BFRI US Equity☆

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

WASHINGTON,

D.C. 20549

FORM

10-K

(Mark

One)

FOR

THE FISCAL YEAR ENDED DECEMBER 31, 2024

OR

FOR

THE TRANSITION PERIOD FROM _________TO__________

COMMISSION

FILE NUMBER 001-40943

BIOFRONTERA

INC.

(Exact

name of registrant as specified in its charter)

120 Presidential Way, Suite 330

Woburn, Massachusetts 01801

(Address of principal executive offices) (Zip code)

(781)245-1325

(Registrant’s

telephone number, including area code)

Securities

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

Common Stock, par value $0.001 per share BFRI The Nasdaq Stock Market LLC

Preferred Stock Purchase Rights The Nasdaq Stock Market LLC

Warrants for common stock BFRIW The Nasdaq Stock Market LLC

Securities

registered pursuant to Section 12(g) of the Act:

None

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

☒

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)

has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule

405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit such files). Yes ☒ No ☐

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

If

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate

by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☐

If

securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 June 30, 2024, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of

the common stock held by non-affiliates of the registrant was approximately $4.2million, based on the closing price of the registrant’s

common stock.

As

of March 19, 2025, there were 8,873,932shares outstanding of the registrant’s common stock,

par value $0.001per

share.

DOCUMENTS

INCORPORATED BY REFERENCE:

Portions

of the registrant’s Proxy Statement relative to the Annual Meeting of Stockholders for the year ended December 31, 2024 are incorporated

by reference into Part III of this Form 10-K.

TABLE

OF CONTENTS

PART I.

Item 1. Business 4

Item 1A. Risk Factors 13

Item 1B. Unresolved Staff Comments 43

Item 1C Cybersecurity 43

Item 2. Properties 43

Item 3. Legal Proceedings 43

Item 4. Mine Safety Disclosures 43

PART II.

Item 6. Reserved 44

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56

Item 8. Financial Statements and Supplementary Data F-1

Item 9A. Controls and Procedures 57

Item 9B. Other Information 57

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 57

PART III.

Item 10. Directors, Executive Officers and Corporate Governance 58

Item 11. Executive Compensation 58

Item 14. Principal Accountant Fees and Services 58

PART IV.

Item 15. Exhibit and Financial Statement Schedules 59

SIGNATURES 63

BASIS

OF PRESENTATION

As

used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), unless the context

otherwise requires, references to “we,” “us,” “our,” the “Company,” “Biofrontera”

and similar references refer to Biofrontera Inc. which includes its wholly owned subsidiary Biofrontera Discovery GmbH (“Discovery”).

References in this Form 10-K to the “Biofrontera Group”, refer to Biofrontera AG and its consolidated

subsidiaries, Biofrontera Pharma GmbH (individually, “Biofrontera Pharma”), Biofrontera Bioscience GmbH (individually

“Biofrontera Bioscience”), Biofrontera Neuroscience GmbH, and Biofrontera Development GmbH. References in this Form

10-K to “Ferrer” refer to Ferrer Internacional S.A. References in this Form 10-K to “Licensors”

refer collectively to Biofrontera Pharma, Biofrontera Bioscience and Ferrer. References in this Form 10-K to “Ameluz Licensor”

refer collectively to Biofrontera Pharma and Biofrontera Bioscience.

SPECIAL

NOTE REGARDING FORWARD-LOOKING STATEMENTS

The

following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated

financial statements and the related notes, which appear elsewhere in this Form 10-K. This Form 10-K, including the section titled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” may contain predictive or “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts,

in this annual report, including statements regarding our strategy, future operations, regulatory process, future financial position,

future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements.

The words “believe”, “anticipate”, “intend”, “expect”, “target”, “goal”,

“estimate”, “plan”, “assume”, “may”, “will”, “predict”, “project”,

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

forward-looking statements contain these identifying words.

