BFRI US Equity☆

Item 1A. Risk Factors 13

Item 1B. Unresolved Staff Comments 33

Item 1C Cybersecurity 33

Item 2. Properties 34

Item 3. Legal Proceedings 34

Item 4. Mine Safety Disclosures 34

PART II.

Item 6. Reserved 35

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 46

Item 8. Financial Statements and Supplementary Data F-1

Item 9A. Controls and Procedures 47

Item 9B. Other Information 47

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 47

PART III.

Item 10. Directors, Executive Officers and Corporate Governance 48

Item 11. Executive Compensation 48

Item 14. Principal Accountant Fees and Services 48

PART IV.

Item 15. Exhibit and Financial Statement Schedules 49

SIGNATURES 55

BASIS

OF PRESENTATION

As

used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (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.

TRADEMARKS, TRADE NAMES, AND SERVICE

MARKS

All trademarks, trade names, and service

marks appearing in this Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade names

in this Form 10-K are referred to without the symbols ® and TM, but such references should not be construed as any indication

that their respective owners will not assert their rights thereto to the fullest extent under applicable law. We do not intend to use

or display other companies’ trademarks, trade names, or service marks to imply a relationship with, or endorsement or sponsorship

of us by, any other companies.

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 products;

● our ability to manufacture our products;

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

● 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 engaging in the development,

manufacturing, and commercialization of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic

therapy (“PDT”). The Company’s products, which include Ameluz as well as the BF-RhodoLED and RhodoLED XL lamp series

(together, the “RhodoLED Lamps”), are used for the treatment of actinic keratosis (“AK”), a common skin condition

characterized by the growth of pre-cancerous lesions (or “AKs”). With our national commercial team, we generate revenue by

selling our products directly to dermatology offices and groups.

We

were formed in 2015 as Biofrontera Inc., a Delaware corporation, and a wholly owned subsidiary of Biofrontera AG, a stock corporation

organized under the laws of Germany. In 2021, we completed our initial public offering. 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 through Discovery, our wholly owned subsidiary that was formed in Germany in 2022. 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.

On October 20, 2025, we entered into i) an Asset Purchase Agreement (the

“Transfer Agreement”) and ii) an Earnout Agreement (together with the Transfer Agreement, the “Agreements”), with

the Biofrontera Group, pursuant to which the Company acquired all rights in the United States to Ameluz and RhodoLED (the “Strategic

Transaction”). See Note 3. Asset Acquisition and Note 16. Related Party Transactions for additional information.

On November 6, 2025, the Company completed the sale of the intangible asset

relating to its Xepi product line, a long-lived asset previously classified as held for sale. See Note 9. Assets Held for Sale,

for additional information.

Our

Strategy

Our

principal objective is to improve patient outcomes in the non-melanoma space through adoption and use of our 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, 2025, the Company had a total of 92 employees comprised of 75 employees (72 full-time and three part-time) in

the United Sates and 19 employees located in Germany (12 full-time and seven part-time).

Significant

Customers

We

have a wide and diverse customer base with no single customer dominating our revenues. At December 31, 2025, no customer represented

more than 10% of the net accounts receivable balance. For the year ended December 31, 2025, no customer represented more than 10% of

net revenues. However, many of our existing and potential customers for our products have combined or could choose to combine in the

near future to form GPOs in an effort to lower costs. See GPO Risk Factor in Item 1A. Risk Factors- Risks Related to Our Business

Strategy.

Ameluzand RhodoLED Lamps

Our

principal 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 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

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, 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 AmeluzPDT 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, leading educational, CME- and non-CME programs, participating in thought leader advisory boards and

focus groups, and offering reimbursement resources 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 products in the United States through the use of our own commercial organization. We have a single sales

force who markets all our products across the dermatology space. We launched the commercialization of Ameluz in combination with the

RhodoLED lamp for the treatment of AK 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 three well

established PDT Current Procedural Terminology (“CPT”) Codes related to Ameluz PDT treatments: 1) code number 96567,

which has an average reimbursement of $129.26 per light treatment, 2) code number 96573, which has an average reimbursement of

$217.44 per light treatment performed by qualified health care professional, or 3) code number 96574 which has an average

reimbursement of $266.87 per debridement of a hyperkeratotic AK lesion followed by a light treatment performed by a

qualified health care professional.

Our

R&D programs

Effective

June 1, 2024, 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. 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.

Effective

October 20, 2025, we acquired all rights in the United States to Ameluz and the RhodoLED Lamps for all indications currently

approved by the Food and Drug Administration (the “FDA”) as well as all future FDA-approved indications.

A

summary of our clinical trials is below:

Clinical Phase

Product Indication / comments Pre-clinical I II III Approval process Status

Ameluz Superficial basal cell carcinoma ● Submitted to FDA in Q4 2025.

Ameluz Actinic Keratosis ● AK Pain Reduction; Plan to start enrollment in 2027

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 AKs on the face and scalp, which corresponds to the current approval of Ameluz and

was launched in June 2024. The RhodoLED XL enables the illumination of larger areas, thus allowing the simultaneous treatment of several

AKs 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 2027. Regulatory submission for the trunk and extremities label change is planned for the second quarter of 2026.

