| (in thousands) | 2025 | 2024 | Change | |||||||||
| Product revenues, net | $ | 17,617 | $ | 15,732 | $ | 1,885 | ||||||
| Related party revenues | - | 18 | (18 | ) | ||||||||
| Revenues, net | $ | 17,617 | $ | 15,750 | $ | 1,867 | ||||||
| Operating expenses: | ||||||||||||
| Cost of revenues, related party | 5,455 | 8,038 | (2,583 | ) | ||||||||
| Cost of revenues, other | 455 | 421 | 34 | |||||||||
| Selling, general and administrative | 19,183 | 17,163 | 2,020 | |||||||||
| Selling, general and administrative, related party | 76 | 29 | 47 | |||||||||
| Research and development | 2,077 | 637 | 1,440 | |||||||||
| Total operating expenses | 27,246 | 26,288 | 958 | |||||||||
| Loss from operations | (9,629 | ) | (10,538 | ) | 909 | |||||||
| Change in fair value of warrant liabilities | 702 | 2,009 | (1,307 | ) | ||||||||
| Change in fair value of investment, related party | 2 | (11 | ) | 13 | ||||||||
| Loss on debt extinguishment | - | (316 | ) | 316 | ||||||||
| Interest expense, net | (220 | ) | (2,003 | ) | 1,783 | |||||||
| Other income (expense), net | (363 | ) | 186 | (549 | ) | |||||||
| Total other income (expense) | 121 | (135 | ) | 256 | ||||||||
| Loss before income taxes | (9,508 | ) | (10,673 | ) | 1,165 | |||||||
| Income tax expenses | 19 | 21 | (2 | ) | ||||||||
| Net loss | $ | (9,527 | ) | $ | (10,694 | ) | $ | 1,167 | ||||
Product Revenues, Net
Net product revenue for the six months ended June 30, 2025 increased by $1.9 million, or 12.0% as compared to the six months ended June 30, 2024. This increase was driven by a higher unit sales price contributing $0.6 million and increased sales volume of Ameluz® contributing $1.0 million, as well as a $0.3 million increase in sales of the RhodoLED® Lamps. The higher sales volume of Ameluz® was due to improvements in direct sales team efficiency.
| 31 |
Operating Expenses
Cost of Revenues, Related Party
Cost of revenues, related party for the six months ended June 30, 2025 decreased by $2.6 million, or 32.1% as compared to the six months ended June 30, 2024. This was driven by the reduced cost structure under the Second A&R Ameluz LSA.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended June 30, 2025 increased by $2.0 million, or 11.8% as compared to the six months ended June 30, 2024. The increase was primarily attributable to a $4.4 million increase in legal expenses driven by patent claim related legal costs. The increased legal expenses were partially offset by savings in personnel expenses of $0.9 million due to headcount fluctuations in our direct sales and administrative teams, as well as a decrease of $0.5 million in expenses relating to sales support functions and a decrease of $0.4 million in issuance costs.
Research and Development Expenses
R&D expenses for the six months ended June 30, 2025 increased by $1.4 million as compared to the six months ended June 30, 2024. The increase was attributable to our assumption of all clinical trial activities for Ameluz® in the United States effective June 1, 2024. The following table summarizes our research and development expenses by indication:
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Superficial basal cell carcinoma | $ | 832 | $ | 108 | ||||
| Actinic keratosis | 232 | 133 | ||||||
| Moderate to severe acne | 218 | 93 | ||||||
| Personnel-related costs | 781 | 254 | ||||||
| Other research and development | 14 | 49 | ||||||
| $ | 2,077 | $ | 637 | |||||
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities was $0.7 million for the six months ended June 30, 2025, as compared to $2.0 million for the six months ended June 30, 2024. The change in fair value of warrant liabilities was driven by a decrease in the underlying value of the Company’s Common Stock for each of the six months ended June 30, 2025 and June 30, 2024.
| 32 |
Interest expense, net
Interest expense decreased by $1.8 million due to the decrease in the interest rate applicable to the outstanding convertible notes of $4.2 million issued in November of 2024, compared to the $4.0 million term loan that matured on July 5, 2024 .
Net Loss to Adjusted EBITDA Reconciliation for the Three and Six Months Ended June 30, 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 and recognized a $0.3 million loss on debt extinguishment upon the early termination of the loan. We exclude the impact of this loss as it is attributed to the prepayment fee, which is considered non-recurring, and the write-off of deferred financing costs, which is considered non-cash.
Change in fair value of warrant liabilities: The warrants issued in conjunction with our private placement offerings and registered public offerings are accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations. We exclude the impact of the change in fair value of warrant liabilities as this is non-cash.
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.
| 33 |
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 and six months ended June 30, 2025 and 2024:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net loss | $ | (5,324 | ) | $ | (257 | ) | $ | (9,527 | ) | $ | (10,694 | ) | ||||
| Interest expense, net | 115 | 596 | 220 | 2,003 | ||||||||||||
| Income tax expenses | 21 | 20 | 19 | 21 | ||||||||||||
| Depreciation and amortization | 22 | 130 | 46 | 258 | ||||||||||||
| EBITDA | (5,166 | ) | 489 | (9,242 | ) | (8,412 | ) | |||||||||
| Loss on debt extinguishment | - | - | - | 316 | ||||||||||||
| Change in fair value of warrant liabilities | (153 | ) | (5,438 | ) | (702 | ) | (2,009 | ) | ||||||||
| Change in fair value of investment, related party | (2 | ) | 14 | (2 | ) | 11 | ||||||||||
| Stock based compensation | 187 | 204 | 426 | 432 | ||||||||||||
| Expensed issuance costs | - | - | - | 354 | ||||||||||||
| Adjusted EBITDA | $ | (5,135 | ) | $ | (4,731 | ) | $ | (9,520 | ) | $ | (9,308 | ) | ||||
| Adjusted EBITDA margin | -56.9 | % | -60.3 | % | -54.0 | % | -59.1 | % | ||||||||
Adjusted EBITDA
Adjusted EBITDA decreased $0.4 million from ($4.7) million for the three months ended June 30, 2024 to ($5.1) million for the three months ended June 30, 2025. This is the result of the increases in selling, general and administrative expenses and research and development expenses, which were partially offset by the increase in gross profit.