You

should read this Form 10-K 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 could 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;

● changes in our relationship with our Licensors;

● our Licensors’ ability to manufacture our licensed products;

● the fact that product quality issues or product defects may harm our business;

● any product liability claims;

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

Our

forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments

that we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future

events or otherwise, except as required by law. Any forward-looking statements speak only as of the date on which they are made, and

we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise

after the date of this Form 10-K, except as required by applicable law. Investors should evaluate any statements made by us in light

of these important factors.

PART

I

Item

1. Business

Overview

We

are 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 (together, the

“RhodoLED® Lamps”), are used for the treatment of actinic keratoses (“AKs”), 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 were formed in March 2015 as Biofrontera

Inc., a Delaware corporation, and a wholly owned subsidiary of Biofrontera AG, a stock corporation organized under the laws of

Germany. We consummated our initial public offering in November 2021. Discovery was formed on February 9, 2022, as a German presence

that manages our clinical trial work and facilitates our relationship with the Ameluz Licensor. We consider the Biofrontera

Group to be a related party. The Biofrontera Group held more than 5% of the outstanding shares of our common stock until December

10, 2024, and we continue to rely on the Biofrontera Group as the sole supplier of Ameluz® and the RhodoLED® Lamps.

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”) programs

are focused on label expansion for Ameluz® as well as supporting PDT growth by improving the capabilities of

the RhodoLED® Lamps to better fulfill the needs of dermatologists.

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 Federal Drug Administration (the “FDA”) for the treatment of impetigo, a common skin

infection, due to Staphylococcus aureus or Streptococcus pyogenes. The Company did not have any sales of Xepi® during

2024 and generated limited revenue during 2023 from sales of Xepi due to third-party manufacturing delays that have impacted our

commercialization of the product. Ferrer is 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. However, the Company is working with a potential purchaser and expects to complete a

sale of the asset within the next three to six months. The related intangible asset is presented as held for sale under current

assets in the Consolidated Balance Sheets. See Note 9. Assets Held for Sale, for additional information.

Our

Strategy

Our

principal objective is to improve patient outcomes through adoption and use of our licensed products. The key elements of our strategy

include the following:

By

executing these strategic objectives and continually evaluating our product portfolio with strategic options to improve our business, we will fuel growth, deepen our trusted relationships in the dermatology community, and

above all, help patients live healthier, more fulfilling lives.

Employees

As of December 31, 2024, the Company had 93 employees,

consisting of 92 full-time employees and one part-time employee. Our commercial team covers the continental United States, and our headquarters

is in Woburn, MA.

Significant Customers

We have a wide and

diverse customer base with no single customer dominating our revenues. At December 31, 2024, no customer represented more than 10% of

the net accounts receivable balance. For the year ended December 31, 2024, no customer represented more than 10%

of net revenues.

Ameluz®

and RhodoLED® Lamps

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 keratosis (“AK”) of mild-to-moderate severity on the

face and scalp. AKs are premalignant lesions of the skin that can potentially develop into skin cancer (squamous cell carcinoma) if left

untreated.1 International treatment guidelines list PDT as the “gold standard” for treating AK, especially multiple

AKs and the surrounding photodamaged skin.2 We are currently selling Ameluz® for this indication in the United States

under an exclusive license and supply agreement between Biofrontera Inc. and the Ameluz Licensor, (the “Second A&R Ameluz LSA”).

AKs,

the number one indication at a dermatologist visit for those 40 and older, are superficial potentially pre-cancerous skin lesions caused

by chronic sun exposure that may, if left untreated, develop into a form of potentially life-threatening skin cancer called squamous

cell carcinoma. AKs typically appear on sun-exposed areas, such as the face, bald scalp, arms or the back of the hands, and are often

elevated, flaky, and rough in texture, and appear on the skin as hyperpigmented spots. AKs are typically treated with cryotherapy, topicals,

or PDT. These treatments can be used in combination as well.