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 in the composite endpoint, 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. In November 2025 a

Supplemental New Drug Application was submitted to the FDA, applying for the approval of the treatment of sBCC by PDT with Ameluz

and the BF-RhodoLED or the RhodoLED XL lamp. The FDA has

accepted the filing and set a Prescription Drug User Fee Act date of September 28, 2026.

Furthermore, the FDA approved a new

formulation of Ameluz that lacks propylene glycol and reduces the accumulation of certain contaminants over time. A corresponding patent

application was granted by the United States Patent and Trademark Office, (the “USPTO”), extending protection of Ameluz to

2043. The new formulation has been implemented in all US productions of Ameluz since 2024.

Seasonality

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

of the year than during the second and third quarters.

Principal

Suppliers & Manufacturers

Historically, we have relied on Biofrontera

Pharma (the “Former Ameluz Licensor”) as the principal supplier and manufacturer of

our products. However, in conjunction with a Strategic Transaction, the Company assumed full control of the Ameluz New Drug Application and Investigational New Drug, enabling the Company to take full

responsibility for all aspects of manufacturing Ameluz and the RhodoLED Lamps in the U.S.

Pursuant to the Strategic Transaction, we will

temporarily continue to rely on the Former Ameluz Licensor for the manufacturing of Ameluz until we secure all necessary licenses

and implement all necessary contracts to fully assume these responsibilities. In preparation of the same, we have entered into an

agreement for the primary procurement of our active pharmaceutical ingredient (“API”) with Midas Pharma GmbH, located in

Germany. We have also identified a secondary source of API and anticipate entering into a similar agreement with this supplier.

Production of Ameluz is carried out by a

contract manufacturer, Glaropharm AG in Switzerland, as well as a second contract manufacturer located in Germany, Pharbil Waltrop

GmbH, who has recently been qualified for manufacturing of Ameluz to ensure stability of the supply chain and help manage possible

tariff impacts. Production of the RhodoLED Lamps is currently carried out by the Former Ameluz Licensor in Leverkusen, Germany, which

responsibility will be transferred to Discovery pursuant to the Strategic Transaction. See Part 1, Item 7, “Overview and

Recent Developments” for more information concerning the Strategic Transaction.

We centralize our customer sales support and back-office

functions through our headquarters in Woburn, Massachusetts.

Intellectual

Property

We

rely on a combination of patents, trademarks, copyrights, trade secrets and other proprietary know-how and regulatory exclusivities,

as well as contractual protections, to establish and protect our intellectual property rights. We consider the overall protection of

our intellectual property rights to be of material value and act to protect these rights from infringement.

We

have patent protection related to our innovative technologies and developments in connection with our nanoemulsion technology, the RhodoLED

Lamps and general PDT illumination procedures.

All

patents awarded by the USPTO to the Company that are material to an understanding of the Company

are listed in the table below:

Patents

pending filed by the Company that are material to an understanding of the Company are as follows:

Commercial Partners and Agreements

Ameluz and RhodoLED Lamps License

Service Agreement

On February 19, 2024, the Company

entered into the Second Amended and Restated License and Supply Agreement (the “Second A&R Ameluz LSA”) with the Former Ameluz Licensor, effective February 13, 2024. Among other things, the Second A&R Ameluz LSA established the “Transfer Price”

of Ameluz at 25% for all purchases in 2024 and 2025. The Transfer Price covered the cost of goods, royalties on sales, and services

including all regulatory efforts, agency fees, pharmacovigilance, and patent administration.

Under the Second A&R Ameluz LSA, the

Former Ameluz Licensor was responsible for obtaining and maintaining the rights to all FDA approvals (and any required maintenance

thereafter) needed for the Former 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 Former Ameluz Licensor was responsible to

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

pharmacovigilance. Biofrontera was required to provide reasonable support relating to any regulatory issues relating to

pharmacovigilance and/or product recalls, obtaining all state licenses or any other similar approvals required to market

Ameluzand/or the RhodoLED Lamps in the United States, and carrying 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. The Second A&R Ameluz LSA was terminated in connection with the Strategic Transaction. See Part 1,

Item 7, “Overview and Recent Developments” for more information concerning the Strategic Transaction.

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.

New

Drug Application (“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 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 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. Until June

1, 2025, under the Second A&R Ameluz LSA, these requirements were handled by both us and our licensor. See Part 1, Item 7, “Overview

and Recent Developments” for more information concerning the Second A&R Ameluz LSA. 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 rely, in part, on our 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 the development

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. Detection 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:

● creating and maintaining 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.

We

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 also imposes two additional post-market requirements on manufacturers, 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 changes to how drugs are covered and paid for under the Medicare Program. Creates

financial penalties for drugs whose prices rise faster than the rate of inflation, makes changes to the Medicare Part D program to require

manufacturers to bear more liability for certain drug benefits, which has taken effect in 2025, and includes government price setting

for certain Medicare Part D drugs starting in 2026 and Medicare Part B drugs starting in 2028.