Adjusted EBITDA for the six months ended June 30, 2025 decreased $0.2 million from ($9.3) million for the six months ended June 30, 2024 to ($9.5) million for the six months ended June 30, 2025. This decrease is mainly due to the increase in legal expense, partially offset by savings in other selling, general and administrative expenses and the increase in gross profit, including the sales revenue increase of $1.9 million and cost of revenue decrease of $2.6 million.
| 34 |
Liquidity and Capital Resources
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Since we commenced operations in 2015, we have generated significant losses. The Company incurred net cash outflows from operations of $7.2 million and $8.0 million for the six months ended June 30, 2025 and 2024, respectively. The Company had an accumulated deficit as of June 30, 2025 of $126.9 million. The Company’s primary sources of liquidity are its cash collected from the sales of its products, and cash flows from financing transactions, including $8.5 million received in a private placement of Series C Preferred Stock, with a second tranche to be received on or before September 30, 2025. As of June 30, 2025, we had cash and cash equivalents of $7.2 million, compared to $5.9 million as of December 31, 2024. However, substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the issuance date of this report.
The Company plans to address the conditions that raise substantial doubt regarding its ability to continue as a going concern by, among other things, utilizing external financing options, including a short-term line of credit, as well as finalizing the sale of its Xepi product line within the next one to three months. However, there can be no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, or close the Xepi disposition as intended. If the Company is unable to raise additional capital when needed, it will not have sufficient cash resources and liquidity to fund its business operations and may be forced to delay or reduce continued commercialization efforts or R&D programs, which could have a material adverse effect on the Company and its financial statements.
The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
Cash Flows
The following table summarizes our cash provided by and (used in) operating, investing and financing activities:
| Six Months Ended June 30, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Net cash used in operating activities | $ | (7,162 | ) | $ | (8,045 | ) | ||
| Net cash provided by (used) in investing activities | (4 | ) | (2 | ) | ||||
| Net cash provided by financing activities | 8,500 | 11,083 | ||||||
| Net increase (decrease) in cash and restricted cash | $ | 1,334 | $ | 3,036 | ||||
Operating Activities
During the six months ended June 30, 2025, operating activities used $7.2 million of cash, primarily resulting from our loss from operations of $9.5 million, adjusted for non-cash expense of stock-based compensation of $0.4 million, depreciation and amortization in the aggregate of $0.4 million, non-cash interest expense of $0.2 million, and net cash used by changes in our operating assets and liabilities of $2.0 million, partially offset by the change in fair value of warrant liabilities of $0.7 million.
During the six months ended June 30, 2024, operating activities used $8.0 million of cash, primarily resulting from our loss from operations of $10.7 million, adjusted for non-cash expense of stock-based compensation of $0.4 million, non-cash interest expense of $0.2 million, loss on debt extinguishment of $0.3 million, depreciation and amortization in the aggregate of $0.6 million, and net cash used by changes in our operating assets and liabilities of $3.0 million, partially offset by the change in fair value of warrant liabilities of $2.0 million.
Investing Activities
During the six months ended June 30, 2025, net cash used in investing activities consisted of negligible fixed asset purchases.
During the six months ended June 30, 2024, net cash used in investing activities consisted of $0.1 million of capitalized software and computer purchases, which were partially offset by the proceeds from the sales of equity investments.
Financing Activities
During the six months ended June 30, 2025, net cash from financing activities consisted of an advance from certain stockholders in accordance with a securities purchase agreement dated June 27, 2025, for the issuance of Series C Preferred Stock, which was not issued until July 1, 2025. On July 1, 2025, upon issuance of the Series C Preferred Stock, the advance from stockholders was settled and reclassed to mezzanine equity. See Note 13. Stockholders’ Equity, for additional details.
During the six months ended June 30, 2024, net cash from financing activities consisted of proceeds of $7.7 million, net of capitalized issuance costs, from the issuance of preferred stock and warrants, and $7.4 million from the exercise of warrants for preferred stock, partially offset by repayments of $3.7 million on our short-term loan, repayments of $0.2 million on our line of credit and prepayment fees of $0.2 million to extinguish our line of credit. See Note 11 Debt.
| 35 |
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 U.S. 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 six months ended June 30, 2025.
Off-balance Sheet Arrangements
Other than those items reflected in Note 18. Commitments and Contingencies we did not have during the periods presented, and we do not currently have, any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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 June 30, 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 June 30, 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).
| 36 |
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.
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
None.
| 37 |
Item 6. Exhibits
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the SEC.
| * | Filed herewith. |
| # | Indicates a management contract or compensatory plan or arrangement. |
| 38 |
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: August 13, 2025 | By: | /s/ Hermann Luebbert |
| Name: | Hermann Luebbert | |
| Title: | Chief Executive Officer & Chairman (Principal Executive Officer) | |
| Date: August 13, 2025 | By: | /s/ E. Fred Leffler III |
| Name: | E. Fred Leffler, III | |
| Title: | Chief Financial Officer (Principal Financial Officer) | |
| 39 |