In

general, PDT is a two-step process:

During

this process, energy from the light activates the photosensitizer. In PDT, the activated photosensitizer transfers energy to oxygen molecules

found in cells, converting the oxygen into a highly reactive oxygen species (“ROS”), which destroys or alters the sensitized

cells. PDT can be a highly selective treatment that targets specific cells while minimizing damage to normal surrounding tissues. It

also can allow for multiple courses of therapy. Hence the mode of action of PDT requires destruction of the altered cells, and temporary

local skin reactions and inflammation of the treated area might be expected. The Ameluz® PDT therapy is highly effective

with patients - efficacy is up to 91% clearance after one or two treatments3 with limited or no scarring. The therapy also

may provide protection from potentially fatal progress of mild AKs.4

Market

and competitive landscape

AK

is the most common precancer; it affects more than 58 million Americans.5 Cryotherapy is

the traditional and most common form of treatment but may not be as effective and may leave scarring; cryotherapy is estimated to be

approximately 86% of the market. Topicals, medications which patients apply to the lesion multiple times per day for up to several weeks,

constitute approximately 12% of the market. PDT is approximately 2% of the market. The total market size is estimated to be roughly $4

billion for the three therapy types. Our primary competitor in the PDT space is Levulan® and the associated light, Blu-U®.

Our

goal is to continue expansion in the current PDT market and focus on converting cryotherapy treatments of more than 14 lesions to

Ameluz® PDT as the switch or even combination of cryotherapy and PDT could be more effective and lead to better

patient outcomes. This targeted market is about 11% or $500 million of the total AK market.6 Ameluz® PDT

is competitive in the market. We are leveraging medical affairs, advisory boards, reimbursement resources, and key opinion leaders

in order to educate the market on the use and benefits of Ameluz® PDT.

1

Fuchs, A., & Marmur, E. The kinetics of skin cancer: Progression of actinic keratosis to squamous cell carcinoma. Dermatologic

Surgery. 2007 Sep; 33(9):1099-101

2

Werner RN, Stockfleth E, Connolly SM, et al. Evidence- and consensus-based (S3) Guidelines for the Treatment of Actinic Keratosis

- International League of Dermatological Societies in cooperation with the European Dermatology Forum - Short version. J Eur Acad Dermatol

Venereol. 2015;29(11):2069-2079. doi:10.1111/jdv.13180

3

For full prescribing information for Ameluz, please see https://bit.ly/AmeluzPI.

4

Reinhold et al. 2016 Br. J. Derm. DOI 10.1111/bjd. 14498

5

https://www.skincancer.org/skin-cancer-information/skin-cancer-facts

6

Market data accessible from CMS and IQVIA, 2020

Sales,

marketing and distribution

We

are currently selling our licensed products in the United States through the use of our own commercial organization. We

have a single sales force who markets all our licensed products across the dermatology space. We launched the commercialization of Ameluz®

in combination with the RhodoLED® lamp for the treatment of actinic keratosis in the United States in October 2016.

Ameluz® PDT is an in-office procedure. Ameluz® is distributed as a “buy-and-bill” drug that

is purchased by the dermatologist, rather than distribution through pharmacies. Our customers will purchase our device and Ameluz®

which will be held in inventory. When a dermatologist uses our product in a treatment, a payor will be billed, and the provider

will be paid for both the product and light treatment. There are well established PDT CPT Codes. Ameluz® PDT is covered

by code number 96574 which has an average reimbursement of $262.68 per light treatment and has to be performed by a qualified healthcare

professional. Public information regarding CPT reimbursement is available at https://www.cms.gov/medicare/physician-fee-schedule/search?Y=0&T=4&HT=0&CT=3&H1=96574&M=5.

Our

R&D programs

We

are a sales organization with a focus on commercializing our portfolio of licensed products that are already FDA-approved. Under the

Second A&R Ameluz LSA, we hold the exclusive license to sell Ameluz® and the RhodoLED® Lamps in the

United States for all indications currently approved by the FDA as well as all future FDA-approved indications identified under the Second

A&R Ameluz LSA.