340B

Drug Discount Program and legislative changes

The

340B drug discount program (part of the Public Health Service Act) requires pharmaceutical manufacturers to sell certain outpatient drugs

at significantly reduced prices to eligible healthcare providers known as “covered entities” that serve a large number of

low-income patients. Participation in this program by manufacturers is often required in exchange for access to the Medicaid market.

Healthcare

Privacy and Security Laws

We

may be subject to, or our marketing activities may be limited by, the federal Health Insurance Portability and Accountability Act of

1996, or HIPAA, and its implementing regulations, which established uniform standards for certain “covered entities” (healthcare

providers, health plans and healthcare clearinghouses) governing the conduct of certain electronic healthcare transactions and protecting

the security and privacy of protected health information. The American Recovery and Reinvestment Act of 2009, commonly referred to as

the economic stimulus package, included sweeping expansion of HIPAA’s privacy and security standards called the Health Information

Technology for Economic and Clinical Health Act, or HITECH. Among other things, the HITECH makes HIPAA’s privacy and security standards

directly applicable to “business associates,” independent contractors or agents of covered entities that receive or obtain

protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and

criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys

general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s

fees and costs associated with pursuing federal civil actions.

Available

Information

We

are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange

Act requires us to file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file

electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.

We

also maintain a website at https://www.biofrontera-us.com. The Information on our website is not incorporated by reference into

this Form 10-K and does not constitute a part of this Form 10-K. We make available, free of charge, on our website our annual report

on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant

to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such with, or furnish it

to, the SEC. Our code of conduct, Board committee charters, and certain other corporate

governance policies are also posted on the Investor Relations section of our website.

Item

1A. Risk Factors

Our business, results of operations and financial condition and the industry

in which we operate are subject to various risks. We have listed below the most significant risk factors we believe to be applicable to

us, but they do not constitute all of the risks that may be applicable to us. New risks may emerge from time to time, and it is not possible

for us to predict all potential risks or to assess the likely impact of all risks. References to past events are examples only and are

not intended to be a complete listing or to indicate the likelihood of similar events occurring in the future. You should read this summary

together with the more detailed description of each risk factor contained below, as well as other information in this Form 10-K and our

other filings with the SEC, including our financial statements and the related notes and the sections entitled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” in such filings. These disclosures reflect the Company’s

beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. Some of these

material risks include:

Summary

of Material Risk Factors

Risks

Related to our Products

Risks

Related to Our Business and Strategy

● If lawsuits are brought against us, we may incur substantial liabilities.

● Our subsidiary and certain third-party employees are subject to foreign laws.

● The results of our R&D efforts are uncertain.

Risks

Related to Our Financial Position and Capital Requirements

● There is substantial doubt about our ability to continue as a “going concern.”

Risks

Related to Clinical Trials and Regulatory Approvals of Indication Expansion

Risks

Related to Corporate Governance, Including Being a Public Company

Risks

Related to Our Securities and the Ownership of Our Common Stock

Risks

Related to Our Products

Generic

versions of Ameluz may enter the market following the expiration of our patents, which may lead to significant reductions in the price

of Ameluz and significant decreases in our market share.

The process of developing generic topical dermatological products presents

specific challenges that may deter potential generic competitors. If generic competitors do enter the market, this may cause

a significant drop in the price of Ameluz and our United States market share for Ameluz, materially and adversely impacting our results

of operations, business, and stock price.

We

hold several patent families protecting our products, including 1) a patent family that protects the technology relating to

nanoemulsions that expires in December 2027, 2) a patent family that protects the current Ameluz formulations (without propylene

glycol) that expires in 2043, and 3) several patent families regarding illumination protocols used in or planned for Ameluz PDT and

covering the RhodoLED Lamps. However, we cannot guarantee that these patents (or additional patents for which we have applied, if

issued) will adequately protect us against copying by competitors.

Our

business depends substantially on the success of our principal product, Ameluz. If we are unable to successfully obtain and maintain

regulatory approvals or reimbursement for Ameluz for existing and additional indications, our business may be materially

harmed.

Although we have received marketing approval in the United States for Ameluz

for lesion- and field-directed treatment of AK in combination with PDT using the BF-RhodoLED Lamps, there remains a significant risk that

we will fail to generate sufficient revenue or otherwise successfully commercialize the product in the United States. The success of Ameluz

will depend on several factors, including:

● successful completion of further clinical trials;

● any contract manufacturing facilities maintaining regulatory compliance;

● compliance with applicable law for our sales force and marketing efforts;

● continued acceptable safety and effectiveness profiles for our products;

● protecting our intellectual property rights.

If

we do not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays or an inability

to successfully commercialize our products, which would materially harm our business and we may not be able to earn sufficient revenue

and cash flows to continue our operations.

Because

we have received approval from the FDA to market in the United States Ameluz in combination with PDT using the BF-RhodoLED lamp series,

any new lamp we may license would require new approval from the FDA. We cannot assure that we will develop any new lamps (beyond the

BF-RhodoLED XL lamp, which was approved by the FDA on October 21, 2021), or obtain any such new approval.

If we or our manufacturing partners, as applicable, fail to manufacture

Ameluz, RhodoLED Lamps, or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply

with cGMP or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of our products or