Effective

June 1, 2024, in accordance with the Second A&R Ameluz LSA, the Company assumed control of all clinical trials relating to

Ameluz® in the US, allowing for more effective cost management and direct oversight of trial efficiency. The increase

to R&D spending will be partially offset by the reduced price we pay per unit for Ameluz®, based on certain

percentages of the anticipated net selling price, (the “Transfer Price”) that covers the cost of goods, royalties on

sales, and services including all regulatory efforts, agency fees, pharmacovigilance, and patent administration. This will allow the

Company to finance such R&D activities and continue our commercial growth trajectory. Our R&D programs are

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.

A

summary of our clinical trials is below:

Clinical Phase

Product Indication Pre-clinical I II III Approval Process Status

Ameluz® Squamous cell carcinoma in situ ● Plan to start enrollment in 2026

The

new, larger RhodoLED® XL was approved by the FDA in 2021 for use in combination with Ameluz® for the treatment

of mild and moderate actinic keratoses on the face and scalp, which corresponds to the current approval of Ameluz®. We

launched the RhodoLED® XL in June 2024. The new PDT-lamp enables the illumination of larger areas, thus allowing the simultaneous

treatment of several actinic keratoses distant from each other. The smaller BF-RhodoLED® model will continue to be offered

in the United States market.

In

October 2024, the FDA approved the Company’s Supplemental New Drug Application to increase the maximally approved dosage of Ameluz® from

one to three tubes per treatment. This approval allows healthcare professionals greater flexibility in addressing larger or multiple

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

and their patients. In combination with the RhodoLED® XL Lamp, providers can now treat a patient’s face more

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

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

Also

in October 2024, the Company received results in its Phase III trial evaluating Ameluz PDT as a treatment for superficial basal cell

carcinoma (“sBCC”). The primary endpoint was a composite of complete clinical and histological clearance of one

preselected “main target” BCC lesion per patient 12 weeks after the start of the last PDT cycle. According to the phase

III ALA-BCC-CT013 study, Ameluz®-PDT achieved 65.5% success, compared to 4.8% success achieved with placebo-PDT. Complete

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

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

Additionally,

our licensor has been granted a patent for a pain-reduced PDT procedure that combines daylight and conventional PDT and, if the respective

Phase III trial leads to inclusion of the procedure into the Ameluz® label, may provide further patent protection beyond

2040. Furthermore, in 2023, the FDA approved a new formulation of Ameluz® that lacks propylene glycol and reduces the

accumulation of certain contaminants over time. The new formulation was implemented in all US productions of Ameluz® starting

in 2024. A corresponding patent application has been filed with the United States Patent and Trademark Office, or USPTO, which, if granted, will

extend protection of Ameluz® to 2043.

Principal

suppliers

Our

source for the Ameluz® and the RhodoLED® Lamps is our Licensor, Biofrontera Pharma, who is considered

the responsible manufacturer for Ameluz® by the FDA. Biofrontera Pharma currently manufactures through a single unaffiliated

contract manufacturer in Switzerland, Glaropharm AG, and is in the process of qualifying a second unaffiliated contract manufacturer

located in Germany, Pharbil Waltrop GmbH, to ensure stability of the supply chain. Our Licensor is responsible for all raw materials,

product, and shipment of products to our third-party logistics partner (“3PL”), Cardinal Health for warehousing and distribution.

We centralize our customer sales support and back-office functions through our headquarters in Woburn, Massachusetts.

Intellectual

Property

We

do not own any material patents or trademarks. We license the rights and trademarks related to the products we sell.

Ameluz®

and the RhodoLED® Lamps are approved by the FDA as a combination product, such that the label requires the use of

both products together. The Licensor has patent protection on its nanoemulsion technology in the United States until 2028 and three new

patent family applications on the RhodoLED® Lamps and general PDT illumination procedures, two of which are already granted,

and one is listed in the Orange Book, that could jointly extend protection until 2040. Additionally, a new patent regarding an Ameluz

formulation without propylene glycol filed at USPTO in 2024, if granted, extends protection to 2043.

Commercial

Partners and Agreements

Ameluz®

and RhodoLED® Lamps License Service Agreement

On

February 19, 2024, the Company entered into the Second A&R Ameluz

LSA with the Ameluz Licensor, effective February 13, 2024. The Second A&R Ameluz LSA amended and restated the

Ameluz License and Supply Agreement, originally dated as of October 1, 2016, which was subsequently amended on July 1, 2019, June 16,

2021, October 8, 2021, December 5, 2023, and January 26, 2024.

Under the terms of

the Second A&R Ameluz LSA, we have an exclusive, non-transferable license from the Ameluz Licensor technology to use, import, export,

distribute, market, offer for sale and sell Ameluz® and the RhodoLED® Lamps for its approved indications

within the United States and certain of its territories. The Second A&R Ameluz LSA will remain in effect for 15 years from its effective

date and automatically renew for a period of five years, in perpetuity as long as certain minimum revenues are achieved. See Note

19. Commitments and Contingencies.

Among

other things, the Second A&R Ameluz LSA reduced the Transfer Price of Ameluz® from 50% to 25% 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 indications. The

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

Price covers the cost of goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance,

and patent administration.

Effective June 1, 2024, the Company assumed control of all clinical trials with Ameluz®

in the US, allowing for more effective cost management and direct oversight of trial efficiency. The reduced Transfer Price in the Second

A&R Ameluz LSA will allow the Company to finance such R&D activities and continue our commercial growth trajectory.

The Ameluz Licensor sell us the RhodoLED® Lamps at cost plus a low double digit handling fee.

There are no milestones or royalty obligations associated with this agreement. Any changes to the pricing of supply of Ameluz®

or RhodoLED® Lamps would require agreement by both contract parties.

The

Ameluz Licensor is responsible for obtaining and maintaining the rights to all FDA approvals (and any required maintenance thereafter)

needed for the Ameluz Licensor to manufacture Ameluz® and/or the RhodoLED® Lamps and/or for Biofrontera

to sell Ameluz® and/or the RhodoLED® Lamps in the United States. Likewise, the Ameluz Licensor is

responsible to maintain a pharmacovigilance database and to respond appropriately to all relevant queries of any regulatory authority

pertaining to pharmacovigilance Biofrontera is required to provide reasonable support relating to any regulatory issues relating to pharmacovigilance

and/or product recalls.

Conversely,

Biofrontera is responsible for obtaining all state licenses or any other similar approvals required to market Ameluz® and/or

the RhodoLED® Lamps in the United States. Biofrontera must also carry out all mandatory reporting responsibilities under

federal and state law with respect to compliance with the Prescription Drug Marketing Act, the Sunshine Act, or any other similar laws

and regulations. Biofrontera is also responsible for all activities related to reimbursement and pricing of the products within the United

States. Biofrontera is required to use commercially reasonable efforts and resources to exploit the license and market Ameluz®

and the RhodoLED® Lamps in the United States.

If

product or lamps are not delivered in conformance with certain specifications of this Agreement and the Quality Agreement dated

November 1, 2016, between the Company and Biofrontera Pharma, and the Ameluz Licensor does not remedy its failure, then we

will have the right to organize manufacturing on our own, and step into contracts with the Ameluz Licensor’s manufacturers,

such that we will replace the Ameluz Licensor as a party to these contracts. If we pursue this option, Ameluz Licensor must use its

best efforts to assist with the transferring of these manufacturing contracts without delay and at its own cost. No Transfer Price

will be paid to the Ameluz Licensor thereafter for products or lamps that are manufactured by third parties.

Government

and Industry Regulation

Governmental

authorities in the United States, at the federal, state and local level, extensively regulate, among other things, the research, development,

testing, manufacture, safety surveillance, efficacy, quality control, labeling, packaging, distribution, record keeping, promotion, storage,

advertising, distribution, marketing, sale, export and import, pricing (including discounts and rebates), and the reporting of safety

and other post-market information of the products we distribute. These laws and regulations may require administrative guidance for implementation,

and a failure to comply could subject us to legal and administrative actions. Enforcement measures may include substantial fines and/or

penalties, orders to stop non-compliant activities, criminal charges, warning letters, product recalls or seizures, delays in product

approvals, exclusion from participation in government programs or contracts as well as limitations on conducting business in applicable

jurisdictions and could result in harm to our reputation and business. Compliance with these laws and regulations may be costly and may

require significant technical expertise and capital investment to ensure compliance.

Cost containment efforts by governmental authorities and health care reform

continue to exert pressure on product pricing and market access. Pricing pressure continues to be influenced by the power exerted through

entities negotiating on behalf of federal health care programs such as Medicare and Medicaid, as well as managed care programs, and commercial

insurance plans. We are also seeing government-mandated pricing restrictions aimed at reducing prices and promoting generic drugs adding

increased competition and pricing pressure in the market. The U.S. Congress continues to consider and discuss legislation aimed at reducing

health care costs, including lowering the price of drugs and biologics.

United

States Drug Development and Review

Drug

Development Process

General

Information about the Drug Approval Process and Post-Marketing Requirements

The

United States system of new drug and biologics approval is a rigorous process. The following general comments about the drug approval process

are relevant to the development activities related to our products.

Investigational

New Drug Application (“IND”): After certain pre-clinical studies are completed, an IND application is submitted to the FDA

to request the ability to begin human testing of the drug or biologic. An IND becomes effective thirty days after the FDA receives the

application (unless the FDA notifies the sponsor of a clinical hold), or upon prior notification by the FDA.

Phase

1 Clinical Trials: These trials typically involve small numbers of healthy volunteers or patients and usually define a drug candidate’s

safety profile, including the safe dosage range.

Phase

2 Clinical Trials: In Phase 2 clinical trials, controlled studies of human patients with the targeted disease/condition are conducted to assess

the drug’s effectiveness. These studies are designed primarily to determine the appropriate dose levels, dose schedules and route(s)

of administration, and to evaluate the effectiveness of the drug or biologic on humans, as well as to determine if there are any side

effects on humans to expand the safety profile following Phase 1. These clinical trials, and Phase 3 trials discussed below, are designed

to evaluate the product’s overall benefit-risk profile, and to provide information for physician labeling.

Phase

3 Clinical Trials: This Phase usually involves a larger number of patients with the targeted disease/condition. Investigators (typically physicians)

monitor the patients to determine the drug candidate’s efficacy and to observe and report any adverse reactions that may result

from long-term use of the drug on a large, more widespread, patient population.

During

the Phase 3 clinical trials, typically the drug candidate is compared to either a placebo or a standard treatment for the target disease.

NDA

or Biologics License Application (“BLA”): After completion of all three clinical trial Phases, if the data indicates that

the drug is safe and effective, an NDA or BLA is filed with the FDA requesting FDA approval to market the new drug as a treatment for

the target disease.

Risk

Evaluation and Mitigation Strategy Authority under the Food and Drug Administration Amendments Act (“FDAAA”): The FDAAA also

gave the FDA authority to require the implementation of a Risk Evaluation and Mitigation Strategy (“REMS”) for a product

when necessary to minimize known and preventable safety risks associated with the product. The FDA may require the submission of a REMS

before a product is approved, or after approval based on “new safety information,” including new analysis of existing safety

information. A REMS may include a medication guide, patient package insert, a plan for communication with healthcare providers, or other

elements as the FDA deems are necessary to assure safe use of the product, which could include imposing certain restrictions on distribution

or use of a product. A REMS must include a timetable for submission of assessments of the strategy at specified time intervals. Failure

to comply with a REMS, including the submission of a required assessment, may result in substantial civil or criminal penalties.

Other

Issues Related to Product Safety: Adverse events that are reported after marketing approval also can result in additional limitations

being placed on a product’s use and, potentially, withdrawal of the product from the market. In addition, under the FDAAA, the

FDA has authority to mandate labeling changes to products at any point in a product’s life cycle based on new safety information

derived from clinical trials, post-approval studies, peer-reviewed medical literature, or post-market risk identification and analysis

systems data.

Clinical

trials may experience delays or fail to demonstrate the safety and efficacy, which could prevent or significantly delay obtaining regulatory

approval.

Clinical

trials require the investment of substantial financial and personnel resources. The commencement and completion of clinical trials

may be delayed by various factors, including, without limitations, scheduling conflicts with participating clinicians and clinical

institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to

complete the clinical trial, delays in accumulating the required number of clinical events for data analysis, delay or failure to

obtain the required approval to conduct a clinical trial at a prospective site, and shortages of available drug supply and clinicians. Moreover,

the outcome of a clinical trial is often uncertain. There may be numerous unforeseen events during, or as a result of, the clinical

trial process that could delay or prevent regulatory approval. In addition, the results of early-stage clinical trials do not

necessarily predict the results of later-stage clinical trials. Later-stage clinical trials may fail to demonstrate that a drug

product is safe and effective despite having progressed through initial clinical testing. Clinical trial data results are

susceptible to varying interpretations, and such data may not be sufficient to support approval by the FDA. The ability to commence

and complete clinical trials may be delayed by many factors that are beyond our control, including:

● delays obtaining regulatory approval to commence a trial;

● delays in obtaining institutional review board (“IRB”), approval at each site;

● inability to retain patients who have initiated a clinical trial;

● negative or inconclusive results;

Delays

can also occur if a clinical trial is suspended or terminated by the IRBs of the clinical trial sites in which such trials are being

conducted, or by the FDA or other regulatory authorities. Such authorities may impose a suspension or termination of the clinical trial

due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols,

inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a

clinical hold, unforeseen safety issues or adverse side effects, or failure to demonstrate a benefit from using a drug.

Post-Approval

Requirements for Approved Drugs

The FDA’s post-market surveillance programs monitor the safety of

drugs once they are approved. Any

of our licensed drug products that require FDA approvals are subject to continuing regulation by the FDA, including, among other things,

record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information,

product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among other

requirements, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are

not described in the drug’s approved labeling (known as “off-label use”), limitations on industry sponsored scientific

and educational activities, and requirements for promotional activities involving the internet. Under the Second A&R Ameluz LSA,

these requirements are handled by both us and our Licensor. Although physicians may prescribe legally available drugs for off-label uses,

manufacturers may not market or promote such off-label uses.

In

addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval.

We are relying exclusively on our licensors’ or their manufacturing partner’s facilities for the production of clinical and

commercial quantities of our products in accordance with Current Good Manufacturing Practices (“cGMP”) regulations. cGMP

regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and

documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved

in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies

and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly,

manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Discovery of problems with a product after approval may result in restrictions on a product manufacturer or holder of an approved NDA,

including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process

are strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented and

development of and submission of data to support the change. Other types of changes to the approved product, such as adding new indications

and additional labeling claims, are also subject to further FDA review and approval, as well as, possibly, the development and submission

of data to support the change.

The

FDA also may require post-approval, sometimes referred to as Phase 4, trials and surveillance to monitor the effects of an approved product

or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems

with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity,

judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors,

and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s

approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk

management measures, such as a risk evaluation and mitigation strategy. Also, new government requirements, including those resulting

from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of

our product label extensions or products under development.

FDA

Regulation for Medical Devices

After

a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply. These

include, but are not limited to:

● establishing establishment registration and device listings with the FDA;

The

FDA has broad post-market and regulatory enforcement powers. The agency may conduct announced and unannounced inspections to determine

compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of subcontractors. Failure

by us or our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory

authorities, which may result in sanctions and related consequences including, but not limited to:

● untitled letters or warning letters;

● fines, injunctions, consent decrees and civil penalties;

● recall, detention or seizure of our products;

● operating restrictions, partial suspension or total shutdown of production;

● withdrawing 510(k) clearance or premarket approvals that are already granted;

● refusal to grant export approval for our products;

● criminal prosecution; and

● unanticipated expenditures to address or defend such actions.

Our

Licensors are subject to announced and unannounced device inspections by FDA and other regulatory agencies overseeing the implementation

and adherence of applicable local, state and federal statutes and regulations.

Safe Medical Devices Act

The Safe Medical Devices Act of 1990, as amended (“SMDA”),

amended the Federal Food, Drug, and Cosmetic Act to require medical device manufacturers and user facilities such as hospitals and ambulatory

surgical centers to report any adverse events associated with a medical device to the FDA. It provides that FDA with two additional post-market

activities including monitoring of products after market clearance and device tracking for maintaining traceability of certain devices

to the user level. The SMDA makes it mandatory for facilities, manufacturers, and importers to submit medical device reporting forms to

the FDA after becoming aware of a serious event associated with a device. Manufacturers are required to submit baseline reports and reports

of deaths, serious injuries, and malfunctions associated with the device to the FDA.

Fraud

and Abuse Laws

We

are subject to healthcare anti-fraud and abuse regulations that are enforced by the United States federal government and the states in which we

conduct our business. The laws that may affect our ability to operate include, without limitation:

● the federal healthcare programs’ Anti-Kickback Law;

● federal false claims laws;

The

federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting

on its behalf) to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is intended

to induce the referral of business, including the purchase, order, or lease of any good, facility, item or service for which payment

may be made under a federal health care program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted

to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers

on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. Although there are a number of statutory

exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn

narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations

may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular

applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead,

the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.

Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration

is to induce referrals of federal health care covered business, the Anti-Kickback Statute has been violated. Violations of this law are

punishable by up to five years in prison, and can also result in criminal fines, civil monetary penalties, administrative penalties and

exclusion from participation in federal health care programs.

Additionally,

the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person

or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal

Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Because of the breadth

of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge

under one or more of such laws.

Federal

false claims and false statement laws, including the federal civil False Claims Act, prohibits, among other things, any person or

entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare

and Medicaid, claims for items or services, including drugs, that are false or fraudulent or not provided as claimed. Entities can

be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for

example, providing inaccurate billing or coding information to customers, promoting a product off-label, or for providing medically

unnecessary services or items. In addition, activities relating to the sale and marketing of products are subject to scrutiny under

this law. Penalties for the federal civil False Claims Act violations may include up to three times the actual damages sustained by

the government, (commonly referred to as treble damages), plus mandatory civil penalties for each separate false claim, the

potential for exclusion from participation in federal health care programs, and, although the federal civil False Claims Act is a

civil statute, False Claims Act violations may also implicate various federal criminal statutes.

Physician Payments Sunshine Act

The Physician Payments Sunshine Act is a national disclosure program created

by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 that aims to

increase transparency in payments from medical device manufacturers and pharmaceutical companies to physicians and teaching hospitals.

In 2018, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act expanded these

covered recipients to include physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists,

anesthesiologist assistants and certified nurse midwives. Common payments in the industry to physicians and other “covered recipients”

can include consulting fees, honoraria, fees for training and education, research fees, gifts, vacations, food and beverage, travel and

lodging, charitable contributions, grants, ownership and investment interests, royalty or license fees, and compensation for serving as

faculty or a speaker.

Inflation Reduction Act (“IRA”)

The IRA, passed by Congress in 2022, makes significant